FTAI Infrastructure (FIP) - 2024 Q4 - Annual Report

Part I Business FTAI Infrastructure Inc. acquires and operates critical infrastructure assets, with Railroad and Ports and Terminals driving 2024 revenue - The company operates as an independent public company following its spin-off from FTAI Aviation Ltd. on August 1, 2022, focusing on infrastructure assets[24] FY 2024 Revenue Contribution by Business Line | Business Line | Revenue Contribution | | :--- | :--- | | Railroad | 54% | | Ports and Terminals | 29% | | Corporate and other | 17% | - The company is externally managed by an affiliate of Fortress, which provides management and professional services for an annual fee of 1.50% of total equity[35][36] - A significant portion of revenue is derived from a small number of customers, with the largest customer accounting for 50% of total revenue in FY 2024[71] Our Portfolio The company's diversified portfolio spans Railroad, Ports and Terminals, Power and Gas, and Sustainability and Energy Transition segments - Railroad (Transtar): Comprises six short-line freight railroads and has an exclusive 15-year strategic rail partnership with U.S. Steel Corporation (USS), with minimum volume commitments for the first five years[37][38] - Ports and Terminals (Jefferson & Repauno): Jefferson Terminal has 6.2 million barrels of storage capacity and handles crude oil and refined products. Repauno is a 1,600-acre deep-water port on the Delaware River with unique underground granite storage caverns[43][52] - Power and Gas (Long Ridge): Operates a 485-megawatt power plant and is exploring running it on carbon-free hydrogen. The company re-acquired the remaining 49.9% interest in Long Ridge in February 2025, and it will be fully consolidated going forward[56][58][61] - Sustainability and Energy Transition: Key investments include Aleon/Gladieux for lithium-ion battery and catalyst recycling, a joint venture with Clean Planet Energy to convert plastic waste into fuel, and an investment in CarbonFree for carbon capture technology[62][63][65] Risk Factors The company faces significant business, regulatory, capital structure, and management-related risks, including customer concentration and stock ownership restrictions - Business Risks: The company faces risks from its limited operating history as an independent entity, macroeconomic conditions, and intense competition. A single customer in the Railroad segment accounted for 50% of revenue in 2024, highlighting significant customer concentration risk[87][91][141] - Regulatory & Environmental Risks: The rail sector is highly regulated, and changes could increase costs. The company is also subject to extensive environmental laws, with potential for significant liability from contamination or spills at its terminal sites like Repauno and Long Ridge[111][114][138] - Capital Structure Risks: The terms of the Series A Preferred Stock could allow holders to elect a majority of the board of directors in an "Event of Noncompliance," such as failure to pay dividends after August 1, 2024[148][149] - Manager & Conflicts of Interest: The company is dependent on its Manager (an affiliate of Fortress). Conflicts of interest exist as the Manager and its affiliates may invest in competing assets. The management agreement was not negotiated at arm's-length[151][154][155] - Common Stock Risks: To preserve its ability to use Net Operating Loss (NOL) carryforwards, the company's certificate of incorporation restricts any person or entity from acquiring 4.8% or more of its outstanding stock[180][181][182] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[201] Cybersecurity The company's cybersecurity program, overseen by the CEO and Manager's ISSC, leverages third-party advisors and NIST, with no material impact on operations to date - Cybersecurity risk management is overseen by the CEO and the Manager's Information Security Steering Committee, which includes the CFO, General Counsel, and CISO[202][203] - The company engages third-party advisors for risk assessments, leveraging standards such as the National Institute of Standards and Technology (NIST) framework[204] - To date, the company reports that cybersecurity threats have not materially affected its business strategy, results of operations, or financial condition[206] Properties The company's key properties include its New York executive offices, Jefferson Terminal, Repauno, and Transtar railroad operations across multiple states - The company's main properties include the Jefferson Terminal in Texas, the Repauno port in New Jersey, and extensive land holdings for its Transtar railroad operations across several states[208] Legal