0001590364 us-gaap:OperatingSegmentsMember ftai:InfrastructureMember srt:EuropeMember ftai:RailroadMember 2018-01-01 2018-06-30

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the quarterly period ended~~ ~~June 30, 2018~~

For the quarterly period ended June 30, 2019



☐
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the transition period from ____ to ____~~

~~Commission file number~~ ~~001-37386~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~ ~~(Exact name of registrant as specified in its charter~~)

For the transition period from ____ to ____

Commission file number 001-37386

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

(Exact name of registrant as specified in its charter)



Delaware		32-0434238
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, 45th Floor	New York	NY	10105
(Address of principal executive offices)			(Zip Code)

(Registrant’s telephone number, including area code) (212) 798-6100

(Former name, former address and former fiscal year, if changed since last report) N/A


~~(Registrant’s telephone number, including area code)~~ ~~(212) 798-6100~~
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of exchange on which registered:
Class A common shares, $0.01 par value per share	FTAI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). YesþNo¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerþ	þ	Accelerated filer	¨
Non-accelerated filer¨	¨	Smaller reporting company¨	☐
		Emerging growth company ¨	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐Noþ

There were ~~82,787,466~~84,903,138 common shares representing limited liability company interests outstanding at July ~~31, 2018.~~30, 2019.

FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to:

changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy;

reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed money;

our ability to take advantage of acquisition opportunities at favorable prices;

a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner;

the relative spreads between the yield on the assets we acquire and the cost of financing;

adverse changes in the financing markets we access affecting our ability to finance our acquisitions;

customer defaults on their obligations;

our ability to renew existing contracts and ~~win additional~~enter into new contracts with existing or potential customers;

the availability and cost of capital for future acquisitions;

concentration of a particular type of asset or in a particular sector;

competition within the aviation, energy, intermodal transport and rail sectors;

the competitive market for acquisition opportunities;

risks related to operating through joint ventures or partnerships or through consortium arrangements;

obsolescence of our assets or our ability to sell, re-lease or re-charter our assets;

exposure to uninsurable losses and force majeure events;

infrastructure operations may require substantial capital expenditures;

the legislative/regulatory environment and exposure to increased economic regulation;

exposure to the oil and gas industry’s volatile oil and gas prices;

difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems;

our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on our operations;

our ability to successfully utilize leverage in connection with our investments;

foreign currency risk and risk management activities;

effectiveness of our internal control over financial reporting;

exposure to environmental risks, including increasing environmental legislation and the broader impacts of climate change;

changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;

actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial performance or value of our assets;

our dependence on our Manager and its professionals and actual, potential or perceived conflicts of interest in our relationship with our Manager;

effects of the merger of Fortress Investment Group LLC with affiliates of SoftBank Group Corp.;

volatility in the market price of our common shares;

the inability to pay dividends to our shareholders in the future; and

other risks described in the “Risk Factors” section of this report.

These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.

If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

INDEX TO FORM 10-Q



	PART I - FINANCIAL INFORMATION
Item 1.	Unaudited Consolidated Financial Statements of Fortress Transportation and Infrastructure Investors LLC:	5
	Consolidated Balance Sheets as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018	5
	Consolidated Statements of Operations for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018	6
	Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, ~~2018~~2019 and ~~2017~~2018	7
	Consolidated Statement of Changes in Equity for the three and six months ended June 30, 2019 and 2018	8
	Consolidated Statements of Cash Flows for the six months ended June 30, ~~2018~~2019 and ~~2017~~2018	9
	Notes to Consolidated Financial Statements	11
	Note 1: Organization	11
	Note 2: Summary of Significant Accounting Policies	11
	Note 3: Leasing Equipment, net	15
	Note 4: Finance Leases, net	15
	Note 5: Property, Plant and Equipment, net	16
	Note ~~4: Finance Leases, net~~6: Investments	17
	Note ~~5: Property, Plant~~7: Intangible Assets and ~~Equipment,~~Liabilities, net	18
	Note ~~6: Investments~~	18
	~~Note 7: Intangible Assets and Liabilities,~~8: Debt, net	20
	Note ~~8: Debt, net~~9: Fair Value Measurements	21
	Note ~~9: Fair Value Measurements~~10: Derivative Financial Instruments	23
	Note 11: Revenues	24
	Note ~~10: Revenues~~12: Leases	2627
	Note ~~11:~~13: Equity-Based Compensation	28
	Note ~~12:~~14: Income Taxes	28
	Note 15: Management Agreement and Affiliate Transactions	29
	Note ~~13: Management Agreement and Affiliate Transactions~~	29
	~~Note 14:~~16: Segment Information	31
	Note ~~15:~~17: Earnings per Share and Equity	41
	Note ~~16:~~18: Commitments and Contingencies	41
	Note 19: Subsequent Events	42
	~~Note 17: Subsequent Events~~	43
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4443
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7160
Item 4.	Controls and Procedures	7261

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	7362
Item 1A.	Risk Factors	7362
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	9583
Item 3.	Defaults Upon Senior Securities	9583
Item 4.	Mine Safety Disclosures	9583
Item 5.	Other Information	9583
Item 6.	Exhibits	9683

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share and per share data)


		(Unaudited)							(Unaudited)
	Notes	June 30,			December 31,			Notes	June 30, 2019			December 31, 2018
(Dollar amounts in thousands, except share and per share data)		2018			2017
Assets
Cash and cash equivalents	2	$	40,319		$	59,400		2	$	115,559		$	99,601
Restricted cash	2	33,526			33,406			2	58,817			21,236
Accounts receivable, net		41,882			31,076				61,878			53,789
Leasing equipment, net	3	1,203,741			1,074,130			3	1,509,848			1,432,210
Operating lease right-of-use assets, net								12	42,993			—
Finance leases, net	4	16,293			9,244			4	20,092			18,623
Property, plant, and equipment, net	5	599,723			489,949			5	855,013			708,853
Investments	6	43,404			42,538			6	38,727			40,560
Intangible assets, net	7	36,019			40,043			7	32,409			38,513
Goodwill		116,584			116,584				116,584			116,584
Other assets	2	79,781			59,436			2	236,589			108,809
Total assets		$	2,211,272		$	1,955,806			$	3,088,509		$	2,638,778

Liabilities
Accounts payable and accrued liabilities		$	83,920		$	68,226			$	117,280		$	112,188
Debt, net	8	862,746			703,264			8	1,631,136			1,237,347
Maintenance deposits		122,617			103,464				180,824			158,163
Security deposits		30,850			27,257				41,103			38,539
Operating lease liabilities								12	43,459			—
Other liabilities		21,813			18,520				36,474			38,759
Total liabilities		$	1,121,946		$	920,731			$	2,050,276		$	1,584,996

Commitments and contingencies	16							18

Equity
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 82,787,466 and 75,771,738 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively)		828			758
Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 84,846,083 and 84,050,889 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively)									$	848		$	840
Additional paid in capital		1,065,474			985,009				972,836			1,029,376
Accumulated deficit		(38,432		)	(38,699		)		(18,865		)	(32,817		)
Accumulated other comprehensive income		—			—				34,058			—
Shareholders' equity		1,027,870			947,068				988,877			997,399
Non-controlling interest in equity of consolidated subsidiaries		61,456			88,007				49,356			56,383
Total equity		1,089,326			1,035,075				1,038,233			1,053,782
Total liabilities and equity		$	2,211,272		$	1,955,806			$	3,088,509		$	2,638,778

See accompanying notes to consolidated financial statements.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~ ~~(unaudited)~~

(Dollar amounts in thousands, except share and per share data)

Three Months Ended June 30,
Six Months Ended June 30,
Notes
2018 2017
2018 2017
Revenues

Equipment leasing revenues

$ 59,330

$ 40,383

$ 115,114

$ 71,771
Infrastructure revenues

12,649

10,811

25,709

24,096
Total revenues 10
71,979

51,194

140,823

95,867

Expenses

Operating expenses

27,593

21,324

55,172

42,337
General and administrative

4,573

3,341

8,159

7,176
Acquisition and transaction expenses

1,508

1,880

3,274

3,332
Management fees and incentive allocation to affiliate 13
4,495

3,865

8,234

7,758
Depreciation and amortization 3, 5, 7
32,844

20,221

62,431

37,598
Interest expense

12,857

7,684

24,728

12,378
Total expenses

83,870

58,315

161,998

110,579

Other income (expense)

Equity in losses of unconsolidated entities 6
(251 )
(327 )
(156 )
(1,593 )
Gain on sale of equipment, net

4,996

1,999

4,991

4,017
Loss on extinguishment of debt 8
—

—

—

(2,456 )
Interest income

74

84

250

367
Other income

1,157

20

1,337

32
Total other income

5,976

1,776

6,422

367

Loss before income taxes

(5,915 )
(5,345 )
(14,753 )
(14,345 )
Provision for income taxes 12
534

464

1,029

676
Net loss

(6,449 )
(5,809 )
(15,782 )
(15,021 )
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries

(7,288 )
(4,349 )
(16,049 )
(9,147 )
Net income (loss) attributable to shareholders

$ 839

$ (1,460 )
$ 267

$ (5,874 )

Earnings (loss) per share 15

Basic

$ 0.01
$ (0.02 ) $ —
$ (0.08 )
Diluted $ 0.01
$ (0.02 ) $ —
$ (0.08 )

Weighted Average Shares Outstanding:
Basic

83,160,037

75,762,674

82,351,736

75,762,480
Diluted 83,160,047
75,762,674
82,351,858
75,762,480

~~See accompanying notes to consolidated financial statements.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~ ~~(unaudited)~~

Three Months Ended June 30, Six Months Ended June 30,
(Dollar amounts in thousands) 2018 2017 2018 2017
Net loss $ (6,449 ) $ (5,809 ) $ (15,782 ) $ (15,021 )
Other comprehensive loss:
Change in fair value of available-for-sale securities —
(6,136 ) —
(1,276 )
Comprehensive loss (6,449 ) (11,945 ) (15,782 ) (16,297 )
Comprehensive loss attributable to non-controlling interest (7,288 ) (4,349 ) (16,049 ) (9,147 )
Comprehensive income (loss) attributable to shareholders $ 839
$ (7,596 ) $ 267
$ (7,150 )

~~See accompanying notes to consolidated financial statements.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~CONSOLIDATED STATEMENT OF CHANGES IN EQUITY~~ ~~(unaudited)~~

(Dollar amounts in thousands) Common Shares Additional Paid In Capital Accumulated Deficit Accumulated Other Comprehensive Income Non-Controlling Interest in Equity of Consolidated Subsidiaries Total Equity
Equity - December 31, 2017 $ 758
$ 985,009
$ (38,699 ) $ —
$ 88,007
$ 1,035,075
Comprehensive loss:
Net income (loss) for the period 267
(16,049 ) (15,782 )
Other comprehensive loss —
—
—
—
Total comprehensive loss

267
—
(16,049 ) (15,782 )
Transfer of non-controlling interest 7,225
(10,930 ) (3,705 )
Dividends declared (54,662 ) —
(54,662 )
Issuance of common shares 70
127,893
—
127,963
Equity-based compensation 9
428
437
Equity - June 30, 2018 $ 828
$ 1,065,474
$ (38,432 ) $ —
$ 61,456
$ 1,089,326

~~See accompanying notes to consolidated financial statements.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~ ~~(unaudited)~~

Six Months Ended June 30,
(Dollar amounts in thousands) 2018 2017
Cash flows from operating activities:
Net loss $ (15,782 ) $ (15,021 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Equity in losses of unconsolidated entities 156
1,593
Gain on sale of equipment, net (4,991 ) (4,017 )
Security deposits and maintenance claims included in earnings (4,325 ) —
Loss on extinguishment of debt —
2,456
Equity-based compensation 437
530
Depreciation and amortization 62,431
37,598
Change in current and deferred income taxes 564
80
Change in fair value of non-hedge derivative (182 ) —
Amortization of lease intangibles and incentives 12,943
3,291
Amortization of deferred financing costs 2,483
2,064
Bad debt expense 1,521
63
Other 21
331
Change in:
Accounts receivable (10,064 ) (6,268 )
Other assets (10,318 ) 9,909
Accounts payable and accrued liabilities 22,091
1,871
Management fees payable to affiliate (668 ) (578 )
Other liabilities 2,835
(627 )
Net cash provided by operating activities 59,152
33,275

Cash flows from investing activities:
Investment in notes receivable (912 ) —
Investment in unconsolidated entities and available for sale securities (1,115 ) (21,172 )
Principal collections on finance leases 539
225
Acquisition of leasing equipment (205,819 ) (224,070 )
Acquisition of property, plant and equipment (124,039 ) (50,688 )
Acquisition of lease intangibles (2,225 ) (197 )
Purchase deposits for acquisitions (17,890 ) (5,725 )
Proceeds from sale of leasing equipment 26,499
30,241
Proceeds from sale of property, plant and equipment 31
51
Proceeds from deposit on sale of leasing equipment 240
2,505
Return of deposit on sale of engine (400 ) —
Net cash used in investing activities $ (325,091 ) $ (268,830 )

~~See accompanying notes to consolidated financial statements.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~ ~~(unaudited)~~

Six Months Ended June 30,
(Dollar amounts in thousands) 2018 2017
Cash flows from financing activities:
Proceeds from debt $ 204,350
$ 243,911
Repayment of debt (45,874 ) (11,875 )
Payment of deferred financing costs (1,819 ) (2,722 )
Receipt of security deposits 3,748
4,590
Return of security deposits (805 ) (1,657 )
Receipt of maintenance deposits 22,355
9,975
Release of maintenance deposits (4,276 ) (6,111 )
Proceeds from issuance of common shares, net of underwriter's discount 128,450
—
Common shares issuance costs (789 ) —
Purchase of non-controlling interest shares (3,700 ) —
Cash dividends (54,662 ) (50,024 )
Net cash provided by financing activities $ 246,978
$ 186,087

Net increase in cash and cash equivalents and restricted cash (18,961 ) (49,468 )
Cash and cash equivalents and restricted cash, beginning of period 92,806
133,496
Cash and cash equivalents and restricted cash, end of period $ 73,845
$ 84,028

Supplemental disclosure of non-cash investing and financing activities:
Proceeds from borrowings of debt $ 511
$ 108,089
Repayment and settlement of debt —
(100,000 )
Acquisition of leasing equipment (4,704 ) (20,834 )
Acquisition of property, plant and equipment (3,621 ) (30,915 )
Settled and assumed security deposits 650
1,467
Billed, assumed and settled maintenance deposits (1,427 ) 4,634
Deferred financing costs —
(7,837 )
Non-cash contribution from non-controlling interest —
1,201
Transfer of non-controlling interest 7,225
—
Issuance of common shares 301
160

~~See accompanying notes to consolidated financial statements.~~

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(Dollars in thousands, except share and per share data)



		Three Months Ended June 30,						Six Months Ended June 30,
	Notes	2019			2018			2019			2018
Revenues
Equipment leasing revenues		$	79,200		$	59,330		$	151,652		$	115,114
Infrastructure revenues		79,805			12,649			131,980			25,709
Total revenues	11	159,005			71,979			283,632			140,823

Expenses
Operating expenses		92,763			27,593			154,681			55,172
General and administrative		4,297			4,573			9,029			8,159
Acquisition and transaction expenses		2,308			1,508			3,782			3,274
Management fees and incentive allocation to affiliate	15	5,710			4,495			9,548			8,234
Depreciation and amortization	3, 5, 7	42,600			32,844			82,133			62,431
Interest expense		25,472			12,857			46,775			24,728
Total expenses		173,150			83,870			305,948			161,998

Other income (expense)
Equity in losses of unconsolidated entities	6	(169		)	(251		)	(553		)	(156		)
Gain on sale of equipment, net		22,630			4,996			24,355			4,991
Interest income		240			74			331			250
Other income		4,938			1,157			2,334			1,337
Total other income		27,639			5,976			26,467			6,422

Income (loss) before income taxes		13,494			(5,915		)	4,151			(14,753		)
(Benefit from) provision for income taxes	14	(2,299		)	534			(1,846		)	1,029
Net income (loss)		15,793			(6,449		)	5,997			(15,782		)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries		(4,539		)	(7,288		)	(7,955		)	(16,049		)
Net income attributable to shareholders		$	20,332		$	839		$	13,952		$	267

Earnings per share	17
Basic		$	0.24		$	0.01		$	0.16		$	—
Diluted		$	0.24		$	0.01		$	0.16		$	—

Weighted Average Shares Outstanding:
Basic		85,987,769			83,160,037			85,987,115			82,351,736
Diluted		85,989,029			83,160,047			85,987,115			82,351,858

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(Dollars in thousands)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Net income (loss)	$	15,793		$	(6,449	)	$	5,997		$	(15,782	)
Other comprehensive income (loss), net of deferred tax:
Change in fair value of cash flow hedge, net ⁽¹⁾	77,070			—			34,058			—
Comprehensive income (loss)	92,863			(6,449		)	40,055			(15,782		)
Comprehensive loss attributable to non-controlling interest	(4,539		)	(7,288		)	(7,955		)	(16,049		)
Comprehensive income attributable to shareholders	$	97,402		$	839		$	48,010		$	267

⁽¹⁾ Net of deferred tax expense of $6,186 for the three and six months ended June 30, 2019.

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)



	Three and Six Months Ended June 30, 2019
	Common Shares		Additional Paid In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income			Non-Controlling Interest in Equity of Consolidated Subsidiaries			Total Equity
Equity - December 31, 2018	$	840	$	1,029,376		$	(32,817	)	$	—		$	56,383		$	1,053,782
Net loss for the period						(6,380		)				(3,416		)	(9,796		)
Other comprehensive loss						—			(43,012		)	—			(43,012		)
Total comprehensive loss						(6,380		)	(43,012		)	(3,416		)	(52,808		)
Issuance of common shares	5		234									—			239
Conversion of participating securities			(4		)										(4		)
Dividends declared			(28,383		)							—			(28,383		)
Equity-based compensation			—									228			228
Equity - March 31, 2019	845		1,001,223			(39,197		)	(43,012		)	53,195			973,054
Net income (loss) for the period						20,332						(4,539		)	15,793
Other comprehensive income						—			77,070			—			77,070
Total comprehensive income (loss)						20,332			77,070			(4,539		)	92,863
Issuance of common shares	3		—									—			3
Conversion of participating securities			(3		)										(3		)
Dividends declared			(28,384		)							—			(28,384		)
Equity-based compensation			—									700			700
Equity - June 30, 2019	$	848	$	972,836		$	(18,865	)	$	34,058		$	49,356		$	1,038,233



	Three and Six Months Ended June 30, 2018
	Common Shares		Additional Paid In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Non-Controlling Interest in Equity of Consolidated Subsidiaries			Total Equity
Equity - December 31, 2017	$	758	$	985,009		$	(38,699	)	$	—	$	88,007		$	1,035,075
Net loss for the period						(572		)			(8,761		)	(9,333		)
Other comprehensive income						—			—		—			—
Total comprehensive loss						(572		)	—		(8,761		)	(9,333		)
Issuance of common shares	70		127,807								—			127,877
Dividends declared			(27,333		)						—			(27,333		)
Equity-based compensation			9								199			208
Equity - March 31, 2018	828		1,085,492			(39,271		)	—		79,445			1,126,494
Net income (loss) for the period						839					(7,288		)	(6,449		)
Other comprehensive income						—			—		—			—
Total comprehensive income (loss)						839			—		(7,288		)	(6,449		)
Purchase of non-controlling interest			7,225								(10,930		)	(3,705		)
Issuance of common shares	—		86								—			86
Dividends declared			(27,329		)						—			(27,329		)
Equity-based compensation			—								229			229
Equity - June 30, 2018	$	828	$	1,065,474		$	(38,432	)	$	—	$	61,456		$	1,089,326

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)



	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	5,997		$	(15,782	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in losses of unconsolidated entities	553			156
Gain on sale of equipment, net	(24,355		)	(4,991		)
Security deposits and maintenance claims included in earnings	(2,869		)	(4,325		)
Equity-based compensation	928			437
Depreciation and amortization	82,133			62,431
Change in current and deferred income taxes	(2,655		)	564
Change in fair value of non-hedge derivative	(250		)	(182		)
Amortization of lease intangibles and incentives	17,288			12,943
Amortization of deferred financing costs	4,043			2,483
Bad debt expense	3,062			1,521
Other	547			21
Change in:
Accounts receivable	(14,675		)	(10,064		)
Other assets	(13,105		)	(10,318		)
Accounts payable and accrued liabilities	8,661			22,091
Management fees payable to affiliate	871			(668		)
Other liabilities	(8,062		)	2,835
Net cash provided by operating activities	58,112			59,152

Cash flows from investing activities:
Investment in notes receivable	—			(912		)
Investment in unconsolidated entities and available for sale securities	—			(1,115		)
Principal collections on finance leases	2,996			539
Acquisition of leasing equipment	(209,171		)	(205,819		)
Acquisition of property, plant and equipment	(159,252		)	(124,039		)
Acquisition of lease intangibles	623			(2,225		)
Purchase deposits for acquisitions	(33,637		)	(17,890		)
Proceeds from sale of leasing equipment	71,497			26,499
Proceeds from sale of property, plant and equipment	7			31
Return of capital distributions from unconsolidated entities	1,280			—
Return of purchase deposit for aircraft and aircraft engines	—			240
Return of deposit on sale of engine	—			(400		)
Net cash used in investing activities	$	(325,657	)	$	(325,091	)

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(Dollars in thousands)



	Six Months Ended June 30,
	2019			2018
Cash flows from financing activities:
Proceeds from debt	$	529,477		$	204,350
Repayment of debt	(128,835		)	(45,874		)
Payment of deferred financing costs	(32,443		)	(1,819		)
Receipt of security deposits	3,475			3,748
Return of security deposits	(233		)	(805		)
Receipt of maintenance deposits	28,903			22,355
Release of maintenance deposits	(22,493		)	(4,276		)
Proceeds from issuance of common shares, net of underwriter's discount	—			128,450
Common shares issuance costs	—			(789		)
Purchase of non-controlling interest	—			(3,700		)
Cash dividends	(56,767		)	(54,662		)
Net cash provided by financing activities	$	321,084		$	246,978

Net increase (decrease) in cash and cash equivalents and restricted cash	53,539			(18,961		)
Cash and cash equivalents and restricted cash, beginning of period	120,837			92,806
Cash and cash equivalents and restricted cash, end of period	$	174,376		$	73,845

Supplemental disclosure of non-cash investing and financing activities:
Proceeds from borrowings of debt	$	—		$	511
Acquisition of leasing equipment	1,558			(4,704		)
Acquisition of property, plant and equipment	(13,735		)	(3,621		)
Settled and assumed security deposits	(679		)	650
Billed, assumed and settled maintenance deposits	14,563			(1,427		)
Purchase of non-controlling interest	—			7,225
Change in fair value of cash flow hedge	34,058			—
Issuance of common shares	242			301

See accompanying notes to consolidated financial statements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)


1.	ORGANIZATION

Fortress Transportation and Infrastructure Investors LLC (the “Company,” “we,” “our” or “us”) is a Delaware limited liability company which, through its subsidiary, Fortress Worldwide Transportation and Infrastructure General Partnership (the “Partnership”), ~~is engaged in the ownership~~owns and ~~leasing of~~leases aviation equipment ~~offshore energy equipment and shipping containers,~~ and also owns and operates a short line railroad in North America, Central Maine and Québec Railway (“CMQR”), a multi-modal crude oil and refined products terminal in Beaumont, Texas (“Jefferson Terminal”), a deep-water port located along the Delaware River with an underground storage cavern and multiple industrial development opportunities (“Repauno”), and a multi-modal terminal located along the Ohio River with multiple industrial development opportunities, including a power plant under construction (“Long Ridge”). Additionally, we own and lease offshore energy equipment and shipping containers. We have ~~six~~four reportable segments, (i) Aviation Leasing, (ii) ~~Offshore Energy, (iii) Shipping Containers, (iv)~~ Jefferson Terminal, ~~(v)~~(iii) Railroad, and ~~(vi)~~(iv) Ports and Terminals, which operate in two primary businesses, Equipment Leasing and Infrastructure (Note ~~14)~~16).


2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting—The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of us and our subsidiaries.

Principles of Consolidation—We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All significant intercompany transactions and balances have been eliminated. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.

We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities.

Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties—In the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements and the majority of terminal services revenue and ~~the majority of~~ freight rail revenue are denominated in U.S. dollars.

Variable Interest Entities—The assessment of whether an entity is a VIE and the determination of whether to consolidate a VIE requires judgment. VIEs are defined as entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, and only by its primary beneficiary, which is defined as the party who has the power to direct the activities of a VIE that most significantly impact its economic performance and who has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

JGP Energy Partners LLC

During the quarter ended September 30, 2016, we initiated activities in our 50% owned joint venture, JGP Energy Partners LLC (“JGP”). The other 50% member to the joint venture is a third party ethanol producer. The purpose of the venture is to build storage capacity with capabilities to receive and/or distribute ethanol via water, rail or truck. Each member contributed up to ~~$27,000~~$27 million (for a total of ~~$54,000)~~$54 million) for the development and construction of the ethanol terminal facilities. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a VIE. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, we do not consolidate JGP and account for this investment in accordance with the equity method. Refer to Note 6 for details.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Delaware River Partners LLC

On July 1, 2016, we, through Delaware River Partners LLC (“DRP”), a consolidated subsidiary, purchased the assets of Repauno, which consisted primarily of land, a storage cavern, and riparian rights for the acquired land, site improvements and rights. Upon acquisition there were no operational processes that could be applied to these assets that would result in outputs without significant green field development. We currently hold a ~~90%~~98% economic interest, which includes the additional 8% economic interest we purchased from non-controlling interest holders in DRP for $4.5 million in April 2019, and a 100% voting interest in DRP. DRP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we were the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying financial statements. We have the right to purchase an additional 8% economic interest from the non-controlling party after the second anniversary but prior to the fifth year anniversary of the acquisition of Repauno. At the time of the purchase, we concluded that 8% of the 10% interest held by the non-controlling party does not share in the risks or rewards of true equity.

Ohio River Partners LLC

On June 16, 2017, we, through Ohio River Partners Shareholder LLC (“ORP”), a consolidated subsidiary, purchased the assets of Long Ridge which consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. We purchased 100% of the interests in these assets. ORP is solely reliant on us to finance its activities and therefore is a VIE. We concluded that we were the primary beneficiary; accordingly, ORP has been presented on a consolidated basis in the accompanying financial statements.

Cash and Cash Equivalents—We consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.

Restricted Cash—Restricted cash ~~was $33,526 and $33,406 as of June 30, 2018 and December 31, 2017, respectively, and~~ consists of prepaid interest and principal pursuant to the requirements of certain of our debt agreements ~~(Note~~(see Note 8), and funds set aside for the power plant construction at Long Ridge (see Note 5) and other qualifying construction projects at Jefferson ~~Terminal and, as of June 30, 2018, Long Ridge.~~Terminal.

~~Available-For-Sale Securities~~Inventory—We consider listed equity securities as available-for-sale securities recorded at fair value with unrealized gains (losses) recorded in other comprehensive income (loss) and realized gains (losses) recorded in earnings. Our basis on which the cost of the security sold or the amount reclassified out of other comprehensive income into earnings is determined using specific identification. Available-for-sale securities are included as a component of investments in the accompanying Consolidated Balance Sheets. At each balance sheet date, we evaluate our available-for-sale securities holdings with unrealized losses to determine if an other-than-temporary impairment has occurred. Refer to Note 6 and Note 9 for details.

~~Inventory~~—Commodities ~~are~~inventory is carried at the lower of cost or net realizable value on our balance sheet. Commodities are removed from inventory based on the average cost at the time of sale. AtAs of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we had commodities inventory of ~~$15,313~~$12.5 million and ~~$8,877, respectively. We record our inventory as a component of other~~$10.4 million, respectively, which is included in Other assets in the ~~accompanying~~ Consolidated Balance Sheets.

Deferred Financing Costs—Costs incurred in connection with obtaining long term financing are capitalized and amortized to interest expense over the term of the underlying loans. Unamortized deferred financing costs of ~~$10,950~~$21.9 million and ~~$11,423~~$14.5 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, are recorded as a component of debt in the ~~accompanying~~ Consolidated Balance Sheets. ~~In connection with the Jefferson Revolver, we incurred $511~~

We also have unamortized deferred revolver fees related to our revolving debt of ~~deferred financing costs~~$21.7 million and $2.4 million as of June 30, 2019 and December 31, 2018, respectively, which are ~~recorded as a component of other~~included in Other assets in the ~~accompanying~~ Consolidated Balance Sheets. ~~Refer to Note 8 for details.~~

Amortization expense was ~~$1,332~~ $2.0 million and ~~$2,483~~$1.3 million for the three months ended June 30, 2019 and 2018, respectively, and $4.0 million and $2.5 million for the six months ended June 30, 2019 and 2018, respectively, and ~~$931 and $2,064 for the three and six months ended June 30, 2017, respectively. Amortization expense~~ is included ~~as a component of~~in interest expense in the ~~accompanying~~ Consolidated Statements of Operations.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

Revenue Recognition

~~Effective January 1, 2018, we adopted FASB ASU No. 2014-09,~~ ~~“Revenue from Contracts with Customers”~~ (Topic 606) and related updates. The standard’s core principle is that we will recognize revenue when we transfer promised goods or services to customers in an amount that reflect the consideration to which a company expects to be entitled in exchange for those goods or services. The adoption of this standard is applied using the modified retrospective approach. See below for a detailed description of revenue recognition by our two strategic business units, Equipment Leasing and Infrastructure.

~~Lease contracts, within the scope of ASC 840,~~ ~~Leases~~, are specifically excluded from ASU 2014-09. Infrastructure revenues that do not qualify as leases or leases that are combined with other services are recognized as revenue only when the services have been performed or goods transferred and we expect to be entitled in exchange for the goods delivered or services performed in accordance with contractual obligations. See Note 11 for additional details regarding the disaggregation of our revenues by segment.

~~The adoption of the standard did not have a material impact on our consolidated financial statements and related disclosures.~~

Equipment Leasing Revenues

Operating Leases—We lease equipment pursuant to net operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

~~We also recognize~~Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance ~~revenue related~~payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the ~~portion~~lessee up to the amount paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.

Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received ~~from lessees of aviation equipment~~ that we do not expect to repay to the lessee are ~~not expected to be reimbursed~~recorded as Maintenance revenues.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in ~~connection with major maintenance events.~~tables in thousands, unless otherwise noted)

Finance ~~Lease~~Leases—From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value ~~of 90%~~that equals or ~~more~~exceeds substantially all of the fair value of the leased equipment at the date of lease inception. Net investment in finance lease represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.

Infrastructure Revenues

Rail Revenues—Rail revenues generally consist of the following performance obligations: freight movement, demurrage, unloading and switching. Freight movement revenues are recognized proportionally based on distance as freight ~~moves~~is transported from origin to destination. ~~Other miscellaneous revenues, such~~Accordingly, freight movement revenue is recognized over time with progress measured based on distance transpired, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time. Demurrage, unloading and switching ~~revenue,~~ are recognized in other miscellaneous rail revenues, for which demurrage progress is measured over time, and unloading and switching revenues are measured at a point in time as the service is ~~performed or contractual obligations are met.~~rendered.

Terminal Services Revenues—Terminal services are provided to customers for the receipt and redelivery of various commodities. These revenues are recognized ~~when~~over time, i.e., as the services ~~have been provided~~are rendered and the customer simultaneously receives and consumes the benefit over time.

Lease Income—Lease income consists of rental income from tenants for storage space. Lease income is recognized on a straight-line basis over the terms of the relevant lease agreement.

Crude Marketing Revenues—Crude marketing revenues consists of marketing revenue related to Canadian crude oil. The revenues are recognized over time, i.e., as the services are rendered and the customer simultaneously receives and consumes the benefit over time.

Other Revenue—Other revenue primarily consists of revenue related to the ~~customer,~~handling, storage and sale of raw materials. Other revenue consists of two performance obligations: handling and storage of raw materials. The revenues are recognized over time, i.e., as the ~~product has been delivered, the price is considered to be fixed or determinable and collectability is reasonably assured. Prepayments for~~ services are ~~deferred until~~rendered and the customer simultaneously receives and consumes the benefit over time.

Payment terms for Infrastructure Revenues are generally short term in nature.

Leasing Arrangements—At contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized in Operating lease right-of-use assets, net and Operating lease liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Property, plant and equipment, net and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets.

All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method.

Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs.

We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the ~~above criteria are met. Terminal services fees include services provided to third-party customers related to receipt and redelivery of crude oil products.~~obligation is incurred.

~~Lease Revenues—We recognize lease revenue as various tenants lease out storage space including equipment, piping and frac sand. Lease revenue is recognized based on the terms of the lease agreement.~~

Concentration of Credit Risk—We are subject to concentrations of credit risk with respect to amounts due from customers on our finance ~~lease~~leases and operating leases. We attempt to limit our credit risk by performing ongoing credit evaluations. During both the three and six months ended June 30, ~~2018 and 2017, we had~~2019, one customer in the Jefferson Terminal segment accounted for approximately 23% of total revenue. There were no customers with a revenue concentration over 10% of total revenue ~~from any one customer.~~during the three and six months ended June 30, 2018.

As of June 30, ~~2018,~~2019, accounts receivable from one customer in the Jefferson Terminal segment ~~and one customer in the Offshore Energy segment~~ represented ~~22% and 10%, respectively,~~17% of total accounts receivable, net. As of December 31, ~~2017,~~2018, accounts receivable from two customers in the ~~Offshore Energy~~Jefferson Terminal segment each represented 17% and ~~10%, respectively,~~15% of total accounts receivable, net.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We maintain cash and restricted cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.

Provision for Doubtful Accounts—We determine the provision for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. The provision for doubtful accounts at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$2,079~~$1.1 million and ~~$983,~~$1.1 million, respectively. Bad debt expense was ~~$80~~$0.1 million and ~~$1,521~~$0.1 million for the three months ended June 30, 2019 and 2018, respectively, and $3.1 million and $1.5 million for the six months ended June 30, 2019 and 2018, respectively, and ~~$32 and $63 for~~is included in operating expenses in the ~~three and six months ended June 30, 2017, respectively.~~Consolidated Statements of Operations.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

Comprehensive Income (Loss)—Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for fair value changes related to ~~the available-for-sale securities and~~ derivatives accounted for as cash flow hedges.

Derivative Financial ~~Instruments—During 2017 we entered~~Instruments

Electricity Derivatives—We enter into derivative contracts as part of a risk management program to mitigate price risk associated with certain electricity price exposures. We primarily use swap derivative contracts, which are agreements to buy or sell a quantity of electricity at a predetermined future date and at a predetermined price.

Cash Flow Hedges

Certain of these derivative instruments are designated and qualify as cash flow hedges. The derivative's gain or loss is reported as a component of Other comprehensive income (loss) and recorded in Accumulated other comprehensive income in our Consolidated Balance Sheets. The gain or loss is subsequently reclassified into the income statement line item that is impacted by the forecasted transaction when the forecasted transaction affects net earnings.

Derivatives Not Designated As Hedging Instruments

Certain of these derivative instruments are not designated as hedging instruments for accounting purposes. The change in fair value of these contracts is recognized in Other income (expense) in the Consolidated Statements of Operations. The cash flow impact of derivative contracts that are not designated as hedging instruments is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.

Commodity Derivatives—We also enter into short-term and long-term crude forward contracts. Gains and losses related to our crude sales and purchase derivatives are recorded on a gross basis and are included in Crude marketing revenues and Operating expenses, respectively, in our Consolidated Statements of Operations. See Note 10 for additional details. The cash flow impact of these derivatives is recognized in Change in fair value of ~~the short-term~~non-hedge derivatives in our Consolidated Statements of Cash Flows.

All of our outstanding derivatives are not used for speculative purposes. We record all derivative ~~asset~~assets and liabilities on a gross basis at ~~June 30, 2018~~fair value and ~~December 31, 2017 was $840~~are included in Other assets and ~~$1,022,~~Other liabilities, respectively, ~~recorded~~ in ~~other assets.~~our Consolidated Balance Sheets.

Other Assets—Other assets is primarily comprised of commodities inventory of ~~$15,313~~$12.5 million and ~~$8,877, notes receivable of $436 and $2,623,~~$10.4 million, purchase deposits for acquisitions of ~~$18,036~~$20.5 million and ~~$12,299,~~$10.2 million, lease incentives of ~~$31,550~~$52.4 million and ~~$23,811,~~$51.0 million, deferred revolver fees, net of amortization of $21.7 million and $2.4 million, prepaid expenses of ~~$4,969~~$21.4 million and ~~$4,149~~$8.2 million, derivative assets of $47.1 million and $7.5 million and notes receivable of $17.2 million and $0.0 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

Dividends—Dividends are recorded if and when declared by the Board of Directors. For both the three and six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, the Board of Directors declared a cash dividend of $0.33 and $0.66 per share, respectively.

Recent Accounting Pronouncements—~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenues from Contracts with Customers (Topic 606)~~ ~~(“ASU 2014-09”)~~. ASU 2014-09 requires that a company recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In August 2015, the FASB deferred the effective date of this standard by one year, which will be for fiscal years, and interim periods within those years, beginning after December 15, 2017. We adopted ASU 2014-09 as of January 1, 2018 and the adoption of this guidance did not have a material impact on our consolidated financial statements.

~~In January 2016, the FASB issued ASU 2016-01,~~ ~~Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~ (“ASU 2016-01”). ASU 2016-01 requires (i) equity investments, except those accounted for under the equity method of accounting or those that result in consolidation of the investee, to be measured at fair value with changes in fair value recognized in net income, (ii) public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and (iii) separate presentation of financial assets and financial liabilities by measurement category and form of financial asset. ASU 2016-01 also eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost. The pronouncement is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, with early adoption permitted. We adopted ASU 2016-01 as of January 1, 2018 and the adoption of this guidance did not have any impact on our consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments~~ ~~(“ASU 2016-15”)~~. ~~ASU 2016-15~~addresses the following eight specific cash flow issues: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies (COLIs); (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; (viii) and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU 2016-15 as of January 1, 2018 and the adoption of this guidance did not have a material impact on the presentation of our Statements of Cash Flows.

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory (“ASU 2016-16”).~~ ASU 2016-16 prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. In addition, interpretations of this guidance have developed in practice for transfers of certain intangible and tangible assets. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. To more faithfully represent the economics of intra-entity asset transfers, the amendments ASU 2016-16 require that entities recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. The amendments in ASU 2016-16 do not change GAAP for the pre-tax effects of an intra-entity asset transfer under Topic 810, ~~Consolidation,~~ or for an intra-entity transfer of inventory. ASU 2016-16 will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those annual reporting periods. Early adoption is permitted, including adoption in an interim period. We adopted ASU 2016-16 as of January 1, 2018 and the adoption of this guidance did not have a material impact on our consolidated financial statements.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-18”)~~. ASU 2016-18 addresses the diversity in the classification and presentation of changes in restricted cash on the statement of cash flows under Topic 230, Statement of Cash Flows. The amendments in ASU 2016-18 require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. ASU 2016-18 will be effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. We adopted ASU 2016-18 as of January 1, 2018 and the adoption of this guidance included changes in restricted cash in our Statements of Cash Flows for all periods presented.

In February ~~2017, the FASB issued ASU 2017-05,~~ Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”). ASU 2017-05 amends the scope of the nonfinancial asset guidance in Subtopic 610-20. The amendments also clarify that the derecognition of all businesses and nonprofit activities (except those related to conveyances of oil and gas mineral rights or contracts with customers) should be accounted for in accordance with the derecognition and deconsolidation guidance in Subtopic 810-10. In addition, the amendments eliminate the exception in the financial asset guidance for transfers of investments (including equity method investments) in real estate entities and supersede the guidance in the Exchanges of a Nonfinancial Asset for a Noncontrolling Ownership Interest Subsection within Topic 845. The amendments in ASU 2017-05 also provide guidance on the accounting for what often are referred to as partial sales of nonfinancial assets within the scope of Subtopic 610-20 and contributions of nonfinancial assets to a joint venture or other noncontrolled investee. ASU 2017-05 will be effective for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. We adopted ASU 2017-05 as of January 1, 2018 and the adoption of this guidance did not have a material impact on our consolidated financial statements.

~~In May 2017,~~2016, the FASB issued Accounting Standards Update ~~No. 2017-09,~~ ~~Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting("ASU 2017-09"~~(“ASU”), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and early adoption is permitted, including in an interim period. ASU 2017-09 is to be applied on a prospective basis to an award modified on or after the adoption date. We adopted ASU 2017-09 as of January 1, 2018 and the adoption of this guidance did not have a material impact on our consolidated financial statements.

~~Unadopted Accounting Pronouncements~~—~~In February 2016, the FASB~~ 2016-02, Leases (and subsequently issued ASU ~~2016-02,~~ ~~Leases~~ (“2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01, collectively, “ASU 2016-02”). ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting.

On January 1, 2019, we adopted ASU 2016-02 ~~will be~~using the modified retrospective approach. We utilized the effective ~~beginning~~date transition method and accordingly are not required to adjust our comparative period financial information for effects of ASU 2016-02. We have elected to adopt the ‘package of practical expedients’ which permits us not to reassess under the new standard our prior conclusions about lease identification (including land easements), lease classification and initial direct costs.

The adoption of ASU 2016-02 resulted in the ~~first quarter~~recognition of ~~2019, with early adoption permitted. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date~~ROU assets and lease liabilities of ~~initial application, with an option to use certain transition relief. Our evaluation~~approximately $46 million in our Consolidated Balance Sheets as of the impact of the new guidance on our consolidated financial statements is ongoing. We are currently identifying the lease arrangements within the scope of the new guidance, and evaluating the impact of the lease arrangements. January 1, 2019.

In ~~September~~August 2017, the FASB issued ASU ~~2017-13,~~ ~~Revenue Recognition (Topic 605), Revenue from contracts from customers (Topic 606), Leases (Topic 840)~~2017-12, Derivatives and ~~Leases (Topic 842)~~ ~~(“ASU 2017-13”)~~Hedging: Targeted Improvements to Accounting for Hedging Activities, which ~~adds SEC paragraphs~~improves the financial reporting of hedging relationships to better represent the ~~new revenue~~economic results of an entity’s risk management activities in its financial statements and ~~lease sections~~make certain improvements to simplify the application of the ~~codification on~~hedge accounting guidance. The amendments will make more financial and nonfinancial hedging strategies eligible for hedge accounting, amend the ~~announcement~~presentation and disclosure requirements and change how entities assess effectiveness. Entities are required to apply the amendments as a cumulative-effect adjustment to retained earnings as of the ~~SEC observer made at the July 2017 EITF meeting~~.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(“ASU 2016-13”)~~. For assets held at amortized cost basis, ASU 2016-13 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basisbeginning of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however this ASU requires that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2016-13 will be effective for fiscal years beginningfirst reporting period after ~~December 15, 2019, including interim periods within those fiscal years. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.~~adoption.

1514

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

On January 1, 2019, we adopted this standard and it did not have an impact on our consolidated financial statements as we did not have any hedging relationships prior to adoption.

In June 2018, the FASB, issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of Accounting Standards Codification (“ASC”) 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. On January 1, 2019, we adopted this standard and it did not have an impact on our consolidated financial statements.

Unadopted Accounting Pronouncements—In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 addresses concerns over the cost and complexity of the two-step goodwill impairment test by removing the second step of the test. An entity will apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of goodwill impairment. ASU 2017-01 will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.

In ~~June~~August 2018, the FASB issued ASU ~~2018-07~~ ~~Improvements~~2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to ~~Nonemployee Share-Based Payment Accounting~~ ~~to simplify~~ the ~~accounting~~Disclosure Requirements for ~~share-based payments to nonemployees by aligning it with the accounting~~Fair Value Measurement. This ASU eliminates, adds and modifies certain disclosure requirements for ~~share-based payments to employees, with certain exceptions. The new guidance expands the scope~~fair value measurements as part of ~~ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50.~~its disclosure framework project. The guidance is effective for ~~public business~~all entities in ~~annual periods~~fiscal years beginning after December 15, ~~2018,~~2019, and interim periods within those ~~annual periods,~~fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this new guidance on our consolidated financial statements.


3.	LEASING EQUIPMENT, NET

Leasing equipment, net is summarized as follows:



	June 30, 2019			December 31, 2018
Leasing equipment	$	1,794,011		$	1,672,156
Less: accumulated depreciation	(284,163		)	(239,946		)
Leasing equipment, net	$	1,509,848		$	1,432,210

June 30, 2018 December 31, 2017
Leasing equipment $ 1,390,177
$ 1,217,862
Less: accumulated depreciation (186,436 ) (143,732 )
Leasing equipment, net $ 1,203,741
$ 1,074,130

During the six months ended June 30, ~~2018,~~2019, we acquired 1310 aircraft and 18 commercial engines, sold three aircraft and 16 commercial engines, and ~~sold one aircraft and six commercial engines. During the six months ended June 30, 2017, we acquired 14 aircraft and 41 commercial engines, and sold one aircraft and six commercial engines.~~recognized a net gain on sale of approximately $24.4 million.

