• FTAI Reports Record Fourth Quarter and Full Year 2018 Results, Dividend of $0.33 per Common Share

    ソース: Nasdaq GlobeNewswire / 27 2 2019 21:15:27   Europe/London

    NEW YORK, Feb. 27, 2019 (GLOBE NEWSWIRE) -- Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) (the “Company”) today reported financial results for the quarter and full year ended December 31, 2018. The Company’s consolidated comparative financial statements and key performance measures are attached as an exhibit to this press release.

        
    Financial Overview   
        
    (in thousands, except per share data)   
    Selected Financial Results(1)Q4’18 FY18 
    Net Cash Provided by Operating Activities$47,282   $133,697 
    Net Income Attributable to Shareholders$1,037   $5,882 
    Basic and Diluted Earnings per Share$0.01   $ 0.07 
         
    Funds Available for Distribution (“FAD”)$57,729
       $181,665 
    Adjusted Net (Loss) Income$(1,675)  $10,128 
    Adjusted Net (Loss) Income per Share$(0.02)  $0.12 
    Adjusted EBITDA$63,128   $222,237 

    (1)  For definitions and reconciliations of Non-GAAP measures, please refer to the exhibit to this press release.

    For the fourth quarter of 2018, our total FAD was $57.7 million. This amount includes $82.9 million from equipment leasing activities, offset by $(1.8) million and $(23.4) million from infrastructure and corporate activities, respectively.

    Joe Adams, FTAI’s CEO, stated “I am pleased to see infrastructure be a positive contributor to EBITDA for the first time, in Q4.  I am also pleased to see our increasingly differentiated and value added aviation leasing business continue to grow while maintaining our profitability goals.”

    Fourth Quarter 2018 Dividend

    On February 27, 2019, the Company’s Board of Directors declared a cash dividend on its common shares of $0.33 per share for the quarter ended December 31, 2018, payable on March 27, 2019 to the holders of record on March 15, 2019.

    Additional Information

    For additional information that management believes to be useful for investors, please refer to the presentation posted on the Investor Relations section of the Company’s website, www.ftandi.com, and the Company’s Annual Report on Form 10-K, when available on the Company’s website. Nothing on the Company’s website is included or incorporated by reference herein.

    Conference Call

    The Company will host a conference call on Thursday, February 28, 2019 at 8:00 A.M. Eastern Time. The conference call may be accessed by dialing 1-877-447-5636 (from within the U.S.) or 1-615-247-0080 (from outside of the U.S.) ten minutes prior to the scheduled start of the call; please reference “FTAI 2018 Fourth Quarter Earnings Call.” A simultaneous webcast of the conference call will be available to the public on a listen-only basis at www.ftandi.com.

    Following the call, a replay of the conference call will be available after 12:00 P.M. on Thursday, February 28, 2019 through midnight Thursday, March 7, 2019 at 1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from outside of the U.S.), Passcode: 9968637.

    About Fortress Transportation and Infrastructure Investors LLC

    Fortress Transportation and Infrastructure Investors LLC owns and acquires high quality infrastructure and equipment that is essential for the transportation of goods and people globally. FTAI targets assets that, on a combined basis, generate strong and stable cash flows with the potential for earnings growth and asset appreciation. FTAI is externally managed by an affiliate of Fortress Investment Group LLC, a leading, diversified global investment firm.

    Cautionary Note Regarding Forward-Looking Statements

    Certain statements in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements, many of which are beyond the Company’s control. The Company can give no assurance that its expectations will be attained and such differences may be material. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. For a discussion of some of the risks and important factors that could affect such forward-looking statements, see the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available on the Company’s website (www.ftandi.com). In addition, new risks and uncertainties emerge from time to time, and it is not possible for the Company to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based. This release shall not constitute an offer to sell or the solicitation of an offer to buy any securities.

