0001590364-17-000017.txt : 20171103 0001590364-17-000017.hdr.sgml : 20171103 20171103161209 ACCESSION NUMBER: 0001590364-17-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 90 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171103 DATE AS OF CHANGE: 20171103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Fortress Transportation & Infrastructure Investors LLC CENTRAL INDEX KEY: 0001590364 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS EQUIPMENT RENTAL & LEASING [7350] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-37386 FILM NUMBER: 171176531 BUSINESS ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 BUSINESS PHONE: 212-823-5564 MAIL ADDRESS: STREET 1: 1345 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10105 FORMER COMPANY: FORMER CONFORMED NAME: Fortress Transportation & Infrastructure Investors Ltd. DATE OF NAME CHANGE: 20131029 10-Q 1 ftai930201710-q.htm 10-Q Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
 
 þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2017
OR
 
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____ to ____
 
Commission file number 001-37386
logoa03.jpg
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,
New York, NY
 
10105
(Address of principal executive offices)
 
(Zip Code)
 
(Registrant’s telephone number, including area code) (212) 798-6100
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨ 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer ¨  
Accelerated filer þ 
Non-accelerated filer  ¨  
 
Smaller reporting company ¨  
Emerging growth company þ 
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.  þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
There were 75,771,738 common shares representing limited liability company interests outstanding at November 3, 2017.



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

2



•
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.

3



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
INDEX TO FORM 10-Q
 
PART I - FINANCIAL INFORMATION
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
PART II - OTHER INFORMATION
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


4



PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED BALANCE SHEETS
 
 
 
(Unaudited)
 
 

Notes

September 30,
 
December 31,
(Dollar amounts in thousands, except share and per share data)

2017

2016
Assets





Cash and cash equivalents
2

$
176,357


$
68,055

Restricted cash
2

36,458


65,441

Accounts receivable, net


27,926


21,358

Leasing equipment, net
3

929,364


765,455

Finance leases, net
4

9,370


9,717

Property, plant, and equipment, net
5

464,399


352,181

Investments (includes $30,470 and $17,630 available-for-sale securities at fair value as of September 30, 2017 and December 31, 2016, respectively)
6

67,792


39,978

Intangible assets, net
7

33,882


38,954

Goodwill


116,584


116,584

Other assets
2

47,789


69,589

Total assets


$
1,909,921


$
1,547,312







Liabilities





Accounts payable and accrued liabilities


$
51,684


$
38,239

Debt, net
8

655,580


259,512

Maintenance deposits
 

81,775


45,394

Security deposits
 

24,752


19,947

Other liabilities


18,207


18,540

Total liabilities


$
831,998


$
381,632







Commitments and contingencies
16










Equity





Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 75,771,738 and 75,750,943 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively)


758


758

Additional paid in capital


1,010,026


1,084,757

Accumulated deficit

 
(41,709
)
 
(38,833
)
Accumulated other comprehensive income


11,638


7,130

Shareholders' equity


980,713


1,053,812

Non-controlling interest in equity of consolidated subsidiaries


97,210


111,868

Total equity


1,077,923


1,165,680

Total liabilities and equity


$
1,909,921


$
1,547,312






See accompanying notes to consolidated financial statements.

5



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


Three Months Ended September 30,

Nine Months Ended September 30,
Notes

2017
 
2016

2017
 
2016
Revenues









Equipment leasing revenues


$
49,616


$
30,054


$
121,387


$
71,980

Infrastructure revenues


10,746


11,672


34,842


34,394

Total revenues
10

60,362


41,726


156,229


106,374











Expenses









Operating expenses


23,688


17,028


66,025


48,937

General and administrative


3,439


3,205


10,615


9,154

Acquisition and transaction expenses


1,732


1,688


5,064


4,622

Management fees and incentive allocation to affiliate
13

3,771


4,146


11,529


12,725

Depreciation and amortization
3, 5, 7

24,784


15,376


62,382


43,294

Interest expense


8,914


5,416


21,292


15,839

Total expenses


66,328


46,859


176,907


134,571











Other income (expense)









Equity in earnings (losses) of unconsolidated entities
6

132


(1,161
)

(1,461
)

(1,335
)
Gain on sale of equipment and finance leases, net


2,709


40


6,726


3,307

Loss on extinguishment of debt
8

—


—


(2,456
)

(1,579
)
Asset impairment
 
 
—

 
—

 
—

 
(7,450
)
Interest income


215


206


582


87

Other income


2,148


485


2,180


583

Total other income (expense)


5,204


(430
)

5,571


(6,387
)










Loss before income taxes


(762
)

(5,563
)

(15,107
)

(34,584
)
Provision for income taxes
12

909


83


1,585


195

Net loss


(1,671
)

(5,646
)

(16,692
)

(34,779
)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries


(4,669
)

(4,370
)

(13,816
)

(16,528
)
Net income (loss) attributable to shareholders


$
2,998


$
(1,276
)

$
(2,876
)

$
(18,251
)














Earnings/(loss) per share
15

 

 

 

 
Basic


$
0.04

 
$
(0.02
)
 
$
(0.04
)
 
$
(0.24
)
Diluted
 
 
$
0.04

 
$
(0.02
)
 
$
(0.04
)
 
$
(0.24
)
 
 
 
 
 
 
 
 
 
 
Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
 
Basic


75,770,529


75,746,200


75,765,144


75,734,587

Diluted
 
 
75,770,665

 
75,746,200

 
75,765,144

 
75,734,587









See accompanying notes to consolidated financial statements.

