Fortress Transportation and Infrastructure Investors LLC Common Shares

Good morning, and thank you for standing by. Welcome to the fourth quarter 2021 Fortress Transportation and Infrastructure Investor LLC earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alan Andretti. Please go ahead.

Thank you, Operator. I would like to welcome you all to the Fortress Transportation Infrastructure fourth quarter and full year 2021 earnings call. Joining me here today are Joe Adams, our Chief Executive Officer, and Scott Christopher, our Chief Financial Officer. We have posted an investor presentation and our press release on our website, which we encourage you to download if you have not already done so. Also, please note that this call is open to the public in listen-only mode and is being web will be discussing some non-GAAP financial measures during the call today, including FAB. The reconciliation of those measures to the most directly comparable GAAP measures can be found in the earnings supplement. Before I turn the call over to Joe, I would like to point out that certain statements made today will be forward-looking statements, including regarding future earnings. These statements, by their nature, are uncertain and may differ materially from actual results. We encourage you an investor presentation regarding non-GAAP financial measures and forward-looking statements, and to review the risk factors contained in our quarterly report filed with the SEC. Now I would like to turn the call over to Joe.

Thank you, Alan. To start today, I'm pleased to announce our 27th dividend as a public company and our 42nd consecutive dividend since inception. The dividend of 33 cents per share will be paid on March 23rd, based on a shareholder record date of March 11th. Now let's turn to the numbers. The key metrics for us are adjusted EBITDA and FAD, or funds available for distribution. We ended the year strongly with adjusted EBITDA of 124.8 million in Q4 2021, which is up 29% compared to 96.4 million in Q3 2021. and up 170% compared to 46.2 million in Q4 2020. In a similar fashion, FAB was 120.1 million in Q4 2021, up 205% compared to 39.4 million in Q3 2021, and up 122% compared to 54.2 million in Q4 2020. During the fourth quarter, The 120.1 million FAB number was comprised of 161.2 million from our aviation leasing portfolio, 11.0 million from our infrastructure business, and negative 52.1 million from corporate and other. Now let's look at all of 2021 versus all of 2020. Adjusted EBITDA was 336.3 million in 2021, up 38% versus $243.3 million in 2020. FAD was $242.2 million in 2021, up 2% versus $237.4 million in 2020. Both our aviation portfolio and infrastructure businesses contributed positive FAD for the year, an overall 20% higher compared to 2020. Meanwhile, corporate expenses were higher compared to 2020, primarily due to higher interest expense resulting from higher average debt outstanding during the year. Turning down aviation, aviation had another up quarter with Q4 EBITDA of 103.7 million. While decreased flying due to Omicron dampened the recovery and leasing activity, we were able to grow our aerospace services EBITDA to 20.3 million for Q4, primarily due to an increasing number of sales and exchanges through our CFM56 module factory. We had approximately 10 active customers in the module factory and are seeing growing interest in the products from MROs, or maintenance and repair organizations, airlines, and lessors. And with our recently signed program with Lufthansa Technique covering the seven-year WestJet CFM56 engine maintenance program, we see growing validation and acceptance of the value proposition which will expand the active customer base across the entire engine ecosystem. Regarding aircraft and engine leasing, we see increased demand for additional equipment, starting in Q2, driving higher lease rates and asset prices, provided that strong forward travel bookings that we have today hold up. Overall, we see improving demand for assets and aftermarket maintenance services driving 2022 financial performance and strengthening our position in the commercial jet engine aftermarket. Now let's turn to infrastructure. Jefferson. The big story with Jefferson in 2021 was major advancements on multiple product fronts with the two largest refineries in the United States and our largest customers, Motiva and Exxon. We started the year with refined products by rail and added a 10-year contract to operate a 2 million barrel multi-product and refined products export hub. And on the crude side, we've been receiving ship cargoes, which we store, blend, and move now by pipe. And we see a good pickup in crude by rail from Utah and Canada, which brings additional services and values to the terminal. We're actively exploring multiple additional products for both refiners, which we expect to add in 2022, and at least one new pipeline connection as well. While throughput volumes are up over 25% in early 2022 versus Q4 2021, we still are only about 33% utilized. But with additional activity from Exxon and Motiva, we have a path to high utilization coming into focus. Rupano. Rupano had a terrific year in 2021 and is very well positioned