    For further information, please contact:

    Alan Andreini
    Investor Relations
    Fortress Transportation and Infrastructure Investors LLC
    (212) 798-6128
    aandreini@fortress.com

    Withholding Information for Withholding Agents

    This announcement is intended to be a qualified notice as provided in the Internal Revenue Code (the “Code”) and the Regulations thereunder. For U.S. federal income tax purposes, the dividend declared in February 2019 will be treated as a partnership distribution.  For tax withholding purposes, the per share distribution components are as follows:

    Distribution Components 
    Non-U.S. Long Term Capital Gain$ 
    U.S. Portfolio Interest Income(1)$0.2200 
    U.S. Dividend Income(2)$ 
    Income Not from U.S. Sources(3)$0.1100 
    Distribution Per Share
    $0.3300 

    (1) Eligible for the U.S. portfolio interest exemption for any holder not considered a 10-percent shareholder under §871(h)(3)(B) of the Code.

    (2) This income is subject to withholding under §1441 of the Code.

    (3) This income is not subject to withholding under §1441 or §1446 of the Code.

    For U.S. shareholders: In computing your U.S. federal taxable income, you should not rely on this qualified notice, but should generally take into account your allocable share of the Company’s taxable income as reported to you on your Schedule K-1.


    Exhibit - Financial Statements

     
    FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

    CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
    (Dollar amounts in thousands, except share and per share data)
     
      Three Months Ended December 31, Year Ended December 31,
      2018 2017(1) 2018 2017
    Revenues        
    Equipment leasing revenues $67,035  $48,613  $253,039  $170,000 
    Infrastructure revenues 70,865  12,817  126,839  47,659 
    Total revenues 137,900  61,430  379,878  217,659 
             
    Expenses        
    Operating expenses 70,675  26,360  167,514  92,385 
    General and administrative 4,955  3,955  17,126  14,570 
    Acquisition and transaction expenses 2,234  2,242  6,968  7,306 
    Management fees and incentive allocation to affiliate 3,646  4,203  15,726  15,732 
    Depreciation and amortization 39,501  25,728  136,354  88,110 
    Interest expense 17,984  17,535  57,854  38,827 
    Total expenses 138,995  80,023  401,542  256,930 
             
    Other income (expense)        
    Equity in losses of unconsolidated entities (410) (140) (1,008) (1,601)
    (Loss) gain on sale of assets, net (1,342) 11,555  3,911  18,281 
    Loss on extinguishment of debt       (2,456)
    Asset impairment        
    Interest income 127  106  488  688 
    Other income 1,867  893  3,941  3,073 
    Total other income 242  12,414  7,332  17,985 
             
    Loss before income taxes (853) (6,179) (14,332) (21,286)
    (Benefit) provision for income taxes (208) 369  1,372  1,954 
    Net loss (645) (6,548) (15,704) (23,240)
    Less:  Net loss attributable to non-controlling interests in consolidated subsidiaries (1,682) (9,558) (21,586) (23,374)
    Net income attributable to shareholders $1,037  $3,010  $5,882  $134 
             
    Basic and Diluted Earnings per Share:        
    Basic $0.01  $0.04  $ 0.07  $- 
    Diluted $0.01  $0.04  $           0.07  $- 
    Weighted Average Shares Outstanding:        
    Basic 85,065,125  75,771,738  83,654,068  75,766,811 
    Diluted 85,068,966  75,772,867  83,664,833  75,766,811 

    (1) Results of operations for the three months ended December 31, 2017 include a $5.9 million out of period adjustment, to interest expense, including non-controlling interest of $2.3 million, which primarily relates to interest previously capitalized that should have been expensed ratably during the first nine months of 2017.  We do not believe this out of period adjustment is material to our financial position or results of operations for any prior periods.