6



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollar amounts in thousands)
2017
 
2016
 
2017
 
2016
Net loss
$
(1,671
)
 
$
(5,646
)
 
$
(16,692
)
 
$
(34,779
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Change in fair value of cash flow hedge
—

 
—

 
—

 
(97
)
Change in fair value of available-for-sale securities
5,784

 
—

 
4,508

 
—

Comprehensive income (loss)
4,113

 
(5,646
)
 
(12,184
)
 
(34,876
)
Comprehensive loss attributable to non-controlling interest
(4,669
)
 
(4,370
)
 
(13,816
)
 
(16,528
)
Comprehensive income (loss) attributable to shareholders
$
8,782

 
$
(1,276
)
 
$
1,632

 
$
(18,348
)


















































See accompanying notes to consolidated financial statements.

7



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
(Dollar amounts in thousands)
Common Stock
 
Additional Paid In Capital
 
Accumulated Deficit
 
 Accumulated Other Comprehensive Income
 
 Non-Controlling Interest in Equity of Consolidated Subsidiaries
 
Total Equity
Equity - December 31, 2016
$
758

 
$
1,084,757

 
$
(38,833
)
 
$
7,130

 
$
111,868

 
$
1,165,680

Comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Net loss for the period
 
 
 
 
(2,876
)
 
 
 
(13,816
)
 
(16,692
)
Other comprehensive loss
 
 
 
 
—

 
4,508

 
—

 
4,508

Total comprehensive loss

 

 
(2,876
)
 
4,508

 
(13,816
)
 
(12,184
)
Capital contributions
 
 


 
 
 
 
 
1,261

 
1,261

Transfer of non-controlling interest
 
 
 
 
 
 
 
 
(2,798
)
 
(2,798
)
Dividends declared
 
 
(75,041
)
 
 
 
 
 
—

 
(75,041
)
Issuance of common shares


 
310

 
 
 
 
 
—

 
310

Equity-based compensation
 
 
—

 
 
 
 
 
695

 
695

Equity - September 30, 2017
$
758

 
$
1,010,026

 
$
(41,709
)
 
$
11,638

 
$
97,210

 
$
1,077,923





































See accompanying notes to consolidated financial statements.


8



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
Nine Months Ended September 30,
(Dollar amounts in thousands)
2017
 
2016
 Cash flows from operating activities:
 
 
 
 Net loss
$
(16,692
)
 
$
(34,779
)
 Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Equity losses of unconsolidated entities
1,461

 
1,335

Gain on sale of equipment and finance leases, net
(6,726
)
 
(3,307
)
Security deposits and maintenance claims included in earnings
(60
)
 
(300
)
Loss on extinguishment of debt
2,456

 
1,579

Equity-based compensation
695

 
(3,818
)
Depreciation and amortization
62,382

 
43,294

Gain on settlement of liabilities
(1,093
)
 
—

Asset impairment
—

 
7,450

Change in current and deferred income taxes
551

 
(399
)
Change in fair value of non-hedge derivative
(1,036
)
 
3

Amortization of lease intangibles and incentives
5,193

 
4,783

Amortization of deferred financing costs
3,120

 
1,927

Operating distributions from unconsolidated entities
—

 
30

Bad debt expense
63

 
134

Other
566

 
100

Change in:
 
 
 
 Accounts receivable
(7,984
)
 
(6,263
)
 Other assets
10,595

 
(4,070
)
 Accounts payable and accrued liabilities
862

 
2,396

 Management fees payable to affiliate
(554
)
 
1

 Other liabilities
(1,356
)
 
5,566

 Net cash provided by operating activities
52,443

 
15,662

 
 
 
 
 Cash flows from investing activities:
 
 
 
Change in restricted cash
28,983

 
(799
)
Investment in notes receivable
—

 
(3,066
)
Investment in unconsolidated entities and available for sale securities
(24,903
)
 
(1,754
)
Principal collections on finance leases
347

 
2,406

Acquisition of leasing equipment
(267,451
)
 
(114,012
)
Acquisition of property plant and equipment
(86,455
)
 
(47,454
)
Acquisition of lease intangibles
(1,583
)
 
(812
)
Purchase deposit for aircraft and aircraft engines
(11,785
)
 
(10,225
)
Proceeds from sale of finance leases
—

 
71,000

Proceeds from sale of leasing equipment
87,093

 
15,905

Proceeds from sale of property, plant and equipment
51

 
125

Proceeds from deposit on sale of leasing equipment
—

 
250

Return of capital distributions from unconsolidated entities
—

 
432

 Net cash used in investing activities
$
(275,703
)
 
$
(88,004
)









See accompanying notes to consolidated financial statements.

9



FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
Nine Months Ended September 30,
(Dollar amounts in thousands)
2017
 
2016
 Cash flows from financing activities:
 
 
 
Proceeds from debt
$
417,191

 
$
110,658

Repayment of debt
(22,623
)
 
(157,603
)
Payment of other liabilities to non-controlling interest holder
—

 
(1,000
)
Payment of deferred financing costs
(3,232
)
 
(3,935
)
Receipt of security deposits
5,826

 
3,340

Return of security deposits
(3,232
)
 
(316
)
Receipt of maintenance deposits
18,784

 
10,806

Release of maintenance deposits
(6,111
)
 
(5,653
)
Capital contributions from non-controlling interests
—

 
7,433

Settlement of equity-based compensation
—

 
(200
)
Cash dividends
(75,041
)
 
(75,017
)
 Net cash provided by (used in) financing activities
$
331,562

 
$
(111,487
)
 
 
 
 
 Net increase (decrease) in cash and cash equivalents
108,302

 
(183,829
)
 Cash and cash equivalents, beginning of period
68,055

 
381,703

 Cash and cash equivalents, end of period
$
176,357

 
$
197,874

 
 
 
 
 Supplemental disclosure of non-cash investing and financing activities:
 
 
 
Restricted cash proceeds from borrowings of debt
$
—

 
$
44,342

Proceeds from borrowings of debt
108,089

 
—

Repayment and settlement of debt
(102,352
)
 
—

Acquisition of leasing equipment
(28,335
)
 
(3,451
)
Acquisition of property, plant and equipment
(36,770
)
 
(11,519
)
Settled and assumed security deposits
2,272

 
(272
)
Billed, assumed and settled maintenance deposits
23,226

 
3,923

Deferred financing costs
(7,867
)
 
(2,884
)
Non-cash contribution from non-controlling interest
1,261

 
—

Transfer of non-controlling interest
(2,798
)
 
—






















See accompanying notes to consolidated financial statements.