Depreciation expense for leasing equipment is summarized as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Depreciation expense for leasing equipment	$	35,150	$	26,779	$	67,046	$	50,470

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Depreciation expense for leasing equipment $ 26,779
$ 15,969
$ 50,470
$ 29,142

4. FINANCE LEASES, NET

Finance leases, net are summarized as follows:



	June 30, 2019			December 31, 2018
Finance leases	$	30,426		$	28,476
Unearned revenue	(10,334		)	(9,853		)
Finance leases, net	$	20,092		$	18,623

We entered into two one-year sales-type lease agreements for the sale of two of our aircraft during the six months ended June 30, 2019.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

4. ~~FINANCE LEASES, NET~~

~~Finance leases, net are summarized as follows:~~

June 30, 2018 December 31, 2017
Finance leases $ 28,513
$ 16,015
Unearned revenue (12,220 ) (6,771 )
Finance leases, net $ 16,293
$ 9,244

~~During the six months ended June 30, 2018, we entered into a two year finance lease arrangement for the sale of one of our aircraft.~~

~~As of June 30, 2018, future minimum lease payments to be received under finance leases for the remainder of the lease terms are as follows:~~

2018 $ 2,062
2019 6,208
2020 10,257
2021 2,008
2022 2,008
Thereafter 5,970
Total $ 28,513

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~


5.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net is summarized as follows:


	June 30, 2018			December 31, 2017			June 30, 2019			December 31, 2018
Land, site improvements and rights	$	74,413		$	74,268		$	74,633		$	75,028
Construction in progress(1)	178,275			100,420			330,872			253,239
Buildings and improvements	9,807			9,807			15,685			14,514
Terminal machinery and equipment	340,960			299,444			418,971			349,227
Proved oil and gas properties							29,940			20,099
Track and track related assets	35,338			35,371			42,833			42,349
Railroad equipment	1,193			1,057			5,616			5,383
Railcars and locomotives	3,429			3,429			4,682			4,513
Computer hardware and software	3,518			3,105			3,811			3,806
Furniture and fixtures	544			544			599			572
Vehicles	1,474			1,480			2,173			1,636
	648,951			528,925			929,815			770,366
Less: accumulated depreciation	(50,747		)	(40,605		)	(76,328		)	(63,032		)
Spare parts	1,519			1,629			1,526			1,519
Property, plant and equipment, net	$	599,723		$	489,949		$	855,013		$	708,853

⁽¹⁾Includes unproved oil and gas properties of $58,082 and $59,930 as of June 30, 2019 and December 31, 2018, respectively.

During the six months ended June 30, ~~2018,~~2019, we ~~acquired~~added property, plant and equipment of ~~$119,916,~~$159.5 million, which primarily consists of terminal machinery and equipment placed in service or under development at Jefferson Terminal and Repauno, and ~~an investment in~~assets under development at Jefferson Terminal and Long Ridge, including a ~~joint venture of a natural gas production asset at Long Ridge.~~power plant under construction.

Depreciation expense for property, plant and equipment is summarized as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Depreciation expense for property, plant and equipment	$	6,558	$	5,166	$	13,295	$	10,162

Construction of Power Plant at Long Ridge

Construction Agreements

On February 15, 2019, our subsidiary, Long Ridge Energy Generation LLC (“LREG”), entered into an engineering, procurement and construction agreement (the “EPC Agreement”) with Kiewit Power Constructors Co. to construct a 485 megawatt natural gas fired, combined cycle power plant at Long Ridge Energy Terminal.

Additionally, on February 15, 2019, LREG entered into an agreement for the purchase of power generation equipment and related services (the “PIE Agreement”) with General Electric Company (“GE”) to acquire equipment and related services to be utilized at the power plant, including one combustion turbine, one condensing steam turbine, one hydrogen-cooled generator, one heat-recovery steam generator and related items.

The aggregate value of the EPC Agreement and the PIE Agreement is approximately $430 million.

Credit Agreements

On February 15, 2019, LREG and two other subsidiaries (collectively, "Co-Borrowers") entered into certain credit agreements establishing (i) a $445 million construction loan and term loan, (ii) a $154 million letter of credit facility and (iii) a $143 million construction loan and term loan, all of which will be used for the purposes of funding the development, construction and completion of the power plant. The interest costs incurred under these credit agreements for qualifying expenditures under construction are capitalized and included in the cost of the asset. Interest capitalization ceases once the asset is substantially complete or no longer undergoing activities to prepare it for its intended use.

See Note 8 for additional information related to the credit agreements.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Depreciation expense for property, plant and equipment $ 5,166
$ 3,353
$ 10,162
$ 6,657

Fixed Price Power Agreements

In connection with the construction of the power plant, LREG entered into fixed price power agreements for 457 megawatts of electric power. The agreements become effective on February 1, 2022, with 207 megawatts having a term of ten years and 250 megawatts having a term of seven years. Under the terms of the agreements, which are accounted for as derivatives, LREG receives a weighted average fixed price of $27.30 per megawatt hour and pays a variable price equal to the ELECTRICITY-PJM-AEP/DAYTON HUB-DAY AHEAD price. See Note 10 for additional information related to the fixed price power agreements.


6.	INVESTMENTS

The following table presents the ownership interests and carrying values of our investments:



			Carrying Value
	Investment	Ownership Percentage	June 30, 2019		December 31, 2018
Advanced Engine Repair JV	Equity method	25%	$	12,539	$	12,981
JGP Energy Partners LLC	Equity method	50%	25,333		25,461
Intermodal Finance I, Ltd.	Equity method	51%	855		2,118
Investments			$	38,727	$	40,560

Carrying Value
Investment Ownership Percentage June 30, 2018 December 31, 2017
Advanced Engine Repair JV Equity method 25% $ 13,374
$ 13,724
JGP Energy Partners LLC Equity method 50% 25,948
24,920
Intermodal Finance I, Ltd. Equity method 51% 4,082
3,894
Investments $ 43,404
$ 42,538

We did not recognize any other-than-temporary impairments for the three and six months ended June 30, ~~2018~~2019 and ~~2017.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

2018.

Equity Method Investments

The following table presents our proportionate share of equity in ~~losses:~~income (losses):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Advanced Engine Repair JV	$	(242	)	$	(126	)	$	(443	)	$	(350	)
JGP Energy Partners LLC	92			(235		)	(128		)	(87		)
Intermodal Finance I, Ltd.	(19		)	110			18			281
Total	$	(169	)	$	(251	)	$	(553	)	$	(156	)

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Advanced Engine Repair JV $ (126 ) $ (107 ) $ (350 ) $ (843 )
JGP Energy Partners LLC (235 ) (10 ) (87 ) (75 )
Intermodal Finance I, Ltd. 110
(210 ) 281
(675 )
Total $ (251 ) $ (327 ) $ (156 ) $ (1,593 )

Advanced Engine Repair JV

In December 2016, we invested ~~$15,000~~$15 million for 25% interest in an advanced engine repair joint venture. We ~~will initially~~ focus on developing new costs savings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment.

JGP

In 2016, we initiated activities in a 50% non-controlling interest in JGP, a joint venture. JGP is governed by a designated operating committee selected by the members in proportion to their equity interests. JGP is solely reliant on its members to finance its activities and therefore is a variable interest entity. We concluded that we are not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the ~~entity;~~entity; therefore, we do not consolidate JGP and instead account for this investment in accordance with the equity method.

Intermodal Finance I, Ltd.

In 2012, we acquired a 51% non-controlling interest in Intermodal Finance I, Ltd. (“Intermodal”), a joint venture. Intermodal is governed by a board of directors, and its shareholders have voting rights through their equity interests. As such, Intermodal is not within the scope of ASC 810-20 and should be evaluated for consolidation under the voting interest model. Due to the existence of substantive participating rights of the 49% equity investor, including the joint approval of material operating and capital decisions, such as material contracts and capital expenditures consistent with ASC 810-10-25-11, we do not have unilateral rights over this ~~investment;~~investment; therefore, we do not consolidate Intermodal but account for this investment in accordance with the equity method. We do not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met.

As of June 30, ~~2018,~~2019, Intermodal owns a portfolio of ~~multiple finance leases, representing four customers and comprising~~ approximately ~~24,000 shipping containers, as well as a portfolio of approximately 7,000~~4,000 shipping containers subject to multiple operating leases.

~~The table below presents summarized financial information for our equity method investments:~~

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Revenue $ 2,785
$ 1,796
$ 6,885
$ 3,417
Expenses 3,639
2,859
8,093
8,568
Net loss $ (854 ) $ (1,063 ) $ (1,208 ) $ (5,151 )

Company’s portion $ (300 ) $ (449 ) $ (205 ) $ (1,715 )

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)


7.	INTANGIBLE ASSETS AND LIABILITIES, NET

Intangible assets and liabilities, net are summarized as follows:


	June 30, 2018												June 30, 2019
	Aviation Leasing			Jefferson Terminal			Railroad			Total			Aviation Leasing			Jefferson Terminal			Railroad			Total
Intangible assets
Acquired favorable lease intangibles	$	38,973		$	—		$	—		$	38,973		$	48,810		$	—		$	—		$	48,810
Less: Accumulated amortization	(24,903		)	—			—			(24,903		)	(34,759		)	—			—			(34,759		)
Acquired favorable lease intangibles, net	14,070			—			—			14,070			14,051			—			—			14,051
Customer relationships	—			35,513			225			35,738			—			35,513			225			35,738
Less: Accumulated amortization	—			(13,601		)	(188		)	(13,789		)	—			(17,155		)	(225		)	(17,380		)
Acquired customer relationships, net	—			21,912			37			21,949			—			18,358			—			18,358
Total intangible assets, net	$	14,070		$	21,912		$	37		$	36,019		$	14,051		$	18,358		$	—		$	32,409

Intangible liabilities
Acquired unfavorable lease intangibles	$	2,732		$	—		$	—		$	2,732		$	5,025		$	—		$	—		$	5,025
Less: Accumulated amortization	(1,769		)	—			—			(1,769		)	(2,428		)	—			—			(2,428		)
Acquired unfavorable lease intangibles, net	$	963		$	—		$	—		$	963		$	2,597		$	—		$	—		$	2,597


	December 31, 2017												December 31, 2018
	Aviation Leasing			Jefferson Terminal			Railroad			Total			Aviation Leasing			Jefferson Terminal			Railroad			Total
Intangible assets
Acquired favorable lease intangibles	$	36,747		$	—		$	—		$	36,747		$	48,143		$	—		$	—		$	48,143
Less: Accumulated amortization	(20,452		)	—			—			(20,452		)	(29,780		)	—			—			(29,780		)
Acquired favorable lease intangibles, net	16,295			—			—			16,295			18,363			—			—			18,363
Customer relationships	—			35,513			225			35,738			—			35,513			225			35,738
Less: Accumulated amortization	—			(11,825		)	(165		)	(11,990		)	—			(15,378		)	(210		)	(15,588		)
Acquired customer relationships, net	—			23,688			60			23,748			—			20,135			15			20,150
Total intangible assets, net	$	16,295		$	23,688		$	60		$	40,043		$	18,363		$	20,135		$	15		$	38,513

Intangible liabilities
Acquired unfavorable lease intangibles	$	2,732		$	—		$	—		$	2,732		$	3,736		$	—		$	—		$	3,736
Less: Accumulated amortization	(1,374		)	—			—			(1,374		)	(2,114		)	—			—			(2,114		)
Acquired unfavorable lease intangibles, net	$	1,358		$	—		$	—		$	1,358		$	1,622		$	—		$	—		$	1,622

Intangible liabilities relate to unfavorable lease intangibles and are included as a component of other liabilities in the ~~accompanying~~ Consolidated Balance Sheets.

Amortization of intangible assets and liabilities is as follows:



	Classification in Consolidated Statements of Operations	Three Months Ended June 30,				Six Months Ended June 30,
	Classification in Consolidated Statements of Operations	2019		2018		2019		2018
Lease intangibles	Equipment leasing revenues	$	2,202	$	2,064	$	4,664	$	4,056
Customer relationships	Depreciation and amortization	892		899		1,792		1,799
Total		$	3,094	$	2,963	$	6,456	$	5,855

Classification in Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Lease intangibles Equipment leasing revenues $ 2,064
$ 1,065
$ 4,056
$ 2,347
Customer relationships Depreciation and amortization 899
899
1,799
1,799
Total $ 2,963
$ 1,964
$ 5,855
$ 4,146

2018

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

As of June 30, ~~2018,~~2019, estimated net annual amortization of intangibles is as follows:



Remainder of 2019	$	5,278
2020	7,977
2021	6,266
2022	4,499
2023	3,583
Thereafter	2,209
Total	$	29,812

2018 $ 5,521
2019 8,360
2020 6,779
2021 5,142
2022 3,596
Thereafter 5,658
Total $ 35,056


8.	~~DEBT, NET~~ FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Dollars in tables in thousands, unless otherwise noted) 8. DEBT, NET

Our debt, net is summarized as follows:



	June 30, 2019					December 31, 2018
	Outstanding Borrowings			Stated Interest Rate	Maturity Date	Outstanding Borrowings
Loans payable
FTAI Pride Credit Agreement ⁽¹⁾	$	44,618		LIBOR + 4.50%	9/15/2019	$	47,743
CMQR Credit Agreement	23,300			(i) Adjusted LIBOR + 2.50% or 4.50%; or (ii) U.S. or Canadian Base Rate + 1.50% or 3.50%; or (iii) Canadian Fixed Rate + 2.50% or 4.50%	5/8/2022	22,265
Revolving Credit Facility ⁽²⁾	90,000			(i) Base Rate + 2.00%; or (ii) Adjusted Eurodollar Rate + 3.00%	1/31/2022	100,000
Jefferson Revolver ⁽²⁾	73,000			(i) Base Rate + 1.50%; or (ii) Base Rate + 2.50% (Eurodollar)	3/7/2021	49,805
DRP Revolver ⁽³⁾	21,600			(i) Base Rate + 1.50%; or (ii) Base Rate + 2.50% (Eurodollar)	11/5/2021	—
LREG Credit Agreement ⁽⁴⁾	71,500			First Lien Credit Agreement: 7.30% LC Facility: Base Rate + 2.50% to 3.50% Second Lien Credit Agreement: Base Rate + 7.50%	2/15/2022 to 6/30/2028	—
Total loans payable	324,018					219,813
Bonds payable
Series 2012 Bonds ⁽⁵⁾	42,765			8.25%	7/1/2032	42,797
Series 2016 Bonds ⁽⁶⁾	144,200			7.25%	2/1/2036	144,200
Senior Notes due 2022 ⁽⁷⁾	697,443			6.75%	3/15/2022	549,405
Senior Notes due 2025 ⁽⁸⁾	444,607			6.50%	10/1/2025	295,642
Total bonds payable	1,329,015					1,032,044

Debt	1,653,033					1,251,857
Less: Debt issuance costs	(21,897		)			(14,510		)
Total debt, net	$	1,631,136				$	1,237,347

Total debt due within one year	$	213,488				$	71,678

June 30, 2018 December 31, 2017
Loans payable
FTAI Pride Credit Agreement $ 50,868
$ 53,993
CMQR Credit Agreement 20,400
22,800
Revolving Credit Facility 25,000
—
Jefferson Revolver 39,511
—
Total loans payable 135,779
76,793
Bonds payable
Series 2012 Bonds⁽¹⁾
44,373
44,404
Series 2016 Bonds 144,200
144,200
Senior Notes⁽²⁾
549,344
449,290
Total bonds payable 737,917
637,894

Debt 873,696
714,687
Less: Debt issuance costs (10,950 ) (11,423 )
Total debt, net $ 862,746
$ 703,264

Total debt due within one year $ 7,795
$ 7,795

⁽¹⁾ ~~Includes unamortized premium of $1,608 and $1,639 at June 30, 2018 and December 31, 2017, respectively.~~

⁽²⁾ Includes unamortized discount of $5,843 and $6,506 at June 30, 2018 and December 31, 2017, respectively and an unamortized premium of $5,187 and $5,796 at June 30, 2018 and December 31, 2017, respectively.

~~FTAI Pride Credit Agreement~~—On September 15, 2014, FTAI Pride, LLC, (“FTAI Pride”), our subsidiary, entered into a credit agreement (the “FTAI Pride Credit Agreement”) with a financial institution for a term loan in an aggregate amount of $75,000. The loan proceeds were used in connection with the acquisition of an offshore construction vessel. The FTAI Pride Credit Agreement requires quarterly payments of interest and scheduled principal payments of $1,562 beginning in the quarter ending December 31, 2015, through its maturity in September 2019, and can be prepaid without penalty at any time. The FTAI Pride Credit Agreement is secured Secured on a first priority basis by the offshore ~~construction~~ vessel. ~~Borrowings under~~

⁽²⁾ Requires a quarterly commitment fee at a rate of 0.50% on the ~~FTAI Pride~~average daily unused portion, as well as customary letter of credit fees and agency fees.

⁽³⁾ Requires a quarterly commitment fee at a rate of 0.875% on the average daily unused portion, as well as customary letter of credit fees and agency fees.

⁽⁴⁾ Requires a quarterly commitment fee on the average daily unused portion at a rate of 1.50% for the First Lien Credit Agreement ~~bear interest at~~and LC Facility and 1.00% for the ~~LIBOR rate plus a spread of 4.50%.~~

~~The FTAI Pride~~Second Lien Credit Agreement, ~~contains affirmative~~as well as customary letter of credit fees and ~~negative covenants which limit certain actions~~agency fees.

⁽⁵⁾ Includes unamortized premium of ~~the borrower~~$1,545 and ~~a financial covenant requiring the borrower to maintain a Fixed Charges Coverage Ratio, as defined, of not less than 1.15:1.00 in any twelve month period ending December 31, 2014, or later.~~

~~CMQR Credit Agreement~~—On$1,577 at June 30, 2017, CMQR amended its credit agreement (the “CMQR Credit Agreement”) with a financial institution for a revolving line of credit to increase the aggregate amount from $20,000 to $25,000 and to extend the maturity date to September 18, 2019. Borrowings under the CMQR Credit Agreement bear interest at either (i) Adjusted LIBOR plus a spread of 2.50% or 4.50%, (ii) the U.S. or Canadian Base Rate plus a spread of 1.50% or 3.50%, or (iii) the Canadian Fixed Rate plus a spread of 2.50% or 4.50%, as defined by the CMQR Credit Agreement. The weighted-average effective interest rate as of June 30, 20182019 and December 31, ~~2017 was 4.46% and 3.95%,~~2018, respectively.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

The CMQR Credit Agreement is also indirectly supported by the Company as sponsor. In the event of a default under the credit agreement, CMQR’s lenders can cause CMQR to call up to a total of $29,000 in capital from the Company, and in the event of CMQR’s bankruptcy, the lenders can put the debt back to the Company. The CMQR Credit Agreement contains affirmative and negative covenants which limit certain actions of CMQR.

~~Series 2012 Bonds~~—~~On August 1, 2012, Jefferson County Development Corporation issued $46,875 of tax-exempt industrial~~⁽⁶⁾ These bonds (“Series 2012 Bonds”), to specifically fund construction and operation of an intermodal transfer facility for crude oil and refined petroleum products. The proceeds of this issuance were loaned to Jefferson Terminal, to be held in trust, as restricted cash, to ensure adherence to the restrictions of use of the funds. Use of the proceeds requires approval from a trustee prior to release of funds. Such restricted cash may only be released to us after payment of applicable reserves, including a six-month interest reserve, and expenses, as determined by the trustee. The Series 2012 Bonds have a stated maturity of July 1, 2032, bear interest at 8.25%, and require scheduled principal payments. The principal of the Series 2012 Bonds is payable annually at varying amounts.

In connection with our acquisition of Jefferson Terminal, the Series 2012 Bonds were recorded at a fair value of $48,554, which represented a premium of $1,823 as compared to their face value at the date of acquisition; such premium is being amortized using the effective interest method over the remaining contractual term of the Series 2012 Bonds.

The Series 2012 Bond agreement contains a financial covenant requiring a subsidiary of ours to maintain a long-term debt service coverage ratio, as defined in the agreement, of 1.25 to 1, in each fiscal year, beginning with December 31, 2014.

~~Series 2016 Bonds~~—On March 7, 2016, the Port of Beaumont Navigation District of Jefferson County, Texas (the “District”) issued $144,200 of Dock and Wharf Facility Revenue Bonds, Series 2016 (Jefferson Energy Companies Project) (the “Series 2016 Bonds”). Proceeds from the issuance of the Series 2016 Bonds were used, in part, to reimburse Jefferson Railport Terminal II, LLC (“Jefferson Railport II”) for certain costs related to the development, construction and acquisition of certain facilities for the transport, loading, unloading, and storage of petroleum products (the “Facilities”) on behalf of the District, and settle the Jefferson Terminal Credit Agreement. Construction of the Facilities has occurred on property leased by the District to Jefferson Railport II pursuant to a First Amended and Restated Ground Lease between Jefferson Railport II, as lessee, and the District, as lessor. All such Facilities will be leased by the District to Jefferson Railport II pursuant to a Lease and Development Agreement between the District and Jefferson Railport II.

The transaction described above did not qualify for sale-leaseback accounting due to our continuing involvement resulting from the mandatory tender feature and, as a result, the leases were classified as a financing transaction in our consolidated financial statements. Under the financing method, the assets constructed or to be constructed will remain on the consolidated balance sheet and the net proceeds received by us are recorded as financial debt. Payments under these leases are recorded as interest expense and reduction of principal in accordance with the terms of the bond agreement with annual interest payments and a principal repayment at February 13, 2020 barring a remarketing of the bond on new terms.

Under a Capital Call Agreement, we have agreed to make funds available to Jefferson Holdings in order to satisfy our obligation under the Standby Bond Purchase Agreement. The Capital Call Agreement contains certain covenants, including a negative lien covenant regarding Aviation Assets, as defined therein, as well as maintenance of a minimum total asset value of Aviation Assets and minimum total equity. In connection with the above, and related to the Series 2016 Bonds, a subsidiary of ours and an affiliate of our Manager entered into a Fee and Support Agreement with FTAI Energy Partners LLC and certain of its subsidiaries. The Fee and Support Agreement provides that both such subsidiary of ours and affiliate of the Manager will effectively guarantee a pro rata portion of the obligations under the Standby Bond Purchase Agreement in return for a guarantee fee of $6,873 (shared on the same pro rata basis). This fee will be amortized as interest expense to the earlier of the redemption date or February 13, 2020.

~~The Series 2016 Bonds bear interest at an initial rate of 7.25% and require scheduled interest payments. The Series 2016 Bonds~~ have a stated maturity of February 1, 2036 but are subject to mandatory tender for purchase at par, by our subsidiary, on February 13, 2020 if they have not been repurchased from proceeds of a remarketing of the ~~Series 2016 Bonds~~bonds or redeemed prior to such date. ~~In the event all~~

⁽⁷⁾ Includes unamortized discount of ~~the Series 2016 Bonds are not repurchased from proceeds~~$6,468 and $5,154 at June 30, 2019 and December 31, 2018, respectively, and an unamortized premium of ~~a remarketing or redeemed~~$3,911 and $4,559 at ~~February 13, 2020,~~ June 30, 2019 and December 31, 2018, respectively.

⁽⁸⁾ Includes unamortized discount of $5,393 and $4,358 at June 30, 2019 and December 31, 2018, respectively.

Jefferson Railport and Jefferson Railport Terminal II Holdings LLC (“Jefferson Holdings”), a Delaware limited liability company and parent of Jefferson Railport II, have agreed to purchase the Series 2016 Bonds from the Holders thereof at par pursuant to a Standby Bond Purchase Agreement. In addition, pursuant to the Standby Purchase Agreement, Jefferson Holdings will guarantee the payment of all Rent (as defined in the Facilities Lease), and all principal of and premium and interest on the Series 2016 Bonds payable prior to repurchase or redemption at February 13, 2020.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~Term Loan~~Revolver—On ~~January 23, 2017, we~~December 20, 2018, our subsidiary entered into an ~~unsecured credit agreement under~~amendment to the Jefferson Revolver which ~~we, through our wholly owned subsidiaries, including~~temporarily increases the ~~Partnership and WWTAI Finance Ltd., an exempted company incorporated with limited liability under~~aggregate revolving commitments by $25 million from $50 million to $75 million, until August 1, 2019, after which the ~~laws of Bermuda, borrowed $100,000 in term loans denominated in U.S. dollars (the “Term Loans”). The proceeds of the Term Loan are~~aggregate revolving commitment will revert back to be used for general corporate purposes, including future acquisitions by us and our subsidiaries of certain aviation and infrastructure assets. The Term Loans bear interest at the Base Rate (determined in accordance with the agreement) plus 2.75% per annum, or at the Adjusted Eurodollar Rate (determined in accordance with the agreement) plus 3.75% per annum, if we choose to make Eurodollar Rate borrowings. The Term Loans mature on January 22, 2018, subject to our right to elect a one year extension, and require amortization payments in the amount of $250 on the last day of each fiscal quarter beginning on March 31, 2017. On March 15, 2017, all amounts outstanding under the Term Loan were repaid in full and the agreement was terminated. Accordingly, during the six months ended June 30, 2017, we recorded a loss on extinguishment of debt of $2,456.$50 million.

~~Senior Notes~~—~~On March 15, 2017, we issued $250,000 aggregate principal amount of 6.75% senior unsecured notes due 2022 (the “Senior Notes”). The~~ Senior Notes ~~were issued pursuant to an indenture, dated as of March 15, 2017, between us and U.S. Bank National Association, as trustee.~~ due 2022—On ~~August 23, 2017,~~February 8, 2019, we issued an additional ~~$100,000~~$150 million of Senior ~~Notes. The additional notes were issued~~Notes (“2022 Notes”) at an offering price of 102.75% of the principal amount plus accrued interest from March 15, 2017 to the date of issuance. On December 20, 2017, we issued an additional $100,000 of Senior Notes. The additional notes issued on December 20, 2017 were issued at an offering price of 103.25%98.5% of the principal amount plus accrued interest from September 15, ~~2017. On May 31, 2018, we issued an additional $100,000 of Senior Notes at an offering price of 100.00% of the principal amount plus accrued interest from March 15,~~ 2018.

The Senior Notes bear interest at a rate of 6.75% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2017, to persons who are registered holders of the Senior Notes on the immediately preceding March 1 and September 1, respectively.

The Senior Notes mature on March 15, 2022. Prior to March 15, 2020, we may redeem some or all of the Senior Notes at a redemption price equal to 100.00% of the principal amount of the Senior Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date, plus a “make-whole” premium. On or after March 15, 2020, we may redeem some or all of the Senior Notes at any time at declining redemption prices equal to (i) 105.063% beginning on March 15, 2020, and (ii) 100.000% beginning on March 15, 2021 and thereafter, plus, in each case, accrued and unpaid interest, if any, to, but not including, the applicable redemption date. In addition, at any time on or prior to March 15, 2020, we may at any time redeem up to 40% of the aggregate principal amount of the Senior Notes using net proceeds from certain equity offerings at a redemption price equal to 106.75% of the principal amount of the Senior Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date.

We used a portion of the proceeds to fully repay all outstanding indebtedness under our Term Loan in the amount of $100,000, payment of fees related to the issuance of Senior Notes, and to fund the purchase of additional investments. We intend to use the remainder of the proceeds for general corporate purposes, including the funding of future investments.

~~Revolving Credit Facility~~—On June 16, 2017, we entered into a revolving credit facility (the “Revolving Credit Facility”) with certain lenders. The Revolving Credit Facility provides for revolving loans in the aggregate principal amount of up to $75,000, of which $25,000 may be utilized for the issuance of letters of credit. The proceeds drawn on this facility will be used for working capital and general corporate purposes, including, without limitation, permitted acquisitions and other investments. The Revolving Credit Facility is secured by the capital stock of certain direct subsidiaries of ours as defined in the related credit agreement.

Borrowings outstanding under the Revolving Credit Facility bear interest at the Adjusted Eurodollar Rate (determined in accordance with the credit agreement) plus 3.00% per annum, if we choose to make Eurodollar Rate borrowings, or at the Base Rate (determined in accordance with the credit agreement) plus 2.00% per annum. We will also be required to pay a quarterly commitment fee at a rate per annum equal to 0.50% on the average daily unused portion of the Revolving Credit Facility, as well as customary letter of credit fees and agency fees.

The Revolving Credit Facility will mature, and commitments in respect of the Revolving Credit Facility will terminate, on June 16, 2020. Any amount borrowed under the Revolving Credit Facility may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of Eurodollar Rate borrowings.

The Revolving Credit Facility includes financial covenants requiring the maintenance of (1) a minimum ratio of the appraised value of certain aviation assets to the aggregate commitments under the revolving credit facility of 3.00 to 1.00 and (2) a maximum ratio of debt to total equity (before reduction for minority interests) for us and our subsidiaries of 1.65 to 1.00 per the terms of the credit agreement.

~~In April 2018 we drew down on the Revolving Credit Facility and our outstanding borrowings as of June 30, 2018 were $25,000.~~

2320

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

~~Jefferson~~ Revolving Credit Facility—On ~~March 7, 2018, a subsidiary of ours~~February 8, 2019, we entered into aan amendment to the revolving credit facility (the ~~“Jefferson Revolver”~~“Revolving Credit Facility”) ~~with certain lenders.~~. The ~~Jefferson Revolver provides for~~amendment, among other things, (i) increases the aggregate revolving commitments by $125 million from $125 million to $250 million, (ii) extends the maturity date of the revolving loans in the aggregate principal amount of up to $50,000. The proceeds drawn on this facility will be used for working capital and general purposes. The Jefferson Revolver is secured by the capital stock of certain of our direct subsidiaries as defined in the related credit agreement.

Borrowings outstanding under the Jefferson Revolver bear interest at the Base Rate (determined in accordance with the credit agreement) plus 1.50% per annum, or if we choose to make Eurodollar Rate borrowings, at the Base Rate (determined in accordance with the credit agreement) plus 2.50% per annum. We will also be required to pay a quarterly commitment fee at a rate per annum equal to 0.50% on the average daily unused portion of the Jefferson Revolver, as well as customary letter of credit fees and agency fees.

~~The Jefferson Revolver will mature,~~ and commitments ~~in respect~~to January 31, 2022 and (iii) makes certain modifications to the Jefferson Revolver will terminate on March 7, 2021. Any amount borrowed under the Jefferson Revolver may be voluntarily prepaid without penalty or premium, other than customary breakage costs related to prepayments of Eurodollar Rate borrowings.

~~The Jefferson Revolver includes~~ financial covenants, ~~requiring~~including an increase in the ~~maintenance of a~~ maximum ratio of debt to total equity ~~(before reduction~~from 1.65 to 1.00 to 2.00 to 1.00.

LREG Credit Agreement—On February 15, 2019, LREG and two other subsidiaries, Ohio Gasco LLC, (“GasCo” and, together with LREG, the “Co-Borrowers”), and Ohio PP Holdco LLC (“Holdings”), entered into a First Lien Credit Agreement establishing (i) a $445 million construction loan (the “First Lien Construction Loans”) and term loan (the “First Lien Term Loans” and, together with the First Lien Construction Loans, the “First Lien Loan Facility”) credit facility for ~~minority interests)~~the purposes of funding the development, construction and completion of the power plant and the associated development, production and drilling of hydrocarbon interests (cumulatively, the “Project”), and (ii) a $154 million letter of credit facility, which is available to the Co-Borrowers solely to support any collateral posting obligations of the Co-Borrowers under certain fixed price power agreements related to the Project (the “LC Facility”). The LC Facility may be increased up to $179 million under certain circumstances as set forth in the First Lien Credit Agreement, with such additional amounts of letters of credit available to LREG solely in support of any collateral posting obligations in connection with a bid in the PJM capacity auction. As of June 30, 2019, $130 million letters of credit have been provided to counterparties in accordance with the provisions of the LC Facility, leaving $24 million of remaining initial letter of credit capacity.

The First Lien Construction Loans are available until the date on which, among other things, substantial completion of the Project is achieved (which is required to occur on or prior to June 1, 2022), at which point the First Lien Construction Loans then outstanding shall automatically convert to Term Loans (“Term Conversion”). Following Term Conversion, the First Lien Term Loans will commence amortization on a quarterly basis and will mature on December 31, 2027. The LC Facility will mature upon the earlier of (a) February 15, 2022, (b) the date the loans under the First Lien Loan Facility are accelerated or (c) the date of Term Conversion.

Also on February 15, 2019, the Co-Borrowers and Holdings entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement” and, together with the First Lien Credit Agreement, the “Credit Agreements”) establishing a $143 million construction loan (the “Second Lien Construction Loans”) and term loan (the “Second Lien Term Loans” and, together with the Second Lien Construction Loans, the “Second Lien Loan Facility”) credit facility for the purposes of funding the development, construction and completion of the Project.

The Co-Borrowers were required to borrow $71.5 million in Second Lien Construction Loans on February 15, 2019, with the remaining Second Lien Construction Loans required to be borrowed no later than February 15, 2020. Following Term Conversion, the Second Lien Construction Loans then outstanding will automatically convert to Second Lien Term Loans and will commence amortization on a quarterly basis and mature on June 30, 2028.

The Co-Borrowers’ obligations under the First Lien Credit Agreement and the Second Lien Credit Agreement are guaranteed by the Co-Borrowers and Holdings and are secured by first priority security interests and second priority security interests, respectively, in all of the assets of the Co-Borrowers and Holdings. The borrowings under the Credit Agreements are not guaranteed by us and are non-recourse to us.

CMQR Credit Agreement—On May 8, 2019, our ~~subsidiaries~~subsidiary entered into an amendment to the CMQR Credit Agreement which extended the maturity date to May 8, 2022.

Senior Notes due 2025—On May 21, 2019, we issued an additional $150 million of ~~1.65 to 1.00.~~

~~At June 30, 2018, we had $39,511 in borrowings outstanding under~~Senior Notes (“2025 Notes”) at an offering price of 99.125% of the ~~Jefferson Revolver.~~principal amount plus accrued interest from April 1, 2019.

We were in compliance with all debt covenants as of June 30, ~~2018.~~2019.


9.	FAIR VALUE MEASUREMENTS

Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:

Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.

Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.

The valuation techniques that may be used to measure fair value are as follows:

Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

The following tables set forth our financial assets measured at fair value on a recurring basis as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, by level within the fair value hierarchy. Assets measured at fair value are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.



	Fair Value as of			Fair Value Measurements Using Fair Value Hierarchy as of
	June 30, 2019			June 30, 2019
	Total			Level 1		Level 2		Level 3			Valuation Technique
Assets
Cash and cash equivalents	$	115,559		$	115,559	$	—	$	—		Market
Restricted cash	58,817			58,817		—		—			Market
Derivative assets	47,131			—		—		47,131			Income
Total assets	$	221,507		$	174,376	$	—	$	47,131

Liabilities
Derivative liabilities	$	(93	)	$	—	$	—	$	(93	)	Income
Total liabilities	$	(93	)	$	—	$	—	$	(93	)

	Fair Value as of			Fair Value Measurements Using Fair Value Hierarchy as of
	December 31, 2018			December 31, 2018
	Total			Level 1		Level 2		Level 3			Valuation Technique
Assets
Cash and cash equivalents	$	99,601		$	99,601	$	—	$	—		Market
Restricted cash	21,236			21,236		—		—			Market
Derivative assets	7,470			—		—		7,470			Income
Total	$	128,307		$	120,837	$	—	$	7,470

Liabilities
Derivative liabilities	$	(925	)	$	—	$	—	$	(925	)	Income
Total liabilities	$	(925	)	$	—	$	—	$	(925	)

Fair Value as of Fair Value Measurements Using Fair Value Hierarchy as of
June 30, 2018 June 30, 2018
Total Level 1 Level 2 Level 3 Valuation Technique
Assets
Cash and cash equivalents $ 40,319
$ 40,319
$ —
$ —
Market
Restricted cash 33,526
33,526
—
—
Market
Derivative assets 840
—
—
840
Income
Total $ 74,685
$ 73,845
$ —
$ 840

Fair Value as of Fair Value Measurements Using Fair Value Hierarchy as of
December 31, 2017 December 31, 2017
Total Level 1 Level 2 Level 3 Valuation Technique
Assets
Cash and cash equivalents $ 59,400
$ 59,400
$ —
$ —
Market
Restricted cash 33,406
33,406
—
—
Market
Derivative assets 1,022
—
—
1,022
Income
Total $ 93,828
$ 92,806
$ —
$ 1,022

~~At June 30, 2018 and December 31, 2017, we had no liabilities that were measured at~~The fair value of our electricity derivative liabilities and commodity derivative assets and liabilities classified as Level 3 measurements are estimated by applying the income approach, which is based on ~~a recurring basis.~~discounted projected future cash flows. The valuation of our electricity derivatives is based on management’s best estimate of certain key assumptions, which include extrapolated power forward curves for periods with unobservable market pricing, credit valuation adjustments utilizing estimated cash flows, estimated price volatility and probability of default, and the discount rate. The valuation of our commodity derivatives is based on management’s best estimate of certain key assumptions, which include an estimated differential factor for varying quality of commodity and the discount rate.

Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy.

Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, accounts payable and accrued liabilities, loans payable, bonds payable, security deposits, maintenance deposits and management fees payable, whose fair value approximates their carrying value based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The fair value of our bonds and notes payable reported as debt, net in the Consolidated Balance Sheets are presented in the table below:

June 30, 2018 December 31, 2017
Series 2012 Bonds⁽¹⁾
$ 44,682
$ 45,691
Series 2016 Bonds⁽¹⁾
149,371
150,329
Senior Notes 564,828
449,290



	June 30, 2019		December 31, 2018
Series 2012 Bonds ⁽¹⁾	$	43,448	$	42,633
Series 2016 Bonds ⁽¹⁾	147,610		149,582
Senior Notes due 2022	728,980		551,144
Senior Notes due 2025	464,031		283,965

^{______________________________________________________________________________________}

⁽¹⁾ Fair value is based upon market prices for similar municipal ~~securities~~securities.

The fair value of all other items reported as debt, net in the Consolidated Balance Sheet approximate their carrying values due to their bearing market rates of interest, and are classified as Level 2 within the fair value hierarchy.

We measure the fair value of certain assets and liabilities on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include goodwill, intangible assets, property, plant and equipment and leasing equipment. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~10. DERIVATIVE FINANCIAL INSTRUMENTS

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~Electricity Derivatives

~~(Dollar amounts~~We are subject to electricity price volatility stemming from the anticipated sales of electricity from our Long Ridge power generation plant under construction. From time to time, we enter into electricity swap agreements to manage our exposure to electricity price fluctuations. Certain derivatives are designated as hedging instruments within cash flow hedging relationships and certain other derivatives are not designated as hedging instruments.

Commodity Derivatives

Depending on market conditions, we source crude oil from producers in ~~thousands, unless otherwise noted)~~

Canada, arranging logistics to Jefferson Terminal and marketing crude oil to third parties. These crude oil forward purchase and sales contracts are not designated in hedging relationships.

~~10. REVENUES~~

~~Components of revenue are as follows:~~The following table presents information related to our outstanding derivative contracts:

Three Months Ended June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Equipment leasing revenues
Lease income $ 33,625
$ 1,868
$ —
$ —
$ —
$ —
$ 35,493
Maintenance revenue 21,688
—
—
—
—
—
21,688
Finance lease income 247
365
—
—
—
—
612
Other revenue 558
954
25
—
—
—
1,537
Total equipment leasing revenues 56,118
3,187
25
—
—
—
59,330
Infrastructure revenues
Lease income —
—
—
—
—
417
417
Rail revenues —
—
—
—
8,788
—
8,788
Terminal services revenues —
—
—
2,550
—
—
2,550
Other revenue —
—
—
—
—
894
894
Total infrastructure revenues —
—
—
2,550
8,788
1,311
12,649
Total revenues $ 56,118
$ 3,187
$ 25
$ 2,550
$ 8,788
$ 1,311
$ 71,979



	Notional Amount	Fair Value of Assets ⁽¹⁾		Fair Value of Liabilities ⁽¹⁾			Term
June 30, 2019
Derivatives Designated in Cash Flow Hedges:
Electricity swaps (MWh)	29,278	$	40,244	$	—		7 to 10 years
Non-hedge Derivative Instruments:
Electricity swaps (MWh)	4,207	$	2,517	$	—		7 to 10 years
Crude oil forwards (BBL)	1,889	4,370		(93		)	1 to 6 months

December 31, 2018
Derivatives Designated in Cash Flow Hedges:
Electricity swaps (MWh)	—	$	—	$	—		N/A
Non-hedge Derivative Instruments:
Electricity swaps (MWh)	—	$	—	$	—		N/A
Crude oil forwards (BBL)	3,225	7,470		(925		)	1 to 12 months

⁽¹⁾ Included in Other assets and Other liabilities, respectively, in our Consolidated Balance Sheets.

Three Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Equipment leasing revenues
Lease income $ 20,001
$ 2,884
$ —
$ —
$ —
$ —
$ 22,885
Maintenance revenue 16,576
—
—
—
—
—
16,576
Finance lease income —
385
—
—
—
—
385
Other revenue —
512
25
—
—
—
537
Total equipment leasing revenues 36,577
3,781
25
—
—
—
40,383
Infrastructure revenues
Lease income —
—
—
—
—
123
123
Rail revenues —
—
—
—
7,662
—
7,662
Terminal services revenues —
—
—
3,026
—
—
3,026
Total infrastructure revenues —
—
—
3,026
7,662
123
10,811
Total revenues $ 36,577
$ 3,781
$ 25
$ 3,026
$ 7,662
$ 123
$ 51,194

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

The following table presents a summary of the changes in fair value for all Level 3 derivatives:

Six Months Ended June 30, 2018
Equipment Leasing
Infrastructure

Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Equipment leasing revenues
Lease income $ 62,933
$ 4,117
$ —
$ —
$ —
$ —
$ 67,050
Maintenance revenue 45,115
—
—
—
—
—
45,115
Finance lease income 247
732
—
—
—
—
979
Other revenue 558
1,362
50
—
—
—
1,970
Total equipment leasing revenues 108,853
6,211
50
—
—
—
115,114
Infrastructure revenues
Lease income —
—
—
—
—
799
799
Rail revenues —
—
—
—
19,835
—
19,835
Terminal services revenues —
—
—
3,803
—
—
3,803
Other revenue —
—
—
—
—
1,272
1,272
Total infrastructure revenues —
—
—
3,803
19,835
2,071
25,709
Total revenues $ 108,853
$ 6,211
$ 50
$ 3,803
$ 19,835
$ 2,071
$ 140,823

Six Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Equipment leasing revenues
Lease income $ 37,636
$ 3,495
$ —
$ —
$ —
$ —
$ 41,131
Maintenance revenue 29,245
—
—
—
—
—
29,245
Finance lease income —
771
—
—
—
—
771
Other revenue 2
572
50
—
—
—
624
Total equipment leasing revenues 66,883
4,838
50
—
—
—
71,771
Infrastructure revenues
Lease income —
—
—
—
—
139
139
Rail revenues —
—
—
—
16,065
—
16,065
Terminal services revenues —
—
—
7,892
—
—
7,892
Total infrastructure revenues —
—
—
7,892
16,065
139
24,096
Total revenues $ 66,883
$ 4,838
$ 50
$ 7,892
$ 16,065
$ 139
$ 95,867



	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
	Electricity Swaps			Crude Oil Forwards			Total			Electricity Swaps			Crude Oil Forwards			Total
Beginning Balance	$	(45,382	)	$	5,695		$	(39,687	)	$	—		$	6,545		$	6,545
Net unrealized gains (losses) recognized in earnings	4,887			(1,417		)	3,470			2,517			(2,267		)	250
Gains recognized in other comprehensive income	83,256			—			83,256			40,244		⁽¹⁾	—			40,244
Purchases	—			310			310			—			314			314
Sales	—			113			113			—			(854		)	(854		)
Settlements	—			(424		)	(424		)	—			539			539
Ending Balance	$	42,761		$	4,277		$	47,038		$	42,761		$	4,277		$	47,038

⁽¹⁾ We entered this contract during the six months ended June 30, 2019.

There were no transfers into or out of Level 3 during the periods presented.

The following table presents pretax gains and losses on our derivative contracts:



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Electricity Swaps:
Gains recognized in other comprehensive income before reclassifications	$	83,256		$	—	$	40,244		$	—
Gains (losses) reclassified from accumulated other comprehensive income	—			—		—			—
Gains recognized in earnings	4,887			—		2,517			—
Crude Oil Forwards:
(Losses) gains recognized in earnings	$	(1,417	)	$	441	$	(2,267	)	$	(182	)

As of June 30, 2019, we do not expect any gains or losses on our electricity swaps to be reclassified into revenue in the next 12 months. As of June 30, 2019, the maximum length of time over which we are hedging forecasted electricity sales is 13 years.