     
    FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

    CONSOLIDATED BALANCE SHEETS (Unaudited)
    (Dollar amounts in thousands, except share and per share data)
     
     December 31,
     2018  2017 
    Assets   
    Cash and cash equivalents$99,601  $59,400 
    Restricted cash21,236  33,406 
    Accounts receivable, net53,789  31,076 
    Leasing equipment, net1,432,210  1,074,130 
    Finance leases, net18,623  9,244 
    Property, plant, and equipment, net708,853  489,949 
    Investments40,560  42,538 
    Intangible assets, net38,513  40,043 
    Goodwill116,584  116,584 
    Other assets108,809  59,436 
    Total assets$2,638,778  $1,955,806 
        
    Liabilities   
    Accounts payable and accrued liabilities$112,188  $68,226 
    Debt, net1,237,347  703,264 
    Maintenance deposits158,163  103,464 
    Security deposits38,539  27,257 
    Other liabilities38,759  18,520 
    Total liabilities1,584,996  920,731 
        
    Commitments and contingencies   
        
    Equity   
    Common shares ($0.01 par value per share; 2,000,000,000 shares authorized; 84,050,889 and 75,771,738 shares issued
    and outstanding as of December 31, 2018 and December 31, 2017, respectively)
    840  758 
    Additional paid in capital1,029,376  985,009 
    Accumulated deficit(32,817) (38,699)
    Accumulated other comprehensive income   
    Shareholders' equity997,399  947,068 
    Non-controlling interest in equity of consolidated subsidiaries56,383  88,007 
    Total equity1,053,782  1,035,075 
    Total liabilities and equity$2,638,778  $1,955,806 
            


     
    FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
    (Dollar amounts in thousands, unless otherwise noted)
     
     Year Ended December 31,
     20182017 
    Cash flows from operating activities:   
    Net loss$(15,704) $(23,240)
    Adjustments to reconcile net loss to cash provided by operating activities:   
    Equity in losses of unconsolidated entities1,008  1,601 
    Gain on sale of assets, net(3,911) (18,281)
    Security deposits and maintenance claims included in earnings(6,323) (60)
    Loss on extinguishment of debt  2,456 
    Equity-based compensation901  1,343 
    Depreciation and amortization136,354  88,110 
    Gain on settlement of liabilities  (1,093)
    Asset impairment   
    Change in current and deferred income taxes649  227 
    Change in fair value of non-hedge derivative(5,523) (1,022)
    Amortization of lease intangibles and incentives26,659  8,306 
    Amortization of deferred financing costs5,430  4,202 
    Operating distributions from unconsolidated entities   
    Bad debt expense1,771  701 
    Other(4) 732 
    Change in:   
     Accounts receivable(23,340) (12,001)
     Other assets(26,212) 6,475 
     Accounts payable and accrued liabilities30,471  10,266 
     Management fees payable to affiliate1,820  899 
     Other liabilities9,651  (1,124)
    Net cash provided by operating activities133,697  68,497 
        
    Cash flows from investing activities:   
    Investment in notes receivable(912)  
    Investment in unconsolidated entities and available for sale securities(1,115) (30,309)
    Principal collections on finance leases1,981  473 
    Acquisition of leasing equipment(497,988) (425,769)
    Acquisition of property, plant and equipment(229,963) (116,031)
    Acquisition of lease intangibles(11,396) (10,149)
    Purchase deposit for aircraft and aircraft engines(10,150) (12,299)
    Proceeds from sale of finance leases   
    Proceeds from sale of leasing equipment44,062  91,130 
    Proceeds from sale of available-for-sale securities  30,238 
    Proceeds from sale of property, plant and equipment23  51 
    Proceeds from deposit on sale of leasing equipment240  400 
    Return of deposit on sale of leasing equipment(400)  
    Return of capital distributions from unconsolidated entities2,085   
    Net cash used in investing activities$(703,533) $(472,265)
            


     
    FORTRESS TRANSPORTATION AND INFRASTRUCTURE INVESTORS LLC

    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
    (Dollar amounts in thousands, unless otherwise noted)
     