10

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


1.
ORGANIZATION
Fortress Transportation and Infrastructure Investors LLC (the “Company”) is a Delaware limited liability company which, through its subsidiary, Fortress Worldwide Transportation and Infrastructure General Partnership (the “Partnership”), is engaged in the ownership and leasing of aviation equipment, offshore energy equipment and shipping containers, and also owns and operates a short line railroad in North America, Central Maine and Québec Railway (“CMQR”), 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 (“Hannibal”). The Company has six reportable segments, (i) Aviation Leasing, (ii) Offshore Energy, (iii) Shipping Containers, (iv) Jefferson Terminal, (v) Railroad, and (vi) Ports and Terminals, which operate in two primary businesses, Equipment Leasing and Infrastructure (Note 14).
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 the Company and its subsidiaries.
Principles of Consolidation—The Company consolidates all entities in which it has a controlling financial interest and in which it has control over significant operating decisions, as well as variable interest entities (“VIEs”) in which the Company is the primary beneficiary. All significant intercompany transactions and balances have been eliminated. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.
The Company uses the equity method of accounting for investments in entities in which the Company exercises significant influence but which do not meet the requirements for consolidation. Under the equity method, the Company records its proportionate share of the underlying net income (loss) of these entities.
Use of Estimates—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and Uncertainties—In the normal course of business, the Company encounters several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee, customer, or derivative counterparty to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which the Company operates which could adversely impact the pricing of the services offered by the Company or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of the Company’s leasing equipment or operating assets. Capital market risk is the risk that the Company is unable to obtain capital at reasonable rates to fund the growth of its business or to refinance existing debt facilities. The Company, through its subsidiaries, also conducts operations outside of the United States; such international operations are subject to the same risks as those associated with its United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. The Company does not have significant exposure to foreign currency risk as all of its leasing arrangements, terminal services revenue and the majority of freight rail revenue are denominated in U.S. dollars.
Variable Interest Entities—The assessment of whether an entity is a variable interest entity (“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.

11

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

WWTAI IES MT6015 Ltd
The Company has an interest in WWTAI IES MT6015 Ltd. (“MT6015”), an entity formed in 2014 which had entered into a contract with a shipbuilder for the construction of an offshore multi service / inspection, maintenance and repair vessel (the “Vessel”) for a price of approximately $75,000. A subsidiary of the Company and a third party each hold a 50% interest in MT6015 and have equal representation on its board of directors. In connection with the initial capitalization of MT6015, another subsidiary of the Company provided the third party partner with a $3,725 loan which was utilized by the third party partner to fund its equity contribution to MT6015. In addition, the agreement provides the Company with disproportionate voting rights, in certain situations, as defined in the agreement. Accordingly, the Company determined that MT6015 is a VIE and that it was the primary beneficiary; accordingly, MT6015 has been presented on a consolidated basis in the accompanying financial statements.
During the second quarter of 2016, the Company determined not to proceed with the purchase of the Vessel. The shipbuilder delivered a notice of termination of the shipbuilding contract to MT6015 in July 2016. Correspondingly, in the second quarter of 2016, the Company recorded an impairment in its MT6015 investment of $7,450. The shipbuilder has no further recourse to the Company.
During the third quarter of 2017, the Company entered into a settlement arrangement whereby the holder of the non-controlling interest settled its $3,725 loan due to the Company by transferring its interest in a subsidiary of the Company, and the note payable due to the holder of the non-controlling interest was extinguished. The settlement resulted in a net gain of $1,093 recorded in other income. Refer to Note 8 for further details.
JGP Energy Partners LLC
During the quarter ended September 30, 2016, the Company initiated activities in its 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 agreed to contribute up to $27,000 (for a total of $54,000) 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. The Company concluded that it is not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, the Company does not consolidate JGP and accounts for this investment in accordance with the equity method. Refer to Note 6 for details.
Delaware River Partners LLC
On July 1, 2016, the Company, 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. The Company currently holds a 90% economic interest and a 100% voting interest in DRP. DRP is solely reliant on the Company to finance its activities and therefore is a VIE. The Company concluded it was the primary beneficiary; and accordingly, DRP has been presented on a consolidated basis in the accompanying financial statements. The Company has 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, the Company concluded that 8% of the 10% interest held by the non-controlling party does not share in the risks or rewards of true equity; and, therefore $5,321 was recorded in other liabilities on the Company’s Consolidated Balance Sheet. The remaining 2% economic non-controlling interest was valued at $641 at the acquisition date.
Ohio River Partners LLC
On June 16, 2017, the Company, through Ohio River Partners LLC (“ORP”), a consolidated subsidiary, purchased the assets of Hannibal which consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. The Company purchased 100% of the interests in these assets. ORP is solely reliant on the Company to finance its activities and therefore is a VIE. The Company concluded it was the primary beneficiary; accordingly, ORP has been presented on a consolidated basis in the accompanying financial statements.
Cash and Cash Equivalents—The Company considers all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.
Restricted Cash—Restricted cash of $36,458 and $65,441 as of September 30, 2017 and December 31, 2016, respectively, consists of prepaid interest and principal pursuant to the requirements of certain of the Company’s debt agreements (Note 8), and funds set aside for qualifying construction projects at Jefferson Terminal.