11. REVENUES

We disaggregate our revenue from contracts with customers by products and services provided for each of our segments, as we believe it best depicts the nature, amount, timing and uncertainty of our revenue. Revenues attributed to our Equipment Leasing business unit are within the scope of ASC 840 prior to January 1, 2019 and ASC 842 after January 1, 2019, while revenues attributed to our Infrastructure business unit are within the scope of ASC 606, unless otherwise noted. Under the provisions of ASC 842, we have elected to exclude sales and other similar taxes from lease payments in arrangements where we are a lessor.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)



	Three Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Equipment leasing revenues
Lease income	$	48,731	$	—	$	—	$	—	$	3,157	$	51,888
Maintenance revenue	25,369		—		—		—		—		25,369
Finance lease income	881		—		—		—		—		881
Other revenue	—		—		—		—		1,062		1,062
Total equipment leasing revenues	74,981		—		—		—		4,219		79,200
Infrastructure revenues
Lease income	—		821		—		265		—		1,086
Rail revenues	—		—		9,977		—		—		9,977
Terminal services revenues	—		7,537		—		1,028		—		8,565
Crude marketing revenues	—		59,204		—		—		—		59,204
Other revenue	—		—		—		973		—		973
Total infrastructure revenues	—		67,562		9,977		2,266		—		79,805
Total revenues	$	74,981	$	67,562	$	9,977	$	2,266	$	4,219	$	159,005



	Three Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Equipment leasing revenues
Lease income	$	35,373	$	—	$	—	$	—	$	1,868	$	37,241
Maintenance revenue	19,940		—		—		—		—		19,940
Finance lease income	247		—		—		—		365		612
Other revenue	558		—		—		—		979		1,537
Total equipment leasing revenues	56,118		—		—		—		3,212		59,330
Infrastructure revenues
Lease income	—		—		—		417		—		417
Rail revenues	—		—		8,788		—		—		8,788
Terminal services revenues	—		2,550		—		—		—		2,550
Crude marketing revenues	—		—		—		—		—		—
Other revenue	—		—		—		894		—		894
Total infrastructure revenues	—		2,550		8,788		1,311		—		12,649
Total revenues	$	56,118	$	2,550	$	8,788	$	1,311	$	3,212	$	71,979

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)



	Six Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Equipment leasing revenues
Lease income	$	96,034	$	—	$	—	$	—	$	5,090	$	101,124
Maintenance revenue	47,146		—		—		—		—		47,146
Finance lease income	1,707		—		—		—		—		1,707
Other revenue	505		—		—		—		1,170		1,675
Total equipment leasing revenues	145,392		—		—		—		6,260		151,652
Infrastructure revenues
Lease income	—		1,129		—		620		—		1,749
Rail revenues	—		—		20,484		—		—		20,484
Terminal services revenues	—		12,404		—		2,846		—		15,250
Crude marketing revenues	—		89,983		—		—		—		89,983
Other revenue	—		—		—		4,514		—		4,514
Total infrastructure revenues	—		103,516		20,484		7,980		—		131,980
Total revenues	$	145,392	$	103,516	$	20,484	$	7,980	$	6,260	$	283,632



	Six Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Equipment leasing revenues
Lease income	$	68,623	$	—	$	—	$	—	$	4,117	$	72,740
Maintenance revenue	39,425		—		—		—		—		39,425
Finance lease income	247		—		—		—		732		979
Other revenue	558		—		—		—		1,412		1,970
Total equipment leasing revenues	108,853		—		—		—		6,261		115,114
Infrastructure revenues
Lease income	—		—		—		799		—		799
Rail revenues	—		—		19,835		—		—		19,835
Terminal services revenues	—		3,803		—		—		—		3,803
Crude marketing revenues	—		—		—		—		—		—
Other revenue	—		—		—		1,272		—		1,272
Total infrastructure revenues	—		3,803		19,835		2,071		—		25,709
Total revenues	$	108,853	$	3,803	$	19,835	$	2,071	$	6,261	$	140,823

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Presented below are the contracted minimum future annual revenues to be received under existing operating and finance leases across several market sectors as of June 30, ~~2018:~~2019:



	Operating Leases		Finance Leases ⁽¹⁾
Remainder of 2019	$	97,498	$	941
2020	142,458		1,611
2021	102,474		1,291
2022	65,496		897
2023	44,061		273
Thereafter	39,526		—
Total	$	491,513	$	5,013

⁽¹⁾ Excludes future revenues that are currently on nonaccrual status due to a recent casualty event on one of our vessels under a finance lease, for which we have insurance. In the case we may not collect future interest or principal, we expect that our insurance proceeds will exceed the current carrying value of this lease.

2018 $ 78,787
2019 106,395
2020 69,944
2021 44,522
2022 25,023
Thereafter 16,155
Total $ 340,826

12. LEASES

We have commitments as lessees under lease arrangements primarily for real estate, equipment and vehicles. Our leases have remaining lease terms ranging from 3 months to 46 years.

The following table presents lease related costs:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance Leases
Amortization of right-of-use assets	$	50	$	99
Interest on lease liabilities	29		59
Finance lease expense	79		158
Operating lease expense	2,520		5,049
Short-term lease expense	672		1,732
Variable lease expense	605		897
Total lease expense	$	3,876	$	7,836

The following table presents information related to our operating leases as of and for the six months ended June 30, 2019:



Right-of-use assets, net	$	42,993
Lease liabilities	43,459

Weighted average remaining lease term	35.6 years
Weighted average incremental borrowing rate	7.1		%

Cash paid for amounts included in the measurement of operating lease liabilities
Operating cash flows	$	5,056

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

~~11.~~ The following table presents future minimum lease payments under non-cancellable operating leases as of June 30, 2019:



Remainder of 2019	$	4,735
2020	5,625
2021	4,220
2022	3,502
2023	2,667
Thereafter	95,202
Total undiscounted lease payments	115,951
Less: Imputed interest	72,492
Total lease liabilities	$	43,459

As of June 30, 2019, we have an agreement for an office lease that has not yet commenced which we estimate will have a right-of-use asset value of $0.8 million. The lease is expected to commence in the fourth quarter of 2019 and has a lease term of seven years.

13. EQUITY-BASED COMPENSATION

In 2015, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to award equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors.

As of June 30, ~~2018,~~2019, the Incentive Plan provides for the issuance of up to 30 million shares. We account for equity-based compensation expense in accordance with ~~Accounting Standards Codification~~ASC 718 Compensation-Stock Compensation ~~(“ASC 718”)~~ and is reported within operating expenses and general and administrative in the Consolidated Statements of Operations.

The Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:



	Three Months Ended June 30,				Six Months Ended June 30,				Remaining Expense To Be Recognized, If All Vesting Conditions Are Met		Weighted Average Remaining Contractual Term, (in years)
	2019		2018		2019		2018				Weighted Average Remaining Contractual Term, (in years)
Stock Options	$	—	$	—	$	—	$	9	$	—	8.6
Restricted Shares	456		90		546		180		1,596		1.3
Common Units	244		139		382		248		3,603		1.5
Total	$	700	$	229	$	928	$	437	$	5,199

Three Months Ended June 30, Six Months Ended June 30, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term, (in years)
2018 2017 2018 2017
Stock Options $ —
$ —
$ 9
$ —
$ —
8.00
Restricted Shares 90
79
180
138
821
1.67
Common Units 139
364
248
392
1,059
1.49
Total $ 229
$ 443
$ 437
$ 530
$ 1,880

~~Stock Options~~

During the six months ended June 30, ~~2018, we granted equity-based compensation awards~~2019, the Manager transferred 165,268 of ~~10,000 stock~~its options to ~~our two new independent directors (5,000 options each) pursuant to~~certain of the Incentive Plan with a grant date fair value of $9 which immediately vested upon grant and expire after 10 years. The fair value of each option was estimated on the grant date using a Black-Scholes option valuation model using the following weighted average assumptions:



~~Expected volatility~~	~~The expected stock volatility is based on an assessment of the stock volatility of our publicly traded stock over the preceding 12-month period~~	~~19.3~~	%
~~Risk free interest rate~~	~~The risk-free rate is determined using the implied yield currently available on U.S. government bonds with a term consistent with the expected term on the date of grant~~	~~2.7~~	%
~~Expected dividend yield~~	~~The expected dividend yield is based on management’s currently expected dividend rate~~	~~7.2~~	%
~~Expected term~~	~~Expected term used represents the period of time the options granted are expected to be outstanding~~	~~5 years~~

Manager’s employees.

Common Units

~~In April 2018,~~During the six months ended June 30, 2019, we ~~granted equity based compensation in a subsidiary consisting~~issued 1,110,000 common units of ~~670,000 common units~~our subsidiaries that had a grant date fair value of ~~$670 in exchange for services assuming no forfeited amounts. The awards~~$3.2 million and vest ~~in installments of 33.3% in March 2019, March 2020 and March 2021. The~~over three years. These awards are ~~equity based with~~subject to continued employment, and the compensation expense is recognized ratably over the vesting periods. The fair value of these awards was based on the fair value of the ~~underlying entity~~operating subsidiary on each grant date, which was estimated using a discounted cash flow analysis that requires the application of discount factors and terminal multiples to projected cash flows. Discount factors and terminal multiples were based on market-based inputs and transactions, as ~~determined~~available at the measurement date.

Restricted Shares

During the six months ended June 30, 2019, we issued 113,121 restricted shares of our subsidiary that had a grant date fair value of $1.5 million, of which 25,138 shares vested during the period of issuance. The remaining shares vest over three years, subject to continued employment, and the compensation expense is recognized ratably over the vesting periods. The fair value of these awards was based on the ~~acquisition~~fair value of the operating subsidiary on each grant date, which was estimated using a discounted cash flow analysis that requires the application of discount factors and terminal multiples to projected cash flows. Discount factors and terminal multiples were based on market-based inputs and transactions, as available at the measurement date.

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~12.~~ 14. INCOME TAXES

The current and deferred components of the income tax (benefit) provision included in the Consolidated Statements of Operations are as follows:



	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019			2018
Current:
Federal	$	51		$	42	$	70		$	171
State and local	43			12		108			31
Foreign	108			33		160			50
Total current provision	202			87		338			252

Deferred:
Federal	(1,863		)	389		(1,760		)	677
State and local	(668		)	58		(639		)	100
Foreign	30			—		215			—
Total deferred (benefit) provision	(2,501		)	447		(2,184		)	777

Total (benefit) provision for income taxes	$	(2,299	)	$	534	$	(1,846	)	$	1,029

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Current:
Federal $ 42
$ 195
$ 171
$ 316
State and local 12
(5 ) 31
48
Foreign 33
20
50
41
Total current provision 87
210
252
405

Deferred:
Federal 389
44
677
48
State and local 58
—
100
—
Foreign —
210
—
223
Total deferred provision 447
254
777
271

Total provision for income taxes $ 534
$ 464
$ 1,029
$ 676

We are taxed as a flow-through entity for U.S. income tax purposes and our taxable income or loss generated is the responsibility of our owners. Taxable income or loss generated by our corporate subsidiaries is subject to U.S. federal, state and foreign corporate income tax in locations where they conduct business.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Our effective tax rate differs from the U.S. federal tax rate of 21% primarily due to a significant portion of our income not being subject to U.S. corporate tax rates, or being deemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates.

As of and for the six ~~month period~~months ended June 30, ~~2018,~~2019, we had not established a liability for uncertain tax positions as no such positions existed. In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S. federal, state, local and foreign income tax examinations by tax authorities. Generally, we are not subject to examination by taxing authorities for tax years prior to ~~2014.~~2015. We do not believe that it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months of the reporting date of June 30, ~~2018.~~

~~On December 22, 2017, legislation referred to as the “Tax Cuts~~2019. The change in our effective tax rate and ~~Jobs Act” (the “TCJA”) was signed into law. The TCJA significantly revises the U.S. corporate income~~resulting tax ~~regime by, among other things, lowering corporate income tax rates. We have accounted~~benefit for the ~~effects of the TCJA for the year~~period ended ~~December 31, 2017 which relates to the remeasurement of deferred tax assets and liabilities due to~~June 30, 2019 is primarily driven by the reduction in ~~the corporate income tax rate. Due to the significant portion~~taxes for one of our ~~income that is not subject to entity level tax and the presence~~corporate subsidiaries as a result of ~~a significant valuation allowance, the effects of the TCJA have had a minimal impact on the income tax provision for the year ended December 31, 2017.~~an internal restructuring.

~~13.~~ 15. MANAGEMENT AGREEMENT AND AFFILIATE TRANSACTIONS

The Manager is paid annual fees in exchange for advising us on various aspects of our business, formulating our investment strategies, arranging for the acquisition and disposition of assets, arranging for financing, monitoring performance, and managing our day-to-day operations, inclusive of all costs incidental thereto. In addition, the Manager may be reimbursed for various expenses incurred by the Manager on our behalf, including the costs of legal, accounting and other administrative activities. Additionally, we have entered into certain incentive allocation arrangements with Master GP, which owns 0.05% of the Partnership and is the general partner of the Partnership.

The Manager is entitled to a management fee, incentive allocations (comprised of income incentive allocation and capital gains incentive allocation, defined below) and reimbursement of certain expenses. The management fee is determined by taking the average value of total equity (excluding non-controlling interests) determined on a consolidated basis in accordance with GAAP at the end of the two most recently completed months multiplied by an annual rate of 1.50%, and is payable monthly in arrears in cash. ~~The total management fees were $3,922 and $7,661 for the three and six months ended June 30, 2018, respectively, and $3,865 and $7,758 for the three and six months ended June 30, 2017, respectively.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

The income incentive allocation is calculated and distributable quarterly in arrears based on the pre-incentive allocation net income for the immediately preceding calendar quarter (the “Income Incentive Allocation”). For this purpose, pre-incentive allocation net income means, with respect to a calendar quarter, net income attributable to shareholders during such quarter calculated in accordance with GAAP excluding our pro rata share of (1) realized or unrealized gains and losses, and (2) certain non-cash or one-time items, and (3) any other adjustments as may be approved by our independent directors. Pre-incentive allocation net income does not include any Income Incentive Allocation or Capital Gains Incentive Allocation (described below) paid to the Master GP during the relevant quarter.

A subsidiary of ours allocates and distributes to the Master GP an Income Incentive Allocation with respect to its pre-incentive allocation net income in each calendar quarter as follows: (1) no Income Incentive Allocation in any calendar quarter in which pre-incentive allocation net income, expressed as a rate of return on the average value of our net equity capital (excluding non-controlling interests) at the end of the two most recently completed calendar quarters, does not exceed 2% for such quarter (8% annualized); (2) 100% of pre-incentive allocation net income with respect to that portion of such pre-incentive allocation net income, if any, that is equal to or exceeds 2% but does not exceed 2.2223% for such quarter; and (3) 10% of the amount of pre-incentive allocation net income, if any, that exceeds 2.2223% for such quarter. These calculations will be prorated for any period of less than three months. ~~No Income Incentive Allocation was due to the Master GP for the three and six months ended June 30, 2018 and 2017.~~

Capital Gains Incentive Allocation is calculated and distributable in arrears as of the end of each calendar year and is equal to 10% of our pro rata share of cumulative realized gains from the date of the IPO through the end of the applicable calendar year, net of our pro rata share of cumulative realized or unrealized losses, the cumulative non-cash portion of equity-based compensation expenses and all realized gains upon which prior performance-based Capital Gains Incentive Allocation payments were made to the Master GP.

The ~~Capital Gains Incentive Allocation was $573 for both~~following table summarizes the ~~three~~management fees, income incentive allocation and ~~six months ended June 30, 2018 and $0 for both the three and six months ended June 30, 2017.~~capital gains incentive allocation:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Management fees	$	3,499	$	3,922	$	7,175	$	7,661
Income incentive allocation	—		—		—		—
Capital gains incentive allocation	2,211		573		2,373		573
Total	$	5,710	$	4,495	$	9,548	$	8,234

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We will pay all of our operating expenses, except those specifically required to be borne by the Manager under the Management Agreement. The expenses required to be paid by us include, but are not limited to, issuance and transaction costs incident to the acquisition, disposition and financing of our assets, legal and auditing fees and expenses, the compensation and expenses of our independent directors, the costs associated with the establishment and maintenance of any credit facilities and other indebtedness of ours (including commitment fees, legal fees, closing costs, etc.), expenses associated with other securities offerings of ours, costs and expenses incurred in contracting with third parties (including affiliates of the Manager), the costs of printing and mailing proxies and reports to our shareholders, costs incurred by the Manager or its affiliates for travel on our behalf, costs associated with any computer software or hardware that is used for us, costs to obtain liability insurance to indemnify our directors and officers and the compensation and expenses of our transfer agent.

We will pay or reimburse the Manager and its affiliates for performing certain legal, accounting, due diligence tasks and other services that outside professionals or outside consultants otherwise would perform, provided that such costs and reimbursements are no greater than those which would be paid to outside professionals or consultants. The Manager is responsible for all of its other costs incident to the performance of its duties under the Management Agreement, including compensation of the Manager’s employees, rent for facilities and other “overhead” expenses; we will not reimburse the Manager for these expenses. ~~During~~

The following table summarizes our reimbursements to the three and six months ended June 30, 2018, expense reimbursement of $2,438 and $4,619 was recorded in general and administrative expenses, respectively, and $1,436 and $3,040 was recorded in acquisition and transaction expenses, respectively, in the Consolidated Statements of Operations. During the three and six months ended June 30, 2017, expense reimbursement of $1,618 and $3,822 was recorded in general and administrative expenses, respectively, and $1,563 and $2,713 was recorded in acquisition and transaction expenses, respectively, in the Consolidated Statements of Operations.Manager:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Classification in the Consolidated Statements of Operations:
General and administrative expenses	$	3,019	$	2,438	$	5,562	$	4,619
Acquisition and transaction expenses	2,309		1,436		3,770		3,040
Total	$	5,328	$	3,874	$	9,332	$	7,659

If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee. The termination fee is equal to the amount of the management fee during the 12 months immediately preceding the date of the termination. In addition, an Incentive Allocation Fair Value Amount will be distributable to the Master GP if the Master GP is removed due to the termination of the Management Agreement in certain specified circumstances. The Incentive Allocation Fair Value Amount is an amount equal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to the Master GP if our assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments).

Upon the successful completion of ~~a post-IPO~~an offering of our common shares or other equity securities (including securities issued as consideration in an acquisition), we will grant the Manager options to purchase common shares in an amount equal to 10% of the number of common shares being sold in the offering (or if the issuance relates to equity securities other than our common shares, options to purchase a number of common shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a common share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a common share as of the date of the equity issuance if it relates to equity securities other than our common shares). Any ultimate purchaser of common shares for which such options are granted may be an affiliate of Fortress.

The ~~Manager was granted 700,000 options as part of the equity offering in the first quarter of 2018 as discussed in Note 15.~~

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~As of June 30, 2018 and December 31, 2017, there were no receivables from the Manager. As of June 30, 2018 and December 31, 2017,~~following table summarizes amounts due to the Manager, ~~or its affiliates of $1,294 and $2,073, respectively, excluding accrued management fees,~~which are included within accounts payable and accrued liabilities in the Consolidated Balance ~~Sheets.~~ Sheets:



	June 30, 2019		December 31, 2018
Accrued management fees	$	1,110	$	1,263
Other payables	5,396		3,965

As of June 30, ~~2018~~2019 and December 31, ~~2017, amounts due to~~2018, there were no receivables from the ~~Manager or its affiliates of $1,280 and $1,228, respectively, related to accrued management fees, are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets.~~Manager.

Other Affiliate Transactions

As of June 30, ~~2018~~2019 and December 31, ~~2017~~2018 an affiliate of our Manager owns an approximately 20% interest in Jefferson Terminal which has been accounted for as a component of non-controlling interest in consolidated subsidiaries in the ~~accompanying~~ consolidated financial statements. The carrying amount of this non-controlling interest at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 was ~~$56,563~~$43.2 million and ~~$66,242,~~$51.1 million, respectively.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table presents the amount of this non-controlling interest share of net ~~loss was $3,248 and $8,013 for the three and six months ended June 30, 2018, respectively, and $1,413 and $3,483 for the three and six months ended June 30, 2017, respectively.~~loss:



	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Non-controlling interest share of net loss	$	4,559	$	3,248	$	7,855	$	8,013

In connection with the Capital Call Agreement related to the Series 2016 Bonds, ~~discussed in Note 8,~~ we, and an affiliate of our Manager, entered into a Fee and Support Agreement. The Fee and Support Agreement provides that the affiliate of the Manager is compensated for its guarantee of a portion of the obligations under the Standby Bond Purchase Agreement. This affiliate of the Manager received fees of ~~$1,740,~~$1.7 million, which are amortized as interest expense to the earlier of the redemption date or February 13, 2020.

In connection with the amendment to the Jefferson Revolver (see Note 8), on December 20, 2018, our subsidiary and an affiliate of our Manager entered into an amended and restated Fee and Support Agreement, and our subsidiary issued a $0.3 million promissory note to the affiliate of our Manager, as consideration for the fee payable pursuant to the amended and restated Fee and Support Agreement.

On June 21, 2018, we, through a wholly owned subsidiary, completed a private offering with several third parties (the “Holders”) to tender their approximately 20% stake in Jefferson Terminal. ~~The offer allowed us to increase~~We increased our majority interest in Jefferson Terminal in exchange for Class B Units of another wholly owned subsidiary, which provide the right to convert such Class B Units to a fixed amount of our shares, equivalent to approximately 1.9 million shares, at a Holder’s request. We have the option to satisfy any exchange request by delivering either common shares or cash. The Holders are entitled to receive distributions equivalent to the distributions paid to our shareholders. This transaction resulted in a ~~transfer~~purchase of non-controlling interest shares.

In See Note 17 for details related to conversions during the ~~second quarter of 2018, we purchased all shares held by the non-controlling interest holder in our Aviation Leasing segment for a purchase price of $3,700.~~period.

~~14.~~ 16. SEGMENT INFORMATION

Our reportable segments represent strategic business units comprised of investments in different types of transportation and infrastructure assets. We have ~~six~~four reportable segments which operate in the Equipment Leasing and Infrastructure businesses across several market sectors. Our reportable segments are (i) Aviation Leasing, (ii) ~~Offshore Energy, (iii) Shipping Containers, (iv)~~ Jefferson Terminal, ~~(v)~~(iii) Railroad, and ~~(vi)~~(iv) Ports and Terminals. Aviation Leasing consists of aircraft and aircraft engines held for lease and are typically held long-term. Offshore Energy consists of vessels and equipment that support offshore oil and gas drilling and production which are typically subject to long-term operating leases. Shipping Containers 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). Jefferson Terminal consists of a multi-modal crude oil and refined products terminal and other related assets. Railroad consists of our CMQR railroad operations. Ports and Terminals consists of Repauno, which is a 1,630 acre deep-water port located along the Delaware ~~river~~River with an underground storage cavern and multiple industrial development opportunities, and Long Ridge, which is a 1,660 acre multi-modal port located along the Ohio River with rail, dock, and multiple industrial development ~~opportunities.~~opportunities, including a power plant under construction.

Corporate and Other primarily consists ~~primarily~~ of debt, unallocated company level general and administrative expenses, and management fees. Additionally, Corporate and Other includes (i) offshore energy related assets, which consists of vessels and equipment that support offshore oil and gas drilling and production which are typically subject to long-term operating leases and (ii) an investment in an unconsolidated entity engaged in the acquisition and leasing of shipping containers (on both an operating lease and finance lease basis).

During the first quarter of 2019, we updated our segment performance measure from Adjusted Net Income to Adjusted EBITDA (see definition below) as this is the primary performance measure that our Chief Operating Decision Maker (“CODM”) utilizes to assess operational performance, as well as make resource and allocation decisions. In connection with the change in our performance measure, in accordance with ASC 280, we also assessed our reportable segments. We determined that our Offshore Energy and Shipping Containers segments no longer met the requirement as reportable segments and, accordingly, we have presented these operating segments, along with Corporate results, within Corporate and Other effective in the first quarter of 2019. All prior periods have been restated for historical comparison across segments.

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. We evaluate investment performance for each reportable segment primarily based on net income attributable to shareholders and Adjusted ~~Net Income.~~EBITDA.

Adjusted ~~Net Income~~EBITDA is defined as net income (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 ~~equity in earnings (losses) of unconsolidated entities;~~amortization expense, and interest expense, (b) to include the impact of ~~cash income tax payments,~~ our pro-rata share of ~~the~~ Adjusted ~~Net Income~~EBITDA from unconsolidated entities, ~~(collectively “Adjusted Net Income”),~~ and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted ~~Net Income.~~EBITDA.

We believe that net income (loss) attributable to shareholders, as defined by GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted ~~Net Income.~~EBITDA. Adjusted ~~Net Income~~EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with GAAP.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

The following tables set forth certain information for each reportable segment:

I. For the Three Months Ended June 30, ~~2018~~2019



	Three Months Ended June 30, 2019
	Equipment Leasing			Infrastructure
	Aviation Leasing			Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Revenues
Equipment leasing revenues	$	74,981		$	—		$	—	$	—		$	4,219		$	79,200
Infrastructure revenues	—			67,562			9,977		2,266			—			79,805
Total revenues	74,981			67,562			9,977		2,266			4,219			159,005

Expenses
Operating expenses	2,721			74,393			9,021		4,757			1,871			92,763
General and administrative	—			—			—		—			4,297			4,297
Acquisition and transaction expenses	—			—			—		—			2,308			2,308
Management fees and incentive allocation to affiliate	—			—			—		—			5,710			5,710
Depreciation and amortization	33,267			5,519			648		1,560			1,606			42,600
Interest expense	—			4,524			79		348			20,521			25,472
Total expenses	35,988			84,436			9,748		6,665			36,313			173,150

Other income (expense)
Equity in (losses) earnings of unconsolidated entities	(242		)	92			—		—			(19		)	(169		)
Gain on sale of equipment, net	22,610			12			8		—			—			22,630
Interest income	28			33			4		173			2			240
Other income	—			50			1		4,887			—			4,938
Total other income (expense)	22,396			187			13		5,060			(17		)	27,639
Income (loss) before income taxes	61,389			(16,687		)	242		661			(32,111		)	13,494
(Benefit from) provision for income taxes	(2,369		)	38			29		—			3			(2,299		)
Net income (loss)	63,758			(16,725		)	213		661			(32,114		)	15,793
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries	—			(4,558		)	41		(22		)	—			(4,539		)
Net income (loss) attributable to shareholders	$	63,758		$	(12,167	)	$	172	$	683		$	(32,114	)	$	20,332

Three Months Ended June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Revenues
Equipment leasing revenues $ 56,118
$ 3,187
$ 25
$ —
$ —
$ —
$ —
$ 59,330
Infrastructure revenues —
—
—
2,550
8,788
1,311
—
12,649
Total revenues 56,118
3,187
25
2,550
8,788
1,311
—
71,979

Expenses
Operating expenses 1,864
3,948
—
11,253
7,813
2,715
—
27,593
General and administrative —
—
—
—
—
—
4,573
4,573
Acquisition and transaction expenses 66
—
—
—
—
—
1,442
1,508
Management fees and incentive allocation to affiliate —
—
—
—
—
—
4,495
4,495
Depreciation and amortization 24,875
1,626
—
4,937
574
832
—
32,844
Interest expense —
961
—
4,285
141
273
7,197
12,857
Total expenses 26,805
6,535
—
20,475
8,528
3,820
17,707
83,870

Other income (expense)
Equity in (losses) earnings of unconsolidated entities (126 ) —
110
(235 ) —
—
—
(251 )
Gain (loss) on sale of equipment, net 5,003
—
—
—
(7 ) —
—
4,996
Interest income 33
5
—
36
—
—
—
74
Other income —
—
—
1,157
—
—
—
1,157
Total other income (expense) 4,910
5
110
958
(7 ) —
—
5,976
Income (loss) before income taxes 34,223
(3,343 ) 135
(16,967 ) 253
(2,509 ) (17,707 ) (5,915 )
Provision for (benefit from) income taxes 523
2
(2 ) 10
—
1
—
534
Net income (loss) 33,700
(3,345 ) 137
(16,977 ) 253
(2,510 ) (17,707 ) (6,449 )
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries —
—
—
(7,309 ) 51
(30 ) —
(7,288 )
Net income (loss) attributable to shareholders $ 33,700
$ (3,345 ) $ 137
$ (9,668 ) $ 202
$ (2,480 ) $ (17,707 ) $ 839

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

Thefollowing table sets forth a reconciliation of Adjusted ~~Net Income (Loss)~~EBITDA to net income attributable to shareholders:



	Three Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Adjusted EBITDA	$	103,610	$	(2,563	)	$	963	$	(2,241	)	$	(5,639	)	$	94,130
Add: Non-controlling share of Adjusted EBITDA														2,871
Add: Equity in losses of unconsolidated entities														(169		)
Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities														(24		)
Less: Interest expense														(25,472		)
Less: Depreciation and amortization expense														(51,554		)
Less: Incentive allocations														(2,211		)
Less: Asset impairment charges														—
Less: Changes in fair value of non-hedge derivative instruments														3,470
Less: Losses on the modification or extinguishment of debt and capital lease obligations														—
Less: Acquisition and transaction expenses														(2,308		)
Less: Equity-based compensation expense														(700		)
Less: Benefit from income taxes														2,299
Net income attributable to shareholders														$	20,332

Three Months Ended June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Adjusted Net Income (Loss) $ 33,868
$ (3,350 ) $ 135
$ (10,250 ) $ 245
$ (2,386 ) $ (15,692 ) $ 2,570
Add: Non-controlling share of adjustments to Adjusted Net Income 198
Add: Equity in losses of unconsolidated entities (251 )
Add: Cash payments for income taxes 474
Less: Incentive allocations (573 )
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities 251
Less: Asset impairment charges —
Less: Changes in fair value of non-hedge derivative instruments 441
Less: Losses on the modification or extinguishment of debt and capital lease obligations —
Less: Acquisition and transaction expenses (1,508 )
Less: Equity-based compensation expense (229 )
Less: Provision for income taxes (534 )
Net income attributable to shareholders $ 839

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:



	Three Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Revenues
Africa	$	2,208	$	—	$	—	$	—	$	—	$	2,208
Asia	25,410		—		—		—		4,219		29,629
Europe	35,413		—		—		—		—		35,413
North America	9,604		67,562		9,977		2,266		—		89,409
South America	2,346		—		—		—		—		2,346
Total	$	74,981	$	67,562	$	9,977	$	2,266	$	4,219	$	159,005

Three Months Ended June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Revenues
Africa $ 2,020
$ —
$ —
$ —
$ —
$ —
$ 2,020
Asia 14,083
2,822
25
—
—
—
16,930
Europe 32,858
—
—
—
—
—
32,858
North America 6,821
365
—
2,550
8,788
1,311
19,835
South America 336
—
—
—

—
336
Total $ 56,118
$ 3,187
$ 25
$ 2,550
$ 8,788
$ 1,311
$ 71,979

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

I.II. For the Six Months Ended June 30, ~~2018~~2019



	Six Months Ended June 30, 2019
	Equipment Leasing			Infrastructure
	Aviation Leasing			Jefferson Terminal			Railroad			Ports and Terminals			Corporate and Other			Total
Revenues
Equipment leasing revenues	$	145,392		$	—		$	—		$	—		$	6,260		$	151,652
Infrastructure revenues	—			103,516			20,484			7,980			—			131,980
Total revenues	145,392			103,516			20,484			7,980			6,260			283,632

Expenses
Operating expenses	8,799			113,634			18,287			9,659			4,302			154,681
General and administrative	—			—			—			—			9,029			9,029
Acquisition and transaction expenses	13			—			—			—			3,769			3,782
Management fees and incentive allocation to affiliate	—			—			—			—			9,548			9,548
Depreciation and amortization	63,272			10,675			1,413			3,553			3,220			82,133
Interest expense	—			8,448			648			644			37,035			46,775
Total expenses	72,084			132,757			20,348			13,856			66,903			305,948

Other income (expense)
Equity in (losses) earnings of unconsolidated entities	(443		)	(128		)	—			—			18			(553		)
Gain on sale of equipment, net	24,328			12			15			—			—			24,355
Interest income	54			71			4			194			8			331
Other (expense) income	—			(183		)	—			2,517			—			2,334
Total other income (expense)	23,939			(228		)	19			2,711			26			26,467
Income (loss) before income taxes	97,247			(29,469		)	155			(3,165		)	(60,617		)	4,151
(Benefit from) provision for income taxes	(2,189		)	124			215			—			4			(1,846		)
Net income (loss)	99,436			(29,593		)	(60		)	(3,165		)	(60,621		)	5,997
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries	—			(7,854		)	(15		)	(86		)	—			(7,955		)
Net income (loss) attributable to shareholders	$	99,436		$	(21,739	)	$	(45	)	$	(3,079	)	$	(60,621	)	$	13,952

Six Months Ended June 30, 2018
Equipment Leasing Infrastructure

Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Revenues
Equipment leasing revenues $ 108,853
$ 6,211
$ 50
$ —
$ —
$ —
$ —
$ 115,114
Infrastructure revenues —
—
—
3,803
19,835
2,071
—
25,709
Total revenues 108,853
6,211
50
3,803
19,835
2,071
—
140,823

Expenses
Operating expenses 5,297
6,316
—
23,212
15,251
5,096
—
55,172
General and administrative —
—
—
—
—
—
8,159
8,159
Acquisition and transaction expenses 223
—
—
—
—
—
3,051
3,274
Management fees and incentive allocation to affiliate —
—
—
—
—
—
8,234
8,234
Depreciation and amortization 46,688
3,228
—
9,727
1,147
1,641
—
62,431
Interest expense —
1,834
—
7,813
486
545
14,050
24,728
Total expenses 52,208
11,378
—
40,752
16,884
7,282
33,494
161,998

Other income (expense)
Equity in (losses) earnings of unconsolidated entities (350 ) —
281
(87 ) —
—
—
(156 )
Gain (loss) on sale of equipment, net 4,983
—
—
—
8
—
—
4,991
Interest income 106
8
—
136
—
—
—
250
Other income —
—
—
1,337
—
—
—
1,337
Total other income 4,739
8
281
1,386
8
—
—
6,422
Income (loss) before income taxes 61,384
(5,159 ) 331
(35,563 ) 2,959
(5,211 ) (33,494 ) (14,753 )
Provision for (benefit from) income taxes 1,006
5
(3 ) 21
—
—
—
1,029
Net income (loss) 60,378
(5,164 ) 334
(35,584 ) 2,959
(5,211 ) (33,494 ) (15,782 )
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries (24 ) —
—
(16,258 ) 257
(24 ) —
(16,049 )
Net income (loss) attributable to shareholders $ 60,402
$ (5,164 ) $ 334
$ (19,326 ) $ 2,702
$ (5,187 ) $ (33,494 ) $ 267

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

Thefollowing table sets forth a reconciliation of Adjusted ~~Net Income (Loss)~~EBITDA to net income attributable to shareholders:



	Six Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Adjusted EBITDA	$	177,820	$	(3,853	)	$	2,162	$	(1,315	)	$	(14,394	)	$	160,420
Add: Non-controlling share of Adjusted EBITDA														5,174
Add: Equity in losses of unconsolidated entities														(553		)
Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities														94
Less: Interest expense														(46,775		)
Less: Depreciation and amortization expense														(99,421		)
Less: Incentive allocations														(2,373		)
Less: Asset impairment charges														—
Less: Changes in fair value of non-hedge derivative instruments														250
Less: Losses on the modification or extinguishment of debt and capital lease obligations														—
Less: Acquisition and transaction expenses														(3,782		)
Less: Equity-based compensation expense														(928		)
Less: Benefit from income taxes														1,846
Net income attributable to shareholders														$	13,952

Six Months Ended June 30, 2018
Equipment Leasing Infrastructure

Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Adjusted Net Income (Loss) $ 61,210
$ (5,166 ) $ 331
$ (18,974 ) $ 2,788
$ (5,031 ) $ (29,861 ) $ 5,297
Add: Non-controlling share of adjustments to Adjusted Net Income —
Add: Equity in losses of unconsolidated entities (156 )
Add: Cash payments for income taxes 465
Less: Incentive allocations (573 )
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities 156
Less: Asset impairment charges —
Less: Changes in fair value of non-hedge derivative instruments (182 )
Less: Losses on the modification or extinguishment of debt and capital lease obligations —
Less: Acquisition and transaction expenses (3,274 )
Less: Equity-based compensation expense (437 )
Less: Provision for income taxes (1,029 )
Net income attributable to shareholders $ 267

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:



	Six Months Ended June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Revenues
Africa	$	5,685	$	—	$	—	$	—	$	—	$	5,685
Asia	47,524		—		—		—		6,260		53,784
Europe	67,298		—		—		—		—		67,298
North America	20,430		103,516		20,484		7,980		—		152,410
South America	4,455		—		—		—		—		4,455
Total	$	145,392	$	103,516	$	20,484	$	7,980	$	6,260	$	283,632

Six Months Ended June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Revenues
Africa $ 3,405
$ —
$ —
$ —
$ —
$ —
$ 3,405
Asia 23,292
5,480
50
—
—
—
28,822
Europe 67,776
—
—
—
—
—
67,776
North America 13,954
731
—
3,803
19,835
2,071
40,394
South America 426
—
—
—
—
—
426
Total $ 108,853
$ 6,211
$ 50
$ 3,803
$ 19,835
$ 2,071
$ 140,823

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

~~II.~~III. For the Three Months Ended June 30, ~~2017~~2018



	Three Months Ended June 30, 2018
	Equipment Leasing			Infrastructure
	Aviation Leasing			Jefferson Terminal			Railroad			Ports and Terminals			Corporate and Other			Total
Revenues
Equipment leasing revenues	$	56,118		$	—		$	—		$	—		$	3,212		$	59,330
Infrastructure revenues	—			2,550			8,788			1,311			—			12,649
Total revenues	56,118			2,550			8,788			1,311			3,212			71,979

Expenses
Operating expenses	1,864			11,253			7,813			2,715			3,948			27,593
General and administrative	—			—			—			—			4,573			4,573
Acquisition and transaction expenses	66			—			—			—			1,442			1,508
Management fees and incentive allocation to affiliate	—			—			—			—			4,495			4,495
Depreciation and amortization	24,875			4,937			574			832			1,626			32,844
Interest expense	—			4,285			141			273			8,158			12,857
Total expenses	26,805			20,475			8,528			3,820			24,242			83,870

Other income (expense)
Equity in (losses) earnings of unconsolidated entities	(126		)	(235		)	—			—			110			(251		)
Gain (loss) on sale of equipment, net	5,003			—			(7		)	—			—			4,996
Interest income	33			36			—			—			5			74
Other income	—			1,157			—			—			—			1,157
Total other income (expense)	4,910			958			(7		)	—			115			5,976
Income (loss) before income taxes	34,223			(16,967		)	253			(2,509		)	(20,915		)	(5,915		)
Provision for income taxes	523			10			—			1			—			534
Net income (loss)	33,700			(16,977		)	253			(2,510		)	(20,915		)	(6,449		)
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries	—			(7,309		)	51			(30		)	—			(7,288		)
Net income (loss) attributable to shareholders	$	33,700		$	(9,668	)	$	202		$	(2,480	)	$	(20,915	)	$	839

Three Months Ended June 30, 2017
Equipment Leasing Infrastructure

Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Revenues
Equipment leasing revenues $ 36,577
$ 3,781
$ 25
$ —
$ —
$ —
$ —
$ 40,383
Infrastructure revenues —
—
—
3,026
7,662
123
—
10,811
Total revenues 36,577
3,781
25
3,026
7,662
123
—
51,194

Expenses
Operating expenses 1,371
4,015
—
7,267
7,907
764
—
21,324
General and administrative —
—
—
—
—
—
3,341
3,341
Acquisition and transaction expenses 55
—
—
—
—
—
1,825
1,880
Management fees and incentive allocation to affiliate —
—
—
—
—
—
3,865
3,865
Depreciation and amortization 14,086
1,606
—
3,956
492
81
—
20,221
Interest expense —
930
—
1,438
247
270
4,799
7,684
Total expenses 15,512
6,551
—
12,661
8,646
1,115
13,830
58,315

Other income (expense)
Equity in losses of unconsolidated entities (107 ) —
(210 ) (10 ) —
—
—
(327 )
Gain (loss) on sale of equipment and finance leases, net 2,029
—
—
—
(30 ) —
—
1,999
Interest income 76
4
—
4
—
—
—
84
Other income —
—
—
20
—
—
—
20
Total other income (expense) 1,998
4
(210 ) 14
(30 ) —
—
1,776
Income (loss) before income taxes 23,063
(2,766 ) (185 ) (9,621 ) (1,014 ) (992 ) (13,830 ) (5,345 )
Provision for (benefit from) income taxes 478
3
(9 ) (5 ) —
(3 ) —
464
Net income (loss) 22,585
(2,769 ) (176 ) (9,616 ) (1,014 ) (989 ) (13,830 ) (5,809 )
Less: Net income (loss) attributable to non-controlling interests in consolidated subsidiaries 224
(216 ) —
(4,045 ) 57
(369 ) —
(4,349 )
Net income (loss) attributable to shareholders $ 22,361
$ (2,553 ) $ (176 ) $ (5,571 ) $ (1,071 ) $ (620 ) $ (13,830 ) $ (1,460 )

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

Thefollowing table sets forth a reconciliation of Adjusted ~~Net Income (Loss)~~EBITDA to net ~~loss~~income attributable to shareholders:



	Three Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Adjusted EBITDA	$	64,826	$	(3,188	)	$	917	$	(1,281	)	$	(9,057	)	$	52,217
Add: Non-controlling share of Adjusted EBITDA														2,447
Add: Equity in losses of unconsolidated entities														(251		)
Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities														192
Less: Interest expense														(12,857		)
Less: Depreciation and amortization expense														(38,506		)
Less: Incentive allocations														(573		)
Less: Asset impairment charges														—
Less: Changes in fair value of non-hedge derivative instruments														441
Less: Losses on the modification or extinguishment of debt and capital lease obligations														—
Less: Acquisition and transaction expenses														(1,508		)
Less: Equity-based compensation expense														(229		)
Less: Provision for income taxes														(534		)
Net income attributable to shareholders														$	839

Three Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Adjusted Net Income (Loss) $ 22,894
$ (2,550 ) $ (277 ) $ (5,574 ) $ (726 ) $ (623 ) $ (12,518 ) $ 626
Add: Non-controlling share of adjustments to Adjusted Net Income 17
Add: Equity in losses of unconsolidated entities (327 )
Add: Cash payments for income taxes 592
Less: Incentive allocations —
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities �� 419
Less: Asset impairment charges —
Less: Changes in fair value of non-hedge derivative instruments —
Less: Losses on the modification or extinguishment of debt and capital lease obligations —
Less: Acquisition and transaction expenses (1,880 )
Less: Equity-based compensation income (443 )
Less: Provision for income taxes (464 )
Net loss attributable to shareholders $ (1,460 )

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:



	Three Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Revenues
Africa	$	2,020	$	—	$	—	$	—	$	—	$	2,020
Asia	14,083		—		—		—		2,847		16,930
Europe	32,858		—		—		—		—		32,858
North America	6,821		2,550		8,788		1,311		365		19,835
South America	336		—		—		—		—		336
Total	$	56,118	$	2,550	$	8,788	$	1,311	$	3,212	$	71,979

Three Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Revenues

Africa $ 2,413
$ —
$ —
$ —
$ —
$ —
$ 2,413
Asia 8,344
2,443
25
—
—
—
10,812
Europe 22,852
953
—
—
—
—
23,805
North America 2,558
385
—
3,026
7,662
123
13,754
South America 410
—
—
—
—
—
410
Total $ 36,577
$ 3,781
$ 25
$ 3,026
$ 7,662
$ 123
$ 51,194

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

~~II.~~IV. For the Six Months Ended June 30, ~~2017~~2018



	Six Months Ended June 30, 2018
	Equipment Leasing			Infrastructure
	Aviation Leasing			Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Revenues
Equipment leasing revenues	$	108,853		$	—		$	—	$	—		$	6,261		$	115,114
Infrastructure revenues	—			3,803			19,835		2,071			—			25,709
Total revenues	108,853			3,803			19,835		2,071			6,261			140,823

Expenses
Operating expenses	5,297			23,212			15,251		5,096			6,316			55,172
General and administrative	—			—			—		—			8,159			8,159
Acquisition and transaction expenses	223			—			—		—			3,051			3,274
Management fees and incentive allocation to affiliate	—			—			—		—			8,234			8,234
Depreciation and amortization	46,688			9,727			1,147		1,641			3,228			62,431
Interest expense	—			7,813			486		545			15,884			24,728
Total expenses	52,208			40,752			16,884		7,282			44,872			161,998