for many years of significant growth. First, let me list the 2021 accomplishments. One, in the first year of operation, we loaded 31 ships with butane for export. Second, we imported our first cargo of polymer-grade propylene that has come to the East Coast in many years. Third, we began construction of a double-unit train rail loop. Fourth, we expanded the truck rack, which will allow direct rail-to-truck propane transloading. Fifth, we operated a new cavern chiller, which allows us for refrigerated LPG marine loading. And sixth, we completed a new bypass road providing direct highway truck access. In terms of volumes, in 2020, we moved 4.3 million gallons through the terminal. In 2021, we moved 130 million gallons. And in 2022, we expect to move 150 to 175 million gallons. And in 2023, with an additional cryogenic tank we plan to build, that number could triple. Rapano is finding its niche with customers to offer unique capabilities for storing and transloading a wide variety of liquid petroleum products and intermediate specialty chemicals for both import and export in a critically important and advantaged location. As such, we see upside over time in this terminal fee per gallon potential. Lastly, we've made significant progress on the Clean Planet joint venture and have begun the permitting process for the first plastics recycling plant at Rapano, which we expect to commence construction on in Q2 of 2022 and complete in Q2 of 2023. Turning to Longridge, Longridge had a good quarter and year due to an earlier than planned startup of a power plant. which allowed us to take advantage of elevated power prices in October and November before our long-term power sales agreements commenced. On a 100% basis, Longridge generated EBITDA of $37.4 million in Q4 and $58.8 million for all of 2021, well ahead of our budget. Starting in January and up until last week, Longridge took an unscheduled maintenance outage, fully covered by GE warranty for repairs to the steam turbine. The outage will reduce EBITDA and Q1 due to the loss of power revenue. We did, however, perform maintenance scheduled for later in the year, thus avoiding future outages, and we completed the hydrogen blending project, giving us the capability to become the first large frame power plant to be able to utilize zero carbon hydrogen as a fuel. Under the recently enacted infrastructure bill, the U.S. government will be designated four locations as hydrogen hubs. Long Ridge is ideally qualified, and we intend to apply for one of those. We also are in the final stages of negotiating to host a new biodegradable plastics manufacturer at Long Ridge. As part of that agreement, we would provide land, power, and natural gas under long-term supply agreements. Turning to Transtar, Transtar generated $16.7 million of adjusted EBITDA in the fourth quarter from continuing operations, and for the full year generated an annualized $68 million of adjusted EBITDA. In addition, Transtar generated $4.5 million of incremental cash flow from the sale of non-core equipment and excess land, which was more than offset maintenance capex in the quarter. This is a collection of railroads that have very low maintenance capex, and industry-leading cash conversion, which we expect to continue in 2022. In the fourth quarter, Transtar moved more than 55,000 carloads, slightly above fourth quarter of 2020, as steel production at Gary and Mon Valley remained stable despite supply chain downstream issues in the automotive and appliance sectors. Some loaded steel carloads in December were held at the origin until cars are offloaded downstream, but are expected to move in Q1 and Q2. This theme is carrying forward early into the first quarter of 2022, but we expect to see increased steel movements in Q2 and beyond as pent-up demand is released and the supply chain rationalizes. Looking forward to 2022, Transtar's goal is to grow its third-party businesses at the underutilized railroads. The team is executing on new transloading opportunities in Detroit and exploring large industrial customers for its 1,000-acre property in northeast Texas. As non-core rail cars are sold, more than 1,500 storage spots are opening up across the network, and the team has a pipeline of opportunities to fill those vacant spots. We're pleased to welcome Gary Long to the team as CEO of FTIE's Rail Investments. Gary brings more than 25 years of experience in the rail industry, including most recently as CEO of Genesee and Wyoming's European Operations. Gary is very well suited to leverage the TransStar platform to execute on the growth initiatives we have set forth, both organically and through acquisitions. In summary, we're very much looking forward to 2022 with aviation recovery gaining momentum accompanied with our advances in aerospace service revenues and EBITDA. And in infrastructure, the maturation of multiple projects, which now generate organic growth across all the platforms. And finally, the spin-off of infrastructure is moving ahead with expected completion in April, which will provide simplification of the business strategy combined with eliminating K-1s for investors. And with that, I'll turn the call back to Alan.