12

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

Available-For-Sale Securities—The Company considers 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. The Company’s 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 on the accompanying Consolidated Balance Sheets. At each balance sheet date, the Company evaluates its available for sale securities holdings with unrealized losses to determine if an other-than-temporary impairment has occurred. Refer to Note 6 and 9 for details.
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 $11,291 and $6,489 as of September 30, 2017 and December 31, 2016, respectively, are recorded as a component of debt in the accompanying Consolidated Balance Sheets. In connection with the revolving credit facility, the Company incurred $1,157 of deferred financing costs as of September 30, 2017 which are recorded as a component of other assets in the accompanying Consolidated Balance Sheet. Refer to Note 8 for details.
Amortization expense was $1,056 and $3,120 for the three and nine months ended September 30, 2017, respectively, and $678 and $1,927 for the three and nine months ended September 30, 2016, respectively. Amortization expenses are included as a component of interest expense in the accompanying Consolidated Statements of Operations.
Concentration of Credit Risk—The Company is subject to concentrations of credit risk with respect to amounts due from customers on its finance lease and operating leases. The Company attempts to limit its credit risk by performing ongoing credit evaluations. During the three and nine months ended September 30, 2017, the Company had no revenue concentration over 10% of total revenue from any one customer. During the three and nine months ended September 30, 2016, the Company earned approximately 9.5% and 10.9%, respectively, of its revenue from one customer in the Jefferson Terminal segment.
As of September 30, 2017, accounts receivable from two customers in the Offshore Energy segment represented 17% and 22%, respectively, of total accounts receivable, net. As of December 31, 2016, accounts receivable from two customers in the Offshore Segment represented 22% and 18%, respectively, of total accounts receivable, net.
The Company maintains cash and restricted cash balances, which generally exceed federally insured limits, and subject the Company to credit risk, in high credit quality financial institutions. The Company monitors the financial condition of these institutions and has not experienced any losses associated with these accounts.
Provision for Doubtful Accounts—The Company determines the provision for doubtful accounts based on its assessment of the collectability of its receivables on a customer-by-customer basis. The provision for doubtful accounts at both September 30, 2017 and December 31, 2016 was $418. Bad debt expense was $0 and $63 for the three and nine months ended September 30, 2017, respectively. Bad debt expense was $79 and $134 for the three and nine months ended September 30, 2016, respectively.
Comprehensive Income (Loss)—Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. The Company’s comprehensive income (loss) represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for fair value changes related to the available-for-sale securities and derivatives accounted for as cash flow hedges.
Other Assets—Other assets is primarily comprised of notes receivable of $2,714 and $22,469, leasing equipment purchase deposits of $11,785 and $13,701, lease incentives of $18,516 and $3,556, capitalized costs for potential asset acquisitions of $781 and $2,116, prepaid expenses of $5,331 and $3,440, a short-term derivative contract asset of $1,036 and $0, and receivables of $4,690 and $21,501 as of September 30, 2017 and December 31, 2016, respectively.
Dividends—Dividends are recorded if and when declared by the Board of Directors. For both the three and nine months ended September 30, 2017 and 2016, the Board of Directors declared a cash dividend of $0.33 and $0.99 per share, respectively.
Recent Accounting Pronouncements—In July 2015, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) 2015-11, Simplifying the Measurement of Inventory (Topic 330) (“ASU 2015-11”), which simplifies the measurement of inventory by requiring certain inventory to be measured at the “lower of cost and net realizable value” and the previous parameters for “market value” will be eliminated. ASU 2015-11 defines net realizable value as the “estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.”  The standard is effective for fiscal years beginning after December 15, 2016, with earlier adoption permitted. The adoption of this standard did not have a material impact on our financial statements.
In March 2016, the FASB issued ASU 2016-06, Contingent put and call options in debt instruments (“ASU 2016-06”). ASU 2016-06 simplifies the embedded derivative analysis for debt instruments containing contingent call or put options. ASU 2016-06 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with early adoption

13

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

permitted. The Company adopted ASU 2016-06 as of January 1, 2017 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). ASU 2016-09 requires the income tax effects of awards to be recognized in the income statement when the awards vest or are settled, increases the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification, and allow recognizing forfeitures of awards as they occur. ASU 2016-09 is effective beginning in the first quarter of 2017, with early adoption permitted. The Company adopted ASU 2016-09 as of January 1, 2017 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control (“ASU 2016-17”). ASU 2016-17 amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. Under the amendments, a single decision maker is not required to consider indirect interests held through related parties that are under common control with the single decision maker to be the equivalent of direct interests in their entirety. Instead, a single decision maker is required to include those interests on a proportionate basis consistent with indirect interests held through other related parties. ASU 2016-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company adopted ASU 2016-17 as of January 1, 2017 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) (“ASU 2017-01”). ASU 2017-01 clarifying the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses or assets. ASU 2017-01 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2017-01 as of January 1, 2017 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Unadopted 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. Additionally, during 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations, ASU 2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing and ASU 2016-12, Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which clarify the guidance on reporting revenue as a principal versus agent, identifying and disclosing performance obligations, accounting for intellectual property licenses, and assessing collectibility, present sales tax, treating noncash consideration. The Company’s evaluation of the impact of the new guidance on its consolidated financial statements is ongoing. The Company’s implementation efforts include the identification of revenue within the scope of the guidance, the evaluation of those revenue contracts, education and discussions with the Company’s control functions. The Company continues to evaluate the timing of recognition for various revenues, however, since a substantial portion of the Company’s revenue is recognized from its leasing contracts, subject to ASU 2016-02 Leases, these have been excluded from the evaluation.
In February 2016, the FASB issued ASU 2016-02, Leases (“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. ASU 2016-02 will be effective beginning in the first quarter 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 of initial application, with an option to use certain transition relief. The Company’s evaluation of the impact of the new guidance on its consolidated financial statements is ongoing. The Company is currently identifying the lease arrangements within the scope of the new guidance, and evaluating the impact of the lease arrangements. In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from contracts from customers (Topic 606), Leases (Topic 840) and Leases (Topic 842), (“ASU 2017-13”) which adds SEC paragraphs to the new revenue and lease sections of the codification on the announcement of the SEC observer made at the July 2017 EITF meeting.
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

14

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

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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
In May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
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 basis 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 beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this new guidance on its 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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.