Other income (expense)
Equity in (losses) earnings of unconsolidated entities	(350		)	(87		)	—		—			281			(156		)
Gain on sale of equipment, net	4,983			—			8		—			—			4,991
Interest income	106			136			—		��			8			250
Other income	—			1,337			—		—			—			1,337
Total other income	4,739			1,386			8		—			289			6,422
Income (loss) before income taxes	61,384			(35,563		)	2,959		(5,211		)	(38,322		)	(14,753		)
Provision for income taxes	1,006			21			—		—			2			1,029
Net income (loss)	60,378			(35,584		)	2,959		(5,211		)	(38,324		)	(15,782		)
Less: Net (loss) income attributable to non-controlling interests in consolidated subsidiaries	(24		)	(16,258		)	257		(24		)	—			(16,049		)
Net income (loss) attributable to shareholders	$	60,402		$	(19,326	)	$	2,702	$	(5,187	)	$	(38,324	)	$	267

Six Months Ended June 30, 2017
Equipment Leasing Infrastructure

Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Revenues
Equipment leasing revenues $ 66,883
$ 4,838
$ 50
$ —
$ —
$ —
$ —
$ 71,771
Infrastructure revenues —
—
—
7,892
16,065
139
—
24,096
Total revenues 66,883
4,838
50
7,892
16,065
139
—
95,867

Expenses
Operating expenses 2,790
7,558
—
14,880
15,451
1,658
—
42,337
General and administrative —
—
—
—
—
—
7,176
7,176
Acquisition and transaction expenses 270
—
—
—
—
—
3,062
3,332
Management fees and incentive allocation to affiliate —
—
—
—
—
—
7,758
7,758
Depreciation and amortization 25,375
3,213
—
7,907
1,018
85
—
37,598
Interest expense —
1,854
—
2,875
446
544
6,659
12,378
Total expenses 28,435
12,625
—
25,662
16,915
2,287
24,655
110,579

Other income (expense)
Equity in losses of unconsolidated entities (843 ) —
(675 ) (75 ) —
—
—
(1,593 )
Gain (loss) on sale of equipment and finance leases, net 4,061
—
—
—
(44 ) —
—
4,017
Loss on extinguishment of debt —
—
—
—
—
—
(2,456 ) (2,456 )
Interest income 159
7
—
201
—
—
—
367
Other income —
—
—
32
—
—
—
32
Total other income (expense) 3,377
7
(675 ) 158
(44 ) —
(2,456 ) 367
Income (loss) before income taxes 41,825
(7,780 ) (625 ) (17,612 ) (894 ) (2,148 ) (27,111 )
(14,345 )
Provision for (benefit from) income taxes 671
5
(34 ) 34
—
—
—
676
Net income (loss) 41,154
(7,785 ) (591 ) (17,646 ) (894 ) (2,148 )
(27,111 )
(15,021 )
Less: Net income (loss) attributable to non-controlling interests in consolidated subsidiaries 142
(464 ) —
(8,403 ) 61
(483 ) —
(9,147 )
Net income (loss) attributable to shareholders $ 41,012
$ (7,321 ) $ (591 ) $ (9,243 ) $ (955 ) $ (1,665 ) $ (27,111 )
$ (5,874 )

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

Thefollowing table sets forth a reconciliation of Adjusted ~~Net Income (Loss)~~EBITDA to net ~~loss~~income attributable to shareholders:



	Six Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal			Railroad		Ports and Terminals			Corporate and Other			Total
Adjusted EBITDA	$	121,036	$	(6,739	)	$	4,323	$	(2,845	)	$	(15,438	)	$	100,337
Add: Non-controlling share of Adjusted EBITDA														5,612
Add: Equity in losses of unconsolidated entities														(156		)
Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities														17
Less: Interest expense														(24,728		)
Less: Depreciation and amortization expense														(75,320		)
Less: Incentive allocations														(573		)
Less: Asset impairment charges														—
Less: Changes in fair value of non-hedge derivative instruments														(182		)
Less: Losses on the modification or extinguishment of debt and capital lease obligations														—
Less: Acquisition and transaction expenses														(3,274		)
Less: Equity-based compensation expense														(437		)
Less: Provision for income taxes														(1,029		)
Net income attributable to shareholders														$	267

Six Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Adjusted Net Income (Loss) $ 41,953
$ (7,316 ) $ (717 ) $ (9,188 ) $ (584 ) $ (1,665 ) $ (22,106 ) $ 377
Add: Non-controlling share of adjustments to Adjusted Net Income 56
Add: Equity in losses of unconsolidated entities (1,593 )
Add: Cash payments for income taxes 595
Less: Incentive allocations —
Less: Pro-rata share of Adjusted Net Income from investments in unconsolidated entities 1,685
Less: Asset impairment charges —
Less: Changes in fair value of non-hedge derivative instruments —
Less: Losses on the modification or extinguishment of debt and capital lease obligations (2,456 )
Less: Acquisition and transaction expenses (3,332 )
Less: Equity-based compensation income (530 )
Less: Provision for income taxes (676 )
Net loss attributable to shareholders $ (5,874 )

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:



	Six Months Ended June 30, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Revenues
Africa	$	3,405	$	—	$	—	$	—	$	—	$	3,405
Asia	23,292		—		—		—		5,530		28,822
Europe	67,776		—		—		—		—		67,776
North America	13,954		3,803		19,835		2,071		731		40,394
South America	426		—		—		—		—		426
Total	$	108,853	$	3,803	$	19,835	$	2,071	$	6,261	$	140,823

Six Months Ended June 30, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Total
Revenues

Africa $ 4,780
$ —
$ —
$ —
$ —
$ —
$ 4,780
Asia 23,113
3,114
50
—
—
—
26,277
Europe 34,322
953
—
—
—
—
35,275
North America 3,963
771
—
7,892
16,065
139
28,830
South America 705
—
—
—
—
—
705
Total $ 66,883
$ 4,838
$ 50
$ 7,892
$ 16,065
$ 139
$ 95,867

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)

V. Balance Sheet and location of long-lived assets

The following tables sets forth summarized balance sheet information and the geographic location of property, plant and equipment and leasing equipment, net as of June 30, ~~2018~~2019 and December 31, ~~2017:~~2018:



	June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other			Total
Total assets	$	1,503,151	$	742,044	$	73,444	$	490,871	$	278,999		$	3,088,509

Debt, net	—		258,887		23,075		90,685		1,258,489			1,631,136

Total liabilities	250,159		345,324		45,304		116,873		1,292,616			2,050,276

Non-controlling interests in equity of consolidated subsidiaries	—		44,749		3,410		673		524			49,356

Total equity	1,252,992		396,720		28,140		373,998		(1,013,617		)	1,038,233

Total liabilities and equity	$	1,503,151	$	742,044	$	73,444	$	490,871	$	278,999		$	3,088,509



	June 30, 2019
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Property, plant and equipment and leasing equipment, net
Africa	$	50,182	$	—	$	—	$	—	$	—	$	50,182
Asia	428,960		—		—		—		33,898		462,858
Europe	611,978		—		—		—		—		611,978
North America	192,360		468,800		53,360		371,755		120,662		1,206,937
South America	32,906		—		—		—		—		32,906
Total	$	1,316,386	$	468,800	$	53,360	$	371,755	$	154,560	$	2,364,861


	June 30, 2018																	December 31, 2018
	Equipment Leasing						Infrastructure											Equipment Leasing		Infrastructure
	Aviation Leasing		Offshore Energy		Shipping Containers		Jefferson Terminal		Railroad		Ports and Terminals		Corporate			Total		Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other			Total
Total assets	$	1,108,811	$	189,969	$	4,759	$	598,704	$	57,905	$	222,901	$	28,223		$	2,211,272	$	1,367,074	$	670,682	$	64,286	$	277,160	$	259,576		$	2,638,778

Debt, net	—		50,579		—		225,284		20,287		—		566,596			862,746		—		234,862		22,239		—		980,246			1,237,347

Total liabilities	171,714		54,651		97		254,938		36,421		21,950		582,175			1,121,946		234,449		288,256		37,207		16,615		1,008,469			1,584,996

Non-controlling interests in equity of consolidated subsidiaries	—		—		—		57,418		3,085		428		525			61,456		—		52,058		3,258		544		523			56,383

Total equity	937,097		135,318		4,662		343,766		21,484		200,951		(553,952		)	1,089,326		1,132,625		382,426		27,079		260,545		(748,893		)	1,053,782

Total liabilities and equity	$	1,108,811	$	189,969	$	4,759	$	598,704	$	57,905	$	222,901	$	28,223		$	2,211,272	$	1,367,074	$	670,682	$	64,286	$	277,160	$	259,576		$	2,638,778

June 30, 2018
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Property, plant and equipment and leasing equipment, net
Africa $ 45,165
$ —
$ —
$ —
$ —
$ —
$ —
$ 45,165
Asia 265,982
35,483
—
—
—
—
—
301,465
Europe 561,690
124,387
—
—
—
—
—
686,077
North America 131,022
—
—
386,566
46,025
207,144
—
770,757
South America —
—
—
—
—
—
—
—
Total $ 1,003,859
$ 159,870
$ —
$ 386,566
$ 46,025
$ 207,144
$ —
$ 1,803,464

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(~~Dollar amounts~~Dollars in tables in thousands, unless otherwise noted)



	December 31, 2018
	Equipment Leasing		Infrastructure
	Aviation Leasing		Jefferson Terminal		Railroad		Ports and Terminals		Corporate and Other		Total
Property, plant and equipment and leasing equipment, net
Africa	$	47,353	$	—	$	—	$	—	$	—	$	47,353
Asia	383,648		—		—		—		34,667		418,315
Europe	592,670		—		—		—		121,950		714,620
North America	177,962		433,404		51,157		263,747		—		926,270
South America	34,505		—		—		—		—		34,505
Total	$	1,236,138	$	433,404	$	51,157	$	263,747	$	156,617	$	2,141,063

December 31, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Total assets $ 952,543
$ 195,101
$ 4,429
$ 579,329
$ 51,989
$ 123,693
$ 48,722
$ 1,955,806

Debt, net —
53,590
—
184,942
22,513
—
442,219
703,264

Total liabilities 145,882
56,853
100
210,159
36,560
14,229
456,948
920,731

Non-controlling interests in equity of consolidated subsidiaries 3,037
—
—
81,414
2,737
295
524
88,007

Total equity 806,661
138,248
4,329
369,170
15,429
109,464
(408,226 ) 1,035,075

Total liabilities and equity $ 952,543
$ 195,101
$ 4,429
$ 579,329
$ 51,989
$ 123,693
$ 48,722
$ 1,955,806

December 31, 2017
Equipment Leasing Infrastructure
Aviation Leasing Offshore Energy Shipping Containers Jefferson Terminal Railroad Ports and Terminals Corporate Total
Property, plant and equipment and leasing equipment, net
Africa $ 36,648
$ —
$ —
$ —
$ —
$ —
$ —
$ 36,648
Asia 210,152
163,072
—
—
—
—
—
373,224
Europe 527,166
—
—
—
—
—
—
527,166
North America 96,525
—
—
371,687
40,512
118,317
—
627,041
South America —
—
—
—
—
—
—
—
Total $ 870,491
$ 163,072
$ —
$ 371,687
$ 40,512
$ 118,317
$ —
$ 1,564,079

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~15.~~ 17. EARNINGS PER SHARE AND EQUITY

Basic earnings ~~(loss)~~ per share (“EPS”) is calculated by dividing net income ~~(loss)~~ attributable to shareholders by the weighted average number of common shares outstanding, plus any participating securities. Diluted EPS is calculated by dividing net income ~~(loss)~~ attributable to shareholders by the weighted average number of common shares outstanding, plus any participating securities and potentially dilutive securities. Potentially dilutive securities are calculated using the treasury stock method.

The calculation of basic and diluted EPS is presented below:



	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except share and per share data)	2019		2018		2019		2018
Net income attributable to shareholders	$	20,332	$	839	$	13,952	$	267
Weighted Average Shares Outstanding - Basic ⁽¹⁾	85,987,769		83,160,037		85,987,115		82,351,736
Weighted Average Shares Outstanding - Diluted ⁽¹⁾	85,989,029		83,160,047		85,987,115		82,351,858

Basic EPS	$	0.24	$	0.01	$	0.16	$	—
Diluted EPS	$	0.24	$	0.01	$	0.16	$	—

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except share and per share data) 2018 2017 2018 2017
Net income (loss) attributable to shareholders $ 839
$ (1,460 ) $ 267
$ (5,874 )
Weighted Average Shares Outstanding - Basic 83,160,037
75,762,674
82,351,736
75,762,480
Weighted Average Shares Outstanding - Diluted 83,160,047
75,762,674
82,351,858
75,762,480

Basic EPS $ 0.01
$ (0.02 ) $ —
$ (0.08 )
Diluted EPS $ 0.01
$ (0.02 ) $ —
$ (0.08 )

~~For the~~⁽¹⁾The three and six months ended June 30, ~~2017, 1,316~~2019 includes 1.1 million equivalent participating securities which can be converted into a fixed amount of our shares.

For the three months ended June 30, 2019 and ~~1,716~~2018, 119,009 and 69,281 shares, respectively, and for the six months ended June 30, 2019 and 2018, 127,923 and 63,432 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive.

In January 2019, we issued 16,275 common shares to certain directors as compensation.

During the six months ended June 30, ~~2018, we issued 7,000,000~~2019, certain holders of Class B Units (see Note 15) converted 1,051,744 Class B Units in exchange for 778,919 common shares, par value $0.01 per share, representing limited liability interest in us, in connection with a public offering, at a price of $18.65 per share. The offering closed on January 16, 2018. Net proceeds from the offering were $128,450 after deducting underwriting discounts and commissions and estimated offering expenses payable by us. To compensate the Manager for its successful efforts in raising capital for us, in connection with the offering, we granted options to the Manager related to 700,000 common shares at the public offering price which had a fair value of approximately $1,900 as of the grant date. The assumptions used in valuing the options were: a 2.52% risk-free rate, a 5.45% dividend yield, a 27.73% volatility and a ten-year term. We intend to use the net proceeds from the offering for general corporate purposes, including the funding of future investments.shares.

~~16.~~ 18. COMMITMENTS AND CONTINGENCIES

In the normal course of business we, and our subsidiaries, may be involved in various claims, legal proceedings, or may enter into contracts that contain a variety of representations and warranties and which provide general indemnifications. Within our ~~Offshore Energy segment,~~offshore energy business, a lessee did not fulfill their obligation under their charter arrangement, therefore we are pursuing rights afforded to us under the charter and the range of potential losses against the obligation is $0$0.0 million to ~~$3,334.~~$3.3 million. Our maximum exposure under other arrangements is unknown as no additional claims have been made. We believe the risk of loss in connection with such arrangements is remote.

We have also entered into an arrangement with our non-controlling interest holder of Repauno, whereby the non-controlling interest holder may receive additional payments contingent upon the achievement of certain conditions, not to exceed ~~$15,000.~~$15.0 million. We will account for such amounts when and if such conditions are achieved.

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We have entered into an arrangement with the seller of Long Ridge, whereby the seller may receive additional payments contingent upon the achievement of certain conditions, not to exceed ~~$5,000.~~$5.0 million. We will account for such amounts when and if such conditions are achieved.

~~Several of our subsidiaries are lessees under various operating and capital leases. Total rent expense for operating leases was as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
Rent expense $ 999
$ 1,279
$ 2,156
$ 2,520

~~FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~ ~~(unaudited)~~

~~(Dollar amounts in thousands, unless otherwise noted)~~

~~As of June 30, 2018, minimum future rental payments under operating and capital leases are as follows:~~

2018 $ 3,120
2019 5,986
2020 5,097
2021 3,312
2022 2,433
Thereafter 69,090
Total $ 89,038

~~17.~~ 19. SUBSEQUENT EVENTS

On August ~~2, 2018,~~1, 2019 our Board of Directors declared a cash dividend on our common shares and eligible participating securities of $0.33 per share for the quarter ended June 30, ~~2018,~~2019, payable on August ~~28, 2018~~27, 2019 to the holders of record on August ~~17, 2018.~~16, 2019.

~~Amendment~~In July 2019, certain holders of Class B Units converted 63,739 Class B Units in exchange for 47,205 common shares.

In July 2019, we issued 9,850 common shares to certain directors as compensation.

In July 2019, our subsidiary repaid $23 million due under the ~~Revolving Credit Facility~~

~~On August 2, 2018, we entered into an amendment to the Revolving Credit Facility.~~Jefferson Revolver. The ~~amendment, among other things, (i) increases the~~ aggregate revolving ~~commitments~~commitment under the ~~Revolving Credit Facility by $50,000 from $75,000~~Jefferson Revolver reverted back to ~~$125,000 and (ii) extends the maturity date of the revolving loans and commitments under the Existing Credit Agreement by one year from June 16, 2020 to June 16, 2021.~~$50 million on August 1, 2019.

4342

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,” “we,” “our” or “us”). Our MD&A should be read in conjunction with our unaudited consolidated financial statements and the accompanying notes, and with Part II, Item 1A, “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We own and acquire high quality infrastructure and related equipment that is essential for the transportation of goods and people globally. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there 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 June 30, ~~2018,~~2019, we had total consolidated assets of ~~$2.2~~$3.1 billion and total equity of ~~$1.1~~$1.0 billion.

Operating Segments

Our operations consist of two primary strategic business units – Infrastructure and Equipment Leasing. Our Infrastructure Business acquires long-lived assets that provide mission-critical services or functions to transportation networks and typically have high barriers to entry. We target or develop operating businesses with strong margins, stable cash flows and upside from earnings growth and asset appreciation driven by increased use and inflation. Our Equipment Leasing Business acquires assets that are designed to carry cargo or ~~people or provide functionality to transportation infrastructure.~~people. 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 ~~six~~four reportable segments: (i) Aviation Leasing, ~~(ii) Offshore Energy, (iii) Shipping Containers, all of~~ which ~~are~~is within the Equipment Leasing Business, and ~~(iv)~~(ii) Jefferson Terminal, ~~(v)~~(iii) Railroad and ~~(vi)~~(iv) 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 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. The Ports and Terminals segment consists of Repauno, acquired in 2016, a 1,630 acre deep-water port located along the Delaware ~~river~~River with an underground storage cavern and multiple industrial development opportunities, and Long Ridge, acquired in June 2017, a 1,660 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~~ Corporate ~~operating segment~~and Other primarily consists of debt, unallocated corporate general and administrative expenses, and management fees. Additionally, Corporate and Other also includes the former Offshore Energy and Shipping Containers segments composed of (i) offshore energy related assets which consists of vessels and equipment that support offshore oil and gas activities and are typically subject to long-term operating leases and (ii) an investment in an unconsolidated entity engaged in the leasing of shipping containers on both an operating lease and finance lease basis.

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 December 27, 2017, SoftBank Group Corp. (“SoftBank”) announced that it completed its previously announced acquisition of Fortress (the “SoftBank Merger”). In connection with the Softbank Merger, Fortress operates within SoftBank as an independent business headquartered in New York.

Results of Operations

Adjusted ~~Net Income (Loss)~~EBITDA (Non-GAAP)

The ~~Chief Operating Decision Maker (“CODM”)~~CODM utilizes Adjusted ~~Net Income (Loss)~~EBITDA as the key performance measure. This performance measure provides the CODM with the information necessary to assess operational performance, as well as make resource and allocation decisions.

Adjusted Net Income (Loss) is defined as net income (loss) attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, and equity in earnings (losses) of unconsolidated entities, (b) to include the impact of cash income tax payments, and our pro-rata share of the Adjusted Net Income (Loss) from unconsolidated entities, and (c) to exclude the impact of the non-controlling share of Adjusted Net Income (Loss). We evaluate investment performance for each reportable segment primarily based on Adjusted Net Income (Loss). We believe that net income attributable to shareholders, as defined by GAAP, is the most comparable earnings measurement with which to reconcile Adjusted Net Income (Loss).

~~Adjusted EBITDA (Non-GAAP)~~

We view Adjusted EBITDA as a secondary measurement to Adjusted Net Income (Loss), which we believe serves as a useful supplement to investors, analysts and management to measure economic performance of deployed revenue generating assets between periods on a consistent basis, and which we believe measures our financial performance and helps identify operational factors that management can impact in the short-term, namely our cost structure and expenses. Adjusted EBITDA may not be comparable to similarly titled measures of other companies because other entities may not calculate Adjusted EBITDA in the same manner.

Adjusted EBITDA is defined as net income (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 six months ended June 30, ~~2018~~2019 and ~~2017~~2018

The following table presents our consolidated results of ~~operations and~~operations:



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018						2019			2018
Revenues
Equipment leasing revenues
Lease income	$	51,888		$	37,241		$	14,647		$	101,124		$	72,740		$	28,384
Maintenance revenue	25,369			19,940			5,429			47,146			39,425			7,721
Finance lease income	881			612			269			1,707			979			728
Other revenue	1,062			1,537			(475		)	1,675			1,970			(295		)
Total equipment leasing revenues	79,200			59,330			19,870			151,652			115,114			36,538
Infrastructure revenues
Lease income	1,086			417			669			1,749			799			950
Rail revenues	9,977			8,788			1,189			20,484			19,835			649
Terminal services revenues	8,565			2,550			6,015			15,250			3,803			11,447
Crude marketing revenues	59,204			—			59,204			89,983			—			89,983
Other revenue	973			894			79			4,514			1,272			3,242
Total infrastructure revenues	79,805			12,649			67,156			131,980			25,709			106,271
Total revenues	159,005			71,979			87,026			283,632			140,823			142,809

Expenses
Operating expenses	92,763			27,593			65,170			154,681			55,172			99,509
General and administrative	4,297			4,573			(276		)	9,029			8,159			870
Acquisition and transaction expenses	2,308			1,508			800			3,782			3,274			508
Management fees and incentive allocation to affiliate	5,710			4,495			1,215			9,548			8,234			1,314
Depreciation and amortization	42,600			32,844			9,756			82,133			62,431			19,702
Interest expense	25,472			12,857			12,615			46,775			24,728			22,047
Total expenses	173,150			83,870			89,280			305,948			161,998			143,950

Other income (expense)
Equity in losses of unconsolidated entities	(169		)	(251		)	82			(553		)	(156		)	(397		)
Gain on sale of equipment, net	22,630			4,996			17,634			24,355			4,991			19,364
Interest income	240			74			166			331			250			81
Other income	4,938			1,157			3,781			2,334			1,337			997
Total other income	27,639			5,976			21,663			26,467			6,422			20,045
Income (loss) before income taxes	13,494			(5,915		)	19,409			4,151			(14,753		)	18,904
(Benefit from) provision for income taxes	(2,299		)	534			(2,833		)	(1,846		)	1,029			(2,875		)
Net income (loss)	15,793			(6,449		)	22,242			5,997			(15,782		)	21,779
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries	(4,539		)	(7,288		)	2,749			(7,955		)	(16,049		)	8,094
Net income attributable to shareholders	$	20,332		$	839		$	19,493		$	13,952		$	267		$	13,685

The following table sets forth a reconciliation of net income ~~(loss)~~ attributable to shareholders to Adjusted ~~Net Income:~~EBITDA:



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018			Change			2019			2018			Change
Net income attributable to shareholders	$	20,332		$	839		$	19,493		$	13,952		$	267		$	13,685
Add: (Benefit from) provision for income taxes	(2,299		)	534			(2,833		)	(1,846		)	1,029			(2,875		)
Add: Equity-based compensation expense	700			229			471			928			437			491
Add: Acquisition and transaction expenses	2,308			1,508			800			3,782			3,274			508
Add: Losses on the modification or extinguishment of debt and capital lease obligations	—			—			—			—			—			—
Add: Changes in fair value of non-hedge derivative instruments	(3,470		)	(441		)	(3,029		)	(250		)	182			(432		)
Add: Asset impairment charges	—			—			—			—			—			—
Add: Incentive allocations	2,211			573			1,638			2,373			573			1,800
Add: Depreciation and amortization expense ⁽¹⁾	51,554			38,506			13,048			99,421			75,320			24,101
Add: Interest expense	25,472			12,857			12,615			46,775			24,728			22,047
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽²⁾	24			(192		)	216			(94		)	(17		)	(77		)
Less: Equity in losses of unconsolidated entities	169			251			(82		)	553			156			397
Less: Non-controlling share of Adjusted EBITDA ⁽³⁾	(2,871		)	(2,447		)	(424		)	(5,174		)	(5,612		)	438
Adjusted EBITDA (non-GAAP)	$	94,130		$	52,217		$	41,913		$	160,420		$	100,337		$	60,083

________________________________________________________

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Equipment leasing revenues
Lease income $ 35,493
$ 22,885
$ 12,608
$ 67,050
$ 41,131
$ 25,919
Maintenance revenue 21,688
16,576
5,112
45,115
29,245
15,870
Finance lease income 612
385
227
979
771
208
Other revenue 1,537
537
1,000
1,970
624
1,346
Total equipment leasing revenues 59,330
40,383
18,947
115,114
71,771
43,343
Infrastructure revenues
Lease income 417
123
294
799
139
660
Rail revenues 8,788
7,662
1,126
19,835
16,065
3,770
Terminal services revenues 2,550
3,026
(476 ) 3,803
7,892
(4,089 )
Other revenue 894
—
894
1,272
—
1,272
Total infrastructure revenues 12,649
10,811
1,838
25,709
24,096
1,613
Total revenues 71,979
51,194
20,785
140,823
95,867
44,956

Expenses
Operating expenses 27,593
21,324
6,269
55,172
42,337
12,835
General and administrative 4,573
3,341
1,232
8,159
7,176
983
Acquisition and transaction expenses 1,508
1,880
(372 ) 3,274
3,332
(58 )
Management fees and incentive allocation to affiliate 4,495
3,865
630
8,234
7,758
476
Depreciation and amortization 32,844
20,221
12,623
62,431
37,598
24,833
Interest expense 12,857
7,684
5,173
24,728
12,378
12,350
Total expenses 83,870
58,315
25,555
161,998
110,579
51,419

Other income (expense)
Equity in losses of unconsolidated entities (251 ) (327 ) 76
(156 ) (1,593 ) 1,437
Gain on sale of equipment, net 4,996
1,999
2,997
4,991
4,017
974
Loss on extinguishment of debt —
—
—
—
(2,456 ) 2,456
Interest income 74
84
(10 ) 250
367
(117 )
Other income 1,157
20
1,137
1,337
32
1,305
Total other income 5,976
1,776
4,200
6,422
367
6,055
Loss before income taxes (5,915 ) (5,345 ) (570 ) (14,753 ) (14,345 ) (408 )
Provision for income taxes 534
464
70
1,029
676
353
Net loss (6,449 ) (5,809 ) (640 ) (15,782 ) (15,021 ) (761 )
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (7,288 ) (4,349 ) (2,939 ) (16,049 ) (9,147 ) (6,902 )
Net income (loss) attributable to shareholders $ 839
$ (1,460 ) $ 2,299
$ 267
$ (5,874 ) $ 6,141

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Add: Provision for income taxes 534
464
70
1,029
676
353
Add: Equity-based compensation expense 229
443
(214 ) 437
530
(93 )
Add: Acquisition and transaction expenses 1,508
1,880
(372 ) 3,274
3,332
(58 )
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 (441 ) —
(441 ) 182
—
182
Add: Asset impairment charges —
—
—
—
—
—
Add: Pro-rata share of Adjusted Net Income (Loss) from unconsolidated entities ⁽¹⁾
(251 ) (419 ) 168
(156 ) (1,685 ) 1,529
Add: Incentive allocations 573
—
573
573
—
573
Less: Cash payments for income taxes (474 ) (592 ) 118
(465 ) (595 ) 130
Less: Equity in losses (earnings) of unconsolidated entities 251
327
(76 ) 156
1,593
(1,437 )
Less: Non-controlling share of Adjusted Net Income (Loss) ⁽²⁾
(198 ) (17 ) (181 ) —
(56 ) 56
Adjusted Net Income $ 2,570
$ 626
$ 1,944
$ 5,297
$ 377
$ 4,920

^{______________________________________________________________________________________}

⁽¹⁾~~Includes our proportionate share of the unconsolidated entities’ net income adjusted for the excluded and included items detailed in the table above.~~

⁽²⁾Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) ~~equity-based compensation~~depreciation and amortization expense of ~~$38~~$42,600 and ~~$50,~~$32,844, (ii) ~~provision for income tax~~lease intangible amortization of $4$2,202 and ~~$(2),~~$2,010 and (iii) ~~changes in fair value~~amortization for lease incentives of ~~non-hedge derivative instruments of $174~~$6,752 and ~~$0 less (iv) cash tax payments of $18 and $31,~~$3,652, respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) ~~equity-based compensation~~depreciation and amortization expense of ~~$75~~$82,133 and ~~$75,~~$62,431, (ii) ~~provision for income tax~~lease intangible amortization of $8$4,664 and ~~$13,~~$4,002 and (iii) ~~changes in fair value~~amortization for lease incentives of ~~non-hedge derivative instruments of $(70)~~$12,624 and ~~$0, less (iv) cash tax payments of $13 and $32,~~$8,887, respectively.

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

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Net income (loss) attributable to shareholders $ 839
$ (1,460 ) $ 2,299
$ 267
$ (5,874 ) $ 6,141
Add: Provision for income taxes 534
464
70
1,029
676
353
Add: Equity-based compensation expense 229
443
(214 ) 437
530
(93 )
Add: Acquisition and transaction expenses 1,508
1,880
(372 ) 3,274
3,332
(58 )
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 (441 ) —
(441 ) 182
—
182
Add: Asset impairment charges —
—
—
—
—
—
Add: Incentive allocations 573
—
573
573
—
573
Add: Depreciation and amortization expense ⁽³⁾
38,506
21,583
16,923
75,320
40,889
34,431
Add: Interest expense 12,857
7,684
5,173
24,728
12,378
12,350
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽⁴⁾
(192 ) 189
(381 ) (17 ) (491 ) 474
Less: Equity in losses (earnings) of unconsolidated entities 251
327
(76 ) 156
1,593
(1,437 )
Less: Non-controlling share of Adjusted EBITDA ⁽⁵⁾
(2,447 ) (2,277 ) (170 ) (5,612 ) (4,519 ) (1,093 )
Adjusted EBITDA (non-GAAP) $ 52,217
$ 28,833
$ 23,384
$ 100,337
$ 50,970
$ 49,367

⁽³⁾⁽²⁾Includes the following items for the three months ended June 30, ~~2018~~2019 and 2017: $32,844 and $20,221 of depreciation and amortization expense, $2,010 and $1,065 of lease intangible amortization, and $3,652 and $297 of amortization for lease incentives for the three months ended June 30, 2018 and 2017, respectively. Includes $62,431 and $37,598 of depreciation and amortization expense, $4,002 and $2,347 of lease intangible amortization, and $8,887 and $944 of amortization for lease incentives for the six months ended June 30, 2018 and 2017, respectively.

⁽⁴⁾~~Includes the following items for the three months ended June 30, 2018 and 2017:~~2018: (i) net loss of ~~$299~~$(276) and ~~$376,~~$(299), (ii) interest expense of ~~$94~~$34 and ~~$223,~~$94 and (iii) depreciation and amortization expense of ~~$13~~$266 and ~~$342,~~$13, respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) net loss of ~~$251~~$(696) and ~~$1,685,~~$(251), (ii) interest expense of ~~$206~~$70 and ~~$474,~~$206 and (iii) depreciation and amortization expense of $532 and $28, ~~and $720,~~ respectively.

⁽⁵⁾⁽³⁾ Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) equity based compensation of ~~$25~~$110 and ~~$50,~~$25, (ii) provision for income taxes of $3$10 and ~~$(2),~~$3, (iii) interest expense of ~~$1,032~~$1,109 and ~~$476,~~$1,032, (iv) depreciation and amortization expense of ~~$1,200~~$1,345 and ~~$1,753,~~$1,200, and (v) changes in fair value of non-hedge derivative instruments of ~~$187~~$297 and ~~$0,~~$187, respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) equity based compensation of ~~$62~~$135 and ~~$75,~~$62, (ii) provision for income taxes of $7$46 and ~~$13,~~$7, (iii) interest expense of ~~$2,324~~$2,008 and ~~$1,004,~~$2,324, (iv) depreciation and amortization expense of ~~$3,276~~$2,509 and ~~$3,427,~~$3,276 and (v) changes in fair value of non-hedge derivative instruments of ~~$(57)~~$476 and ~~$0,~~$(57), respectively.

Revenues

Comparison of the three months ended June 30, ~~2018~~2019 and ~~2017~~2018

Total revenues increased ~~by $20,785,~~$87.0 million, primarily due to higher revenues in the Jefferson Terminal and Aviation Leasing ~~Railroad and Ports and Terminals~~ segments.

In Equipment Leasing, lease income increased ~~by $12,608,~~$14.6 million, primarily driven by an increase in acquired assets on lease in the Aviation Leasing segment. Maintenance revenue increased ~~by $5,112 as the number of aircraft and engines subject to leases with maintenance arrangements increased.~~

In Infrastructure, rail revenues increased by $1,126, primarily due to higher traffic and increased carloads by the Railroad segment. Other revenue increased by $894, which relates to services performed for lessees at Long Ridge in the Ports and Terminals segment.

~~Comparison of the six months ended June 30, 2018 and 2017~~

Total revenues increased $44,956, due to higher revenues in our Aviation Leasing, Railroad, Ports and Terminals and Offshore Energy segments. These increases were partially offset by a decrease in the Jefferson Terminal segment.

In Equipment Leasing, lease income increased $25,919, primarily due to an increase in the number of assets on lease in the Aviation Leasing segment. Additionally, maintenance revenue increased $15,870 primarily$5.4 million due to an increase in the number of aircraft and engines ~~subject to leases with maintenance arrangements, and the release of maintenance claims into revenue for aircraft that are being returned from~~on lease.

In Infrastructure, ~~rail~~crude marketing revenue increased $59.2 million. During the third quarter of 2018, Jefferson Terminal initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and marketing crude to third parties. Terminal services revenue increased $6.0 million primarily due to increased activity and storage capacity at Jefferson Terminal.

Comparison of the six months ended June 30, 2019 and 2018

Total revenues increased ~~$3,770,~~$142.8 million, primarily due to higher ~~traffic related to a detour resulting~~revenues in the ~~diversion of trains onto our track. Other~~Jefferson Terminal, Aviation Leasing and Ports and Terminals segments.

In Equipment Leasing, lease income increased $28.4 million, primarily driven by an increase in acquired assets on lease in the Aviation Leasing segment. Maintenance revenue increased ~~$1,272, which relates~~$7.7 million due to ~~services performed for lessees at Long Ridge. The increases were offset by lower~~an increase in the number of aircraft and engines on lease.

In Infrastructure, crude marketing revenue increased $90.0 million. During the third quarter of 2018, Jefferson Terminal initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and marketing crude to third parties. Terminal services revenue ~~of $4,089~~increased $11.4 million primarily due to ~~lower volumes.~~increased activity and storage capacity at Jefferson Terminal and increased activity at Long Ridge.

Expenses

Comparison of the three months ended June 30, ~~2018~~2019 and ~~2017~~2018

Total expenses increased ~~by $25,555,~~$89.3 million, primarily due to higher (i) ~~deprecation and amortization, (ii)~~ operating expenses, (ii) interest expense and (iii) ~~interest expense.~~depreciation and amortization.

Operating expenses increased $65.2 million, primarily due to increases in:

cost of sales of $60.1 million primarily due to costs associated with crude marketing at Jefferson Terminal;

compensation and benefits of $2.4 million primarily due to increased headcount and stock compensation in the Jefferson Terminal, Ports and Terminals and Railroad segments; and

facility operations of $1.2 million primarily due to higher equipment shipping and storage costs in the Aviation Leasing and Jefferson Terminal segments and increased activity in the Ports and Terminals segment.

Interest expense increased $12.6 million due to an increase in our average outstanding debt of approximately $776.1 million, which primarily consists of the (i) 2025 Notes of $400.0 million, (ii) 2022 Notes of $176.6 million, (iii) Revolving Credit Facility of $73.3 million, (iv) LREG Credit Agreement of $71.5 million, (v) Jefferson Revolver of $45.3 million and (vi) DRP Revolver of $17.6 million.

Depreciation and amortization increased ~~by $12,623,~~$9.8 million, primarily due to additional assets acquired in the Aviation Leasing segment and assets placed into service ~~in the Jefferson Terminal segment.~~

Operating expenses increased by $6,269, primarily due to an increase in (i) facility operations of $2,251 primarily in the Jefferson Terminal and Ports and Terminals segments, (ii) professional fees of $1,455 primarily in the Jefferson Terminal segment, (iii) repairs and maintenance of $589 primarily in the Ports and Terminals, Jefferson Terminal and Offshore Energy segments and (iv) other operating expenses related to business growth.

Interest expense increased by $5,173, primarily due to additional debt of $64,511 from the Jefferson Revolver and Revolving Credit Facility, a decrease in capitalized interest from the Series 2016 Bonds and a decrease in construction in progress as certain terminal storage assets were placed into service in the first quarter of 2018.at Long Ridge.

Comparison of the six months ended June 30, ~~2018~~2019 and ~~2017~~2018

Total expenses increased ~~$51,419, mainly~~$144.0 million, primarily due to higher (i) operating expenses, (ii) interest expense and (iii) depreciation and ~~amortization,~~amortization.

Operating expenses increased $99.5 million, primarily due to increases in:

cost of sales of $89.0 million primarily due to costs associated with crude marketing at Jefferson Terminal;

compensation and benefits of $3.8 million primarily due to increased headcount and stock compensation in the Jefferson Terminal, Ports and Terminals and Railroad segments; and

facility operations of $2.5 million primarily due to higher equipment shipping and storage costs in the Aviation Leasing and Jefferson Terminal segments and increased activity in the Ports and Terminals segment.

Interest expense increased $22.0 million due to an increase in our average outstanding debt of approximately $742.7 million, which primarily consists of the (i) 2025 Notes of $350.0 million, (ii) ~~operating expenses~~2022 Notes of $185.5 million, (iii) Revolving Credit Facility of $90.8 million, (iv) LREG Credit Agreement of $59.6 million, (v) Jefferson Revolver of $50.1 million and ~~(iii) interest expense.~~(vi) DRP Revolver of $12.9 million.

Depreciation and amortization increased ~~$24,833,~~$19.7 million, primarily due to additional assets acquired ~~and placed on lease in the Aviation Leasing segment.~~

Operating expenses increased $12,835, primarily due to increases in (i) facility operations of $4,270 primarily in the Jefferson Terminal segment, (ii) professional fees of $1,460 primarily in the Jefferson Terminal segment, (iii) bad debt expense of $1,458 primarily related to the write-off of receivables in the Aviation Leasing segment ~~(iv) compensation~~ and benefits of $1,436 primarily reflecting hiring in the Ports and Terminals and Railroad segments, (v) repairs and maintenance expense of $1,385 primarily due to maintenance costs in the Jefferson Terminal and Ports and Terminals segments and (vi) other operating expenses related to business growth.

Interest expense increased $12,350, primarily related to interest on the Senior Notes and the Revolving Credit Facility. Refer to the Note 8 of the Consolidated Financial Statements for further detail.assets placed into service at Long Ridge.

Other Income (Expense)

Total other income increased ~~$4,200~~$21.7 million during the three months ended June 30, ~~2018, compared to the three months ended June 30, 2017,~~2019, primarily due to ana net increase in ~~gains~~gain on ~~sales~~sale of ~~$2,997 primarily~~$17.6 million in the Aviation Leasing segment and ~~a fair value~~an unrealized gain of $4.9 million on ~~a short term derivative of $441.~~our electricity derivatives in the Ports and Terminals segment.

Total other income increased ~~$6,055~~$20.0 million during the six months ended June 30, ~~2018, compared~~2019, primarily due to ~~the six months ended June 30, 2017. The increase primarily reflects (i) the loss on extinguishment of debt of $2,456 during the six months ended June 30, 2017, (ii) an~~a net increase in ~~gains~~gain on ~~sales~~sale of ~~$974 primarily~~$19.3 million in the Aviation Leasing ~~segment and (iii) lower equity in losses in unconsolidated subsidiaries of $1,437.~~segment.

Net ~~Loss~~Income Attributable to Shareholders

Net income attributable to shareholders increased ~~$2,299~~$19.5 million and ~~$6,141~~$13.7 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017,~~2019, respectively, primarily due to the changes discussed ~~above.~~

~~Adjusted Net Income (Non-GAAP)~~

~~Adjusted Net Income increased $1,944~~above and ~~$4,920~~a benefit from income taxes recognized during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively, primarily due to the changes in revenue, expenses and other income (expense) noted above. Additionally, the change was due to (i) incentive fees, (ii) lower cash payments for income taxes, (iii) a lower pro-rata share of Adjusted Net Loss and (iv) the loss on extinguishment of debt during the six months ended June 30, 2017.2019.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased ~~$23,384~~$41.9 million and ~~$49,367~~$60.1 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017, respectively. In addition~~2019, respectively, primarily due to the changes ~~in revenue, expenses and income/(loss)~~ noted above, which resulted in an increase in income attributable to shareholders, the change was primarily due to (i) increased depreciation and amortization expense from additional assets acquired and placed into service, (ii) increased interest expense, (iii) incentive fees and (iv) increased pro-rata share of Adjusted EBITDA from unconsolidated entities. Partially offsetting these changes were changes in (i) the loss on extinguishment of debt for the six month period, (ii) equity in losses of unconsolidated entities and (iii) non-controlling share of Adjusted EBITDA.above.

Aviation Leasing Segment

As of June 30, ~~2018,~~2019, in our Aviation Leasing segment, we own and manage ~~183~~231 aviation assets, consisting of 5770 commercial aircraftand ~~126~~161 engines.

As of June 30, ~~2018, 53~~2019, 68 of our commercial aircraft and 98119 of our engines were leased to operators or other third parties. Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease. Our aviation equipment was approximately ~~87%~~90% utilized as of June 30, ~~2018,~~2019, based on the equity value of our on-hire leasing equipment as a percentage of the total equity value of our aviation leasing equipment. Our aircraft currently have a weighted average remaining lease term of 3134 months, and our engines currently on-lease have an average remaining lease term of 11 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, 2019	14		56		70
Purchases	4		6		10
Sales	—		(3	)	(3	)
Transfers	(3	)	(4	)	(7	)
Assets at June 30, 2019	15		55		70

Engines
Assets at January 1, 2019	78		64		142
Purchases	13		5		18
Sales	(6	)	(10	)	(16	)
Transfers	9		8		17
Assets at June 30, 2019	94		67		161

4947

Aviation Assets Widebody Narrowbody Total
Aircraft
Assets at January 1, 2018 9
39
48
Purchases 2
11
13
Sales —
(1 ) (1 )
Transfers —
(3 ) (3 )
Assets at June 30, 2018 11
46
57

Engines
Assets at January 1, 2018 57
53
110
Purchases 8
8
16
Sales (2 ) (4 ) (6 )
Transfers —
6
6
Assets at June 30, 2018 63
63
126

The following table presents our results of ~~operations and~~operations:



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018						2019			2018
Revenues
Equipment leasing revenues
Lease income	$	48,731		$	35,373		$	13,358		$	96,034		$	68,623		$	27,411
Maintenance revenue	25,369			19,940			5,429			47,146			39,425			7,721
Finance lease income	881			247			634			1,707			247			1,460
Other revenue	—			558			(558		)	505			558			(53		)
Total revenues	74,981			56,118			18,863			145,392			108,853			36,539

Expenses
Operating expenses	2,721			1,864			857			8,799			5,297			3,502
Acquisition and transaction expenses	—			66			(66		)	13			223			(210		)
Depreciation and amortization	33,267			24,875			8,392			63,272			46,688			16,584
Total expenses	35,988			26,805			9,183			72,084			52,208			19,876

Other (expense) income
Equity in losses of unconsolidated entities	(242		)	(126		)	(116		)	(443		)	(350		)	(93		)
Gain on sale of equipment, net	22,610			5,003			17,607			24,328			4,983			19,345
Interest income	28			33			(5		)	54			106			(52		)
Total other income	22,396			4,910			17,486			23,939			4,739			19,200
Income before income taxes	61,389			34,223			27,166			97,247			61,384			35,863
(Benefit from) provision for income taxes	(2,369		)	523			(2,892		)	(2,189		)	1,006			(3,195		)
Net income	63,758			33,700			30,058			99,436			60,378			39,058
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries	—			—			—			—			(24		)	24
Net income attributable to shareholders	$	63,758		$	33,700		$	30,058		$	99,436		$	60,402		$	39,034

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

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Equipment leasing revenues
Lease income $ 33,625
$ 20,001
$ 13,624
$ 62,933
$ 37,636
$ 25,297
Maintenance revenue 21,688
16,576
5,112
45,115
29,245
15,870
Finance lease income 247
—
247
247
—
247
Other revenue 558
—
558
558
2
556
Total revenues 56,118
36,577
19,541
108,853
66,883
41,970

Expenses
Operating expenses 1,864
1,371
493
5,297
2,790
2,507
Acquisition and transaction expenses 66
55
11
223
270
(47 )
Depreciation and amortization 24,875
14,086
10,789
46,688
25,375
21,313
Total expenses 26,805
15,512
11,293
52,208
28,435
23,773

Other (expense) income
Equity in losses of unconsolidated entities (126 ) (107 ) (19 ) (350 ) (843 ) 493
Gain on sale of equipment, net 5,003
2,029
2,974
4,983
4,061
922
Interest income 33
76
(43 ) 106
159
(53 )
Total other income 4,910
1,998
2,912
4,739
3,377
1,362
Income before income taxes 34,223
23,063
11,160
61,384
41,825
19,559
Provision for income taxes 523
478
45
1,006
671
335
Net income 33,700
22,585
11,115
60,378
41,154
19,224
Less: Net (loss) income attributable to non-controlling interest in consolidated subsidiaries —
224
(224 ) (24 ) 142
(166 )
Net income attributable to shareholders $ 33,700
$ 22,361
$ 11,339
$ 60,402
$ 41,012
$ 19,390
Add: Provision for income taxes 523
478
45
1,006
671
335
Add: Equity-based compensation expense —
—
—
—
—
—
Add: Acquisition and transaction expenses 66
55
11
223
270
(47 )
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⁾
(126 ) (107 ) (19 ) (350 ) (843 ) 493
Add: Incentive allocations —
—
—
—
—
—
Less: Cash payments for income taxes (421 ) —
(421 ) (421 ) —
(421 )
Less: Equity in losses of unconsolidated entities 126
107
19
350
843
(493 )
Less: Non-controlling share of Adjusted Net Income —
—
—
—
—
—
Adjusted Net Income $ 33,868
$ 22,894
$ 10,974
$ 61,210
$ 41,953
$ 19,257



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018			Change			2019			2018			Change
Net income attributable to shareholders	$	63,758		$	33,700		$	30,058		$	99,436		$	60,402		$	39,034
Add: (Benefit from) provision for income taxes	(2,369		)	523			(2,892		)	(2,189		)	1,006			(3,195		)
Add: Equity-based compensation expense	—			—			—			—			—			—
Add: Acquisition and transaction expenses	—			66			(66		)	13			223			(210		)
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 ⁽¹⁾	42,221			30,537			11,684			80,560			59,577			20,983
Add: Interest expense	—			—			—			—			—			—
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽²⁾	(242		)	(126		)	(116		)	(443		)	(350		)	(93		)
Less: Equity in losses of unconsolidated entities	242			126			116			443			350			93
Less: Non-controlling share of Adjusted EBITDA ⁽³⁾	—			—			—			—			(172		)	172
Adjusted EBITDA (non-GAAP)	$	103,610		$	64,826		$	38,784		$	177,820		$	121,036		$	56,784

⁽¹⁾Includes the following items for the three months ended June 30, 2019 and 2018: (i) depreciation expense of $33,267 and $24,875, (ii) lease intangible amortization of $2,202 and $2,010 and (iii) amortization for lease incentives of $6,752 and $3,652, respectively. Includes the following items for the six months ended June 30, 2019 and 2018: (i) depreciation expense of $63,272 and $46,688, (ii) lease intangible amortization of $4,664 and $4,002 and (iii) amortization for lease incentives of $12,624 and $8,887, respectively.