Proceedings The company is involved in ordinary course legal proceedings, not expected to materially affect its financial position or operations - Management does not expect current legal proceedings to have a material adverse effect on the company's business or financial results[209] Mine Safety Disclosures This disclosure item is not applicable to the company's operations - Not applicable[210] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities FTAI Infrastructure Inc.'s common stock trades on NASDAQ, with a declared Q4 2024 dividend, outperforming benchmarks since its 2022 spin-off - The company's common stock trades on NASDAQ under the symbol "FIP"[211] - A cash dividend of $0.03 per share was declared for Q4 2024, payable in March 2025. However, management plans to eliminate future common dividends to preserve liquidity[212] Cumulative Total Return Comparison | Index | 8/1/2022 | 12/31/2022 | 12/31/2023 | 12/31/2024 | | :--- | :--- | :--- | :--- | :--- | | FTAI Infrastructure Inc. | $100.00 | $90.44 | $123.89 | $234.77 | | S&P SmallCap 600 | $100.00 | $94.09 | $109.19 | $118.69 | | Alerian MLP | $100.00 | $105.77 | $133.85 | $166.53 | Management's Discussion and Analysis of Financial Condition and Results of Operations Total revenues increased in 2024, but net loss widened due to a significant asset impairment, while Adjusted EBITDA improved; liquidity is managed by accruing PIK dividends Consolidated Financial Highlights (in thousands) | Metric | 2024 (in thousands) | 2023 (in thousands) | Change '24 vs '23 (in thousands) | | :--- | :--- | :--- | :--- | | Total Revenues | $331,497 | $320,472 | $11,025 | | Total Expenses | $430,993 | $364,847 | $66,146 | | Asset Impairment | $72,336 | $743 | $71,593 | | Net Loss | $(266,064) | $(159,750) | $(106,314) | | Net Loss Attributable to Stockholders | $(294,459) | $(183,736) | $(110,723) | | Adjusted EBITDA (Non-GAAP) | $127,588 | $107,522 | $20,066 | - The increase in total expenses and net loss in 2024 was primarily driven by a $71.6 million asset impairment charge related to the investment in GM-FTAI Holdco LLC in the Sustainability and Energy Transition segment[234][285] - To manage liquidity, management has approved a plan to accrue paid-in-kind (PIK) dividends on its Series A Preferred Stock, which will prevent the payment of future dividends on common stock (excluding the Q4 2024 dividend)[305][382] - The annual goodwill impairment test for the Jefferson Terminal reporting unit indicated its fair value exceeded its carrying value by more than 10% as of October 1, 2024. The analysis used a 9.5% discount rate[329][330] Results of Operations by Segment In FY 2024, Railroad, Jefferson Terminal, and Power and Gas segments showed Adjusted EBITDA growth, while Repauno's loss narrowed and Sustainability's loss widened Adjusted EBITDA by Segment (in thousands) | Segment | 2024 (in thousands) | 2023 (in thousands) | | :--- | :--- | :--- | | Railroad | $84,254 | $78,521 | | Jefferson Terminal | $41,967 | $35,694 | | Repauno | $(5,186) | $(8,061) | | Power and Gas | $40,246 | $34,784 | | Sustainability and Energy Transition | $(9,485) | $(7,253) | | Corporate and Other | $(24,208) | $(26,163) | | Total Adjusted EBITDA | $127,588 | $107,522 | - Railroad: Revenue increased by $10.6 million in 2024 due to higher carloads and rates per car, leading to a $5.7 million increase in Adjusted EBITDA[249][252] - Jefferson Terminal: Revenue grew by $8.5 million from increased crude oil throughput, contributing to a $6.3 million rise in Adjusted EBITDA[259][261] - Sustainability and Energy Transition: Reported a net loss of $88.6 million, driven by a $72.3 million impairment of its investment in GM-FTAI Holdco LLC[283][285] Liquidity and Capital Resources The company manages liquidity by accruing PIK dividends on preferred stock to conserve cash, with operating cash flow turning negative in 2024, while extending debt maturities - Management has approved a plan to accrue paid-in-kind (PIK) dividends on its Series A Preferred Stock to ensure sufficient liquidity to meet obligations over the next twelve months[305] Historical Cash Flow (in thousands) | Cash Flow Data | 2024 (in thousands) | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(15,278) | $5,513 | $(42,690) | | Net cash used in investing activities | $(118,137) | $(147,123) | $(267,266) | | Net cash provided by financing activities | $193,232 | $79,447 | $157,743 | - As of December 31, 2024, the company has total debt obligations of $1.6 billion in principal and $555.3 million in interest, with $50.0 million of principal and $122.0 million of interest due within the next twelve