15

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

In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323) (“ASU 2017-03”). ASU 2017-03 adds and amends SEC paragraphs pursuant to the SEC Staff Announcements at the September 22, 2016 and November 17, 2016 Emerging Issues Task Force (EITF) meetings. The September announcement is about the disclosure of the impact that recently issued accounting standards will have on the financial statements of a registrant when such standards are adopted in a future period. The November announcement made amendments to conform the SEC Observer Comment on Accounting for Tax Benefits Resulting from Investments in Qualified Affordable Housing Projects to the guidance issued in ASU 2014-01, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
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 amendments 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. The Company is currently evaluating the impact of adopting this new guidance on its consolidated financial statements.
In May 2017, the FASB issued Accounting Standards Update No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"), 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 do not expect the adoption of ASU 2017-09 to have a material impact on our consolidated financial statements.
3.
LEASING EQUIPMENT, NET
Leasing equipment, net is summarized as follows:
 
September 30, 2017
 
December 31, 2016
Leasing equipment
$
1,055,548

 
$
849,565

Less: accumulated depreciation
(126,184
)
 
(84,110
)
Leasing equipment, net
$
929,364

 
$
765,455

During the nine months ended September 30, 2017, the Company acquired seventeen aircraft, fifty commercial jet engines, and sold five aircraft and thirteen commercial jet engines.
Depreciation expense for leasing equipment is summarized as follows:
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Depreciation expense for leasing equipment
$
19,792

 
$
11,322

 
$
48,934

 
$
31,065


16

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

4.     FINANCE LEASES, NET
Finance leases, net are summarized as follows:
 
September 30, 2017
 
December 31, 2016
Finance leases
$
16,521

 
$
18,022

Unearned revenue
(7,151
)
 
(8,305
)
Finance leases, net
$
9,370

 
$
9,717

As of September 30, 2017, future minimum lease payments to be received under finance leases for the remainder of the lease terms are as follows:
 
Total
2017
$
507

2018
2,008

2019
2,008

2020
2,013

2021
2,008

Thereafter
7,977

Total
$
16,521

5.
PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is summarized as follows:
 
September 30, 2017
 
December 31, 2016
Land, site improvements and rights
$
74,270

 
$
57,617

Construction in progress
114,844

 
49,605

Buildings and improvements
9,763

 
2,750

Terminal machinery and equipment
262,212

 
236,652

Track and track related assets
27,977

 
22,948

Railroad equipment
1,037

 
1,091

Railcars and locomotives
3,114

 
2,909

Computer hardware and software
3,034

 
388

Furniture and fixtures
544

 
405

Vehicles
1,171

 
985

 
497,966

 
375,350

Less: accumulated depreciation
(36,413
)
 
(26,002
)
Spare parts
2,846

 
2,833

Property, plant and equipment, net
$
464,399

 
$
352,181

During the nine months ended September 30, 2017, additional property, plant and equipment of $122,737 was acquired. Acquisitions primarily consist of construction in progress, terminal machinery and equipment, and computer hardware and software due to the ongoing development of Jefferson Terminal and Repauno.
On June 16, 2017, the Company, through one of its consolidated subsidiaries, purchased the assets of Hannibal for $30,000. The assets acquired consisted primarily of land, buildings, railroad track, docks, water rights, site improvements and other rights. As part of the transaction, additional amounts of $2,335 were capitalized for costs directly related to the purchase, including costs for legal advice, exploratory diligence, and regulatory permitting. Hannibal is part of the Ports and Terminals segment.
During the nine months ended September 30, 2017 and 2016, disposals of property, plant and equipment totaled $108 and $125, respectively, mainly related to railroad equipment, vehicles, and furniture and fixtures.

17

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

Depreciation expense for property, plant and equipment is summarized as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Depreciation expense for property, plant and equipment
$
4,092

 
$
3,154

 
$
10,749

 
$
9,530


6.
INVESTMENTS
The following table presents the ownership interests and carrying values of the Company’s investments:
 
 
 
 
 
Carrying Value
 
Investment
 
Ownership Percentage
 
September 30, 2017
 
December 31, 2016
Listed security
Available-for-sale
 
2%
 
$
30,470

 
$
17,630

Advanced Engine Repair JV
Equity method
 
25%
 
13,954

 
15,000

JGP Energy Partners LLC
Equity method
 
50%
 
19,741

 
3,266

Intermodal Finance I, Ltd.
Equity method
 
51%
 
3,627

 
4,082

Investments
 
 
 
 
$
67,792

 
$
39,978

Available-for-sale securities
 
 
Equity Security
December 31, 2016
 
$
17,630

Purchases
 
8,332

Unrealized gain
 
4,508

September 30, 2017
 
$
30,470

 
 
 
Cost
 
$
18,833

The Company did not recognize any other-than-temporary impairments for the three and nine months ended September 30, 2017.
Equity Method Investments
Advanced Engine Repair JV
In December 2016, the Company invested $15,000 for 25% interest in an advanced engine repair joint venture. The Company will initially focus on developing new costs savings programs for engine repairs. The primary financial activities for the joint venture relate to member contributions and therefore its summary financial information has not been presented. The Company’s proportionate share of equity in losses was $203 and $1,046 for the three and nine months ended September 30, 2017, respectively.
JGP
In 2016, the Company 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. The Company concluded it is not the primary beneficiary of JGP as the members share equally in the risks and rewards and decision making authority of the entity; therefore, the Company does not consolidate JGP and instead accounts for this investment in accordance with the equity method. The primary financial activities for JGP relate to member investments and therefore JGP summary financial information has not been presented. The Company’s proportionate share of equity in losses was $24 and $99 for the three and nine months ended September 30, 2017, respectively.
Intermodal Finance I, Ltd.
In 2012, the Company 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,