⁽²⁾Includes 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.

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

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Net income attributable to shareholders $ 33,700
$ 22,361
$ 11,339
$ 60,402
$ 41,012
$ 19,390
Add: Provision for income taxes 523
478
45
1,006
671
335
Add: Equity-based compensation expense —
—
—
—
—
—
Add: Acquisition and transaction expenses 66
55
11
223
270
(47 )
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⁾
30,537
15,448
15,089
59,577
28,666
30,911
Add: Interest expense —
—
—
—
—
—
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities⁽³⁾
(126 ) (107 ) (19 ) (350 ) (843 ) 493
Less: Equity in losses of unconsolidated entities 126
107
19
350
843
(493 )
Less: Non-controlling share of Adjusted EBITDA⁽⁴⁾
—
(121 ) 121
(172 ) (162 ) (10 )
Adjusted EBITDA (non-GAAP) $ 64,826
$ 38,221
$ 26,605
$ 121,036
$ 70,457
$ 50,579

^{______________________________________________________________________________________(3)}

⁽²⁾Includes ~~(i) $24,875 and $14,086 of~~ depreciation expense ~~(ii) $2,010~~of $0 and ~~$1,065~~$172 for the six months ended June 30, 2019 and 2018, respectively.

Revenues

Comparison of ~~lease intangible amortization, and (iii) $3,652 and $297 of amortization for lease incentives during~~ the three months ended June 30, ~~2018~~2019 and 2017, respectively. Includes (i) $46,688 and $25,375 of depreciation expense, (ii) $4,002 and $2,347 of lease intangible amortization, and (iii) $8,887 and $944 of amortization for lease incentives during the six months ended June 30, 2018 ~~and 2017, respectively.~~

⁽³⁾Includes 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.

⁽⁴⁾Includes $0 and $121 of depreciation expense during the three months ended June 30, 2018 and 2017, respectively. Includes $172 and $162 of depreciation expense during the six months ended June 30, 2018 and 2017, respectively.

~~Revenues~~

Total revenue increased ~~$19,541 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017, due to~~$18.9 million driven by higher lease income and maintenance ~~revenue driven by the acquisition and placement of aviation assets on lease.~~ revenue.

Lease income increased ~~by $13,624~~$13.4 million mainly due to an increase in (i) aircraft lease income of ~~$8,471~~$9.6 million primarily driven by the addition of 2723 aircraft on lease and (ii) engine lease income of ~~$5,153~~$3.7 million primarily driven by an ~~increase in the number of engines which have generated~~additional 17 revenue ~~during the quarter from 68 in the three months ended June 30, 2017 to 99 in the three months ended June 30, 2018.~~ generating engines.

Maintenance revenue increased ~~by $5,112~~$5.4 million due to an increase in the number of aircraft and engines on lease.


•	Finance lease income increased $0.6 million due to income earned from aircraft classified as a finance lease.

~~Total revenues increased $41,970 during~~Comparison of the six months ended June 30, 2019 and 2018 ~~compared to the six months ended June 30, 2017, due to~~

Total revenue increased $36.5 million driven by higher lease income and maintenance ~~revenue reflecting newly acquired assets.~~ revenue.

Lease income increased ~~$25,297,~~$27.4 million mainly due to an increase in (i) aircraft lease income ~~increase $15,334~~of $19.4 million primarily ~~due to~~driven by the addition of 24 aircraft on lease and (ii) engine lease income of $8.0 million primarily driven by an additional ~~30 aircraft on lease. Engine lease income~~23 revenue generating engines.

Maintenance revenue increased ~~$9,963 primarily driven by~~$7.7 million due to an increase in the number of ~~engines which generated revenue from 70 to 103 in the six months ended June 30, 2017 and 2018, respectively. Maintenance revenue increased $15,870 due to a higher number of~~ aircraft and engines on lease.

Finance lease ~~and the release of maintenance claims into revenue for~~income increased $1.5 million due to income earned from aircraft ~~that are being returned from~~classified as a finance lease. ~~Engine maintenance and aircraft maintenance revenue increased $12,479 and $3,391, respectively, in the six months ended June 30, 2018 compared to the six months ended June 30, 2017.~~

Expenses

~~Total expenses in the Aviation Leasing segment increased by $11,293 in~~Comparison of the three months ended June 30, 2019 and 2018 ~~as compared to the three months ended June 30, 2017,~~

Total expenses increased $9.2 million primarily due to an increase in depreciation and amortization expense and operating expenses.

Depreciation and amortization expense increased ~~by $10,789~~$8.4 million driven by additional aircraft and engines owned and on lease.

Operating expenses increased ~~by $493,~~$0.9 million primarily ~~the~~as a result of an increase in ~~professional~~shipping and storage fees of ~~$498~~$0.6 million due to the ~~number~~positioning of our assets ~~placed on~~for lease and other operating expenses of ~~$162, offset by decreases in equipment shipping costs of $167.~~$0.3 million.

5249

~~Total expenses increased $23,773 in~~Comparison of the six months ended June 30, 2019 and 2018 ~~compared to the six months ended June 30, 2017~~

Total expenses increased $19.9 million primarily due to an increase in depreciation and amortization expense and ~~an increase in~~ operating expenses.

Depreciation and amortization expense increased $16.6 million driven by ~~$21,313 reflecting the depreciation of~~ additional aircraft and engines owned ~~or put~~and on ~~lease in the six months ended June 30, 2018.~~ lease.

Operating expenses increased ~~$2,507,~~$3.5 million primarily ~~reflecting increases~~as a result of an increase in (i) bad debt expense of ~~$1,436 related~~$1.5 million relating to ~~receivables~~an engine loss receivable deemed uncollectible due to bankruptcy, (ii) ~~professional~~shipping and storage fees of ~~$652~~$1.3 million due to ~~an increased number~~the positioning of our assets ~~placed on~~for lease and (iii) other operating ~~expense~~expenses of ~~$419 due to positioning our assets for lease and the overall growth~~$1.0 million, partially offset by (iv) a decrease in professional fees of ~~the aviation portfolio.~~$0.3 million.

Other Income

Total other income increased ~~$2,912 in~~$17.5 million during the three months ended June 30, ~~2018 as compared to the three months ended June 30, 2017~~2019 primarily due to an increase of ~~$2,974~~$17.6 million in gain on the sale of leasing equipment in ~~2018.~~2019.

Total other income increased ~~$1,362 in~~$19.2 million during the six months ended June 30, ~~2018 compared to the six months ended June 30, 2017~~2019 primarily due to an increase of ~~$922~~$19.3 million in gain on the sale of leasing equipment in ~~2018.~~2019.

Adjusted ~~Net Income~~EBITDA (Non-GAAP)

Adjusted ~~Net Income~~EBITDA increased ~~$10,974~~$38.8 million and ~~$19,257~~$56.8 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017,~~2019, respectively, primarily ~~reflecting the changes to net income attributable to shareholders noted above, adjusted for the provision for income taxes, and cash payment for taxes.~~

~~Adjusted EBITDA (Non-GAAP)~~

~~Adjusted EBITDA increased $26,605 and $50,579 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively. In addition~~due to the changes ~~in net income attributable to shareholders~~ noted above ~~this movement was primarily due to~~and higher depreciation and amortization ~~expense~~ for the additional aircraft and engines owned and on ~~lease in the three and six months ended June 30, 2018 and higher provision for income tax.~~lease.

~~Offshore Energy~~Jefferson Terminal Segment

In our Offshore Energy segment, we own one remotely operated vehicle (“ROV”) support vessel, one construction support vessel (“CSV”) and one anchor handling tug supply (“AHTS”) vessel. The chart below describes the assets in our Offshore Energy segment as of June 30, 2018:



~~Offshore Energy Assets~~
~~Asset Type~~	~~Year Built~~	~~Description~~
~~AHTS Vessel~~	~~2010~~	~~Anchor handling tug supply vessel with accommodation for 30 personnel and a total bollard pull of 68.5 tons~~
~~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~~
~~ROV Support Vessel~~	~~2011~~	~~DP-2 dive and ROV support vessel with 50-ton crane, moon pool and accommodation for 120 personnel~~

The following table presents our results of ~~operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:~~operations:

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Equipment leasing revenues
Lease income $ 1,868
$ 2,884
$ (1,016 ) $ 4,117
$ 3,495
$ 622
Finance lease income 365
385
(20 ) 732
771
(39 )
Other revenue 954
512
442
1,362
572
790
Total revenues 3,187
3,781
(594 ) 6,211
4,838
1,373

Expenses
Operating expenses 3,948
4,015
(67 ) 6,316
7,558
(1,242 )
Depreciation and amortization 1,626
1,606
20
3,228
3,213
15
Interest expense 961
930
31
1,834
1,854
(20 )
Total expenses 6,535
6,551
(16 ) 11,378
12,625
(1,247 )

Other income
Interest income 5
4
1
8
7
1
Total other income 5
4
1
8
7
1
Loss before income taxes (3,343 ) (2,766 ) (577 ) (5,159 ) (7,780 ) 2,621
Provision for income taxes 2
3
(1 ) 5
5
—
Net loss (3,345 ) (2,769 ) (576 ) (5,164 ) (7,785 ) 2,621
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries —
(216 ) 216
—
(464 ) 464
Net loss attributable to shareholders $ (3,345 ) $ (2,553 ) $ (792 ) $ (5,164 ) $ (7,321 ) $ 2,157
Add: Provision for income taxes 2
3
(1 ) 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 (7 ) —
(7 ) (7 ) —
(7 )
Less: Equity in earnings of unconsolidated entities —
—
—
—
—
—
Less: Non-controlling share of Adjusted Net Income —
—
—
—
—
—
Adjusted Net Loss $ (3,350 ) $ (2,550 ) $ (800 ) $ (5,166 ) $ (7,316 ) $ 2,150



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018						2019			2018
Revenues
Infrastructure revenues
Lease income	$	821		$	—		$	821		$	1,129		$	—		$	1,129
Terminal services revenues	7,537			2,550			4,987			12,404			3,803			8,601
Crude marketing revenues	59,204			—			59,204			89,983			—			89,983
Total revenues	67,562			2,550			65,012			103,516			3,803			99,713

Expenses
Operating expenses	74,393			11,253			63,140			113,634			23,212			90,422
Depreciation and amortization	5,519			4,937			582			10,675			9,727			948
Interest expense	4,524			4,285			239			8,448			7,813			635
Total expenses	84,436			20,475			63,961			132,757			40,752			92,005

Other income
Equity in earnings (losses) of unconsolidated entities	92			(235		)	327			(128		)	(87		)	(41		)
Gain on sale of equipment, net	12			—			12			12			—			12
Interest income	33			36			(3		)	71			136			(65		)
Other income (expense)	50			1,157			(1,107		)	(183		)	1,337			(1,520		)
Total other income (expense)	187			958			(771		)	(228		)	1,386			(1,614		)
Loss before income taxes	(16,687		)	(16,967		)	280			(29,469		)	(35,563		)	6,094
Provision for income taxes	38			10			28			124			21			103
Net loss	(16,725		)	(16,977		)	252			(29,593		)	(35,584		)	5,991
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries	(4,558		)	(7,309		)	2,751			(7,854		)	(16,258		)	8,404
Net loss attributable to shareholders	$	(12,167	)	$	(9,668	)	$	(2,499	)	$	(21,739	)	$	(19,326	)	$	(2,413	)

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


	Three Months Ended June 30,						Change				Six Months Ended June 30,								Change			Three Months Ended June 30,						Change				Six Months Ended June 30,								Change
(Dollar amounts in thousands)	2017			2016						2018				2017
(in thousands)																						2019			2018						Change				2019				2018				Change
Net loss attributable to shareholders	$	(3,345	)	$	(2,553	)		$	(792	)		$	(5,164	)		$	(7,321	)					$	2,157	$	(12,167	)	$	(9,668	)						$	(21,739	)		$	(19,326	)
Add: Provision for income taxes	2			3			(1		)		5				5				—			38			10			28				124				21				103
Add: Equity-based compensation expense	—			—			—				—				—				—			456			90			366				546				180				366
Add: Acquisition and transaction expenses	—			—			—				—				—				—			—			—			—				—				—				—
Add: Losses on the modification or extinguishment of debt and capital lease obligations	—			—			—				—				—				—			—			—			—				—				—				—
Add: Changes in fair value of non-hedge derivative instruments	—			—			—				—				—				—			1,417			(441		)	1,858				2,267				182				2,085
Add: Asset impairment charges	—			—			—				—				—				—			—			—			—				—				—				—
Add: Incentive allocations	—			—			—				—				—				—			—			—			—				—				—				—
Add: Depreciation and amortization expense	1,626			1,606			20				3,228				3,213				15			5,519			4,937			582				10,675				9,727				948
Add: Interest expense	961			930			31				1,834				1,854				(20		)	4,524			4,285			239				8,448				7,813				635
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities	—			—			—				—				—				—
Less: Equity in earnings of unconsolidated entities	—			—			—				—				—				—
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽¹⁾																						285			(235		)	520				331				(87		)		418
Less: Equity in (earnings) losses of unconsolidated entities																						(92		)	235			(327		)		128				87				41
Less: Non-controlling share of Adjusted EBITDA ⁽¹⁾⁽²⁾	—			(91		)	91				—				(186		)		186			(2,543		)	(2,401		)	(142		)		(4,633		)		(5,336		)		703
Adjusted EBITDA (non-GAAP)	$	(756	)	$	(105	)	$	(651	)		$	(97	)		$	(2,435	)		$	2,338		$	(2,563	)	$	(3,188	)	$	625			$	(3,853	)		$	(6,739	)		$	2,886

⁽¹⁾Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) net income (loss) of $19 and $(235) and (ii) depreciation and amortization expense of $0$266 and ~~$61 and (ii) interest expense of~~ $0, ~~and $30,~~ respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) net loss of $(201) and $(87) and (ii) depreciation and amortization expense of $532 and $0, ~~and $123 and (ii) interest expense of $0 and $63,~~ respectively.

~~Revenues~~

Total revenues decreased $594 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017 primarily due to lower lease income. The decrease in lease income reflects the CSV vessel having been off lease at the beginning of May in 2018 compared to 2017 when the vessel was on short-term lease arrangements during the quarter. Other revenues increased $442 primarily due to the crew provisions reimbursement income for the offshore construction vessel.

Total revenues increased $1,373 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017 primarily due to higher lease income and other revenue. The increase in lease income reflects the ROV support vessel having been on lease for six months in 2018 as compared to three months in 2017, as part of a long term lease arrangement entered into in Q2 2017. Other revenue increased $790 primarily due to the crew provisions reimbursement income for the offshore construction vessel.

~~Expenses~~

Total expenses in the Offshore Energy segment decreased by $16 in the three months ended June 30, 2018 as compared to the three months ended June 30, 2017, primarily due to decreases in operating expenses. Operating expenses decreased $67 reflecting lower legal fees of $1,012 and other operating costs of $251 offset by increased (i) mobilization and cost for spare parts of $726, (ii) project costs of $387 and crew costs of $83. Depreciation expense of $1,218 and $408 related to the construction support vessel and ROV support vessel, respectively, consistent to the prior period. The segment incurred interest expense of $961 related to the financing for the construction support vessel.

Total expenses decreased $1,247 in the six months ended June 30, 2018 compared to the six months ended June 30, 2017, primarily due to decreases in operating expenses. Operating expenses decreased $1,242 reflecting lower legal fees of $1,987 and other operating costs of $467 offset by increased (i) project costs of $913, (ii) crew costs of $217 and (iii) mobilization and cost for spare parts of $82. Depreciation expense of $2,412 and $816 related to the construction support vessel and ROV support vessel, respectively, consistent to the prior period. The segment incurred interest expense of $1,834 related to the financing for the construction support vessel.

~~Adjusted Net Loss (Non-GAAP)~~

Adjusted Net Loss increased $800 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017, respectively. The change is primarily due to the changes to net loss attributable to shareholders described above.

Adjusted Net Loss decreased $2,150 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017, respectively. The change is primarily due to the changes to net loss attributable to shareholders described above.

~~Adjusted EBITDA (Non-GAAP)~~

Adjusted EBITDA decreased $651 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017, respectively. The decrease is primarily due to the changes to net loss attributable to shareholders described above, and the non-controlling interest share of Adjusted EBITDA, which was settled during the third quarter of 2017.

Adjusted EBITDA increased $2,338 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017, respectively. The increase is primarily due to the changes to net loss attributable to shareholders described above, and the non-controlling interest share of Adjusted EBITDA, which was settled during the third quarter of 2017.

~~Shipping Containers Segment~~

In our Shipping Containers segment, we own, through a joint venture an interest in approximately 31,000 maritime shipping containers and related equipment through one portfolio. The chart below describes the assets in our Shipping Containers segment as of June 30, 2018:

Shipping Containers Assets
Number of Containers Type Average Age Lease Type Customer Mix Economic Interest (%)
31,000 20’ Dry
20’ Reefer
40’ Dry
40’ HC Dry
40’ HC Reefer
~10 Years Direct Finance Lease/Operating Lease 4 Customers 51%

~~The following table presents our results of operations and reconciliation of Net income (loss) attributable to shareholders to Adjusted Net Income (Loss):~~

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Equipment leasing revenues
Other revenue $ 25
$ 25
$ —
$ 50
$ 50
$ —
Total revenues 25
25
—
50
50
—

Other income (expense)
Equity in earnings (losses) of unconsolidated entities 110
(210 ) 320
281
(675 ) 956
Total other income (expense) 110
(210 ) 320
281
(675 ) 956
Income (loss) before income taxes 135
(185 ) 320
331
(625 ) 956
Benefit from income taxes (2 ) (9 ) 7
(3 ) (34 ) 31
Net income (loss) attributable to shareholders $ 137
$ (176 ) $ 313
$ 334
$ (591 ) $ 925
Add: Benefit from income taxes (2 ) (9 ) 7
(3 ) (34 ) 31
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 (Loss) from unconsolidated entities ⁽¹⁾
110
(302 ) 412
281
(767 ) 1,048
Add: Incentive allocations —
—
—
—
—
—
Less: Cash payments for income taxes —
—
—
—
—
—
Less: Equity in (losses) earnings of unconsolidated entities (110 ) 210
(320 ) (281 ) 675
(956 )
Less: Non-controlling share of Adjusted Net Income —
—
—
—
—
—
Adjusted Net Income (Loss) $ 135
$ (277 ) $ 412
$ 331
$ (717 ) $ 1,048

⁽¹⁾~~Includes Shipping Container’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:~~

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Net income (loss) attributable to shareholders $ 137
$ (176 ) $ 313
$ 334
$ (591 ) $ 925
Add: Benefit from income taxes (2 ) (9 ) 7
(3 ) (34 ) 31
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: Incentive allocations —
—
—
—
—
—
Add: Depreciation and amortization expense —
—
—
—
—
—
Add: Interest expense —
—
—
—
—
—
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽²⁾
169
306
(137 ) 420
427
(7 )
Less: Equity in (losses) earnings of unconsolidated entities (110 ) 210
(320 ) (281 ) 675
(956 )
Less: Non-controlling share of Adjusted EBITDA —
—
—
—
—
—
Adjusted EBITDA (non-GAAP) $ 194
$ 331
$ (137 ) $ 470
$ 477
$ (7 )

⁽²⁾ Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) ~~net~~equity-based compensation of $96 and $22, (ii) provision for income ~~(loss)~~taxes of ~~$62~~$8 and ~~$(259), (ii)~~$3, (iii) interest expense of ~~$94~~$983 and ~~$223,~~$1,024, (iv) changes in fair value of non-hedge derivative instruments of $297 and ~~(iii)~~$187 and (v) depreciation and amortization expense of ~~$13~~$1,159 and ~~$342,~~$1,165, respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017: (i) net income (loss) of $186 and $(767), (ii) interest expense of $206 and $474, and (iii) depreciation and amortization expense of $28 and $720, respectively.~~

~~Revenues~~

~~Total revenues remained consistent in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017.~~

~~Other Income (Expense)~~

Total other income (expense) increased $320 and $956 in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively, reflecting income earned from the sales of operating lease containers within our shipping container joint venture.

~~Adjusted Net Income (Loss) (Non-GAAP)~~

Adjusted Net Income (Loss) increased $412 and $1,048 in the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively, reflecting the increase in equity in earnings (losses) of unconsolidated entities.

~~Adjusted EBITDA (Non-GAAP)~~

Adjusted EBITDA decreased $137 and $7 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively. The decrease primarily reflects the entities’ change in equity in unconsolidated entities and lower pro-rata share of Adjusted EBITDA from unconsolidated entities.

~~Jefferson Terminal Segment~~

~~The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:~~

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Infrastructure revenues
Terminal services revenues $ 2,550
$ 3,026
$ (476 ) $ 3,803
$ 7,892
$ (4,089 )
Total revenues 2,550
3,026
(476 ) 3,803
7,892
(4,089 )

Expenses
Operating expenses 11,253
7,267
3,986
23,212
14,880
8,332
Depreciation and amortization 4,937
3,956
981
9,727
7,907
1,820
Interest expense 4,285
1,438
2,847
7,813
2,875
4,938
Total expenses 20,475
12,661
7,814
40,752
25,662
15,090

Other income
Equity in losses of unconsolidated entities (235 ) (10 ) (225 ) (87 ) (75 ) (12 )
Interest income 36
4
32
136
201
(65 )
Other income 1,157
20
1,137
1,337
32
1,305
Total other income 958
14
944
1,386
158
1,228
Loss before income taxes (16,967 ) (9,621 ) (7,346 ) (35,563 ) (17,612 ) (17,951 )
Provision for (benefit from) income taxes 10
(5 ) 15
21
34
(13 )
Net loss (16,977 ) (9,616 ) (7,361 ) (35,584 ) (17,646 ) (17,938 )
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (7,309 ) (4,045 ) (3,264 ) (16,258 ) (8,403 ) (7,855 )
Net loss attributable to shareholders $ (9,668 ) $ (5,571 ) $ (4,097 ) $ (19,326 ) $ (9,243 ) $ (10,083 )
Add: Provision for (benefit from) income taxes 10
(5 ) 15
21
34
(13 )
Add: Equity-based compensation expense 90
79
11
180
138
42
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 (441 ) —
(441 ) 182
—
182
Add: Asset impairment charges —
—
—
—
—
—
Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities ⁽¹⁾
(235 ) (10 ) (225 ) (87 ) (75 ) (12 )
Add: Incentive allocations —
—
—
—
—
—
Less: Cash payments for income taxes (46 ) (79 ) 33
(37 ) (82 ) 45
Less: Equity in losses of unconsolidated entities 235
10
225
87
75
12
Less: Non-controlling share of Adjusted Net (Loss) Income⁽²⁾
(195 ) 2
(197 ) 6
(35 ) 41
Adjusted Net Loss $ (10,250 ) $ (5,574 ) $ (4,676 ) $ (18,974 ) $ (9,188 ) $ (9,786 )

⁽¹⁾Includes Jefferson Terminal’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⁾~~Includes the following items for the three months ended June 30, 2018 and 2017:~~2018: (i) equity-based compensation of ~~$35~~$115 and ~~$31,~~$56, (ii) provision for income taxes of $4$26 and $(2), (iii) changes in fair value of non-hedge derivative instruments of $174 and $0, less (iv) cash paid for income taxes of $18 and $31, respectively. Includes the following items for the six months ended June 30, 2018 and 2017: (i) equity-based compensation of $69 and $54, (ii) provision for income taxes of $8 and $13, (iii) changes in fair value of non-hedge derivative instruments of $(70) and $0, less (iv) cash paid for income taxes of $13 and $32, respectively.

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

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Net loss attributable to shareholders $ (9,668 ) $ (5,571 ) $ (4,097 ) $ (19,326 ) $ (9,243 ) $ (10,083 )
Add: Provision for income taxes 10
(5 ) 15
21
34
(13 )
Add: Equity-based compensation expense 90
79
11
180
138
42
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 (441 ) —
(441 ) 182
—
182
Add: Asset impairment charges —
—
—
—
—
—
Add: Incentive allocations —
—
—
—
—
—
Add: Depreciation and amortization expense 4,937
3,956
981
9,727
7,907
1,820
Add: Interest expense 4,285
1,438
2,847
7,813
2,875
4,938
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities⁽³⁾
(235 ) (10 ) (225 ) (87 ) (75 ) (12 )
Less: Equity in (losses) earnings of unconsolidated entities 235
10
225
87
75
12
Less: Non-controlling share of Adjusted EBITDA ⁽⁴⁾
(2,401 ) (2,032 ) (369 ) (5,336 ) (4,070 ) (1,266 )
Adjusted EBITDA (non-GAAP) $ (3,188 ) $ (2,135 ) $ (1,053 ) $ (6,739 ) $ (2,359 ) $ (4,380 )


⁽³⁾	Includes Jefferson Terminal’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.

⁽⁴⁾ ~~Includes the following items for the three months ended June 30, 2018 and 2017: (i) equity-based compensation of $22 and $31, (ii) provision for income taxes of $3 and $(2),~~$7, (iii) interest expense of ~~$1,024~~$1,774 and ~~$459,~~$2,295, (iv) changes in fair value of non-hedge derivative instruments of ~~$187~~$476 and ~~$0,~~$(57) and ~~(vii)~~(v) depreciation and amortization expense of ~~$1,165~~$2,242 and ~~$1,544,~~$3,035, respectively. ~~Includes~~

Revenues

Comparison of the ~~following items for~~three months ended June 30, 2019 and 2018

Total revenues increased $65.0 million primarily due to crude marketing revenue of $59.2 million. During the third quarter of 2018, Jefferson Terminal initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and marketing crude to third parties. Additionally, terminal services revenue increased $5.0 million primarily due to increased activity and storage capacity.

Comparison of the six months ended June 30, ~~2018~~2019 and 2017: (i) equity-based compensation of $56 and $54, (ii) provision for income taxes of $7 and $13, (iii) interest expense of $2,295 and $917, (iv) changes in fair value of non-hedge derivative instruments of $(57) and $0, and (vii) depreciation and amortization expense of $3,035 and $3,086, respectively.

~~Revenues~~2018

Total revenues ~~decreased $476~~increased $99.7 million primarily due to crude marketing revenue of $90.0 million. During the third quarter of 2018, Jefferson Terminal initiated a strategy in Canada sourcing crude from producers, arranging logistics to Jefferson Terminal and ~~$4,089~~marketing crude to third parties. Additionally, terminal services revenue increased $8.6 million primarily due to increased activity and storage capacity.

Expenses

Comparison of the three months ended June 30, 2019 and 2018

Total expenses increased $64.0 million primarily due to higher operating expenses of $63.1 million, which primarily reflected higher costs associated with crude marketing.

Comparison of the six months ended June 30, 2019 and 2018

Total expenses increased $92.0 million primarily due to higher operating expenses of $90.4 million, which primarily reflected higher costs associated with crude marketing.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $0.6 million and $2.9 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017,~~2019, respectively, ~~reflecting lower volumes.~~

~~Other Income~~

~~Other income increased $1,137 and $1,305 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively,~~primarily due to the ~~increased activity relating to the sale of crude oil.~~changes noted above.

~~Expenses~~

Total expenses increased $7,814 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017 primarily due to higher operating expenses of $3,986, which reflected higher (i) facility operations costs of $1,961, (ii) professional fees of $1,732 relating to legal expenses for ongoing matters, (iii) repairs and maintenance expenses of $185, (iv) environmental expense of $142, offset by lower (v) general operating costs of $34.

Interest expense increased $2,847 and $4,938 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively, due to a decrease in interest capitalized under the Series 2016 bonds and a decrease in construction in progress as certain terminal storage assets were placed into service in the first quarter of 2018. Further, there was additional debt outstanding during the periods, as a result of the Revolving Credit Facility.

Depreciation expense increased $981 and $1,820 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively, due to new assets being placed into service during the periods.

6050

Total expenses increased $15,090 in the six months ended June 30, 2018 compared to the six months ended June 30, 2017, primarily due to higher operating expenses of $8,332. During the period, Jefferson Terminal transitioned terminal operations to a new terminal operator. As a result of this transition, there was a non-recurring increase in facility operating costs related to the ramp-up of the new operator of $1,144. Due to the transition, the terminal had various other facility operating costs totaling $3,095. Additionally, the increase in total operating expenses reflect higher (i) professional fees of $2,562 which were related to legal expenses for ongoing matters, and (ii) repairs and maintenance of $750, for maintenance performed during the period on various projects. General operating costs increased by (iii) $588 related to relocation expenses for a new office, and (iv) environmental expense of $259 related to waste disposal costs incurred in 2018. These increases were offset by decreases in other operating expenses of $66.

~~Adjusted Net Loss (Non-GAAP)~~

Adjusted Net Loss increased $4,676 and $9,786 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively. The increase reflects the changes in net loss attributable to shareholders noted above, offset by the changes in fair value of non-hedge derivatives and the non-controlling interest share of Adjusted Net Loss.

~~Adjusted EBITDA (Non-GAAP)~~

Adjusted EBITDA decreased $1,053 and $4,380 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, respectively. The decrease reflects the changes in net loss attributable to shareholders noted above, changes in the fair value of non-hedge derivative instruments of $441 and $182, and non-controlling share of adjusted EBITDA of $369 and $1,266. Offsetting these decreases were an increase in interest expense of $2,847 and $4,938 noted above, as well as depreciation and amortization expense of $981 and $1,820.

Railroad Segment

The following table presents our results of ~~operations and reconciliation of net income (loss) attributable to shareholders to Adjusted Net Income (Loss):~~operations:

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Infrastructure revenues
Rail revenues $ 8,788
$ 7,662
$ 1,126
$ 19,835
$ 16,065
$ 3,770
Total revenues 8,788
7,662
1,126
19,835
16,065
3,770

Expenses
Operating expenses 7,813
7,907
(94 ) 15,251
15,451
(200 )
Depreciation and amortization 574
492
82
1,147
1,018
129
Interest expense 141
247
(106 ) 486
446
40
Total expenses 8,528
8,646
(118 ) 16,884
16,915
(31 )

Other (expense) income
(Loss) Gain on sale of equipment, net (7 ) (30 ) 23
8
(44 ) 52
Total other (expense) income (7 ) (30 ) 23
8
(44 ) 52
Income (expense) before income taxes 253
(1,014 ) 1,267
2,959
(894 ) 3,853
Provision for income taxes —
—
—
—
—
—
Net income (loss) 253
(1,014 ) 1,267
2,959
(894 ) 3,853
Less: Net income attributable to non-controlling interest in consolidated subsidiaries 51
57
(6 ) 257
61
196
Net income (loss) attributable to shareholders $ 202
$ (1,071 ) $ 1,273
$ 2,702
$ (955 ) $ 3,657
Add: Provision for income taxes —
—
—
—
—
—
Add: Equity-based compensation expense 46
364
(318 ) 92
392
(300 )
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⁾
(3 ) (19 ) 16
(6 ) (21 ) 15
Adjusted Net Income (Loss) $ 245
$ (726 ) $ 971
$ 2,788
$ (584 ) $ 3,372



	Three Months Ended June 30,					Change			Six Months Ended June 30,					Change
(in thousands)	2019		2018						2019			2018
Revenues
Infrastructure revenues
Rail revenues	$	9,977	$	8,788		$	1,189		$	20,484		$	19,835	$	649
Total revenues	9,977		8,788			1,189			20,484			19,835		649

Expenses
Operating expenses	9,021		7,813			1,208			18,287			15,251		3,036
Depreciation and amortization	648		574			74			1,413			1,147		266
Interest expense	79		141			(62		)	648			486		162
Total expenses	9,748		8,528			1,220			20,348			16,884		3,464

Other income (expense)
Gain (loss) on sale of equipment, net	8		(7		)	15			15			8		7
Interest income	4		—			4			4			—		4
Other income	1		—			1			—			—		—
Total other income (expense)	13		(7		)	20			19			8		11
Income before income taxes	242		253			(11		)	155			2,959		(2,804		)
Provision for income taxes	29		—			29			215			—		215
Net income	213		253			(40		)	(60		)	2,959		(3,019		)
Less: Net income (loss) attributable to non-controlling interest in consolidated subsidiaries	41		51			(10		)	(15		)	257		(272		)
Net income (loss) attributable to shareholders	$	172	$	202		$	(30	)	$	(45	)	$	2,702	$	(2,747	)

⁽¹⁾ ~~Includes equity-based compensation of $3 and $19 for the three months ended June 30, 2018 and 2017, respectively, and $6 and $21 for the six months ended June 30, 2018 and 2017, respectively.~~

6251

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


	Three Months Ended June 30,						Change				Six Months Ended June 30,								Change			Three Months Ended June 30,						Change				Six Months Ended June 30,								Change
(Dollar amounts in thousands)	2018			2017						2018				2017
(in thousands)																						2019			2018						Change				2019				2018				Change
Net income (loss) attributable to shareholders	$	202		$	(1,071	)		$	1,273			$	2,702			$	(955	)					$	3,657	$	172		$	202							$	(45	)		$	2,702
Add: Provision for income taxes	—			—			—				—				—				—			29			—			29				215				—				215
Add: Equity-based compensation expense	46			364			(318		)		92				392				(300		)	121			46			75				167				92				75
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	574			492			82				1,147				1,018				129			648			574			74				1,413				1,147				266
Add: Interest expense	141			247			(106		)		486				446				40			79			141			(62		)		648				486				162
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities	—			—			—				—				—				—			—			—			—				—				—				—
Less: Equity in earnings of unconsolidated entities	—			—			—				—				—				—			—			—			—				—				—				—
Less: Non-controlling share of Adjusted EBITDA ⁽¹⁾	(46		)	(60		)	14				(104		)		(101		)		(3		)	(86		)	(46		)	(40		)		(236		)		(104		)		(132		)
Adjusted EBITDA (non-GAAP)	$	917		$	(28	)	$	945			$	4,323			$	800			$	3,523		$	963		$	917		$	46			$	2,162			$	4,323			$	(2,161	)

⁽¹⁾ Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) equity-based compensation of $3$12 and ~~$19,~~$3, (ii) interest expense of $9 and $8, (iii) provision for income taxes of $2 and ~~$14,~~$0 and ~~(iii)~~(iv) depreciation and amortization expense of ~~$35~~$63 and ~~$27,~~$35, respectively. Includes the following items for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) equity-based compensation of $6$16 and ~~$21,~~$6, (ii) interest expense of $63 and $29, (iii) provision for income taxes of $20 and ~~$24,~~$0 and ~~(iii)~~(iv) depreciation and amortization expense of $137 and $69, ~~and $56,~~ respectively.

Revenues

~~Total revenues increased $1,126 during~~Comparison of the three months ended June 30, 2019 and 2018 ~~compared~~

Total revenues increased $1.2 million which primarily reflects an increase in freight transportation revenue of $1.1 million, due to an increase in carloads primarily driven by haulage.

Comparison of the ~~three~~six months ended June 30, ~~2017~~2019 and 2018

Total revenues increased $0.6 million primarily due to ~~higher traffic and increased carloads. The~~an increase ~~reflects (i) $910 of higher freight transportation revenue (ii) $230 of~~in switching and other rail service revenue of $1.3 million relating to increased contract repair revenue, partially offset by a ~~$14~~ decrease in ~~car hire income.~~

~~Total revenues increased $3,770 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017 due~~freight transportation revenue of $0.6 million as a detour led to higher traffic ~~related to a detour resulting~~on our tracks in the diversion of trains onto our track. The increase reflects $3,935 of higher freight transportation revenue partially offset by $147 of switching and other rail service revenue and a $18 decrease in car hire income.2018.

Expenses

Total expenses ~~decreased $118 during the three months ended June 30, 2018 compared to the three months ended June 30, 2017 primarily due to lower operating expenses~~increased $1.2 million and lower interest expense of $106. The decrease in operating expenses of $94 reflects (i) lower fuel expense of $508 (ii) insurance expense of $37 and (iii) compensation and benefits of $26. Partially offsetting these decreases was higher expenses of $477 pertaining to the increased traffic.

Total expenses decreased $31 during the six months ended June 30, 2018 compared to the six months ended June 30, 2017 primarily due to lower operating expenses offset by increases of $129 in depreciation and amortization. The decrease in operating expenses of $200 reflects lower (i) general operating expense of $1,316 due to certain tax benefits taken in the six months ended June 30, 2018 for the 2017 annual period that were enacted during 2018, (ii) fuel expense of $690 and (iii) professional fees of $58. Partially offsetting these decreases was higher expenses of (i) $1,566 pertaining to the increased traffic resulting from the diversion of trains onto our track and (ii) $298 relating to compensation and benefits.

~~Adjusted Net Income (Non-GAAP)~~

~~Adjusted Net Income increased $971 and $3,372~~$3.5 million during the three and six months ended June 30, 2019, respectively, primarily due to higher operating expenses. These increases primarily reflect additional operating costs resulting from the car cleaning business, which commenced in 2019, and a credit for certain tax benefits taken in 2018 ~~compared to the three and six months ended June 30, 2017. In addition to the changes~~which were not repeated in ~~net income attributable to shareholders noted above, Adjusted Net Income was impacted by a decrease in equity-based compensation expense of $318 and $300, respectively.~~

2019.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased ~~$945~~$0.0 million and ~~$3,523~~decreased $2.2 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017. In addition~~2019, respectively, primarily due to the changes ~~in net income attributable to shareholders~~ noted ~~above, Adjusted EBITDA was also impacted by an increase in interest expense of $106 and $40, respectively, and higher equity-based compensation expense of $318 and $300, respectively.~~above.

Ports and Terminals

The following table presents our results of ~~operations and~~operations:



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018						2019			2018
Revenues
Infrastructure revenues
Lease income	$	265		$	417		$	(152	)	$	620		$	799		$	(179	)
Terminal services revenues	1,028			—			1,028			2,846			—			2,846
Other revenue	973			894			79			4,514			1,272			3,242
Total revenues	2,266			1,311			955			7,980			2,071			5,909

Expenses
Operating expenses	4,757			2,715			2,042			9,659			5,096			4,563
Depreciation and amortization	1,560			832			728			3,553			1,641			1,912
Interest expense	348			273			75			644			545			99
Total expenses	6,665			3,820			2,845			13,856			7,282			6,574

Other income (expense)
Interest income	173			—			173			194			—			194
Other income	4,887			—			4,887			2,517			—			2,517
Total other income	5,060			—			5,060			2,711			—			2,711
Income (loss) before income taxes	661			(2,509		)	3,170			(3,165		)	(5,211		)	2,046
Provision for income taxes	—			1			(1		)	—			—			—
Net income (loss)	661			(2,510		)	3,171			(3,165		)	(5,211		)	2,046
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries	(22		)	(30		)	8			(86		)	(24		)	(62		)
Net income (loss) attributable to shareholders	$	683		$	(2,480	)	$	3,163		$	(3,079	)	$	(5,187	)	$	2,108

The following table sets forth a reconciliation of net ~~loss~~income (loss) attributable to shareholders to Adjusted ~~Net Loss:~~EBITDA:

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Revenues
Infrastructure revenues

Lease income $ 417
$ 123
$ 294
$ 799
$ 139
$ 660
Other revenue 894
—
894
1,272
—
1,272
Total revenues 1,311
123
1,188
2,071
139
1,932

Expenses
Operating expenses 2,715

764
1,951
5,096
1,658
3,438
Depreciation and amortization 832
81
751
1,641
85
1,556
Interest expense 273
270
3
545
544
1
Total expenses 3,820
1,115
2,705
7,282
2,287
4,995
Loss before income taxes (2,509 ) (992 ) (1,517 ) (5,211 ) (2,148 ) (3,063 )
Provision for (benefit from) income taxes 1
(3 ) 4
—
—
—
Net loss (2,510 ) (989 ) (1,521 ) (5,211 ) (2,148 ) (3,063 )
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries (30 ) (369 ) 339
(24 ) (483 ) 459
Net loss attributable to shareholders $ (2,480 ) $ (620 ) $ (1,860 ) $ (5,187 ) $ (1,665 ) $ (3,522 )
Add: Provision for (benefit from) income taxes 1
(3 ) 4
—
—
—
Add: Equity-based compensation expense 93
—
93
156
—
156
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 —
—
—
—
—
—
Adjusted Net Loss $ (2,386 ) $ (623 ) $ (1,763 ) $ (5,031 ) $ (1,665 ) $ (3,366 )



	Three Months Ended June 30,						Change			Six Months Ended June 30,						Change
(in thousands)	2019			2018			Change			2019			2018			Change
Net income (loss) attributable to shareholders	$	683		$	(2,480	)	$	3,163		$	(3,079	)	$	(5,187	)	$	2,108
Add: Provision for income taxes	—			1			(1		)	—			—			—
Add: Equity-based compensation expense	123			93			30			215			156			59
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	(4,887		)	—			(4,887		)	(2,517		)	—			(2,517		)
Add: Asset impairment charges	—			—			—			—			—			—
Add: Incentive allocations	—			—			—			—			—			—
Add: Depreciation and amortization expense	1,560			832			728			3,553			1,641			1,912
Add: Interest expense	348			273			75			644			545			99
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities	—			—			—			—			—			—
Less: Equity in earnings of unconsolidated entities	—			—			—			—			—			—
Less: Non-controlling share of Adjusted EBITDA ⁽¹⁾	(68		)	—			(68		)	(131		)	—			(131		)
Adjusted EBITDA (non-GAAP)	$	(2,241	)	$	(1,281	)	$	(960	)	$	(1,315	)	$	(2,845	)	$	1,530

⁽¹⁾ Includes the following items for the three and six months ended June 30, 2019: (i) equity-based compensation of $2 and $4, (ii) interest expense of $58 and $112 and (iii) depreciation and amortization expense of $8 and $15, respectively.

6453

Revenues

Comparison of the three months ended June 30, 2019 and 2018

Total revenue increased $1.0 million primarily due to an increase in terminal services revenue, which relates to natural gas sales at Long Ridge.

Comparison of the six months ended June 30, 2019 and 2018

Total revenue increased $5.9 million primarily due to other revenue of $3.2 million and terminal services revenue of $2.8 million.

The increase in other revenue is primarily due to (i) higher oil and gas related activity of $1.8 million at Long Ridge and (ii) higher butane sales of $1.4 million at Repauno.

The increase in terminal services revenue primarily reflects higher transloading revenue of $2.7 million at Long Ridge.