months[317] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations on variable-rate debt, with a 100-basis point increase potentially raising annual interest expense by $0.7 million - The company's main market risk is interest rate risk from variable rate debt agreements tied to indices like SOFR[337][339] - A hypothetical 100-basis point (1%) increase/decrease in the variable interest rate would result in a change of approximately $0.7 million in interest expense over the next 12 months[341] Financial Statements and Supplementary Data This section presents the company's audited financial statements and an unqualified auditor's report, with notes detailing accounting policies, debt, equity, and subsequent events - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2024[345][346] - A critical audit matter identified was the valuation of goodwill for the Jefferson Terminal reporting unit, due to the significant estimation required for forecasted revenue growth, capital expenditures, and the discount rate[352][353] Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Total Assets | $2,374,388 | $2,379,609 | | Total Liabilities | $1,918,032 | $1,641,518 | | Redeemable Preferred Stock | $381,218 | $325,232 | | Total Equity | $75,138 | $412,859 | Notes to Consolidated and Combined Consolidated Financial Statements The notes detail financial statement support, including debt instruments, preferred stock terms, segment performance, and the February 2025 acquisition of Long Ridge Energy & Power - Debt (Note 7): As of Dec 31, 2024, total debt was $1.6 billion, composed of various loans and bonds, including Senior Notes due 2027, Series 2020, 2021, and 2024 bonds for Jefferson Terminal, and the DRP Revolver[468] - Redeemable Preferred Stock (Note 16): The Series A Preferred Stock has a 14.0% dividend rate, which increases to 18.0% if required cash dividends are not paid after August 2024. As of Dec 31, 2024, $122.5 million in PIK dividends had been accrued[577][578] - Subsequent Events (Note 19): In February 2025, the company acquired the remaining 49.9% of Long Ridge Energy & Power LLC. Consideration included cash, a promissory note, and 160,000 shares of new Series B Preferred Stock[597] - Subsequent Events (Note 19): In March 2025, the Repauno segment entered into a new $30.0 million credit agreement[606] Controls and Procedures Management concluded disclosure controls were effective as of December 31, 2024, having remediated a material weakness in goodwill impairment analysis, with an unqualified auditor opinion - Management concluded that internal control over financial reporting was effective as of December 31, 2024[611] - A material weakness identified at the end of 2023, related to the goodwill impairment analysis for the Jefferson Terminal reporting unit, was remediated during 2024[613] - Remediation efforts included developing more detailed cash flow projection models and implementing multi-tiered reviews of key assumptions[613] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2025 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting[628] Executive Compensation Information regarding executive and director compensation is incorporated by reference from the 2025 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting[628] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details the equity compensation plan, with over 4.1 million securities issuable and nearly 25 million available, and other ownership information incorporated by reference Equity Compensation Plan Information as of December 31, 2024 | Plan category | Number of securities to be issued upon exercise | Weighted-average exercise price | Number of securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 4,106,088 | $2.62 | 24,906,155 | - Other information regarding security ownership is incorporated by reference from the definitive proxy statement for the 2025 annual meeting[631] Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2025 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting[632] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the 2025 definitive proxy statement - Information is incorporated by reference from the definitive proxy statement for the 2025 annual meeting[632] Part IV Exhibits This section lists exhibits filed with the Form 10-K, including key agreements, debt indentures, and various material contracts and certifications - Key exhibits filed include the Separation and Distribution Agreement (2.1), Amended and Restated Management and Advisory Agreement (10.1), and the Indenture for the Senior Notes due 2027 (4.1)[634] Form 10-K Summary This section indicates that no summary was provided in the report - None[640]