18

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

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, the Company does not have unilateral rights over this investment; therefore, the Company does not consolidate Intermodal but accounts for this investment in accordance with the equity method. The Company does not have a variable interest in this investment as none of the criteria of ASC 810-10-15-14 were met.
As of September 30, 2017, Intermodal owns a portfolio of multiple finance leases, representing five customers and comprising approximately 24,000 shipping containers, as well as a portfolio of approximately 12,000 shipping containers subject to multiple operating leases. The Company’s proportionate share of equity in income was $359 and equity in losses was $316 for the three and nine months ended September 30, 2017, respectively, and $1,161 and $1,335 for the three and nine months ended September 30, 2016, respectively.
7.
INTANGIBLE ASSETS AND LIABILITIES, NET
The Company’s intangible assets and liabilities, net are summarized as follows:
 
September 30, 2017
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
28,180

 
$
—

 
$
—

 
$
28,180

Less: Accumulated amortization
(18,946
)
 
—

 
—

 
(18,946
)
Acquired favorable lease intangibles, net
9,234

 
—

 
—

 
9,234

Customer relationships
—

 
35,513

 
225

 
35,738

Less: Accumulated amortization
—

 
(10,936
)
 
(154
)
 
(11,090
)
Acquired customer relationships, net
—

 
24,577

 
71

 
24,648

Total intangible assets, net
$
9,234

 
$
24,577

 
$
71

 
$
33,882

 
 
 
 
 
 
 
 
Intangible liabilities
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
2,440

 
$
—

 
$
—

 
$
2,440

Less: Accumulated amortization
(1,090
)
 
—

 
—

 
(1,090
)
Acquired unfavorable lease intangibles, net
$
1,350

 
$
—

 
$
—

 
$
1,350

 
December 31, 2016
 
Aviation Leasing
 
Jefferson Terminal
 
Railroad
 
Total
Intangible assets
 
 
 
 
 
 
 
Acquired favorable lease intangibles
$
26,605

 
$
—

 
$
—

 
$
26,605

Less: Accumulated amortization
(14,998
)
 
—

 
—

 
(14,998
)
Acquired favorable lease intangibles, net
11,607

 
—

 
—

 
11,607

Customer relationships
—

 
35,513

 
225

 
35,738

Less: Accumulated amortization
—

 
(8,271
)
 
(120
)
 
(8,391
)
Acquired customer relationships, net
—

 
27,242

 
105

 
27,347

Total intangible assets, net
$
11,607

 
$
27,242

 
$
105

 
$
38,954

 
 
 
 
 
 
 
 
Intangible liabilities
 
 
 
 
 
 
 
Acquired unfavorable lease intangibles
$
1,506

 
$
—

 
$
—

 
$
1,506

Less: Accumulated amortization
(627
)
 
—

 
—

 
(627
)
Acquired unfavorable lease intangibles, net
$
879

 
$
—

 
$
—

 
$
879


19

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

Intangible liabilities relate to unfavorable lease intangibles and are included as a component of other liabilities in the accompanying Consolidated Balance Sheets.
Amortization of intangible assets and liabilities is recorded in the Consolidated Statements of Operations as follows:
 
Classification in Consolidated Statements of Operations
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
 
2017
 
2016
 
2017
 
2016
Lease intangibles
Equipment leasing revenues
 
$
1,147

 
$
1,403

 
$
3,494

 
$
4,557

Customer relationships
Depreciation and amortization
 
900

 
900

 
2,699

 
2,699

Total
 
 
$
2,047

 
$
2,303

 
$
6,193

 
$
7,256

As of September 30, 2017, estimated net annual amortization of intangibles is as follows:
 
Total
2017
$
1,899

2018
7,301

2019
5,625

2020
4,331

2021
3,847

Thereafter
9,529

Total
$
32,532

8.
DEBT, NET
The Company’s debt, net is summarized as follows:
 
September 30, 2017
 
December 31, 2016
Loans payable
 
 
 
FTAI Pride Credit Agreement
$
53,993

 
$
60,937

CMQR Credit Agreement
18,400

 
12,625

Revolving Credit Facility
60,000

 
—

Total loans payable
132,393

 
73,562

Bonds payable
 
 
 
Series 2012 Bonds (including unamortized premium of $1,654 and $1,697 at September 30, 2017 and December 31, 2016, respectively)
44,419

 
45,887

Series 2016 Bonds
144,200

 
144,200

Senior Notes (including unamortized discount of $6,826 and unamortized premium of $2,686 at September 30, 2017)
345,859

 
—

Total bonds payable
534,478

 
190,087

Note payable to non-controlling interest
 
 
 
Note payable to non-controlling interest
—

 
2,352

Total note payable to non-controlling interest
—

 
2,352


 
 
 
Debt
666,871

 
266,001

Less: Debt issuance costs
(11,291
)
 
(6,489
)
Total debt, net
$
655,580

 
$
259,512

 
 
 
 