Expenses

Comparison of the three months ended June 30, 2019 and 2018

Total expenses increased $2.8 million primarily due to higher operating expenses of $2.0 million and depreciation and amortization of $0.7 million.

The increase in operating expenses primarily reflects increases in (i) operating costs of $0.5 million for proved gas properties at Long Ridge that were previously being capitalized, (ii) compensation and benefits of $0.5 million due to additional headcount and (iii) other facility operations due to increased activity.

The increase in depreciation and amortization is primarily due to assets placed into service at Long Ridge.

Comparison of the six months ended June 30, 2019 and 2018

Total expenses increased $6.6 million primarily due to higher operating expenses of $4.6 million and depreciation and amortization of $1.9 million.

The increase in operating expenses primarily reflects higher (i) cost of sales of $1.4 million related to the sale of butane at Repauno, (ii) facility operations of $0.9 million due to increased activity, (iii) compensation and benefits of $0.7 million due to additional headcount and (iv) operating costs of $0.5 million for proved gas properties at Long Ridge that were previously being capitalized.

The increase in depreciation and amortization is primarily due to assets placed into service at Long Ridge.

Other Income

Total other income increased $5.1 million during the three months ended June 30, 2019 primarily due to an unrealized gain of $4.9 million on our electricity derivatives.

Total other income increased $2.7 million during the six months ended June 30, 2019 primarily due to an unrealized gain of $2.5 million on our electricity derivatives.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $1.0 million and increased $1.5 million during the three and six months ended June 30, 2019, 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)	2019			2018						2019			2018
Revenues
Equipment leasing revenues
Lease income	$	3,157		$	1,868		$	1,289		$	5,090		$	4,117		$	973
Finance lease income	—			365			(365		)	—			732			(732		)
Other revenue	1,062			979			83			1,170			1,412			(242		)
Total revenues	4,219			3,212			1,007			6,260			6,261			(1		)

Expenses
Operating expenses	1,871			3,948			(2,077		)	4,302			6,316			(2,014		)
General and administrative	4,297			4,573			(276		)	9,029			8,159			870
Acquisition and transaction expenses	2,308			1,442			866			3,769			3,051			718
Management fees and incentive allocation to affiliate	5,710			4,495			1,215			9,548			8,234			1,314
Depreciation and amortization	1,606			1,626			(20		)	3,220			3,228			(8		)
Interest expense	20,521			8,158			12,363			37,035			15,884			21,151
Total expenses	36,313			24,242			12,071			66,903			44,872			22,031

Other income
Equity in (losses) earnings of unconsolidated entities	(19		)	110			(129		)	18			281			(263		)
Interest income	2			5			(3		)	8			8			—
Total other (expense) income	(17		)	115			(132		)	26			289			(263		)
Loss before income taxes	(32,111		)	(20,915		)	(11,196		)	(60,617		)	(38,322		)	(22,295		)
Provision for income taxes	3			—			3			4			2			2
Net loss	(32,114		)	(20,915		)	(11,199		)	(60,621		)	(38,324		)	(22,297		)
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries	—			—			—			—			—			—
Net loss attributable to shareholders	$	(32,114	)	$	(20,915	)	$	(11,199	)	$	(60,621	)	$	(38,324	)	$	(22,297	)

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


	Three Months Ended June 30,						Change				Six Months Ended June 30,								Change			Three Months Ended June 30,							Change				Six Months Ended June 30,								Change
(Dollar amounts in thousands)	2018			2017						2018				2017
(in thousands)																						2019				2018						Change				2019				2018				Change
Net loss attributable to shareholders	$	(2,480	)	$	(620	)		$	(1,860	)		$	(5,187	)		$	(1,665	)					$	(3,522	)	$	(32,114	)	$	(20,915	)						$	(60,621	)		$	(38,324	)
Add: Provision for (benefit from) income taxes	1			(3		)	4				—				—				—
Add: Provision for income taxes																						3				—			3				4				2				2
Add: Equity-based compensation expense	93			—			93				156				—				156			—				—			—				—				9				(9		)
Add: Acquisition and transaction expenses	—			—			—				—				—				—			2,308				1,442			866				3,769				3,051				718
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																						2,211				573			1,638				2,373				573				1,800
Add: Depreciation and amortization expense	832			81			751				1,641				85				1,556			1,606				1,626			(20		)		3,220				3,228				(8		)
Add: Interest expense	273			270			3				545				544				1			20,521				8,158			12,363				37,035				15,884				21,151
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities	—			—			—				—				—				—
Less: Equity in earnings of unconsolidated entities	—			—			—				—				—				—
Less: Non-controlling share of Adjusted EBITDA ⁽¹⁾	—			27			(27		)		—				—				—
Adjusted EBITDA	$	(1,281	)	$	(245	)	$	(1,036	)		$	(2,845	)		$	(1,036	)		$	(1,809	)
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽¹⁾																						(19		)		169			(188		)		18				420				(402		)
Less: Equity in losses (earnings) of unconsolidated entities																						19				(110		)	129				(18		)		(281		)		263
Less: Non-controlling share of Adjusted EBITDA ⁽²⁾																						(174		)		—			(174		)		(174		)		—				(174		)
Adjusted EBITDA (non-GAAP)																						$	(5,639	)		$	(9,057	)	$	3,418			$	(14,394	)		$	(15,438	)		$	1,044

⁽¹⁾Includes the following items for the three months ended June 30, ~~2018~~2019 and ~~2017:~~2018: (i) net (loss) income of $(53) and $62, (ii) interest expense of $34 and $94, and (iii) depreciation and amortization expense of $0 and ~~$(27).~~$13, respectively. Includes the following items for the six months ended June 30, 2019 and 2018: (i) net (loss) income of $(52) and $186, (ii) interest expense of $70 and $206 and (iii) depreciation and amortization expense of $0 and $28, respectively.

⁽²⁾Includes the following items for the three and six months ended June 30, 2019: (i) interest expense of $59 and (ii) depreciation and amortization expense of $115.

Revenues

Comparison of the three months ended June 30, 2019 and 2018

Total ~~revenue~~revenues increased ~~$1,188~~$1.0 million which primarily reflects higher lease income due to a vessel being on hire for the entire period in 2019 as compared to 2018.

Expenses

Comparison of the three months ended June 30, 2019 and ~~$1,932~~2018

Total expenses increased $12.1 million primarily due to higher (i) interest expense of $12.4 million and (ii) management fees and incentive allocation to affiliate of $1.2 million, partially offset by (iii) lower operating expenses of $2.1 million.

The increase in interest expense reflects an increase in our average outstanding debt of approximately $650.1 million, which consists of the (i) 2025 Notes of $400.0 million, (ii) 2022 Notes of $176.7 million and (iii) Revolving Credit Facility of $73.3 million.

The increase in management fees and incentive allocation to affiliate reflects incentive fees paid to the Manager related to gains on sale of equipment recognized during the period.

The decrease in operating expenses is primarily due to lower repairs and maintenance expense and general and administrative related expense for our offshore vessels.

Comparison of the six months ended June 30, 2019 and 2018

Total expenses increased $22.0 million primarily due to higher (i) interest expense of $21.2 million and (ii) management fees and incentive allocation to affiliate of $1.3 million, partially offset by (iii) lower operating expenses of $2.0 million.

The increase in interest expense reflects an increase in our average outstanding debt of approximately $626.4 million, which consists of the (i) 2025 Notes of $350.0 million, (ii) 2022 Notes of $185.6 million and (iii) Revolving Credit Facility of $90.8 million.

The increase in management fees and incentive allocation to affiliate reflects incentive fees paid to the Manager related to gains on sale of equipment recognized during the period.

The decrease in operating expenses is primarily due to lower repairs and maintenance expense and general and administrative related expense for our offshore vessels.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $3.4 million and $1.0 million during the three and six months ended June 30, ~~2018 compared to the three and six months ended June 30, 2017,~~2019, respectively, primarily ~~due to $294 and $660 of higher lease income from leases in place at Long Ridge, as well as $894 and $1,272 of other revenue, relating to services performed for lessees at Long Ridge.~~

~~Expenses~~

Total expenses increased $2,705 in the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The increase is primarily due to higher operating expenses of $1,951, which consisted of increased (i) compensation and benefits expenses of $556, due to the hiring of additional employees, (ii) facility operations of $358, as the result of increased operations at each facility, (iii) utilities of $335, (iv) professional fees of $253, and (v) general operating costs of $449.

Total expenses increased $4,995 in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Operating expenses increased by $3,438 during the period. This consisted of higher (i) compensation and benefits expenses of $1,033, due to the hiring of additional employees, (ii) facility operations of $769, due to increased activities at the facilities, (iii) utilities of $489, (iv) professional fees of $328, (v) insurance expense of $279, for new policies that were added as operations increased, (vi) repairs and maintenance of $262, and (vii) general operating costs of $278.

Depreciation expense increased by $751 and $1,556 in the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017, due to assets that were placed into service at Repauno.

~~Adjusted Net Loss (Non-GAAP)~~

~~Adjusted Net Loss increased $1,763 and $3,366 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017,~~ due to the changes ~~in net loss attributable to shareholders~~ noted ~~above, offset by equity based compensation of $93 and $156, respectively.~~

~~Adjusted EBITDA (Non-GAAP)~~

Adjusted EBITDA decreased $1,036 and $1,809 in the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017. In addition to the changes in net loss attributable to shareholders noted above, Adjusted EBITDA for the three and six months ended June 30, 2018 includes an increase in depreciation and amortization expense of $751 and $1,556, respectively, compared to the three and six months ended June 30, 2017. Equity-based compensation expense saw an increase of $93 and $156 during the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017.

~~Corporate~~

~~The following table presents our results of operations and reconciliation of net loss attributable to shareholders to Adjusted Net Loss:~~

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Expenses
General and administrative $ 4,573
$ 3,341
$ 1,232
$ 8,159
$ 7,176
$ 983
Acquisition and transaction expenses 1,442
1,825
(383 ) 3,051
3,062
(11 )
Management fees and incentive allocation to affiliate 4,495
3,865
630
8,234
7,758
476
Interest expense 7,197
4,799
2,398
14,050
6,659
7,391
Total expenses 17,707
13,830
3,877
33,494
24,655
8,839

Other expense
Loss on extinguishment of debt —
—
—
—
(2,456 ) 2,456
Total other expense —
—
—
—
(2,456 ) 2,456
Loss before income taxes (17,707 ) (13,830 ) (3,877 ) (33,494 ) (27,111 ) (6,383 )
Provision for income taxes —
—
—
—
—
—
Net loss (17,707 ) (13,830 ) (3,877 ) (33,494 ) (27,111 ) (6,383 )
Less: Net loss attributable to non-controlling interest in consolidated subsidiaries —
—
—
—
—
—
Net loss attributable to shareholders $ (17,707 ) $ (13,830 ) $ (3,877 ) $ (33,494 ) $ (27,111 ) $ (6,383 )
Add: Provision for income taxes —
—
—
—
—
—
Add: Equity-based compensation expense —
—
—
9
—
9
Add: Acquisition and transaction expenses 1,442
1,825
(383 ) 3,051
3,062
(11 )
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 573
—
573
—
—
Less: Cash payments for income taxes —
(513 ) 513
—
(513 ) 513
Less: Equity in earnings of unconsolidated entities —
—
—
—
—
—
Less: Non-controlling share of Adjusted Net Income —
—
—
—
—
—
Adjusted Net Loss $ (15,692 ) $ (12,518 ) $ (3,747 ) $ (29,861 ) $ (22,106 ) $ (8,328 )

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

Three Months Ended June 30, Change Six Months Ended
June 30, Change
(Dollar amounts in thousands) 2018 2017 2018 2017
Net loss attributable to shareholders $ (17,707 ) $ (13,830 ) $ (3,877 ) $ (33,494 ) $ (27,111 ) $ (6,383 )
Add: Provision for income taxes —
—
—
—
—
—
Add: Equity-based compensation expense —
—
—
9
—
9
Add: Acquisition and transaction expenses 1,442
1,825
(383 ) 3,051
3,062
(11 )
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 573
—
573
573
—
573
Add: Depreciation and amortization expense —
—
—
—
—
—
Add: Interest expense 7,197
4,799
2,398
14,050
6,659
7,391
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 $ (8,495 ) $ (7,206 ) $ (1,289 ) $ (15,811 ) $ (14,934 ) $ (877 )

~~Expenses~~

Total expenses increased $3,877 and $8,839 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017. The increase primarily consists of higher interest expense of $2,398 and $7,391 related to Senior Notes issued throughout 2017 and in the first six months of 2018.

During the three months ended June 30, 2018, general and administrative costs increased $1,232 compared to the three months ended June 30, 2017, and reflected (i) $820 of higher reimbursement expenses to our Manager, (ii) $410 of higher professional fees, due to SOX consulting fees incurred during the period, and (iii) $75 of higher director’s fees, the result of two new directors elected in 2018. Partially offsetting these increases was a decrease in general corporate costs of $73.

During the six months ended June 30, 2018, general and administrative costs increased $983 compared to the six months ended June 30, 2017, and reflected (i) $797 of higher reimbursement expenses to our Manager, (ii) $413 of higher professional fees, and (iii) $159 of higher director’s fees. Partially offsetting these increases was a decrease in general corporate costs of $386.

~~Other Expenses~~

Total other expenses decreased $0 and $2,456 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017, due to a loss on extinguishment of debt incurred in the prior period.

~~Adjusted Net Loss (Non-GAAP)~~

Adjusted Net Loss increased $3,747 and $8,328 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017. In addition to the changes in net loss attributable to shareholders noted above, Adjusted Net Loss was reduced by $2,456 in the six months ended June 30, 2017 related to the extinguishment of debt. There was no extinguishment in 2018.

~~Adjusted EBITDA (Non-GAAP)~~

Adjusted EBITDA decreased $1,289 and $877 during the three and six months ended June 30, 2018 compared to the three and six months ended June 30, 2017. In addition to the changes in net loss attributable to shareholders noted above, Adjusted EBITDA includes the impact of higher interest expense of $2,398 and $7,391 during the three and six months ended June 30, 2018, related to the Senior Notes issued throughout 2017. Adjusted EBITDA for the six months ended June 30, 2017 period reflects the impact of losses on the extinguishment of debt. There was no extinguishment in 2018.above.

Liquidity and Capital Resources

Our principal uses of liquidity have been and continue to be (i) acquisitions of transportation infrastructure and equipment, (ii) dividends to our shareholders and holders of eligible participating securities, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our ~~investments (all dollar amounts are expressed in thousands).~~investments.

~~In the six months ended June 30, 2018 and 2017, cash~~Cash used for the purpose of making investments was ~~$349,328~~$401.4 million and ~~$301,852, respectively.~~

In$352.0 million during the six months ended June 30, 2019 and 2018, ~~and 2017, dividends~~respectively.

Dividends to shareholders and holders of eligible participating securities were ~~$54,662~~$56.8 million and ~~$50,024,~~$54.7 million during the six months ended June 30, 2019 and 2018, 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) proceeds from asset ~~sales and (iv) proceeds from the issuance of common shares.~~sales.

~~During the six months ended June 30, 2018 and 2017, cash~~Cash flows from operating activities, plus the principal collections on finance leases and maintenance reserve collections were ~~$82,046~~$90.0 million and ~~$43,475,~~$82.0 million during the six months ended June 30, 2019 and 2018, respectively.

During the six months ended June 30, 2019, additional borrowings were obtained in connection with the 2025 Notes of $148.7 million, 2022 Notes of $147.8 million, Revolving Credit Facility of $105.0 million, LREG Credit Agreement of $71.5 million, Jefferson Revolver of $23.2 million, DRP Revolver of $21.6 million, and CMQR Credit Agreement of $11.7 million. We made total principal repayments of $128.8 million, primarily relating to the Revolving Credit Facility of $115.0 million and CMQR Credit Agreement of $10.7 million. During the six months ended June 30, 2018, additional borrowings were obtained in connection with the ~~Senior~~2022 Notes of ~~$100,000, the~~$100.0 million, Revolving Credit Facility of ~~$50,000, the~~$50.0 million, Jefferson Revolver of ~~$39,000,~~$39.0 million, net of financing costs, and the CMQR Credit Agreement of ~~$13,350.~~$13.4 million. We made total principal repayments of ~~$45,874,~~$45.9 million, primarily relating to the Revolving Credit Facility, CMQR Credit Agreement and FTAI Pride Credit ~~Agreement,~~Agreement.

Proceeds from the ~~Revolving Credit Facility~~sale of assets were $71.5 million and ~~the CMQR Credit Agreement. During~~$26.5 million during the six months ended June 30, ~~2017, additional borrowings were obtained in connection with~~2019 and 2018, respectively.

Proceeds from the ~~Term Loan~~issuance of ~~$97,163,~~common shares was $128.5 million, net of ~~deferred financing~~issuance costs ~~and the Senior Notes~~ of $137,248, net of deferred financing costs and the repayment of the Term Loan. We made total principal repayments of $11,875 primarily related to the FTAI Pride Credit Agreement and the CMQR Credit Agreement.

~~During~~$2.1 million, during the six months ended June 30, ~~2018 and 2017, proceeds from the sale of assets~~2018. There were ~~$26,530 and $30,292, respectively.~~

~~During the six months ended June 30, 2018, proceeds from the issuance~~no issuances of common shares ~~were $128,450, net of issuance costs of $2,100.~~in 2019.

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 our planned liquidity needs. We cannot assure ~~you~~ if or when any such transaction will be consummated or the terms of any such transaction.

We have a dividend reinvestment plan in place which allows shareholders to automatically reinvest dividends in our common shares. The plan became effective on February 24, 2017.

Historical Cash Flow

Comparison of the six months endedJune 30, ~~2018~~2019 and ~~2017~~2018

The following table compares the historical cash flow for the six months ended June 30, ~~2018~~2019 and ~~2017:~~2018:

Six Months Ended June 30,
(Dollar amounts in thousands) 2018 2017
Cash Flow Data:
Net cash provided by operating activities $ 59,152
$ 33,275
Net cash used in investing activities (325,091 ) (268,830 )
Net cash provided by financing activities 246,978
186,087



	Six Months Ended June 30,
(in thousands)	2019			2018
Cash Flow Data:
Net cash provided by operating activities	$	58,112		$	59,152
Net cash used in investing activities	(325,657		)	(325,091		)
Net cash provided by financing activities	321,084			246,978

Net cash provided by operating activities ~~was $59,152 in the six months ended June 30, 2018 as compared~~decreased $1.0 million primarily due to $33,275 in the six months ended June 30, 2017, representing a $25,877 increase. Net loss was $15,782 for the six months ended June 30, 2018, compared $15,021 for the six months ended June 30, 2017, an increase in net loss of $761. The increase in operating cash flow was attributable to changesadjustments to reconcile net income which include ~~an increase~~decreases in (i) gain on sale of equipment of $19.4 million and (ii) changes in accounts receivable, other assets and other liabilities due to the continued expansion of operations across all business segments. The overall decrease was offset primarily by changes in (i) ~~$24,833 relating to~~ depreciation and amortization of $19.7 million and (ii) ~~$9,652 relating to~~ amortization of lease intangibles and incentives ~~and (iii) $1,458 relating to bad debt expense offset by a decrease~~ of $2,456 loss on extinguishment of debt and decrease of $974 in gain on sale of assets. The increase was offset by changes in (i) other assets of $20,227 due to acquisition of crude inventory and prepaid expenses in the six months ended June 30, 2018, and (ii) in accounts receivable of $3,796 offset by increases in (i) accounts payable of $20,220 and (ii) other liabilities of $3,462 due to the expansion of business operations across all segments.$4.3 million.

Net cash used in investing activities ~~was $325,091 in the six months ended June 30, 2018 as compared~~increased $0.6 million primarily due to ~~$268,830 in the six months ended June 30, 2017, representing a $56,261 increase. Cash used in investing activities increased by $12,165 in purchase deposits in the Aviation Leasing segment as well as~~(i) the acquisition of property, plant and equipment of ~~$73,351 mainly due to on going capital projects at Repauno, Hannibal~~$35.2 million and ~~Jefferson Terminal. This increase in investing activities was~~(ii) purchase deposits for acquisitions of $15.7 million, partially offset by ~~a decrease in cash used in investments in unconsolidated entities of $20,057 and a decrease in cash used for the acquisition~~(iii) proceeds from sale of leasing equipment of $45.0 million and ~~lease intangibles in the Aviation Leasing segment~~(iv) principal collections on finance leases of ~~$16,223 in the six months ended June 30, 2018 as compared to the six months ended June 30, 2017.~~$2.5 million.

Net cash provided by financing activities ~~was $246,978 in the six months ended June 30, 2018 as compared to $186,087 in the six months ended June 30, 2017, representing a $60,891 increase. This was attributable~~increased $74.1 million primarily due to an increase in proceeds from debt of ~~$128,450~~$325.1 million, partially offset by (i) proceeds from ~~proceeds for~~ the issuance of common stock net of issuance costs ~~and an increase in receipt~~ of ~~maintenance deposits of $12,380. These increases were offset by a $39,561 decrease in proceeds from borrowings, attributable to the Senior Notes and an increase of $33,999 on the~~$127.7 million, (ii) repayment of debt ~~attributable to repayments under the CMQR Credit Agreement~~of $83.0 million and ~~the Revolving Credit Facility.~~(iii) payment of deferred financing costs of $30.6 million.

Funds Available for Distribution (Non-GAAP)

We use Funds Available for Distribution (“FAD”) in evaluating our ability to meet our stated dividend policy. FAD is not a financial measure in accordance with GAAP. The GAAP measure most directly comparable to FAD is net cash provided by operating activities. We believe FAD is a useful metric for investors and analysts for similar purposes.

We define FAD as: net cash provided by operating activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and ~~excluding~~excludes 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,						Six Months Ended June 30,
(Dollar amounts in thousands)	2018			2017
(in thousands)							2019			2018
Net Cash Provided by Operating Activities	$	59,152		$	33,275		$	58,112		$	59,152
Add: Principal Collections on Finance Leases	539			225			2,996			539
Add: Proceeds from sale of assets	26,530			30,292
Add: Proceeds from Sale of Assets							71,504			26,530
Add: Return of Capital Distributions from Unconsolidated Entities	—			—			1,280			—
Less: Required Payments on Debt Obligations ⁽¹⁾	(3,124		)	(3,125		)	(3,125		)	(3,124		)
Less: Capital Distributions to Non-Controlling Interest	—			—			—			—
Exclude: Changes in Working Capital	(3,876		)	(4,307		)	26,310			(3,876		)
Funds Available for Distribution (FAD)	$	79,221		$	56,360		$	157,077		$	79,221

⁽¹⁾Required payments on debt obligations for the six months ended June 30, ~~2018 excludes $17,750 repayment~~2019 exclude repayments of $115,000 for the Revolving Credit Facility and $10,710 for the CMQR Credit Agreement, ~~and $25,000 repayment of the Revolving Credit Facilities,~~ and for the six months ended June 30, ~~2017 excludes $100,000 repayment~~2018 exclude repayments of $25,000 for the ~~Term Loan, both~~Revolving Credit Facility and $17,750 for the CMQR Credit Agreement, all of which were voluntary refinancings as repayments of these amounts were not required at such time.

Limitations

FAD is subject to a number of limitations and assumptions and there can be no assurance that we will generate FAD sufficient to meet our intended dividends. FAD has material limitations as a liquidity measure because such measure excludes items that are required elements of our net cash provided by operating activities as described below. FAD should not be considered in isolation nor as a substitute for analysis of our results of operations under GAAP, and it is not the only metric that should be considered in evaluating our ability to meet our stated dividend policy. Specifically:

FAD does not include equity capital called from our existing limited partners, proceeds from any debt issuance or future equity offering, historical cash and cash equivalents and expected investments in our operations.

FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified.

~~While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire~~ ~~assets as we rely on alternative sources of liquidity to fund such purchases.~~


•	While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as we rely on alternative sources of liquidity to fund such purchases.

FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as we have multiple sources of liquidity and intends to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity.

FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments.

FAD does not reflect changes in working capital balances as management believes that changes in working capital are primarily driven by short term timing differences, which are not meaningful to our distribution decisions.

Management has significant discretion to make distributions, and we are not bound by any contractual provision that requires us to use cash for distributions.

If such factors were included in FAD, there can be no assurance that the results would be consistent with our presentation of FAD.

Debt Obligations

Refer to Note 8 of the Consolidated Financial Statements for ~~detail.~~additional information.

Contractual Obligations

The following table summarizes our future obligations, by period due, as of June 30, ~~2018,~~2019, under our various contractual obligations and commitments. We had no off-balance sheet arrangements as of June 30, ~~2018.~~2019.



(in thousands)	2018		2019		2020		2021		2022		Thereafter		Total		Remainder of 2019		2020		2021		2022		2023		Thereafter		Total
FTAI Pride Credit Agreement	$	3,125	$	47,743	$	—	$	—	$	—	$	—	$	50,868	$	44,618	$	—	$	—	$	—	$	—	$	—	$	44,618
CMQR Credit Agreement	—		—		20,400		—		—		—		20,400		—		—		—		23,300		—		—		23,300
Revolving Credit Facility	—		—		25,000		—		—		—		25,000		—		—		—		90,000		—		—		90,000
Jefferson Revolver	—		—		—		39,511		—		—		39,511		23,000		—		50,000		—		—		—		73,000
DRP Revolver															—		—		21,600		—		—		—		21,600
LREG Credit Agreement															—		—		—		—		—		71,500		71,500
Series 2012 Bonds	1,545		1,670		1,810		1,960		2,120		33,660		42,765		1,670		1,810		1,960		2,120		2,295		31,365		41,220
Series 2016 Bonds	—		—		144,200		—		—		—		144,200		—		144,200		—		—		—		—		144,200
Senior Notes	—		—		—		—		550,000		—		550,000
Senior Notes due 2022															—		—		—		700,000		—		—		700,000
Senior Notes due 2025															—		—		—		—		—		450,000		450,000
Total principal payments on loans and bonds payable	4,670		49,413		191,410		41,471		552,120		33,660		872,744		69,288		146,010		73,560		815,420		2,295		552,865		1,659,438

Total estimated interest payments ⁽¹⁾	30,654		56,415		43,564		40,508		10,598		15,683		197,422		60,023		95,394		91,242		48,270		37,295		87,426		419,650
Obligation to third-party	22,215		7,210		—		—		—		—		29,425		13,737		20,421		—		—		—		—		34,158
Operating lease obligations	2,925		5,603		4,730		3,079		2,324		69,083		87,744		4,735		5,625		4,220		3,502		2,667		95,202		115,951
Capital lease obligations	195		382		367		233		110		7		1,294		211		407		273		147		31		—		1,069
	55,989		69,610		48,661		43,820		13,032		84,773		315,885		78,706		121,847		95,735		51,919		39,993		182,628		570,828
Total contractual obligations	$	60,659	$	119,023	$	240,071	$	85,291	$	565,152	$	118,433	$	1,188,629	$	147,994	$	267,857	$	169,295	$	867,339	$	42,288	$	735,493	$	2,230,266

⁽¹⁾ Estimated interest rates as of June 30, ~~2018.~~2019.

We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required.

Application of Critical Accounting Policies

Goodwill—Goodwill includes the excess of the purchase price over the fair value of the net tangible and intangible assets associated with the acquisitions of CMQR and Jefferson Terminal. The carrying amount of goodwill is approximately ~~$116,584~~$116.6 million as of both June 30, ~~2018~~2019 and December 31, ~~2017.~~

2018.

We review the carrying values of goodwill at least annually to assess impairment since these assets are not amortized. An annual impairment review is conducted as of October 1st of each year. Additionally, we review the carrying value of goodwill whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The determination of fair value involves significant management judgment.

For an annual goodwill impairment assessment, an optional qualitative analysis may be performed. If the option is not elected or if it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then a two-step goodwill impairment test is performed to identify potential goodwill impairment and measure an impairment loss. A qualitative analysis was not elected for the year ended December 31, ~~2017.~~

2018.

The first step of an impairment assessment compares the fair value of a respective reporting unit with its carrying amount, including goodwill. The estimate of fair value of the respective reporting unit is based on the best information available as of the date of assessment, which primarily incorporates certain factors including our assumptions about operating results, business plans, income projections, anticipated future cash flows and market data. If the estimated fair value of the reporting unit is less than the carrying amount, a second step must be completed in order to determine the amount of goodwill impairment that should be recorded, if any.

In performing the annual analysis, our two reporting units subject to the test are the Jefferson Terminal and Railroad reporting units. We estimate the fair value of the reporting units using an income approach, specifically a discounted cash flow analysis. This analysis requires us to make significant assumptions and estimates about the extent and timing of future cash flows, discount rates and growth rates. The estimates and assumptions used consider historical performance if indicative of future performance, and are consistent with the assumptions used in determining future profit plans for the reporting units. We also utilize market valuation models and other financial ratios, which require us to make certain assumptions and estimates regarding the applicability of those models to our assets and businesses.

Although we believe the estimates of fair value are reasonable, the determination of certain valuation inputs is subject to management’s judgment. Changes in these inputs, including as a result of events beyond our control, could materially affect the results of the impairment review. If the forecasted cash flows of the Jefferson Terminal and Railroad reporting units or other key inputs are negatively revised in the future, the estimated fair value of the Jefferson Terminal and Railroad reporting units could be adversely impacted, potentially leading to an impairment in the future that could materially affect our operating results. Specifically, as it relates to the Jefferson Terminal segment, forecasted revenue is dependent on the ramp up of volumes under current contracts and the acquisition of additional storage contracts for the heavy and light crude and refined products during 2019 subject to obtaining rail capacity for crude, permits for pipeline and ~~ethanol.~~movements in future oil spreads. Jefferson Terminal was designed to reach a storage capacity of 21.7 million barrels, and 2.9 million of storage, or approximately 13% of capacity, is currently operational. If the Company strategy changes from planned capacity downward due to an inability to source contracts or expand volumes, the fair value of the reporting units would be negatively affected, which could lead to an impairment. The expansion of refineries in the Beaumont/Port Arthur area, as well as growing crude oil production in the U.S. and Canada, are expected to result in increased demand for storage on the U.S. Gulf Coast. Other assumptions utilized in our annual impairment analysis that are significant in determination of the fair value of the reporting unit include the discount rate utilized in our discounted cash flow analysis of 14% and our terminal growth rate of 3%.

Furthermore, development of both inbound and outbound pipelines to and from the Jefferson Terminal over the next two to three years will affect our forecasted growth and therefore our estimated fair value. We continue to expect the Jefferson Terminal segment to generate positive Adjusted EBITDA ~~near the end of 2018.~~during 2019. Although certain of our anticipated contracts or expected volumes from existing contracts for Jefferson Terminal have been delayed, we continue to believe our projected revenues are achievable and have not yet modified those projections based on ongoing negotiations with our customers and discussions with major pipeline companies. Further delays in executing these contracts or achieving our projections could adversely affect the fair value of the reporting unit. However, due to strengthening macroeconomic conditions such as increased oil prices, and our expectation that the ~~increasing~~ spread between Western Canadian Crude and Western Texas Intermediate ~~are better than we anticipated, and~~will increase over the long term, we remain positive for the outlook of Jefferson Terminal’s earnings potential.

For the year ended December 31, ~~2017,~~2018, there was no impairment of goodwill.

Recent Accounting Pronouncements

See Note 2 to our Consolidated Financial Statements for recent accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of changes in value of a financial instrument, caused by fluctuations in interest rates and foreign exchange rates. Changes in these factors could cause fluctuations in our results of operations and cash flows. We are exposed to the market risks described below.

Interest Rate Risk

Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. Interest rate risk is highly sensitive to many factors, including the U.S. government’s monetary and tax policies, global economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposure relates to our term loan arrangements.

LIBOR and other indices which are deemed “benchmarks” are the subject of recent national, international, and other regulatory guidance and proposals for reform, and it appears likely that LIBOR will be phased out or the methodology for determining LIBOR will be modified by 2021. We currently have agreements that are indexed to LIBOR and are monitoring related reform proposals and evaluating the related risks; however, it is not possible to predict the effects of any of these developments, and any future initiatives to regulate, reform or change the manner of administration of LIBOR could result in adverse consequences to the rate of interest payable and receivable on, market value of and market liquidity for LIBOR-based financial instruments.

Our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our finance leases. We manage our exposure to interest rate movements through the use of interest rate derivatives (interest rate swaps and caps). As a result, when market rates of interest change, there is generally not a material impact on our interest expense, future earnings or cash flows.

The following discussion about the potential effects of changes in interest rates is based on a sensitivity analysis, which models the effects of hypothetical interest rate shifts on our financial condition and results of operations. Although we believe a sensitivity analysis provides the most meaningful analysis permitted by the rules and regulations of the SEC, it is constrained by several factors, including the necessity to conduct the analysis based on a single point in time and by the inability to include the extraordinarily complex market reactions that normally would arise from the market shifts modeled. Although the following results of a sensitivity analysis for changes in interest rates may have some limited use as a benchmark, they should not be viewed as a forecast. This forward-looking disclosure also is selective in nature and addresses only the potential interest expense impacts on our financial instruments and, in particular, does not address the mark-to-market impact on our interest rate derivatives. It also does not include a variety of other potential factors that could affect our business as a result of changes in interest rates.

As of June 30, ~~2018,~~2019, assuming we do not hedge our exposure to interest rate fluctuations related to our outstanding floating rate debt, a hypothetical 100-basis point increase/decrease in our variable interest rate on our borrowings would result in an increase/decrease in interest expense of approximately ~~$1,295~~$2.2 million over the next 12 months before the impact of interest rate derivatives.

Foreign Currency Exchange Risk

Our functional currency is U.S. dollars. All of our leasing arrangements are denominated in U.S. dollars. Currently, the majority of freight rail revenue is also denominated in U.S. dollars, but a portion is denominated in Canadian dollars. Although foreign exchange risk could arise from our operations in multiple jurisdictions, we do not have significant exposure to foreign currency risk as our leasing arrangements are denominated in U.S. dollars. All of our purchase agreements are negotiated in U.S. dollars, and we currently receive the majority of revenue in U.S. dollars. We pay substantially all of our expenses in U.S. dollars; however we pay some expenses in Canadian dollars. Because we currently receive the majority of our revenues in U.S. dollars and pay substantially all of our expenses in U.S. dollars, we do not expect a change in foreign exchange rates would have a significant impact on our results of operations or cash flows.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based ~~on the~~upon that evaluation, of our disclosure controls and procedures as of June 30, 2018, and due to the material weakness in our internal control over financial reporting described in Management’s Report on Internal Control over Financial Reporting included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 1, 2018, our Chief Executive Officer and Chief Financial Officer have concluded that ~~as of such date,~~ our disclosure controls and procedures were ~~not effective.~~effective as of and for the period covered by this report.

Internal Control over Financial Reporting

~~No change other than certain remediation efforts related to~~There have not been any changes in our internal control over financial reporting (as such term is defined in ~~Rule~~Rules 13a-15(f) and 15d-15(f) under the Exchange Act) ~~occurred~~ during ~~our most recent~~the fiscal quarter to which this report relates that ~~has~~have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We have made no significant changes in our remediation plans during the three months ended June 30, 2018 that could materially affect, or are reasonably likely to materially affect, our internal control over financial reporting. For further information with regard to our “Remediation Plans,” please refer to Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 1, 2018.

7261

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

We are and may become involved in legal proceedings, including but not limited to regulatory investigations and inquiries, in the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, regulatory investigation or inquiry, in the opinion of management, we do not expect our current and any threatened legal proceedings to have a material adverse effect on our business, financial position or results of operations. Given the inherent unpredictability of these types of proceedings, however, it is possible that future adverse outcomes could have a material adverse effect on our financial results.

Item 1A. Risk Factors

You should carefully consider the following risks and other information in this Form 10-Q in evaluating us and our common shares. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition. The risk factors generally have been separated into the following categories: risks related to our business, risks related to our Manager, risks related to taxation and risks related to our common shares. However, these categories do overlap and should not be considered exclusive.

Risks Related to Our Business

Uncertainty relating to macroeconomic conditions may reduce the demand for our assets, result in non-performance of contracts by our lessees or charterers, limit our ability to obtain additional capital to finance new investments, or have other unforeseen negative effects.

Uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets and commodity price volatility, historically have created difficult operating environments for owners and operators in the transportation industry. Many factors, including factors that are beyond our control, may impact our operating results or financial condition and/or affect the lessees and charterers that form our customer base. For some years, the world has experienced weakened economic conditions and volatility following adverse changes in global capital markets. Excess supply in oil and gas markets can put significant downward pressure on prices for these commodities, and may affect demand for assets used in production, refining and transportation of oil and gas. In the past, a significant decline in oil prices has led to lower offshore exploration and production budgets worldwide. These conditions have resulted in significant contraction, ~~de-leveraging~~deleveraging and reduced liquidity in the credit markets. A number of governments have implemented, or are considering implementing, a broad variety of governmental actions or new regulations for the financial markets. In addition, limitations on the availability of capital, higher costs of capital for financing expenditures or the desire to preserve liquidity, may cause our current or prospective customers to make reductions in future capital budgets and spending.

Further, demand for our assets is related to passenger and cargo traffic growth, which in turn is dependent on general business and economic conditions. Global economic downturns could have an adverse impact on passenger and cargo traffic levels and consequently our lessees’ and charterers’ business, which may in turn result in a significant reduction in revenues, earnings and cash flows, difficulties accessing capital and a deterioration in the value of our assets. We may also become exposed to increased credit risk from our customers and third parties who have obligations to us, which could result in increased non-performance of contracts by our lessees or charterers and adversely impact our business, prospects, financial condition, results of operations and cash flows.

The industries in which we operate have experienced periods of oversupply during which lease rates and asset values have declined, particularly during the most recent economic downturn, and any future oversupply could materially adversely affect our results of operations and cash flows.

The oversupply of a specific asset is likely to depress the lease or charter rates for and the value of that type of asset and result in decreased utilization of our assets, and the industries in which we operate have experienced periods of oversupply during which rates and asset values have declined, particularly during the most recent economic downturn. Factors that could lead to such oversupply include, without limitation:

general demand for the type of assets that we purchase;

general macroeconomic conditions, including market prices for commodities that our assets may serve;

geopolitical events, including war, prolonged armed conflict and acts of terrorism;

outbreaks of communicable diseases and natural disasters;

governmental regulation;

interest rates;

the availability of credit;

restructurings and bankruptcies of companies in the industries in which we operate, including our customers;

manufacturer production levels and technological innovation;

manufacturers merging or exiting the industry or ceasing to produce certain asset types;

retirement and obsolescence of the assets that we own;

our railroad infrastructure may be damaged, including by flooding and railroad derailments;

increases in supply levels of assets in the market due to the sale or merging of operating lessors; and

reintroduction of previously unused or dormant assets into the industries in which we operate.

These and other related factors are generally outside of our control and could lead to persistence of, or increase in, the oversupply of the types of assets that we acquire or decreased utilization of our assets, either of which could materially adversely affect our results of operations and cash flow. In addition, lessees may redeliver our assets to locations where there is oversupply, which may lead to additional repositioning costs for us if we move them to areas with higher demand. Positioning expenses vary depending on geographic location, distance, freight rates and other factors, and may not be fully covered by drop-off charges collected from the last lessees of the equipment or pick-up charges paid by the new lessees. Positioning expenses can be significant if a large portion of our assets are returned to locations with weak demand, which could materially adversely affect our business, prospects, financial condition, results of operations and cash flow.

There can be no assurance that any target returns will be achieved.

Our target returns for assets are targets only and are not forecasts of future profits. We develop target returns based on our Manager’s assessment of appropriate expectations for returns on assets and the ability of our Manager to enhance the return generated by those assets through active management. There can be no assurance that these assessments and expectations will be achieved and failure to achieve any or all of them may materially adversely impact our ability to achieve any target return with respect to any or all of our assets.

In addition, our target returns are based on estimates and assumptions regarding a number of other factors, including, without limitation, holding periods, the absence of material adverse events affecting specific investments (which could include, without limitation, natural disasters, terrorism, social unrest or civil disturbances), general and local economic and market conditions, changes in law, taxation, regulation or governmental policies and changes in the political approach to transportation investment, either generally or in specific countries in which we may invest or seek to invest. Many of these factors, as well as the other risks described elsewhere in this report, are beyond our control and all could adversely affect our ability to achieve a target return with respect to an asset. Further, target returns are targets for the return generated by specific assets and not by us. Numerous factors could prevent us from achieving similar returns, notwithstanding the performance of individual assets, including, without limitation, taxation and fees payable by us or our operating subsidiaries, including fees and incentive allocation payable to our Manager.

There can be no assurance that the returns generated by any of our assets will meet our target returns, or any other level of return, or that we will achieve or successfully implement our asset acquisition objectives, and failure to achieve the target return in respect of any of our assets could, among other things, have a material adverse effect on our business, prospects, financial condition, results of operations and cash flow. Further, even if the returns generated by individual assets meet target returns, there can be no assurance that the returns generated by other existing or future assets would do so, and the historical performance of the assets in our existing portfolio should not be considered as indicative of future results with respect to any assets.

Contractual defaults may adversely affect our business, prospects, financial condition, results of operations and cash flows by decreasing revenues and increasing storage, positioning, collection, recovery and lost equipment expenses.

The success of our business depends in large part on the success of the operators in the sectors in which we participate. Cash flows from our assets are substantially impacted by our ability to collect compensation and other amounts to be paid in respect of such assets from the customers with whom we enter into leases, charters or other contractual arrangements. Inherent in the nature of the leases, charters and other arrangements for the use of such assets is the risk that we may not receive, or may experience delay in realizing, such amounts to be paid. While we target the entry into contracts with credit-worthy counterparties, no assurance can be given that such counterparties will perform their obligations during the term of the leases, charters or other contractual arrangements. In addition, when counterparties default, we may fail to recover all of our assets, and the assets we do recover may be returned in damaged condition or to locations where we will not be able to efficiently lease, charter or sell them. In most cases, we maintain, or require our lessees to maintain, certain insurances to cover the risk of damages or loss of our assets. However, these insurance policies may not be sufficient to protect us against a loss.

Depending on the specific sector, the risk of contractual defaults may be elevated due to excess capacity as a result of oversupply during the most recent economic downturn. We lease assets to our customers pursuant to fixed-price contracts, and our customers then seek to utilize those assets to transport goods and provide services. If the price at which our customers receive for their transportation services decreases as a result of an oversupply in the marketplace, then our customers may be forced to reduce their prices in order to attract business (which may have an adverse effect on their ability to meet their contractual lease obligations to us), or may seek to renegotiate or terminate their contractual lease arrangements with us to pursue a lower-priced opportunity with another lessor, which may have a direct, adverse effect on us. See “-The industries in which we operate have experienced periods of oversupply during which lease rates and asset values have declined, particularly during the ~~financial crisis,~~most recent economic downturn, and any future oversupply could materially adversely affect our results of operations and cash flows.” Any default by a material customer would have a significant impact on our profitability at the time the customer defaulted, which could materially adversely affect our operating results and growth prospects. In addition, some of our counterparties may reside in jurisdictions with legal and regulatory regimes that make it difficult and costly to enforce such counterparties’ obligations.

We may not be able to renew or obtain new or favorable charters or leases, which could adversely affect our business, prospects, financial condition, results of operations and cash flows.

Our operating leases are subject to greater residual risk than direct finance leases because we will own the assets at the expiration of an operating lease term and we may be unable to renew existing charters or leases at favorable rates, or at all, or sell the leased or chartered assets, and the residual value of the asset may be lower than anticipated. In addition, our ability to renew existing charters or leases or obtain new charters or leases will also depend on prevailing market conditions, and upon expiration of the contracts governing the leasing or charter of the applicable assets, we may be exposed to increased volatility in terms of rates and contract provisions. For example, we do not currently have long-term charters for our construction support vessel and our ROV support vessel. Likewise, our customers may reduce their activity levels or seek to terminate or renegotiate their charters or leases with us. If we are not able to renew or obtain new charters or leases in direct continuation, or if new charters or leases are entered into at rates substantially below the existing rates or on terms otherwise less favorable compared to existing contractual terms, or if we are unable to sell assets for which we are unable to obtain new contracts or leases, our business, prospects, financial condition, results of operations and cash flows could be materially adversely affected.

If we acquire a high concentration of a particular type of asset, or concentrate our investments in a particular sector, our business, prospects, financial condition, results of operations and cash flows could be adversely affected by changes in market demand or problems specific to that asset or sector.

If we acquire a high concentration of a particular asset, or concentrate our investments in a particular sector, our business and financial results could be adversely affected by sector-specific or asset-specific factors. For example, if a particular sector experiences difficulties such as increased competition or oversupply, the operators we rely on as a lessor may be adversely affected and consequently our business and financial results may be similarly affected. If we acquire a high concentration of a particular asset and the market demand for a particular asset declines, it is redesigned or replaced by its manufacturer or it experiences design or technical problems, the value and rates relating to such asset may decline, and we may be unable to lease or charter such asset on favorable terms, if at all. Any decrease in the value and rates of our assets may have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

We operate in highly competitive markets.

The business of acquiring transportation and transportation-related infrastructure assets is highly competitive. Market competition for opportunities includes traditional transportation and infrastructure companies, commercial and investment banks, as well as a growing number of non-traditional participants, such as hedge funds, private equity funds and other private investors, including Fortress-related entities. Some of these competitors may have access to greater amounts of capital and/or to capital that may be committed for longer periods of time or may have different return thresholds than us, and thus these competitors may have certain advantages not shared by us. In addition, competitors may have incurred, or may in the future incur, leverage to finance their debt investments at levels or on terms more favorable than those available to us. Strong competition for investment opportunities could result in fewer such opportunities for us, as certain of these competitors have established and are establishing investment vehicles that target the same types of assets that we intend to purchase.

In addition, some of our competitors may have longer operating histories, greater financial resources and lower costs of capital than us, and consequently, may be able to compete more effectively in one or more of our target markets. We likely will not always be able to compete successfully with our competitors and competitive pressures or other factors may also result in significant price competition, particularly during industry downturns, which could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

Litigation to enforce our contracts and recover our assets has inherent uncertainties that are increased by the location of our assets in jurisdictions that have less developed legal systems.

While some of our contractual arrangements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in the state of New York, our ability to enforce our counterparties’ obligations under such contractual arrangements is subject to applicable laws in the jurisdiction in which enforcement is sought. While some of our existing assets are used in specific jurisdictions, transportation and transportation-related infrastructure assets by their nature generally move throughout multiple jurisdictions in the ordinary course of business. As a result, it is not possible to predict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. Litigation and enforcement proceedings have inherent uncertainties in any jurisdiction and are expensive. These uncertainties are enhanced in countries that have less developed legal systems where the interpretation of laws and regulations is not consistent, may be influenced by factors other than legal merits and may be cumbersome, time-consuming and even more expensive. For example, repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same security interests and rights to creditors and lessors as those in the United States and where the legal system is not as well developed. As a result, the remedies available and the relative success and expedience of collection and enforcement proceedings with respect to the owned assets in various jurisdictions cannot be predicted. To the extent more of our business shifts to areas outside of the United States and Europe, such as Asia and the Middle East, it may become more difficult and expensive to enforce our rights and recover our assets.

Certain liens may arise on our assets.

Certain of our assets are currently subject to liens under separate financing arrangements entered into by certain subsidiaries in connection with acquisitions of assets. In the event of a default under such arrangements by the applicable subsidiary, the lenders thereunder would be permitted to take possession of or sell such assets. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” In addition, our currently owned assets and assets that we purchase in the future may be subject to other liens based on the industry practices relating to such assets. Until they are discharged, these liens could impair our ability to repossess, re-lease or sell our assets, and to the extent our lessees or charterers do not comply with their obligations to discharge any liens on the applicable assets, we may find it necessary to pay the claims secured by such liens in order to repossess such assets. Such payments could materially adversely affect our operating results and growth prospects.

The values of ~~the~~our assets ~~that we purchase~~ may fluctuate due to various factors.

The fair market values of our assets may decrease or increase depending on a number of factors, including the prevailing level of charter or lease rates from time to time, general economic and market conditions affecting our target markets, type and age of assets, supply and demand for assets, competition, new governmental or other regulations and technological advances, all of which could impact our profitability and our ability to lease, charter, develop, operate, or sell such assets. In addition, our assets depreciate as they age and may generate lower revenues and cash flows. We must be able to replace such older, depreciated assets with newer assets, or our ability to maintain or increase our revenues and cash flows will decline. In addition, if we dispose of an asset for a price that is less than the depreciated book value of the asset on our balance sheet or if we determine that an asset’s value has been impaired, we will recognize a related charge in our consolidated statement of operations and such charge could be material.

We may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.

Our ability to make payments on our indebtedness as required depends on our ability to generate cash flow in the future. This ability, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If we do not generate sufficient free cash flow to satisfy our debt obligations, including interest payments and the payment of principal at maturity, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot provide assurance that any refinancing would be possible, that any assets could be sold, or, if sold, of the timeliness and amount of proceeds realized from those sales, that additional financing could be obtained on acceptable terms, if at all, or that additional financing would be permitted under the terms of our various debt instruments then in effect. Furthermore, our ability to refinance would depend upon the condition of the finance and credit markets. Our inability to generate sufficient free cash flow to satisfy our debt obligations, or to refinance our obligations on commercially reasonable terms or on a timely basis, would materially affect our business, financial condition and results of operations.

We may acquire operating businesses, including businesses whose operations are not fully matured and stabilized. These businesses may be subject to significant operating and development risks, including increased competition, cost overruns and delays, and difficulties in obtaining approvals or financing. These factors could materially affect our business, financial condition, liquidity and results of operations.

We have acquired, and may in the future acquire, operating businesses, including businesses whose operations are not fully matured and stabilized (including, but not limited to, our businesses within the Jefferson Terminal and Ports and Terminals segments). While we have deep experience in the construction and operation of these companies, we are nevertheless subject to significant risks and contingencies of an operating business, and these risks are greater where the operations of such businesses are not fully matured and stabilized. Key factors that may affect our operating businesses include, but are not limited to:

competition from market participants;

general economic and/or industry trends, including pricing for the products or services offered by our operating businesses;

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the issuance and/or continued availability of necessary permits, licenses, approvals and agreements from governmental agencies and third parties as are required to construct and operate such businesses;

changes or deficiencies in the design or construction of development projects;

unforeseen engineering, environmental or geological problems;

potential increases in construction and operating costs due to changes in the cost and availability of fuel, power, materials and supplies;

the availability and cost of skilled labor and equipment;

our ability to enter into additional satisfactory agreements with contractors and to maintain good relationships with these contractors in order to construct development projects within our expected cost parameters and time frame, and the ability of those contractors to perform their obligations under the contracts and to maintain their creditworthiness;

potential liability for injury or casualty losses which are not covered by insurance;

potential opposition from non-governmental organizations, environmental groups, local or other groups which may delay or prevent development activities;

local and economic conditions;

changes in legal requirements; and

force majeure events, including catastrophes and adverse weather conditions.

Any of these factors could materially affect our business, financial condition, liquidity and results of operations.

Our use of joint ventures or partnerships, and our Manager’s outsourcing of certain functions, may present unforeseen obstacles or costs.

We have acquired and may in the future acquire interests in certain assets in cooperation with third-party partners or co-investors through jointly-owned acquisition vehicles, joint ventures or other structures. In these co-investment situations, our ability to control the management of such assets depends upon the nature and terms of the joint arrangements with such partners and our relative ownership stake in the asset, each of which will be determined by negotiation at the time of the investment and the determination of which is subject to the discretion of our Manager. Depending on our Manager’s perception of the relative risks and rewards of a particular asset, our Manager may elect to acquire interests in structures that afford relatively little or no operational and/or management control to us. Such arrangements present risks not present with wholly-owned assets, such as the possibility that a co-investor becomes bankrupt, develops business interests or goals that conflict with our interests and goals in respect of the assets, all of which could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.

In addition, our Manager expects to utilize third party contractors to perform services and functions related to the operation and leasing of our assets. These functions may include billing, collections, recovery and asset monitoring. Because we and our Manager do not directly control these third parties, there can be no assurance that the services they provide will be delivered at a level commensurate with our expectations, or at all. The failure of any such third party contractors to perform in accordance with our expectations could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.

We are subject to the risks and costs of obsolescence of our assets.

Technological and other improvements expose us to the risk that certain of our assets may become technologically or commercially obsolete. For example, in our Aviation Leasing segment, as manufacturers introduce technological innovations and new types of aircraft, some of our assets could become less desirable to potential lessees. Such technological innovations may increase the rate of obsolescence of existing aircraft faster than currently anticipated by us. In addition, the imposition of increased regulation regarding stringent noise or emissions restrictions may make some of our aircraft less desirable and less valuable in the marketplace. In our ~~Offshore Energy segment,~~offshore energy business, development and construction of new, sophisticated, high-specification assets could cause our assets to become less desirable to potential charterers, and insurance rates may also increase with the age of a vessel, making older vessels less desirable to potential charterers. Any of these risks may adversely affect our ability to lease, charter or sell our assets on favorable terms, if at all, which could materially adversely affect our operating results and growth prospects.

The North American rail sector is a highly regulated industry and increased costs of compliance with, or liability for violation of, existing or future laws, regulations and other requirements could significantly increase our costs of doing business, thereby adversely affecting our profitability.

The rail sector is subject to extensive laws, regulations and other requirements including, but not limited to, those relating to the environment, safety, rates and charges, service obligations, employment, labor, immigration, minimum wages and overtime pay, health care and benefits, working conditions, public accessibility and other requirements. These laws and regulations are enforced by U.S. and Canadian federal agencies including the U.S. and Canadian Environmental Protection Agencies, the U.S. and Canadian Departments of Transportation ~~(USDOT~~(DOT or Transport Canada), the Occupational Safety and Health Act (OSHA or Canadian provincial equivalents), the U.S. Federal Railroad Administration ~~or FRA,~~(FRA), and the U.S. Surface Transportation Board ~~or STB,~~(STB), as well as numerous other state, provincial, local and federal agencies. Ongoing compliance with, or a violation of, these laws, regulations and other requirements could have a material adverse effect on our business, financial condition and results of operations.

We believe that our rail operations are in substantial compliance with applicable laws and regulations. However, these laws and regulations, and the interpretation or enforcement thereof, are subject to frequent change and varying interpretation by regulatory authorities, and we are unable to predict the ongoing cost to us of complying with these laws and regulations or the future impact of these laws and regulations on our operations. In addition, from time to time we are subject to inspections and investigations by various regulators. Violation of environmental or other laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions and construction bans or delays.

Legislation passed by the U.S. Congress or Canadian Parliament or new regulations issued by federal agencies can significantly affect the revenues, costs and profitability of our business. For instance, more recently proposed bills such as the “Rail Shipper Fairness Act of 2017,” or competitive access proposals under consideration by the STB, if adopted, could increase government involvement in railroad pricing, service and operations and significantly change the federal regulatory framework of the railroad industry. Several of the changes under consideration could have a significant negative impact on FTAI’s ability to determine prices for rail services, meet service standards and could force a reduction in capital spending. Statutes imposing price constraints or affecting rail-to-rail competition could adversely affect FTAI’s profitability.

Under various U.S. and Canadian federal, state, provincial and local environmental requirements, as the owner or operator of terminals or other facilities, we may be liable for the costs of removal or remediation of contamination at or from our existing locations, whether we knew of, or were responsible for, the presence of such contamination. The failure to timely report and properly remediate contamination may subject us to liability to third parties and may adversely affect our ability to sell or rent our property or to borrow money using our property as collateral. Additionally, we may be liable for the costs of remediating third-party sites where hazardous substances from our operations have been transported for treatment or disposal, regardless of whether we own or operate that site. In the future, we may incur substantial expenditures for investigation or remediation of contamination that has not yet been discovered at our current or former locations or locations that we may acquire.

A discharge of hydrocarbons or hazardous substances into the environment associated with operating our rail assets could subject us to substantial expense, including the cost to recover the materials spilled, restore the affected natural resources, pay fines and penalties, and natural resource damages and claims made by employees, neighboring landowners, government authorities and other third parties, including for personal injury and property damage. We may experience future catastrophic sudden or gradual releases into the environment from our facilities or discover historical releases that were previously unidentified or not assessed. Although our inspection and testing programs are designed to prevent, detect and address any such releases promptly, the liabilities incurred due to any future releases into the environment from our assets, have the potential to substantially affect our business. Such events could also subject us to media and public scrutiny that could have a negative effect on our operations and also on the value of our common shares.

Our business could be adversely affected if service on the railroads is interrupted or if more stringent regulations are adopted regarding railcar design or the transportation of crude oil by rail.

As a result of hydraulic fracturing and other improvements in extraction technologies, there has been a substantial increase in the volume of crude oil and liquid hydrocarbons produced and transported in North America, and a geographic shift in that production versus historical production. The increase in volume and shift in geography has resulted in a growing percentage of crude oil being transported by rail. High-profile accidents involving crude-oil-carrying trains in Quebec, North Dakota and Virginia, and more recently in West Virginia and Illinois, have raised concerns about the environmental and safety risks associated with crude oil transport by rail and the associated risks arising from railcar design.

In May 2015, the DOT issued new production standards and operational controls for rail tank cars used in “High-Hazard Flammable Trains” (i.e., trains carrying commodities such as ethanol, crude oil and other flammable liquids). Similar standards have been adopted in Canada. The new standard applies for all cars manufactured after October 1, 2015, and existing tank cars must be retrofitted within the next three to eight years. The applicable operational controls include reduced speed restrictions, and maximum lengths on trains carrying these materials. Retrofitting our tank cars will be required under these new standards to the extent we elect to move certain flammable liquids in the future. While we may be able to pass some of these costs on to our customers, there may be costs that we cannot pass on to them. We continue to monitor the railcar regulatory landscape and remain in close contact with railcar suppliers and other industry stakeholders to stay informed of railcar regulation rulemaking developments. It is unclear how these regulations will impact the crude-by-rail industry, and any such impact would depend on a number of factors that are outside of our control. If, for example, overall volume of crude-by-rail decreases, or if we do not have access to a sufficient number of compliant cars to transport required volumes under our existing contracts, our operations may be negatively affected. This may lead to a decrease in revenues and other consequences.

The adoption of additional federal, state, provincial or local laws or regulations, including any voluntary measures by the rail industry regarding railcar design or crude oil and liquid hydrocarbon rail transport activities, or efforts by local communities to restrict or limit rail traffic involving crude oil, could affect our business by increasing compliance costs and decreasing demand for our services, which could adversely affect our financial position and cash flows. Moreover, any disruptions in the operations of railroads, including those due to shortages of railcars, weather-related problems, flooding, drought, accidents, mechanical difficulties, strikes, lockouts or bottlenecks, could adversely impact our customers’ ability to move their product and, as a result, could affect our business.

Our assets are exposed to unplanned interruptions caused by catastrophic events outside of our control which may disrupt our business and cause damage or losses that may not be adequately covered by insurance.

The operations of transportation and infrastructure projects are exposed to unplanned interruptions caused by significant catastrophic events, such as hurricanes, cyclones, earthquakes, landslides, floods, explosions, fires, major plant breakdowns, pipeline or electricity line ruptures or other disasters. Operational disruption, as well as supply disruption, could adversely impact the cash flows available from these assets. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged interruption may result in temporary or permanent loss of customers, substantial litigation or penalties for regulatory or contractual non-compliance, and any loss from such events may not be recoverable under relevant insurance policies. Although we believe that we are adequately insured against these types of events, either indirectly through our lessees or charterers or through our own insurance policies, no assurance can be given that the occurrence of any such event will not materially adversely affect us. In addition, if a lessee or charterer is not obligated to maintain sufficient insurance, we may incur the costs of additional insurance coverage during the related lease or charter. We can give no assurance that such insurance will be available at commercially reasonable rates, if at all.

Our assets generally require routine maintenance, and we may be exposed to unforeseen maintenance costs.

We may be exposed to unforeseen maintenance costs for our assets associated with a lessee’s or charterer’s failure to properly maintain the asset. We enter into leases and charters with respect to some of our assets pursuant to which the lessees are primarily responsible for many obligations, which generally include complying with all governmental requirements applicable to the lessee or charterer, including operational, maintenance, government agency oversight, registration requirements and other applicable directives. Failure of a lessee or charterer to perform required maintenance during the term of a lease or charter could result in a decrease in value of an asset, an inability to re-lease or charter an asset at favorable rates, if at all, or a potential inability to utilize an asset. Maintenance failures would also likely require us to incur maintenance and modification costs upon the termination of the applicable lease or charter; such costs to restore the asset to an acceptable condition prior to re-leasing, charter or sale could be substantial. Any failure by our lessees or charterers to meet their obligations to perform required scheduled maintenance or our inability to maintain our assets could materially adversely affect our business, prospects, financial condition, results of operations and cash flows.

Some of our customers operate in highly regulated industries and changes in laws or regulations, including laws with respect to international trade, may adversely affect our ability to lease, charter or sell our assets.

Some of our customers operate in highly regulated industries such as aviation and offshore energy. A number of our contractual arrangements-for example, our leasing aircraft engines or offshore energy equipment to third-party operators-require the operator (our customer) to obtain specific governmental or regulatory licenses, consents or approvals. These include consents for certain payments under such arrangements and for the export, import or re-export of the related assets. Failure by our customers or, in certain circumstances, by us, to obtain certain licenses and approvals could negatively affect our ability to conduct our business. In addition, the shipment of goods, services and technology across international borders subjects the operation of our assets to international trade laws and regulations. Moreover, many countries, including the United States, control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. If any such regulations or sanctions affect the asset operators that are our customers, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.

It is impossible to predict whether third parties will allege liability related to our purchase of the Montreal, Maine and Atlantic Railway (“MM&A”) assets out of bankruptcy, including possible claims related to the July 6, 2013 train derailment near Lac-Mégantic, Quebec.

On July 6, 2013, prior to our ownership, a train carrying crude oil on the MM&A line derailed near Lac-Mégantic, Quebec which resulted in fires that claimed the lives of 47 individuals (the “Incident”). Approximately two million gallons of crude oil were either burned or released into the environment, including into the nearby Chaudière River. Prior to our acquisition of the MM&A assets in May and June 2014, we received written assurance from the Quebec Ministry of Sustainable Development, Environment, Wildlife and Parks that it would take full responsibility for the environmental clean-up and that it would not hold CMQR liable for any environmental damages or costs relating to clean-up or restoration of the affected area as a result of the Incident. While we don’t anticipate any liability relating to the Incident, including liability for claims alleging personal injury, property damage or natural resource damages, there can be no assurance that such claims relating to the Incident will not arise in the future. No claims have been made or threatened against us as of June 30, 2018 and we do not anticipate any expenditures relating to environmental clean-up (including impacts to the Chaudière River) as a result of the Incident.

Certain of our assets are subject to purchase options held by the charterer or lessee of the asset which, if exercised, could reduce the size of our asset base and our future revenues.

We have granted purchase options to the charterers and lessees of certain of our assets. The market values of these assets may change from time to time depending on a number of factors, such as general economic and market conditions affecting the industries in which we operate, competition, cost of construction, governmental or other regulations, technological changes and prevailing levels of charter or lease rates from time to time. The purchase price under a purchase option may be less than the asset’s market value at the time the option may be exercised. In addition, we may not be able to obtain a replacement asset for the price at which the asset is sold. In such cases, our business, prospects, financial condition, results of operations and cash flows may be materially adversely affected.

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The profitability of our ~~Offshore Energy segment~~offshore energy assets may be impacted by the profitability of the offshore oil and gas industry generally, which is significantly affected by, among other things, volatile oil and gas prices.

Demand for assets in the ~~Offshore Energy segment~~offshore energy business and our ability to secure charter contracts for our assets at favorable charter rates following expiry or termination of existing charters will depend, among other things, on the level of activity in the offshore oil and gas industry. The offshore oil and gas industry is cyclical and volatile, and demand for oil-service assets depends on, among other things, the level of development and activity in oil and gas exploration, as well as the identification and development of oil and gas reserves and production in offshore areas worldwide. The availability of high quality oil and gas prospects, exploration success, relative production costs, the stage of reservoir development, political concerns and regulatory requirements all affect the level of activity for charterers of oil-service vessels. Accordingly, oil and gas prices and market expectations of potential changes in these prices significantly affect the level of activity and demand for oil-service assets. Oil and gas prices can be extremely volatile and are affected by numerous factors beyond our control, such as: worldwide demand for oil and gas; costs of exploring, developing, producing and delivering oil and gas; expectations regarding future energy prices; the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and impact pricing; the level of production in non-OPEC countries; governmental regulations and policies regarding development of oil and gas reserves; local and international political, economic and weather conditions; domestic and foreign tax or trade policies; political and military conflicts in oil-producing and other countries; and the development and exploration of alternative fuels. Any reduction in the demand for our assets due to these or other factors could materially adversely affect our operating results and growth prospects.

~~Our Shipping Containers segment is affected by the lack of an international title registry for containers, which increases the risk of ownership disputes.~~

Although the Bureau International des Containers registers and allocates a unique four letter prefix to every container in accordance with International Standardization Organization (“ISO”) standard 6346 (Freight container coding, identification and marking) there is no internationally recognized system of recordation or filing to evidence our title to containers nor is there an internationally recognized system for filing security interest in containers. While this has not historically had a material impact on our intermodal assets, the lack of a title recordation system with respect to containers could result in disputes with lessees, end-users, or third parties, such as creditors of end-users, who may improperly claim ownership of the containers, especially in countries with less developed legal systems.

Our international operations involve additional risks, which could adversely affect our business, prospects, financial condition, results of operations and cash flows.

We and our customers operate in various regions throughout the world. As a result, we may, directly or indirectly, be exposed to political and other uncertainties, including risks of:

terrorist acts, armed hostilities, war and civil disturbances;

acts of piracy;

potential cybersecurity attacks;

significant governmental influence over many aspects of local economies;

seizure, nationalization or expropriation of property or equipment;

repudiation, nullification, modification or renegotiation of contracts;

limitations on insurance coverage, such as war risk coverage, in certain areas;

political unrest;

foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;

the inability to repatriate income or capital;

complications associated with repairing and replacing equipment in remote locations;

import-export quotas, wage and price controls, imposition of trade barriers;

U.S. and foreign sanctions or trade embargoes;

restrictions on the transfer of funds into or out of countries in which we operate;

compliance with U.S. Treasury sanctions regulations restricting doing business with certain nations or specially designated nationals;

regulatory or financial requirements to comply with foreign bureaucratic actions;

compliance with applicable anti-corruption laws and regulations;

changing taxation policies, including confiscatory taxation;

other forms of government regulation and economic conditions that are beyond our control; and

governmental corruption.

Any of these or other risks could adversely impact our customers’ international operations which could materially adversely impact our operating results and growth opportunities.

We may make acquisitions in emerging markets throughout the world, and investments in emerging markets are subject to greater risks than developed markets and could adversely affect our business, prospects, financial condition, results of operations and cash flows.

To the extent that we acquire assets in emerging markets-which we may do throughout the world-additional risks may be encountered that could adversely affect our business. Emerging market countries have less developed economies and infrastructure and are often more vulnerable to economic and geopolitical challenges and may experience significant fluctuations in gross domestic product, interest rates and currency exchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government authorities. In addition, the currencies in which investments are denominated may be unstable, may be subject to significant depreciation and may not be freely convertible or may be subject to the imposition of other monetary or fiscal controls and restrictions.

Emerging markets are still in relatively early stages of their development and accordingly may not be highly or efficiently regulated. Moreover, emerging markets tend to be shallower and less liquid than more established markets which may adversely affect our ability to realize profits from our assets in emerging markets when we desire to do so or receive what we perceive to be their fair value in the event of a realization. In some cases, a market for realizing profits from an investment may not exist locally. In addition, issuers based in emerging markets are not generally subject to uniform accounting and financial reporting standards, practices and requirements comparable to those applicable to issuers based in more developed countries, thereby potentially increasing the risk of fraud and other deceptive practices. Settlement of transactions may be subject to greater delay and administrative uncertainties than in developed markets and less complete and reliable financial and other information may be available to investors in emerging markets than in developed markets. In addition, economic instability in emerging markets could adversely affect the value of our assets subject to leases or charters in such countries, or the ability of our lessees or charters, which operate in these markets, to meet their contractual obligations. As a result, lessees or charterers that operate in emerging market countries may be more likely to default under their contractual obligations than those that operate in developed countries. Liquidity and volatility limitations in these markets may also adversely affect our ability to dispose of our assets at the best price available or in a timely manner.

As we have and may continue to acquire assets located in emerging markets throughout the world, we may be exposed to any one or a combination of these risks, which could adversely affect our operating results.

We are actively evaluating potential acquisitions of assets and operating companies in other transportation and infrastructure sectors which could result in additional risks and uncertainties for our business and unexpected regulatory compliance costs.

While our existing portfolio consists of assets in the aviation, energy, intermodal transport and rail sectors, we are actively evaluating potential acquisitions of assets and operating companies in other sectors of the transportation and transportation-related infrastructure and equipment markets and we plan to be flexible as other attractive opportunities arise over time. To the extent we make acquisitions in other sectors, we will face numerous risks and uncertainties, including risks associated with the required investment of capital and other resources and with combining or integrating operational and management systems and controls. Entry into certain lines of business may subject us to new laws and regulations and may lead to increased litigation and regulatory risk. Many types of transportation assets, including certain rail, airport and seaport assets, are subject to registration requirements by U.S. governmental agencies, as well as foreign governments if such assets are to be used outside of the United States. Failing to register the assets, or losing such registration, could result in substantial penalties, forced liquidation of the assets and/or the inability to operate and, if applicable, lease the assets. We may need to incur significant costs to comply with the laws and regulations applicable to any such new acquisition. The failure to comply with these laws and regulations could cause us to incur significant costs, fines or penalties or require the assets to be removed from service for a period of time resulting in reduced income from these assets. In addition, if our acquisitions in other sectors produce insufficient revenues, or produce investment losses, or if we are unable to efficiently

manage our expanded operations, our results of operations will be adversely affected, and our reputation and business may be harmed.

We have acquired, and may in the future acquire, operating businesses including businesses whose operations are not fully matured and stabilized (including, but not limited to, our businesses within the Jefferson Terminal and Ports and Terminals segments). While we have deep experience in the construction and operation of these companies, we are nevertheless subject to significant risks and contingencies of an operating business, and these risks are greater where the operations of such businesses are not fully matured and stabilized. Key factors that may affect our operating businesses include, but are not limited to:

~~competition from market participants;~~

~~general economic and/or industry trends, including pricing for the products or services offered by our operating businesses;~~

~~changes or deficiencies in the design or construction of development projects;~~

~~unforeseen engineering, environmental or geological problems;~~

~~potential increases in construction and operating costs due to changes in the cost and availability of fuel, power, materials and supplies;~~

~~the availability and cost of skilled labor and equipment;~~

~~potential liability for injury or casualty losses which are not covered by insurance;~~

~~potential opposition from non-governmental organizations, environmental groups, local or other groups which may delay or prevent development activities;~~

~~local and economic conditions;~~

~~changes in legal requirements; and~~

~~force majeure events, including catastrophes and adverse weather conditions.~~

~~Any of these factors could materially affect our business, financial condition, liquidity and results of operations.~~

The agreements governing our indebtedness place restrictions on us and our subsidiaries, reducing operational flexibility and creating default risks.

The agreements governing our indebtedness, including, but not limited to, the indenture governing our Senior Notes and the revolving credit facility entered into on June 16, 2017 ("Revolving Credit Facility"), contain covenants that place restrictions on us and our subsidiaries. The ~~indenture~~indentures governing our Senior Notes ~~restricts,~~and the Revolving Credit Facility restrict among other things, our and certain of our subsidiaries’ ability to:

merge, consolidate or transfer all, or substantially all, of our assets;

incur additional debt or issue preferred shares;

make certain investments or acquisitions;

create liens on our or our subsidiaries’ assets;

sell assets;

make distributions on or repurchase our shares;

enter into transactions with affiliates; and

create dividend restrictions and other payment restrictions that affect our subsidiaries.

These covenants could impair our ability to grow our business, take advantage of attractive business opportunities or successfully compete. A breach of any of these covenants could result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders or holders thereof could elect to declare all outstanding debt under such agreements to be immediately due and payable.

Terrorist attacks could negatively impact our operations and our profitability and may expose us to liability and reputational damage.

Terrorist attacks may negatively affect our operations. Such attacks have contributed to economic instability in the United States and elsewhere, and further acts of terrorism, violence or war could similarly affect world trade and the industries in which we and our customers operate. In addition, terrorist attacks or hostilities may directly impact airports or aircraft, ports where our containers and vessels travel, or our physical facilities or those of our customers. In addition, it is also possible that our assets could be involved in a terrorist attack. The consequences of any terrorist attacks or hostilities are unpredictable, and we may not be able to foresee events that could have a material adverse effect on our operations. Although our lease and charter agreements generally require the counterparties to indemnify us against all damages arising out of the use of our assets, and we carry insurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, our insurance does not cover certain types of terrorist attacks, and we may not be fully protected from liability or the reputational damage that could arise from a terrorist attack which utilizes our assets.

Because we ~~are a recently formed company with~~have a limited operating history, our historical financial and operating data may not be representative of our future results.

We are a ~~recently formed~~ limited liability company with a limited operating history. Our results of operations, financial condition and cash flows reflected in our consolidated financial statements may not be indicative of the results we would have achieved if we were a public company or results that may be achieved in future periods. Consequently, there can be no assurance that we will be able to generate sufficient income to pay our operating expenses and make satisfactory distributions to our shareholders, or any distributions at all. Further, we only make acquisitions identified by our Manager. As a result of this concentration of assets, our financial performance depends on the performance of our Manager in identifying target assets, the availability of opportunities falling within our asset acquisition strategy and the performance of those underlying assets.

Our leases and charters require payments in U.S. dollars, but many of our customers operate in other currencies; if foreign currencies devalue against the U.S. dollar, our lessees or charterers may be unable to meet their payment obligations to us in a timely manner.

Our current leases and charters require that payments be made in U.S. dollars. If the currency that our lessees or charterers typically use in operating their businesses devalues against the U.S. dollar, our lessees or charterers could encounter difficulties in making payments to us in U.S. dollars. Furthermore, many foreign countries have currency and exchange laws regulating international payments that may impede or prevent payments from being paid to us in U.S. dollars. Future leases or charters may provide for payments to be made in euros or other foreign currencies. Any change in the currency exchange rate that reduces the amount of U.S. dollars obtained by us upon conversion of future lease payments denominated in euros or other foreign currencies, may, if not appropriately hedged by us, have a material adverse effect on us and increase the volatility of our earnings.

Our inability to obtain sufficient capital would constrain our ability to grow our portfolio and to increase our revenues.

Our business is capital intensive, and we have used and may continue to employ leverage to finance our operations. Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on the availability and cost of debt and equity capital. Additionally, our ability to borrow against our assets is dependent, in part, on the appraised value of such assets. If the appraised value of such assets declines, we may be required to reduce the principal outstanding under our debt facilities or otherwise be unable to incur new borrowings.

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We can give no assurance that the capital we need will be available to us on favorable terms, or at all. Our inability to obtain sufficient capital, or to renew or expand our credit facilities, could result in increased funding costs and would limit our ability to:

meet the terms and maturities of our existing and future debt facilities;

purchase new assets or refinance existing assets;

fund our working capital needs and maintain adequate liquidity; and

finance other growth initiatives.

In addition, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act of 1940 (the “Investment Company Act”). As such, certain forms of financing such as finance leases may not be available to us. Please see “- If we are deemed an investment company under the Investment Company Act, it could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.”

~~We may not generate a sufficient amount of cash or generate sufficient free cash flow to fund our operations or repay our indebtedness.~~

The effects of various environmental regulations may negatively affect the industries in which we operate which could have a material adverse effect on our financial condition, results of operations and cash flows.

We are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants to air and water, the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites and noise and emission levels. Under some environmental laws in the United States and certain other countries, strict liability may be imposed on the owners or operators of assets, which could render us liable for environmental and natural resource damages without regard to negligence or fault on our part. We could incur substantial costs, including cleanup costs, fines and third-party claims for property or natural resource damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our or our lessee’s or charterer’s current or historical operations, any of which could have a material adverse effect on our results of operations and financial condition. While we typically maintain liability insurance coverage and typically require our lessees to provide us with indemnity against certain losses, the insurance coverage is subject to large deductibles, limits on maximum coverage and significant exclusions and may not be sufficient or available to protect against any or all liabilities and such indemnities may not cover or be sufficient to protect us against losses arising from environmental damage. In addition, changes to environmental standards or regulations in the industries in which we operate could limit the economic life of the assets we acquire or reduce their value, and also require us to make significant additional investments in order to maintain compliance, which would negatively impact our cash flows and results of operations.

Our Repauno site and Long Ridge property are subject to environmental laws and regulations that may expose us to significant costs and liabilities.

Our Repauno site is subject to ongoing environmental investigation and remediation by the former owner of the property related to historic industrial operations. The former owner is responsible for completion of this work, and we benefit from a related indemnity and insurance policy. If the former owner fails to fulfill its investigation and remediation, or indemnity obligations and the related insurance, which are subject to limits and conditions, fail to cover our costs, we could incur losses. Redevelopment of the property in those areas undergoing investigation and remediation must await state environmental agency confirmation that no further investigation or remediation is required before redevelopment activities can occur in such areas of the property. Therefore, any delay in the former owner’s completion of the environmental work or receipt of related approvals in an area of the property could delay our redevelopment activities. In addition, once received, permits and approvals may be subject to litigation, and projects may be delayed or approvals reversed or modified in litigation. If there is a delay in obtaining any required regulatory approval, it could delay projects and cause us to incur costs.

In connection with our acquisition of Long Ridge, the former owner of the property is obligated to perform certain post-closing demolition activities, remove specified containers, equipment and structures and conduct investigation, removal, cleanup and decontamination related thereto. In addition, the former owner is responsible for ongoing environmental remediation related to historic industrial operations on and off Long Ridge. Pursuant to an order issued by the Ohio Environmental Protection Agency (“Ohio EPA”), the former owner is responsible for completing the removal and off-site disposal of electrolytic pots associated with the former use of Long Ridge as an aluminum reduction plant. In addition, Long Ridge is located adjacent to the former Ormet Corporation Superfund site (the “Ormet site”), which is owned and operated by the former owner of Long Ridge. Pursuant to an order with the United States Environmental Protection Agency (“USU.S. EPA”), the former owner is obligated to pump groundwater that has been impacted by the adjacent Ormet site beneath our site and discharge it to the Ohio River and monitor the groundwater annually. Long Ridge is also subject to an environmental covenant related to the adjacent Ormet site that, inter alia, restricts the use of groundwater beneath our site and requires USU.S. EPA consent for activities on Long Ridge that could disrupt the groundwater monitoring or pumping. The former owner is contractually obligated to complete its regulatory obligations on Long Ridge and we benefit from a related indemnity and insurance policy. If the former owner fails to fulfill its demolition, removal, investigation, remediation, monitoring, or indemnity obligations, and if the related insurance, which is subject to limits and conditions, fails to cover our costs, we could incur losses. Redevelopment of the property in those areas undergoing investigation and remediation pursuant to the Ohio EPA order must await state environmental agency confirmation that no further investigation or remediation is required before redevelopment activities can occur in such area of the property. Therefore, any delay in the former owner’s completion of the environmental work or receipt of related approvals or consents from Ohio EPA or USU.S. EPA could delay our redevelopment activities.

In addition, a portion of Long Ridge is proposed for redevelopment as a combined cycle gas-fired electric generating facility. Although environmental investigations in that portion of the property have not identified material impacts to soils or groundwater that reasonably would be expected to prevent or delay redevelopment, impacted materials could be encountered during construction that require special handling and/or result in delays to the project. In addition, the construction of an electric generating plant will require environmental permits and approvals from federal, state and local environmental agencies. Once received, permits and approvals may be subject to litigation, and projects may be delayed or approvals reversed or modified in litigation. If there is a delay in obtaining any required regulatory approval, it could delay projects and cause us to incur costs.

Moreover, new, stricter environmental laws, regulations or enforcement policies, including those imposed in response to climate change, could be implemented that significantly increase our compliance costs, or require us to adopt more costly methods of operation. If we are not able to transform Repauno or Long Ridge into hubs for industrial and energy development in a timely manner, their future prospects could be materially and adversely affected, which may have a material adverse effect on our business, operating results and financial condition.

On July 6, 2013, prior to our ownership, a train carrying crude oil on the MM&A line derailed near Lac-Mégantic, Quebec which resulted in fires that claimed the lives of 47 individuals (the “Incident”). Approximately two million gallons of crude oil were either burned or released into the environment, including into the nearby Chaudière River. Prior to our acquisition of the MM&A assets in May and June 2014, we received written assurance from the Quebec Ministry of Sustainable Development, Environment, Wildlife and Parks that it would take full responsibility for the environmental clean-up and that it would not hold CMQR liable for any environmental damages or costs relating to clean-up or restoration of the affected area as a result of the Incident. While we do not anticipate any liability relating to the Incident, including liability for claims alleging personal injury, property damage or natural resource damages, there can be no assurance that such claims relating to the Incident will not arise in the future. No claims have been made or threatened against us as of June 30, 2019 and we do not anticipate any expenditures relating to environmental clean-up (including impacts to the Chaudière River) as a result of the Incident.

If we are deemed an “investment company” under the Investment Company Act, it could have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

We conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the Investment Company Act. Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company for certain privately-offered investment vehicles set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We are a holding company that is not an investment company because we are engaged in the business of holding securities of our wholly-owned and majority-owned subsidiaries, which are engaged in transportation and related businesses which lease assets pursuant to operating leases and finance leases. The Investment Company Act may limit our and our subsidiaries’ ability to enter into financing leases and engage in other types of financial activity because less than 40% of the value of our and our subsidiaries’ total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis can consist of “investment securities.”

If we or any of our subsidiaries were required to register as an investment company under the Investment Company Act, the registered entity would become subject to substantial regulation that would significantly change our operations, and we would not be able to conduct our business as described in this report. We have not obtained a formal determination from the SEC as to our status under the Investment Company Act and, consequently, any violation of the Investment Company Act would subject us to material adverse consequences.

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Risks Related to Our Manager

We are dependent on our Manager and other key personnel at Fortress and may not find suitable replacements if our Manager terminates the Management Agreement or if other key personnel depart.

Our officers and other individuals who perform services for us (other than Jefferson, CMQR, Repauno and ~~CMQR~~Long Ridge employees) are employees of our Manager or other Fortress entities. We are completely reliant on our Manager, which has significant discretion as to the implementation of our operating policies and strategies, to conduct our business. We are subject to the risk that our Manager will terminate the Management Agreement and that we will not be able to find a suitable replacement for our Manager in a timely manner, at a reasonable cost, or at all. Furthermore, we are dependent on the services of certain key employees of our Manager and certain key employees of Fortress entities whose compensation is partially or entirely dependent upon the amount of management fees earned by our Manager or the incentive allocations distributed to the General Partner and whose continued service is not guaranteed, and the loss of such personnel or services could materially adversely affect our operations. We do not have key man insurance for any of the personnel of the Manager or other Fortress entities that are key to us. An inability to find a suitable replacement for any departing employee of our Manager or Fortress entities on a timely basis could materially adversely affect our ability to operate and grow our business.

In addition, our Manager may assign our Management Agreement to an entity whose business and operations are managed or supervised by Mr. Wesley R. Edens, who is a principal, Co-Chief Executive Officer and a member of the board of directors of Fortress, an affiliate of our Manager, and a member of the management committee of Fortress since co-founding Fortress in May 1998. In the event of any such assignment to a non-affiliate of Fortress, the functions currently performed by our Manager’s current personnel may be performed by others. We can give you no assurance that such personnel would manage our operations in the same manner as our Manager currently does, and the failure by the personnel of any such entity to acquire assets generating attractive risk-adjusted returns could have a material adverse effect on our business, financial condition, results of operations and cash flows.

On December 27, 2017, SoftBank announced that it completed the SoftBank Merger. In connection with the SoftBank Merger, Fortress operates within SoftBank as an independent business headquartered in New York. There can be no assurance that the SoftBank Merger will not have an impact on us or our relationship with the Manager.

There are conflicts of interest in our relationship with our Manager.

Our Management Agreement, the Partnership Agreement and our operating agreement were negotiated prior to our IPO and among affiliated parties, and their terms, including fees payable, may not be as favorable to us as if they had been negotiated after our IPO with an unaffiliated third-party.

There are conflicts of interest inherent in our relationship with our Manager insofar as our Manager and its affiliates - including investment funds, private investment funds, or businesses managed by our Manager, including Seacastle Ships Holdings Inc., Trac Intermodal and Florida East Coast Industries - invest in transportation and transportation-related infrastructure assets and whose investment objectives overlap with our asset acquisition objectives. Certain opportunities appropriate for us may also be appropriate for one or more of these other investment vehicles. Certain members of our board of directors and employees of our Manager who are our officers also serve as officers and/or directors of these other entities. For example, we have some of the same directors and officers as Seacastle Ships Holdings Inc. and Trac Intermodal. Although we have the same Manager, we may compete with entities affiliated with our Manager or Fortress, including Seacastle Ships Holdings Inc. and Trac Intermodal, for certain target assets. From time to time, affiliates of Fortress focus on investments in assets with a similar profile as our target assets that we may seek to acquire. These affiliates may have meaningful purchasing capacity, which may change over time depending upon a variety of factors, including, but not limited to, available equity capital and debt financing, market conditions and cash on hand. Fortress has multiple existing and planned funds focused on investing in one or more of our target sectors, each with significant current or expected capital commitments. We may co-invest with these funds in transportation and transportation-related infrastructure assets. Fortress funds generally have a fee structure similar to ours, but the fees actually paid will vary depending on the size, terms and performance of each fund.

Our Management Agreement generally does not limit or restrict our Manager or its affiliates from engaging in any business or managing other pooled investment vehicles that invest in assets that meet our asset acquisition objectives. Our Manager intends to engage in additional transportation and infrastructure related management and other investment opportunities in the future, which may compete with us for investments or result in a change in our current investment strategy. In addition, our operating agreement provides that if Fortress or an affiliate or any of their officers, directors or employees acquire knowledge of a potential transaction that could be a corporate opportunity, they have no duty, to the fullest extent permitted by law, to offer such corporate opportunity to us, our shareholders or our affiliates. In the event that any of our directors and officers who is also a director, officer or employee of Fortress or its affiliates acquires knowledge of a corporate opportunity or is offered a corporate opportunity, provided that this knowledge was not acquired solely in such person’s capacity as a director or officer of FTAI and such person acts in good faith, then to the fullest extent permitted by law such person is deemed to have fully satisfied such person’s fiduciary duties owed to us and is not liable to us if Fortress or its affiliates pursues or acquires the corporate opportunity or if such person did not present the corporate opportunity to us.

The ability of our Manager and its officers and employees to engage in other business activities, subject to the terms of our Management Agreement, may reduce the amount of time our Manager, its officers or other employees spend managing us. In addition, we may engage (subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates, including Seacastle Ships Holdings Inc., Trac Intermodal and Florida East Coast Industries, which may include, but are not limited to, certain acquisitions, financing arrangements, purchases of debt, co-investments, consumer loans, servicing advances and other assets that present an actual, potential or perceived conflict of interest. Our board of directors adopted a policy regarding the approval of any “related person transactions” pursuant to which certain of the material transactions described above may require disclosure to, and approval by, the independent members of our board of directors. Actual, potential or perceived conflicts have given, and may in the future give, rise to investor dissatisfaction, litigation or regulatory inquiries or enforcement actions. Appropriately dealing with conflicts of interest is complex and difficult, and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential, actual or perceived conflicts of interest. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverse effect on our reputation, which could materially adversely affect our business in a number of ways, including causing an inability to raise additional funds, a reluctance of counterparties to do business with us, a decrease in the prices of our equity securities and a resulting increased risk of litigation and regulatory enforcement actions.

The structure of our Manager’s and the General Partner’s compensation arrangements may have unintended consequences for us. We have agreed to pay our Manager a management fee and the General Partner is entitled to receive incentive allocations from Holdco that are each based on different measures of performance. Consequently, there may be conflicts in the incentives of our Manager to generate attractive risk-adjusted returns for us. In addition, because the General Partner and our Manager are both affiliates of Fortress, the Income Incentive Allocation paid to the General Partner may cause our Manager to place undue emphasis on the maximization of earnings, including through the use of leverage, at the expense of other objectives, such as preservation of capital, to achieve higher incentive allocations. Investments with higher yield potential are generally riskier or more speculative than investments with lower yield potential. This could result in increased risk to the value of our portfolio of assets and our common shares.

Our directors have approved a broad asset acquisition strategy for our Manager and do not approve each acquisition we make at the direction of our Manager. In addition, we may change our strategy without a shareholder vote, which may result in our acquiring assets that are different, riskier or less profitable than our current assets.

Our Manager is authorized to follow a broad asset acquisition strategy. We may pursue other types of acquisitions as market conditions evolve. Our Manager makes decisions about our investments in accordance with broad investment guidelines adopted by our board of directors. Accordingly, we may, without a shareholder vote, change our target sectors and acquire a variety of assets that differ from, and are possibly riskier than, our current asset portfolio. Consequently, our Manager has great latitude in determining the types and categories of assets it may decide are proper investments for us, including the latitude to invest in types and categories of assets that may differ from those in our existing portfolio. Our directors will periodically review our strategy and our portfolio of assets. However, our board does not review or pre-approve each proposed acquisition or our related financing arrangements. In addition, in conducting periodic reviews, the directors rely primarily on information provided to them by our Manager. Furthermore, transactions entered into by our Manager may be difficult or impossible to reverse by the time they are reviewed by the directors even if the transactions contravene the terms of the Management Agreement. In addition, we may change our asset acquisition strategy, including our target asset classes, without a shareholder vote.