Total debt due within one year
$
6,233

 
$
8,078


20

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

FTAI Pride Credit Agreement—On September 15, 2014, FTAI Pride, LLC, (“FTAI Pride”) a subsidiary of the Company 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 and can be prepaid without penalty at any time. The FTAI Pride Credit Agreement is secured on a first priority basis by the offshore construction vessel. Borrowings under the FTAI Pride Credit Agreement bear interest at the LIBOR rate plus a spread of 4.50%.
The FTAI Pride Credit Agreement contains affirmative and negative covenants which limit certain actions of the borrower 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 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 September 30, 2017 was 3.61%.
The CMQR Credit Agreement is also indirectly supported by Fortress Transportation and Infrastructure Investors LLC (the “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 Sponsor, and in the event of CMQR’s bankruptcy, the lenders can put the debt back to the Sponsor. The CMQR Credit Agreement contains affirmative and negative covenants which limit certain actions of CMQR.
Jefferson Terminal Credit Agreement—On August 27, 2014, a subsidiary of the Company entered into a credit agreement (the “Jefferson Terminal Credit Agreement”) with a financial institution for an aggregate amount of $100,000. The Jefferson Terminal Credit Agreement required quarterly payments of $250 beginning with the quarter ending December 31, 2014, with such quarterly payments increasing to $1,250 beginning with the quarter ending December 31, 2016, and could be prepaid or repaid at any time prior to its maturity on February 27, 2018. On March 8, 2016, all amounts outstanding under the Jefferson Terminal Credit Agreement were paid in full and such agreement was terminated. Accordingly, during the first quarter of 2016, the Company recorded a loss on extinguishment of debt of $1,579.
Series 2012 Bonds—On August 1, 2012, Jefferson County Development Corporation issued $46,875 of tax-exempt industrial 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 the Company’s 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 the Company 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, and will occur, 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 the continuing involvement of the Company resulting from the mandatory tender feature and, as a result, the leases were classified as a financing transaction in the Company’s 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 the Company 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. 

21

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

Under a Capital Call Agreement, the Company has agreed to make funds available to Jefferson Holdings in order to satisfy its obligation under the Standby Bond Purchase Agreement. The Capital Call Agreement contains certain covenants applicable to the Company, 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 of the Company. In connection with the above, and related to the Series 2016 Bonds, a subsidiary of the Company and an affiliate of its 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 the Company 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 on February 13, 2020 if they have not been repurchased from proceeds of a remarketing of the Series 2016 Bonds or redeemed prior to such date. In the event all of the Series 2016 Bonds are not repurchased from proceeds of a remarketing or redeemed at February 13, 2020, 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.
Term Loan—On January 23, 2017, the Company entered into an unsecured credit agreement under which the Company, through its wholly owned subsidiaries, including the Partnership and WWTAI Finance Ltd., an exempted company incorporated with limited liability under 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 to be used for general corporate purposes, including future acquisitions by the Company and its 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 the Company chooses to make Eurodollar Rate borrowings. The Term Loans mature on January 22, 2018, subject to the Company’s 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 nine months ended September 30, 2017, the Company recorded a loss on extinguishment of debt of $2,456.
Senior Notes—On March 15, 2017, the Company 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 the Company and U.S. Bank National Association, as trustee. On August 23, 2017, the Company issued an additional $100,000 of Senior Notes. The additional notes were issued at an offering price of 102.75% of the principal amount plus accrued interest from March 15, 2017 to the date of issuance.
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, the Company 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, the Company 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, the Company 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.
The Company used a portion of the proceeds to fully repay all outstanding indebtedness under the Company’s 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. The Company intends to use the remainder of the proceeds for general corporate purposes, including the funding of future investments.
Revolving Credit Facility- On June 16, 2017, the Company entered into a revolving credit facility (the “Revolving Credit Facility”) with certain lenders and issuing banks and JPMorgan Chase Bank, N.A., as administrative agent. 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 the Company as defined in the related credit agreement.

22

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

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 the Company chooses to make Eurodollar Rate borrowings, or at the Base Rate (determined in accordance with the credit agreement) plus 2.00% per annum.  The Company 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 the Company and its subsidiaries of 1.65 to 1.00 per the terms of the credit agreement.
At September 30, 2017, the Company had $60,000 of borrowings outstanding under the revolving credit facility.
Note Payable to Non-Controlling Interest—In May 2013, in connection with the capitalization of a consolidated subsidiary, the Company and the owner of the non-controlling interest loaned approximately $18,275 and $3,225, respectively, to the entity in proportion to their respective ownership percentages of 85% and 15%. The loans bear interest at an annual rate of 5% and mature in May 2021. The loan amount funded by the Company and related interest have been eliminated in consolidation.
During the third quarter of 2017, the Company entered into a settlement arrangement whereby the holder of the non-controlling interest settled its $3,725 loan due to the Company in conjunction with the MT6015 venture by transferring its 15% interest in a consolidated subsidiary of the Company, and the note payable due to the holder of the non-controlling interest was extinguished. The settlement resulted in a net gain of $1,093 recorded in other income. Refer to Note 2 for further detail.
The Company was in compliance with all debt covenants as of September 30, 2017.
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 the Company to develop its own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
•
Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
•
Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.
•
Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).

23

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

The following tables set forth the Company’s financial assets measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016, 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
 
 
 
September 30, 2017
 
September 30, 2017
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
176,357

 
$
176,357

 
$
—

 
$
—

 
Market
Restricted cash
36,458

 
36,458

 
—

 
—

 
Market
Available-for-sale securities
30,470

 
30,470

 
—

 
—

 
Market
Total
$
243,285

 
$
243,285

 
$
—

 
$
—

 

 
 
 
 
 
 
 
 
 
 
 
Fair Value as of
 
Fair Value Measurements Using Fair Value Hierarchy as of
 
 
 
December 31, 2016
 
December 31, 2016
 
 
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Valuation Technique
Assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
68,055

 
$
68,055

 
$
—

 
$
—

 
Market
Restricted cash
65,441

 
65,441

 
—

 
—

 
Market
Available-for-sale securities
17,630

 
17,630

 
—

 
—

 
Market
Total
$
151,126

 
$
151,126

 
$
—

 
$
—

 