Our asset acquisition strategy may evolve in light of existing market conditions and investment opportunities, and this evolution may involve additional risks depending upon the nature of the assets we target and our ability to finance such assets on a short or long-term basis. Opportunities that present unattractive risk-return profiles relative to other available opportunities under particular market conditions may become relatively attractive under changed market conditions and changes in market conditions may therefore result in changes in the assets we target. Decisions to make acquisitions in new asset categories present risks that may be difficult for us to adequately assess and could therefore reduce or eliminate our ability to pay dividends on our common shares or have adverse effects on our liquidity or financial condition. A change in our asset acquisition strategy may also increase our exposure to interest rate, foreign currency or credit market fluctuations. In addition, a change in our asset acquisition strategy may increase our use of non-match-funded financing, increase the guarantee obligations we agree to incur or increase the number of transactions we enter into with affiliates. Our failure to accurately assess the risks inherent in new asset categories or the financing risks associated with such assets could adversely affect our results of operations and our financial condition.

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Our Manager will not be liable to us for any acts or omissions performed in accordance with the Management Agreement, including with respect to the performance of our assets.

Pursuant to our Management Agreement, our Manager will not assume any responsibility other than to render the services called for thereunder in good faith and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Our Manager, its members, managers, officers, employees, sub-advisers and any other person controlling or Manager, will not be liable to us or any of our subsidiaries, to our board of directors, or our or any subsidiary’s shareholders or partners for any acts or omissions by our Manager, its members, managers, officers, employees, sub-advisers and any other person controlling or Manager, except liability to us, our shareholders, directors, officers and employees and persons controlling us, by reason of acts constituting bad faith, willful misconduct, gross negligence or reckless disregard of our Manager’s duties under our Management Agreement. We will, to the full extent lawful, reimburse, indemnify and hold our Manager, its members, managers, officers and employees, sub-advisers and each other person, if any, controlling our Manager harmless of and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever (including attorneys’ fees) in respect of or arising from any acts or omissions of an indemnified party made in good faith in the performance of our Manager’s duties under our Management Agreement and not constituting such indemnified party’s bad faith, willful misconduct, gross negligence or reckless disregard of our Manager’s duties under our Management Agreement.

Our Manager’s due diligence of potential asset acquisitions or other transactions may not identify all pertinent risks, which could materially affect our business, financial condition, liquidity and results of operations.

Our Manager intends to conduct due diligence with respect to each asset acquisition opportunity or other transaction it pursues. It is possible, however, that our Manager’s due diligence processes will not uncover all relevant facts, particularly with respect to any assets we acquire from third parties. In these cases, our Manager may be given limited access to information about the asset and will rely on information provided by the seller of the asset. In addition, if asset acquisition opportunities are scarce, the process for selecting bidders is competitive, or the timeframe in which we are required to complete diligence is short, our ability to conduct a due diligence investigation may be limited, and we would be required to make decisions based upon a less thorough diligence process than would otherwise be the case. Accordingly, transactions that initially appear to be viable may prove not to be over time, due to the limitations of the due diligence process or other factors.

Risks Related to Taxation

Shareholders may be subject to U.S. federal income tax on their share of our taxable income, regardless of whether they receive any cash dividends from us.

So long as we would not be required to register as an investment company under the Investment Company Act of 1940 if we were a U.S. Corporation and 90% of our gross income for each taxable year constitutes “qualifying income” within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), on a continuing basis, FTAI will be treated, for U.S. federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation. Shareholders may be subject to U.S. federal, state, local and possibly, in some cases, non-U.S. income taxation on their allocable share of our items of income, gain, loss, deduction and credit (including our allocable share of those items of Holdco or any other entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis) for each of our taxable years ending with or within their taxable year, regardless of whether they receive cash dividends from us. Shareholders may not receive cash dividends equal to their allocable share of our net taxable income or even the tax liability that results from that income.

In addition, certain of our holdings, including holdings, if any, in a ~~Controlled Foreign Corporation (“CFC”~~controlled foreign corporation (as defined in the Code) (a “CFC”) may produce taxable income prior to our receipt of cash relating to such income, and shareholders subject to U.S. federal income tax will be required to take such income into account in determining their taxable income.

~~New~~ U.S. tax ~~legislation~~reform could adversely affect us and our shareholders.

On December 22, 2017, legislation referred to as the “Tax Cuts and Jobs Act” (the “TCJA”) was signed into law. The TCJA is generally effective for taxable years beginning after December 31, 2017. The TCJA includes significant amendments to the Code, including amendments that significantly change the taxation of individuals and business entities, including the taxation of offshore earnings and the deductibility of interest. Some of the amendments could adversely affect our business and financial condition and the value of our common shares.

~~Although we are currently evaluating~~ In some cases, there is uncertainty around the ~~impact~~scope and application of the ~~TCJA on our business, significant uncertainty exists with respect to how~~new legislation that may be addressed in future guidance issued by the ~~TCJA will affect our business. Some~~U.S. Department of ~~this uncertainty will not be resolved until clarifying~~ Treasury ~~regulations are promulgated or other relevant authoritative guidance is published.~~and the IRS.

Prospective investors should consult their tax advisors about the TCJA and its potential impact before investing in our common shares.

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Under the TCJA, shareholders that are Non-U.S. Holders (defined below) could be subject to U.S. federal income tax, including a 10% withholding tax, on the disposition of our common shares.

If the Internal Revenue Service (the “IRS”) were to determine that we, Holdco, or any other entity in which we invest that is subject to tax on a flow-through basis, is engaged in a U.S. trade or business for U.S. federal income tax purposes, any gain recognized by a foreign transferor on the sale, exchange or other disposition of our common shares would generally be treated as “effectively connected” with such trade or business to the extent it does not exceed the effectively connected gain that would be allocable to the transferor if we sold all of our assets at their fair market value as of the date of the transferor’s disposition. Under the TCJA, any such gain that is treated as effectively connected will generally be subject to U.S. federal income tax. In addition, the transferee of the common shares or the applicable withholding agent would be required to deduct and withhold a tax equal to 10% of the amount realized by the transferor on the disposition, which would include an allocable portion of our liabilities and would therefore generally exceed the amount of transferred cash received by transferor in the disposition, unless the transferor provides an IRS Form W-9 or an affidavit stating the transferor’s taxpayer identification number and that the transferor is not a foreign person. If the transferee fails to properly withhold such tax, we would be required to deduct and withhold from distributions to the transferee a tax in an amount equal to the amount the transferee failed to withhold, plus interest. Although we do not believe that we are currently directly engaged in a U.S. trade or business, we are not required to manage our operations in a manner that is intended to avoid the conduct of a U.S. trade or business.

The withholding requirements with respect to the disposition of an interest in a publicly traded partnership are currently suspended and will remain suspended until Treasury regulations are promulgated or other relevant authoritative guidance is issued. Future guidance on the implementation of these requirements will be applicable on a prospective basis.

Tax gain or loss on a sale or other disposition of our common shares could be more or less than expected.

If a sale of our common shares by a shareholder is taxable in the United States, the shareholder will recognize gain or loss equal to the difference between the amount realized by such shareholder in the sale and such shareholder’s adjusted tax basis in those shares. A shareholder’s adjusted tax basis in the shares at the time of sale will generally be lower than the shareholder’s original tax basis in the shares to the extent that prior distributions to such shareholder exceed the total taxable income allocated to such shareholder. A shareholder may therefore recognize a gain in a sale of our common shares if the shares are sold at a price that is less than their original cost. A portion of the amount realized, whether or not representing gain, may be treated as ordinary income to such shareholder.

Our ability to make distributions depends on our receiving sufficient cash distributions from our subsidiaries, and we cannot assure our shareholders that we will be able to make cash distributions to them in amounts that are sufficient to fund their tax liabilities.

Our subsidiaries may be subject to local taxes in each of the relevant territories and jurisdictions in which they operate, including taxes on income, profits or gains and withholding taxes. As a result, our funds available for distribution are indirectly reduced by such taxes, and the post-tax return to our shareholders is similarly reduced by such taxes.

In general, a shareholder that is subject to U.S. federal income tax must include in income its allocable share of FTAI’s items of income, gain, loss, deduction, and credit (including, so long as FTAI is treated as a partnership for U.S. federal income tax purposes, FTAI’s allocable share of those items of Holdco and any pass-through subsidiaries of Holdco) for each of our taxable years ending with or within such shareholder’s taxable year. However, the cash distributed to a shareholder may not be sufficient to pay the full amount of such shareholder’s tax liability in respect of its investment in us, because each shareholder’s tax liability depends on such shareholder’s particular tax situation and the tax treatment of our underlying activities or assets.

If we are treated as a corporation for U.S. federal income tax purposes, the value of the shares could be adversely affected.

We have not requested, and do not plan to request, a ruling from the IRS on our treatment as a partnership for U.S. federal income tax purposes, or on any other matter affecting us. As of the date of the consummation of our initial public offering, under then current law and assuming full compliance with the terms of our operating agreement (and other relevant documents) and based upon factual statements and representations made by us, our outside counsel opined that we will be treated as a partnership, and not as an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. However, opinions of counsel are not binding upon the IRS or any court, and the IRS may challenge this conclusion and a court may sustain such a challenge. The factual representations made by us upon which our outside counsel relied relate to our organization, operation, assets, activities, income, and present and future conduct of our operations. In general, if an entity that would otherwise be classified as a partnership for U.S. federal income tax purposes is a “publicly traded partnership” (as defined in the Code) it will be nonetheless treated as a corporation for U.S. federal income tax purposes, unless the exception described below, and upon which we intend to rely, applies. A publicly traded partnership will, however, be treated as a partnership, and not as a corporation for U.S. federal income tax purposes, so long as 90% or more of its gross income for each taxable year constitutes “qualifying income” within the meaning of the Code and it is not required to register as an investment company under the Investment Company Act of 1940. We refer to this exception as the “Qualifying Income Exception.”

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Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities and certain other forms of investment income. A substantial portion of our income consists of “Subpart F” income (which includes rent and other types of passive income) derived from CFCs. While we believe that such income constitutes qualifying income, no assurance can be given that the IRS will agree with such position. We also believe that our return from investments will include interest, dividends, capital gains and other types of qualifying income, but no assurance can be given as to the types of income that will be earned in any given year.

If we fail to satisfy the Qualifying Income Exception, we would be required to pay U.S. federal income tax at regular corporate rates on our income. Although the TCJA reduced regular corporate rates from 35% to 21%, our failure to qualify as a partnership for U.S. federal income tax purposes could nevertheless adversely affect our business, operating results and financial condition. In addition, we would likely be liable for state and local income and/or franchise taxes on our income. Finally, distributions of cash to shareholders would constitute qualified dividend income taxable to such shareholders to the extent of our earnings and profits and would not be deductible by us. Taxation of us as a publicly traded partnership taxable as a corporation could result in a material adverse effect on our cash flow and the after-tax returns for shareholders and thus could result in a substantial reduction in the value of our common shares.

Shareholders that are not U.S. persons should also anticipate being required to file U.S. tax returns and may be required to pay U.S. tax solely on account of owning our common shares.

In light of our intended investment activities, we may be, or may become, engaged in a U.S. trade or business for U.S. federal income tax purposes, in which case some portion of our income would be treated as effectively connected income with respect to non-U.S. persons. Moreover, we anticipate that, in the future, we will sell interests in U.S. real holding property corporations (each a “USRPHC”) and therefore be deemed to be engaged in a U.S. trade or business at such time. If we were to realize gain from the sale or other disposition of a U.S. real property interest (including a USRPHC) or were otherwise engaged in a U.S. trade or business, non-U.S. persons generally would be required to file U.S. federal income tax returns and would be subject to U.S. federal withholding tax on their allocable share of the effectively connected income on gain at the highest marginal U.S. federal income tax rates applicable to ordinary income. Non-U.S. persons that are corporations may also be subject to a branch profits tax on their allocable share of such income. Non-U.S. persons should anticipate being required to file U.S. tax returns and may be required to pay U.S. tax solely on account of owning our common shares.

Non-U.S. persons that hold (or are deemed to hold) more than 5% of our common shares (or held, or were deemed to hold, more than 5% of our common shares) may be subject to U.S. federal income tax upon the disposition of some or all their common shares.

If a non-U.S. person held more than 5% of our common shares at any time during the 5-year period preceding such non-U.S. person’s disposition of our common shares, and we were considered a USRPHC (determined as if we were a U.S. corporation) at any time during such 5-year period because of our current or previous ownership of U.S. real property interests above a certain threshold, such non-U.S. person may be subject to U.S. tax on such disposition of our common shares (and may have a U.S. tax return filing obligation).

Tax-exempt shareholders may face certain adverse U.S. tax consequences from owning our common shares.

We are not required to manage our operations in a manner that would minimize the likelihood of generating income that would constitute “unrelated business taxable income” (“UBTI”) to the extent allocated to a tax-exempt shareholder. Although we expect to invest through subsidiaries that are treated as corporations for U.S. federal income tax purposes and such corporate investments would generally not result in an allocation of UBTI to a shareholder on account of the activities of those subsidiaries, we may not invest through corporate subsidiaries in all cases. Moreover, UBTI also includes income attributable to debt-financed property and we are not prohibited from incurring debt to finance our investments, including investments in subsidiaries. Furthermore, we are not prohibited from being (or causing a subsidiary to be) a guarantor of loans made to a subsidiary. If we (or certain of our subsidiaries) were treated as the borrower for U.S. tax purposes on account of those guarantees, some or all of our investments could be considered debt-financed property. The potential for income to be characterized as UBTI could make our common shares an unsuitable investment for a tax-exempt entity. Tax-exempt shareholders are urged to consult their tax advisors regarding the tax consequences of an investment in common shares.

We may hold or acquire certain investments through an entity classified as a CFC for U.S. federal income tax purposes.

Many of our investments are in non-U.S. corporations or are held through a non-U.S. subsidiary that is classified as a corporation for U.S. federal income tax purposes. Many of these entities are CFCs for U.S. federal income tax purposes. U.S. Holders indirectly owning an interest in a CFC may experience adverse U.S. tax consequences.

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If substantially all of the U.S. source rental income derived from aircraft or ships used to transport passengers or cargo in international traffic (“U.S. source international transport rental income”) of any of our non-U.S. corporate subsidiaries is attributable to activities of personnel based in the United States, such subsidiary could be subject to U.S. federal income tax on a net income basis at regular tax rates, rather than at a rate of 4% on gross income, which would adversely affect our business and result in decreased funds available for distribution to our shareholders.

We believe that the U.S. source international transport rental income of our non-U.S. subsidiaries generally will be subject to U.S. federal income tax, on a gross-income basis at a rate not in excess of 4%. If any of our non-U.S. subsidiaries that is treated as a corporation for U.S. federal income tax purposes did not comply with certain administrative guidelines of the IRS, such that 90% or more of such subsidiary’s U.S. source international transport rental income were attributable to the activities of personnel based in the United States (in the case of bareboat leases) or from “regularly scheduled transportation” as defined in such administrative guidelines (in the case of time-charter leases), such subsidiary’s U.S. source rental income would be treated as income effectively connected with a trade or business in the United States. In such case, such subsidiary’s U.S. source international transport rental income would be subject to U.S. federal income tax at a maximum rate of 21% for taxable years beginning after December 31, 2017. In addition, such subsidiary would be subject to the U.S. federal branch profits tax on its effectively connected earnings and profits at a rate of 30%. The imposition of such taxes would adversely affect our business and would result in decreased funds available for distribution to our shareholders.

The ability of our corporate subsidiaries to utilize net operating losses ("NOLs") to offset their future taxable income may become limited.

Certain of our corporate subsidiaries have significant NOLs, and any limitation on their use could materially affect our profitability. Such a limitation could occur if our corporate subsidiaries were to experience an "ownership change" as defined under Section 382 of the Code. The rules for determining ownership changes are complex, and changes in the ownership of our common shares could cause an ownership change in one or more of our corporate subsidiaries. Sales of our common shares by our shareholders, as well as future issuances of our common shares, could contribute to a potential ownership change in our corporate subsidiaries.

Our subsidiaries may become subject to unanticipated tax liabilities that may have a material adverse effect on our results of operations.

Some of our subsidiaries are subject to income, withholding or other taxes in certain non-U.S. jurisdictions by reason of their jurisdiction of incorporation, activities and operations, where their assets are used or where the lessees of their assets (or others in possession of their assets) are located, and it is also possible that taxing authorities in any such jurisdictions could assert that our subsidiaries are subject to greater taxation than we currently anticipate. ~~For~~Further, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting ("BEPS") recently entered into force among the jurisdictions that ratified it. The implementation of BEPS prevention measures could result in a higher effective tax rate on our worldwide earnings by, for example, reducing the tax deductions or otherwise increasing the taxable income of our subsidiaries. In addition, a portion of certain of our non-U.S. corporate subsidiaries’ income is treated as effectively connected with a U.S. trade or business and is accordingly subject to U.S. federal income tax. It is possible that the IRS could assert that a greater portion of any such non-U.S. subsidiaries’ income is effectively connected income that should be subject to U.S. federal income tax.

Our structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. Our structure also is subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.

The U.S. federal income tax treatment of our shareholders depends in some instances on determinations of fact and interpretations of complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. The U.S. federal income tax treatment of our common shareholders may also be modified by administrative, legislative or judicial interpretation at any time, possibly on a retroactive basis, and any such action may affect our investments and commitments that were previously made, and could adversely affect the value of our shares or cause us to change the way we conduct our business.

Our organizational documents and agreements permit the board of directors to modify our operating agreement from time to time, without the consent of shareholders, in order to address certain changes in Treasury regulations, legislation or interpretation. In some circumstances, such revisions could have a material adverse impact on some or all shareholders. Moreover, we will apply certain assumptions and conventions in an attempt to comply with applicable rules and to report income, gain, deduction, loss and credit to shareholders in a manner that reflects such shareholders’ beneficial ownership of partnership items, taking into account variation in ownership interests during each taxable year because of trading activity. However, these assumptions and conventions may not be in compliance with all aspects of applicable tax requirements. It is possible that the IRS will assert successfully that the conventions and assumptions used by us do not satisfy the technical requirements of the Code and/or Treasury regulations and could require that items of income, gain, deduction, loss or credit, including interest deductions, be adjusted, reallocated, or disallowed, in a manner that adversely affects shareholders.

We could incur a significant tax liability if the IRS successfully asserts that the “anti-stapling” rules apply to our investments in our non-U.S. and U.S. subsidiaries, which would adversely affect our business and result in decreased funds available for distribution to our shareholders.

If we were subject to the “anti-stapling” rules of Section 269B of the Code, we would incur a significant tax liability as a result of owning more than 50% of the value of both U.S. and non-U.S. corporate subsidiaries, whose equity interests constitute “stapled interests” that may only be transferred together. If the “anti-stapling” rules applied, our non-U.S. corporate subsidiaries that are treated as corporations for U.S. federal income tax purposes would be treated as U.S. corporations, which would cause those entities to be subject to U.S. federal corporate income tax on their worldwide income. Because we intend to separately manage and operate our non-U.S. and U.S. corporate subsidiaries and structure their business activities in a manner that would allow us to dispose of such subsidiaries separately, we do not expect that the “anti-stapling” rules will apply. However, there can be no assurance that the IRS would not successfully assert a contrary position, which would adversely affect our business and result in decreased funds available for distribution to our shareholders.

Because we cannot match transferors and transferees of our shares, we have therefore adopted certain income tax accounting positions that may not conform with all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value of our shares.

Because we cannot match transferors and transferees of our shares, we have adopted depreciation, amortization and other tax accounting positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to our shareholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of our common shares and could have a negative impact on the value of our common shares or result in audits of and adjustments to our shareholders’ tax returns.

We generally allocate items of income, gain, loss and deduction using a monthly or other convention, whereby any such items we recognize in a given month are allocated to our shareholders as of a specified date of such month. As a result, if a shareholder transfers its common shares, it might be allocated income, gain, loss and deduction realized by us after the date of the transfer. Similarly, if a shareholder acquires additional common shares, it might be allocated income, gain, loss, and deduction realized by us prior to its ownership of such common shares. Consequently, our shareholders may recognize income in excess of cash distributions received from us, and any income so included by a shareholder would increase the basis such shareholder has in its common shares and would offset any gain (or increase the amount of loss) realized by such shareholder on a subsequent disposition of its common shares.

~~Recently enacted~~New legislation regarding U.S. federal income tax liability arising from IRS audits could adversely affect our shareholders.

For taxable years beginning on or after January 1, 2018, we will be liable for U.S. federal income tax liability arising from an IRS audit, unless certain alternative methods are available and we elect to use them. Under the new rules, it is possible that certain shareholders or we may be liable for taxes attributable to adjustments to our taxable income with respect to tax years that closed before such shareholders owned our shares. Accordingly, this new legislation may adversely affect certain shareholders in certain cases. This differs from the prior rules, which generally provided that tax adjustments only affect the persons who were shareholders in the tax year in which the item was reported on our tax return. The changes created by the new legislation are uncertain and in many respects depend on the promulgation of future regulations or other guidance by the U.S. Treasury Department or the IRS.

Risks Related to Our Common Shares

The market price and trading volume of our common shares may be volatile, which could result in rapid and substantial losses for our shareholders.

The market price of our common shares may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our common shares may fluctuate and cause significant price variations to occur. If the market price of our common shares declines significantly, you may be unable to resell your shares at or above your purchase price, if at all. The market price of our common shares may fluctuate or decline significantly in the future. Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our common shares include:

a shift in our investor base;

our quarterly or annual earnings, or those of other comparable companies;

actual or anticipated fluctuations in our operating results;

changes in accounting standards, policies, guidance, interpretations or principles;

announcements by us or our competitors of significant investments, acquisitions or dispositions;

the failure of securities analysts to cover our common shares;

changes in earnings estimates by securities analysts or our ability to meet those estimates;

the operating and share price performance of other comparable companies;

overall market fluctuations;

general economic conditions; and

developments in the markets and market sectors in which we participate.

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Stock markets in the United States have experienced extreme price and volume fluctuations. Market fluctuations, as well as general political and economic conditions, such as acts of terrorism, prolonged economic uncertainty, a recession or interest rate or currency rate fluctuations, could adversely affect the market price of our common shares.

We are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls, and the outcome of that effort may adversely affect our results of operations, financial condition and liquidity. Because we are no longer an emerging growth company, we are subject to heightened disclosure obligations, which may impact our share price.

As a public company, we are required to comply with Section 404 (“Section 404”) of the Sarbanes-Oxley Act. Section 404 requires that we evaluate the effectiveness of our internal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K for that fiscal year. Section 404 also requires an independent registered public accounting firm to attest to, and report on, management’s assessment of our internal controls over financial reporting. Because we ceased to be an emerging growth company at the end of 2017, we were required to have our independent registered public accounting firm attest to the effectiveness of our internal controls in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018, and will be required to do so going forward. The outcome of our review and the report of our independent registered public accounting firm may adversely affect our results of operations, financial condition and liquidity. During the course of our review, we may identify control deficiencies of varying degrees of severity, and we may incur significant costs to remediate those deficiencies or otherwise improve our internal controls. As a public company, we are required to report control deficiencies that constitute a “material weakness” in our internal control over financial reporting. If we discover a material weakness in our internal control over financial reporting, our share price could decline and our ability to raise capital could be impaired.

Furthermore, because we are no longer an emerging growth company, we can no longer take advantage of certain other exemptions from various SEC reporting requirements, including, but not limited to, exemptions from enhanced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the requirements of holding a non-binding advisory vote on executive compensation at our annual meeting and obtaining shareholder approval of any golden parachute payments not previously approved. Until we comply with these requirements in connection with our 2018 periodic reports, proxy statement and annual meeting of shareholders, our shareholders may not have access to certain information they deem important. Because we have previously taken advantage of each of these exemptions, we do not know if some investors will find our common shares less attractive as a result.

Your percentage ownership in us may be diluted in the future.

Your percentage ownership in FTAI may be diluted in the future because of equity awards granted and may be granted to our Manager pursuant to the Management Agreement and the Incentive Plan. ~~We recently~~In early 2018, we granted our Manager an option to acquire 700,000 common shares are part of the equity offering discussed in Note 15 ~~to this Quarterly~~in our Annual Report on Form ~~10Q.~~10-K. In the future, upon the successful completion of additional offerings of our common shares or other equity securities (including securities issued as consideration in an acquisition), we will grant to our Manager options to purchase common shares in an amount equal to 10% of the number of common shares being sold in such offerings (or if the issuance relates to equity securities other than our common shares, options to purchase a number of common shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a common share as of the date of the issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a common share as of the date of the equity issuance if it relates to equity securities other than our common shares), and any such offering or the exercise of the option in connection with such offering would cause dilution.

Our board of directors has adopted the Incentive Plan, which provides for the grant of equity-based awards, including restricted shares, stock options, stock appreciation rights, performance awards, restricted share units, tandem awards and other equity-based and non-equity based awards, in each case to our Manager, to the directors, officers, employees, service providers, consultants and advisors of our Manager who perform services for us, and to our directors, officers, employees, service providers, consultants and advisors. We have initially reserved 30,000,000 common shares for issuance under the Incentive Plan. As of June 30, ~~2018,~~2019, rights relating to ~~725,000~~851,642 of our common shares were outstanding under the Incentive Plan. In connection with an offering that closed on January 16, 2018, the number of shares reserved for issuance under the Incentive Plan will be increased in an amount equal to 700,000 common shares, which amount corresponds to the common shares subject to the option described above. In the future on the date of any equity issuance by us during the ten-year term of the Incentive Plan (including in respect of securities issued as consideration in an acquisition), the maximum number of shares available for issuance under the Plan will be increased to include an additional number of common shares equal to ten percent (10%) of either (i) the total number of common shares newly issued by us in such equity issuance or (ii) if such equity issuance relates to equity securities other than our common shares, a number of our common shares equal to 10% of (A) the gross capital raised in an equity issuance of equity securities other than common shares during the ten-year term of the Incentive Plan, divided by (B) the fair market value of a common share as of the date of such equity issuance.

Sales or issuances of our common shares could adversely affect the market price of our common shares.

Sales of substantial amounts of our common shares in the public market, or the perception that such sales might occur, could adversely affect the market price of our common shares. The issuance of our common shares in connection with property, portfolio or business acquisitions or the exercise of outstanding options or otherwise could also have an adverse effect on the market price of our common shares.

The incurrence or issuance of debt, which ranks senior to our common shares upon our liquidation, and future issuances of equity or equity-related securities, which would dilute the holdings of our existing common shareholders and may be senior to our common shares for the purposes of making distributions, periodically or upon liquidation, may negatively affect the market price of our common shares.

We have incurred and may in the future incur or issue debt or issue equity or equity-related securities to finance our operations, acquisitions or investments. Upon our liquidation, lenders and holders of our debt and holders of our preferred shares (if any) would receive a distribution of our available assets before common shareholders. Any future incurrence or issuance of debt would increase our interest cost and could adversely affect our results of operations and cash flows. We are not required to offer any additional equity securities to existing common shareholders on a preemptive basis. Therefore, additional issuances of common shares, directly or through convertible or exchangeable securities (including limited partnership interests in our operating partnership), warrants or options, will dilute the holdings of our existing common shareholders and such issuances, or the perception of such issuances, may reduce the market price of our common shares. Any preferred shares issued by us would likely have a preference on distribution payments, periodically or upon liquidation, which could eliminate or otherwise limit our ability to make distributions to common shareholders. Because our decision to incur or issue debt or issue equity or equity-related securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. Thus, common shareholders bear the risk that our future incurrence or issuance of debt or issuance of equity or equity-related securities will adversely affect the market price of our common shares.

Our determination of how much leverage to use to finance our acquisitions may adversely affect our return on our assets and may reduce funds available for distribution.

We utilize leverage to finance many of our asset acquisitions, which entitles certain lenders to cash flows prior to retaining a return on our assets. While our Manager targets using only what we believe to be reasonable leverage, our strategy does not limit the amount of leverage we may incur with respect to any specific asset. The return we are able to earn on our assets and funds available for distribution to our shareholders may be significantly reduced due to changes in market conditions, which may cause the cost of our financing to increase relative to the income that can be derived from our assets.

While we currently intend to pay regular quarterly dividends to our shareholders, we may change our dividend policy at any time.

Although we currently intend to pay regular quarterly dividends to holders of our common shares, we may change our dividend policy at any time. Our net cash provided by operating activities has been less than the amount of distributions to our shareholders. The declaration and payment of dividends to holders of our common shares will be at the discretion of our board of directors in accordance with applicable law after taking into account various factors, including actual results of operations, liquidity and financial condition, net cash provided by operating activities, restrictions imposed by applicable law, our taxable income, our operating expenses and other factors our board of directors deem relevant. Our long term goal is to maintain a payout ratio of between 50-60% of funds available for distribution, with remaining amounts used primarily to fund our future acquisitions and opportunities. There can be no assurance that we will continue to pay dividends in amounts or on a basis consistent with prior distributions to our investors, if at all. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries and our ability to receive distributions from our subsidiaries may be limited by the financing agreements to which they are subject. In addition, pursuant to the Partnership Agreement, the General Partner will be entitled to receive incentive allocations before any amounts are distributed by us based both on our consolidated net income and capital gains income in each fiscal quarter and for each fiscal year, respectively.

Anti-takeover provisions in our operating agreement and Delaware law could delay or prevent a change in control.

Provisions in our operating agreement may make it more difficult and expensive for a third party to acquire control of us even if a change of control would be beneficial to the interests of our shareholders. For example, our operating agreement provides for a staggered board, requires advance notice for proposals by shareholders and nominations, places limitations on convening shareholder meetings, and authorizes the issuance of preferred shares that could be issued by our board of directors to thwart a takeover attempt. In addition, certain provisions of Delaware law may delay or prevent a transaction that could cause a change in our control. The market price of our shares could be adversely affected to the extent that provisions of our operating agreement discourage potential takeover attempts that our shareholders may favor.

There are certain provisions in our operating agreement regarding exculpation and indemnification of our officers and directors that differ from the Delaware General Corporation Law (the “DGCL”) in a manner that may be less protective of the interests of our shareholders.

Our operating agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. Under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowing violations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividend, or (iv) a transaction from which the director derived an improper personal benefit. In addition, our operating agreement provides that we indemnify our directors and officers for acts or omissions to the fullest extent provided by law. Under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officer acted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director had no reasonable cause to believe his conduct was unlawful. Accordingly, our operating agreement may be less protective of the interests of our shareholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors.

As a public company, we will incur additional costs and face increased demands on our management.

As a relatively new public company with shares listed on the NYSE, we need to comply with an extensive body of regulations that did not apply to us previously, including certain provisions of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, regulations of the SEC and requirements of the NYSE. These rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, as a result of becoming a public company, we have independent directors and board committees. In addition, we may continue to incur additional costs associated with maintaining directors’ and officers’ liability insurance and with the termination of our status as an emerging growth company as of the end of 2017. Because we are no longer an emerging growth company, we are subject to the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and enhanced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We are currently evaluating and monitoring developments with respect to these rules, which may impose additional costs on us and have a material adverse effect on our business, prospects, financial condition, results of operations and cash flows.

If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common shares, our share price and trading volume could decline.

The trading market for our common shares are influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrades our common units or publishes inaccurate or unfavorable research about our business, our common share price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common share price or trading volume to decline and our common shares to be less liquid.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Appointment of Principal Accounting Officer~~

On August 2, 2018, our Board of Directors appointed Eun Nam, 36, as our Chief Accounting Officer, effective as of August 6, 2018. Ms. Nam serves as a Senior Vice President of the Private Equity group of the Manager, and has been involved in various mergers and acquisitions and capital markets transactions. Ms. Nam previously served as Interim Chief Accounting Officer of Drive Shack Inc., an entity that was then managed by the Manager, from March through September 2016. Prior to joining Fortress in 2014, Ms. Nam worked in KPMG LLP’s audit and risk advisory services for over ten years. Ms. Nam received a Bachelor of Business Administration in Finance and Accounting from Emory University, and is a certified public accountant in Georgia.

Our officers are appointed annually by the Board of Directors. There is no arrangement or understanding between Ms. Nam and any other person pursuant to which she was appointed as an officer of the Company. There are also no family relationships between Ms. Nam and any director or executive officer of the Company.

Our officers are not employees of ours and do not receive direct cash compensation for services rendered to us. Rather, they are employees of the Manager and are compensated by the Manager for their services to us as well as other entities affiliated with the Manager. The Manager has informed us that, because the services performed by certain individuals who serve as our officers are not performed exclusively for us, the Manager cannot segregate and identify that portion of compensation awarded to, earned by or paid to certain of our officers, including Ms. Nam, that relates solely to her services to us. Outside of the fees and compensation paid to the Manager by us, Ms. Nam does not have any direct or indirect material interests in any transaction with us or in any currently proposed transaction to which we are a party. Effective as of August 6, 2018, Mr. Scott Christopher will resign as our Chief Accounting Officer. Mr. Christopher will continue to serve as our Chief Financial Officer.

~~Director and Officer Indemnification Agreements~~

In connection with the appointment of Ms. Nam, we have entered into an indemnification agreement with her, effective as of August 6, 2018. Under the indemnification agreement with our directors and officers, we, subject to certain limitations, have agreed to indemnify our directors and officers against certain liabilities arising out of their service as a director or officer of the Company.

~~Amendment to the Revolving Credit Facility~~

~~On August 2, 2018, we entered into Amendment No. 1 (the “Amendment”) to the Revolving Credit Facility.~~

The Amendment, among other things, (i) increases the aggregate revolving commitments under the Revolving Credit Facility by $50,000,000 from $75,000,000 to $125,000,000 and (ii) extends the maturity date of the revolving loans and commitments under the Existing Credit Agreement by one year from June 16, 2020 to June 16, 2021.

The foregoing description of the Amendment does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Amendment, which is attached hereto as Exhibit 10.15 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.None.

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Item 6. Exhibits



	Exhibit No.	Description
	3.1	Certificate of Formation (incorporated by reference to Exhibit 3.1 of Amendment No. 4 to the Company's Registration Statement on Form S-1, filed on April 30, 2015).
	3.2	Amended and Restated Limited Liability Company Agreement of Fortress Transportation and Infrastructure Investors LLC (incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K, filed on May 21, 2015).
	3.3	First Amendment to Amended and Restated Limited Liability Company Agreement of Fortress Transportation and Infrastructure Investors LLC (incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).
	4.1	Indenture, dated March 15, 2017, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed on March 15, 2017).
	4.2	Form of global note representing the Company’s 6.75% senior unsecured notes due 2022 (included in Exhibit 4.1).
	4.3	First Supplemental Indenture, dated June 8, 2017, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.3 of the Company’s Annual Report on Form 10-K, filed on March 1, ~~2018.~~2018).
	4.4	Second Supplemental Indenture, dated August 23, 2017, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed on August 23, 2017).
	4.5	Third Supplemental Indenture, dated December 20, 2017, between Fortress Transportation and Infrastructure LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on December 20, 2017).
	4.6	Fourth Supplemental Indenture, dated May 31, 2018, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed May 31, 2018).
	~~10.1~~4.7	Fifth Supplemental Indenture, dated February 8, 2019, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.75% senior unsecured notes due 2022 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed February 8, 2019).
	4.8	Indenture, dated September 18, 2018, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.50% senior unsecured notes due 2025 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed on September 18, 2018).
	4.9	Form of global note representing the Company’s 6.50% senior unsecured notes due 2025 (included in Exhibit 4.8).
	4.10	First Supplemental Indenture, dated May 21, 2019, between Fortress Transportation and Infrastructure Investors LLC and U.S. Bank National Association, as trustee, relating to the Company’s 6.50% senior unsecured notes due 2025 (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K, filed on May 21, 2019).
	10.1	Fourth Amended and Restated Partnership Agreement of Fortress Worldwide Transportation and Infrastructure General Partnership (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed on May 21, 2015).
†	10.2	Management and Advisory Agreement, dated as of May 20, 2015, between Fortress Transportation and Infrastructure Investors LLC and FIG LLC (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K, filed on May 21, 2015).
†	10.3	Registration Rights Agreement, dated as of May 20, 2015, among Fortress Transportation and Infrastructure Investors LLC, FIG LLC and Fortress Transportation and Infrastructure Master GP LLC (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K, filed on May 21, 2015).
†	10.4	Fortress Transportation and Infrastructure Investors LLC Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K, filed on May 21, 2015).
	10.5	Form of director and officer indemnification agreement of Fortress Transportation and Infrastructure Investors LLC (incorporated by reference to Exhibit 10.5 of Amendment No. 4 to the Company's Registration Statement on Form S-1, filed April 30, 2015).
	10.6	Credit Agreement, dated as of August 27, 2014, among Morgan Stanley Senior Funding, Inc., as administrative agent, Jefferson Gulf Coast Energy Partners LLC and the other lenders party thereto (incorporated by reference to Exhibit 10.6 of Amendment No. 4 to the Company's Registration Statement on Form S-1, filed April 30, 2015).
	10.7	Trust Indenture and Security Agreement between the District and The Bank of New York Mellon Trust Company, National Association, dated as of February 1, 2016 (incorporated by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).
	10.8	Standby Bond Purchase Agreement among the Port of Beaumont Navigation District of Jefferson County, Texas, The Bank of New York Mellon Trust Company, National Association, Jefferson Railport Terminal II Holdings LLC and Jefferson Railport Terminal II LLC dated as of February 1, 2016 (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).
	10.9	Capital Call Agreement, by and among Fortress Transportation and Infrastructure Investors LLC, FTAI Energy Holdings LLC, FTAI Partner Holdings LLC, FTAI Midstream GP Holdings LLC, FTAI Midstream GP LLC, FTAI Midstream Holdings LLC, FTAI Energy Partners LLC and Jefferson Railport Terminal II Holdings LLC, dated as of February 1, 2016 (incorporated by reference to Exhibit 10.9 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).
	10.10	Fee and Support Agreement, among FTAI Energy Holdings LLC, FEP Terminal Holdings LLC, FTAI Energy Partners LLC and Jefferson Railport Terminal II LLC, dated as of March 7, 2016 (incorporated by reference to Exhibit 10.10 of the Company's Amended Annual Report on Form 10-K/A, filed on April 29, 2016).
	10.11	Lease and Development Agreement (Facilities Lease), dated as of February 1, 2016, by and between the Port of Beaumont Navigation District of Jefferson County, Texas and Jefferson Railport Terminal II LLC (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).



	Exhibit No.			Description
	10.12			Deed of Trust of Jefferson Railport Terminal II LLC, dated as of February 1, 2016 (incorporated by reference to Exhibit 10.12 of the Company's Annual Report on Form 10-K, filed on March 10, 2016).
	10.13			Credit Agreement, dated January 23, 2017, among Fortress Transportation and Infrastructure Investors LLC, as holdings, Fortress Worldwide Transportation and Infrastructure General Partnership, as IntermediateCo, WWTAI Finance Ltd., as Borrower, the Subsidiary Guarantors from time to time party thereto, the lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, filed on January 27, 2017).
	10.14			Credit Agreement, dated June 16, 2017, among Fortress Transportation and Infrastructure Investors LLC, as Borrower, the lenders and issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on June 22, 2017).



	~~Exhibit No.~~	~~Description~~
	10.15		Credit Agreement Amendment No. 1, dated as of August 2, 2018, among Fortress Transportation and Infrastructure Investors LLC, as borrower, Fortress Worldwide Transportation and Infrastructure General Partnership, the lenders and issuing banks from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative ~~agent.~~agent (incorporated by reference to Exhibit 10.15 of the Company’s Quarterly Report on Form 10-Q, filed on August 3, 2018).
	10.16		Credit Agreement Amendment No. 2 dated as of February 8, 2019, among Fortress Transportation and Infrastructure Investors LLC, as borrower, Fortress Worldwide Transportation and Infrastructure General Partnership, as grantor, JPMorgan Chase Bank, N.A., Morgan Stanley Senior Funding, Inc. and Barclays Bank PLC, as lenders and issuing banks, and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed February 11, 2019).
*	10.17		Engineering, Procuring and Construction Agreement dated as of February 15, 2019, between Long Ridge Energy Generation LLC and Kiewit Power Constructors Co. (incorporated by reference to Exhibit 10.17 of the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2019).
*	10.18		Purchase and Sale of Power Generation Equipment and Related Services Agreement dated as of February 15, 2019, between Long Ridge Energy Generation LLC and General Electric Company (incorporated by reference to Exhibit 10.18 of the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2019).
	10.19		First Lien Credit Agreement dated as of February 15, 2019, among Ohio River PP Holdco LLC, Ohio Gasco LLC, Long Ridge Energy Generation LLC, the lenders and issuing banks from time to time party thereto, and Cortland Capital Market Services LLC, as administrative agent (incorporated by reference to Exhibit 10.19 of the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2019).
	10.20		Second Lien Credit Agreement dated as of February 15, 2019, among Ohio River PP Holdco LLC, Ohio Gasco LLC, Long Ridge Energy Generation LLC, the lenders from time to time party thereto, and Cortland Capital Market Services LLC, as administrative agent (incorporated by reference to Exhibit 10.20 of the Company’s Quarterly Report on Form 10-Q, filed on May 3, 2019).
†	~~10.16~~10.21		Form of Award Agreement under the Fortress Transportation and Infrastructure Investors Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on January 17, 2018).
	31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002.
	32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	~~101.INS~~101		Inline XBRL Instance Document.
	101.SCH		Inline XBRL Taxonomy Extension Schema Document.
	101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
	101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.
	101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.
	101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
	104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†	Management contracts and compensatory plans or arrangements.
*	Portions of this exhibit have been omitted.

9885

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC



By:	/s/ Joseph P. Adams, Jr.	Date:	August ~~3, 2018~~2, 2019
	Joseph P. Adams, Jr.
	Chairman and Chief Executive Officer



By:	/s/ Scott Christopher	Date:	August ~~3, 2018~~2, 2019
	Scott Christopher
	Chief Financial Officer ~~and~~



By:	/s/ Eun Nam	Date:	August 2, 2019
	Eun Nam
	Chief Accounting Officer

9986



2018	$	2,062
2019	6,208
2020	10,257
2021	2,008
2022	2,008
Thereafter	5,970
Total	$	28,513



2018	$	5,521
2019	8,360
2020	6,779
2021	5,142
2022	3,596
Thereafter	5,658
Total	$	35,056



	June 30, 2018		December 31, 2017
Series 2012 Bonds⁽¹⁾	$	44,682	$	45,691
Series 2016 Bonds⁽¹⁾	149,371		150,329
Senior Notes	564,828		449,290



	Three Months Ended June 30, 2017
	Equipment Leasing						Infrastructure
	Aviation Leasing		Offshore Energy		Shipping Containers		Jefferson Terminal		Railroad		Ports and Terminals		Total
Equipment leasing revenues
Lease income	$	20,001	$	2,884	$	—	$	—	$	—	$	—	$	22,885
Maintenance revenue	16,576		—		—		—		—		—		16,576
Finance lease income	—		385		—		—		—		—		385
Other revenue	—		512		25		—		—		—		537
Total equipment leasing revenues	36,577		3,781		25		—		—		—		40,383
Infrastructure revenues
Lease income	—		—		—		—		—		123		123
Rail revenues	—		—		—		—		7,662		—		7,662
Terminal services revenues	—		—		—		3,026		—		—		3,026
Total infrastructure revenues	—		—		—		3,026		7,662		123		10,811
Total revenues	$	36,577	$	3,781	$	25	$	3,026	$	7,662	$	123	$	51,194



	Six Months Ended June 30, 2017
	Equipment Leasing						Infrastructure
	Aviation Leasing		Offshore Energy		Shipping Containers		Jefferson Terminal		Railroad		Ports and Terminals		Total
Equipment leasing revenues
Lease income	$	37,636	$	3,495	$	—	$	—	$	—	$	—	$	41,131
Maintenance revenue	29,245		—		—		—		—		—		29,245
Finance lease income	—		771		—		—		—		—		771
Other revenue	2		572		50		—		—		—		624
Total equipment leasing revenues	66,883		4,838		50		—		—		—		71,771
Infrastructure revenues
Lease income	—		—		—		—		—		139		139
Rail revenues	—		—		—		—		16,065		—		16,065
Terminal services revenues	—		—		—		7,892		—		—		7,892
Total infrastructure revenues	—		—		—		7,892		16,065		139		24,096
Total revenues	$	66,883	$	4,838	$	50	$	7,892	$	16,065	$	139	$	95,867



2018	$	78,787
2019	106,395
2020	69,944
2021	44,522
2022	25,023
Thereafter	16,155
Total	$	340,826



2018	$	3,120
2019	5,986
2020	5,097
2021	3,312
2022	2,433
Thereafter	69,090
Total	$	89,038



Shipping Containers Assets
Number of Containers	Type	Average Age	Lease Type	Customer Mix	Economic Interest (%)
31,000	20’ Dry 20’ Reefer 40’ Dry 40’ HC Dry 40’ HC Reefer	~10 Years	Direct Finance Lease/Operating Lease	4 Customers	51%