At September 30, 2017 and December 31, 2016, the Company had no liabilities that were measured at fair value on a recurring basis.
The Company’s cash and cash equivalents and restricted cash consist largely of demand deposit accounts with 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. Publicly traded securities with sufficient trading volume are fair valued by management using quoted prices for identical instruments in active markets and are therefore classified as Level 1 within the fair value hierarchy.
Except as discussed below, the Company’s financial instruments other than cash and cash equivalents, restricted cash and available-for-sale securities 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.
At September 30, 2017 and December 31, 2016, the Company’s notes receivable included a $0 and $17,935, respectively, loan bearing interest at 10% related to a terminal site under development, collateralized by property at that site, which was settled in the acquisition of Hannibal (Note 5). At December 31, 2016 the Company’s notes receivable included, as a component of other assets on the accompanying Consolidated Balance Sheets, a $3,725 loan bearing interest at 12.0% made to the Company’s joint venture partner in MT 6015 (Note 2) which was collateralized by other property owned by the joint venture partner. During the third quarter of 2017 the Company entered into a settlement agreement for this loan more fully discussed in Note 2. The fair value of these notes receivable approximate carrying value and are classified as Level 2, which is within the fair value hierarchy.
At September 30, 2017, the Company recorded a derivative asset related to short-term forward crude contracts. The fair value of the short-term derivative asset of $1,036, recorded in other assets, is classified as Level 3 within the fair value hierarchy.
The fair value of Series 2012 bonds, reported in debt, net on the Consolidated Balance Sheets, was approximately $44,667 and $46,488, at September 30, 2017 and December 31, 2016, respectively, based upon market prices for similar municipal securities. The fair value of Series 2016 bonds, reported in debt, net on the Consolidated Balance Sheets, was approximately $149,463 and $149,575 at September 30, 2017 and December 31, 2016, respectively, based upon market prices for similar municipal securities. The fair value of Senior Notes, reported in debt, net on the Consolidated Balance Sheets, was approximately $345,859 as of September 30, 2017 as the carrying value approximates the market prices. The fair values of all other items reported as debt, net in the Consolidated Balance Sheet approximate their carrying values due to their bearing market rates

24

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

of interest, and are classified as Level 2 within the fair value hierarchy.
The Company measures the fair value of certain assets and liabilities on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include goodwill, intangible assets, property, plant and equipment and leasing equipment. The Company records such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include the Company’s assumptions as to future cash flows from operation of the underlying businesses and the leasing and eventual sale of assets.

25

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

10. REVENUES
Components of revenue are as follows:
 
Three Months Ended September 30, 2017
 
Equipment Leasing
 
Infrastructure
 
 
Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Ports and Terminals
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
25,941

 
$
3,800

 
$
—

 
$
—

 
$
—

 
$
—

 
$
29,741

Maintenance revenue
17,533

 
—

 
—

 
—

 
—

 
—

 
17,533

Finance lease income
—

 
385

 
—

 
—

 
—

 
—

 
385

Other revenue
—

 
1,932

 
25

 
—

 
—

 
—

 
1,957

Total equipment leasing revenues
43,474

 
6,117

 
25

 
—

 
—

 
—

 
49,616

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
—

 
—

 
—

 
—

 
—

 
455

 
455

Rail revenues
—

 
—

 
—

 
—

 
8,258

 
—

 
8,258

Terminal services revenues
—

 
—

 
—

 
1,730

 
—

 
—

 
1,730

Other revenue
—

 
—

 
—

 
—

 
—

 
303

 
303

Total infrastructure revenues
—

 
—

 
—

 
1,730

 
8,258

 
758

 
10,746

Total revenues
$
43,474

 
$
6,117

 
$
25

 
$
1,730

 
$
8,258

 
$
758

 
$
60,362

 
Three Months Ended September 30, 2016
 
Equipment Leasing
 
Infrastructure
 
 
Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Ports and Terminals
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
19,039

 
$
2,561

 
$
—

 
$
—

 
$
—

 
$
—

 
$
21,600

Maintenance revenue
7,646

 
—

 
—

 
—

 
—

 
—

 
7,646

Finance lease income
—

 
403

 
—

 
—

 
—

 
—

 
403

Other revenue
375

 
5

 
25

 
—

 
—

 
—

 
405

Total equipment leasing revenues
27,060

 
2,969

 
25

 
—

 
—

 
—

 
30,054

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
—

 
—

 
—

 
—

 
—

 
16

 
16

Rail revenues
—

 
—

 
—

 
—

 
7,401

 
—

 
7,401

Terminal services revenues
—

 
—

 
—

 
4,255

 
—

 
—

 
4,255

Total infrastructure revenues
—

 
—

 
—

 
4,255

 
7,401

 
16

 
11,672

Total revenues
$
27,060

 
$
2,969

 
$
25

 
$
4,255

 
$
7,401

 
$
16

 
$
41,726






26

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

 
Nine Months Ended September 30, 2017
 
Equipment Leasing

Infrastructure
 

Revenues
Aviation Leasing
 
Offshore Energy
 
Shipping Containers
 
Jefferson Terminal
 
Railroad
 
Ports and Terminals
 
Total
Equipment leasing revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
$
63,577

 
$
7,295

 
$
—

 
$
—

 
$
—

 
$
—

 
$
70,872

Maintenance revenue
46,778

 
—

 
—

 
—

 
—

 
—

 
46,778

Finance lease income
—

 
1,156

 
—

 
—

 
—

 
—

 
1,156

Other revenue
2

 
2,504

 
75

 
—

 
—

 
—

 
2,581

Total equipment leasing revenues
110,357

 
10,955

 
75

 
—

 
—

 
—

 
121,387

Infrastructure revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease income
—

 
—

 
—

 
—

 
—

 
594

 
594

Rail revenues
—

 
—

 
—

 
—

 
24,323

 
—

 
24,323

Terminal services revenues
—

 
—

 
—

 
9,622

 
—

 
—

 
9,622

Other revenue
—

 
—

 
—

 
—

 
—

 
303

 
303

Total infrastructure revenues
—

 
—

 
—

 
9,622

 
24,323