     Year Ended December 31,
     20182017 
    Cash flows from financing activities:   
    Proceeds from debt$750,980  $567,191 
    Repayment of debt(218,819) (125,223)
    Payment of other liabilities to non-controlling interest holder   
    Payment of deferred financing costs(3,055) (3,377)
    Receipt of security deposits9,264  7,290 
    Return of security deposits(1,775) (3,231)
    Receipt of maintenance deposits53,645  27,049 
    Release of maintenance deposits(25,582) (6,270)
    Proceeds from issuance of common shares, net of underwriter's discount148,318   
    Common shares issuance costs(820)  
    Capital contributions from non-controlling interests  35 
    Capital distributions to non-controlling interests  (254)
    Settlement of equity-based compensation  (74)
    Purchase of non-controlling interest shares(3,705)  
    Cash dividends(110,584) (100,058)
    Net cash provided by (used in) financing activities597,867  363,078 
        
    Net increase (decrease) in cash and cash equivalents and restricted cash28,031  (40,690)
    Cash and cash equivalents and restricted cash, beginning of period92,806  133,496 
    Cash and cash equivalents and restricted cash, end of period$120,837  $92,806 
        
    Supplemental disclosure of cash flow information:   
    Cash paid for interest, net of capitalized interest$43,636  $25,068 
    Cash paid for taxes721  1,726 
        
    Supplemental disclosure of non-cash investing and financing activities:   
    Proceeds from borrowings of debt511  108,339 
    Repayment and settlement of debt  (102,352)
    Acquisition of leasing equipment(14,263) (35,332)
    Acquisition of property, plant and equipment(17,587) (37,281)
    Financing of property, plant and equipment   
    Settled and assumed security deposits3,793  3,312 
    Billed, assumed and settled maintenance deposits24,518  37,292 
    Deferred financing costs(4,500) (8,802)
    Non-cash contribution of non-controlling interest  1,261 
    Equity compensation to non-controlling interest892  1,343 
    Change in fair value of cash flow hedge   
    Transfer of non-controlling interest7,225  (2,798)
    Issuance of common shares301   
          

    Key Performance Measures

    The Chief Operating Decision Maker (“CODM”) utilizes Adjusted Net Income (Loss) and Adjusted EBITDA as performance measures.

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

    The following table presents our consolidated reconciliation of net income attributable to shareholders to Adjusted Net (Loss) Income for the three months ended and years ended December 31, 2018 and December 31, 2017:

     Three Months Ended
    December 31,
     Year Ended
    December 31,
    (in thousands)2018 2017 2018 2017
    Net income attributable to shareholders$1,037  $3,010  $5,882  $134 
    Add: (Benefit) provision for income taxes(208) 369  1,372  1,954 
    Add: Equity-based compensation expense232  648  901  1,343 
    Add: Acquisition and transaction expenses2,234  2,242  6,968  7,306 
    Add: Losses on the modification or extinguishment of debt and capital lease obligations      2,456 
    Add: Changes in fair value of non-hedge derivative instruments(6,090) 14  (5,523) (1,022)
    Add: Asset impairment charges       
    Add: Pro-rata share of Adjusted Net Loss from unconsolidated entities (1)(604) (2) (1,196) (1,601)
    Add: Incentive allocations(146) 514  407  514 
    Less: Cash payments for income taxes189  (693) (721) (1,726)
    Less: Equity in losses of unconsolidated entities410  140  1,008  1,601 
    Less: Non-controlling share of Adjusted Net Income (2)1,271  (55) 1,030  (558)
    Adjusted Net (Loss) Income$(1,675)  $6,187  $10,128  $10,401 

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

    (2) Includes the following items for the three months ended December 31, 2018 and 2017: (i) equity-based compensation of $35 and $51 and (ii) (benefit) provision for income tax of $(57) and $4 and (iii) changes in fair value of non-hedge derivative instruments of $(1,248) and $0, less (iv) cash tax payments of $1 and $0, respectively.

    Includes the following items for the years ended December 31, 2018 and 2017: (i) equity-based compensation of $131 and $169, (ii) (benefit) provision for income tax of $(47) and $16 and (iii) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, less (iv) cash tax payments of $15 and $31, respectively.

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

    Adjusted EBITDA is defined as net income attributable to shareholders, adjusted (a) to exclude the impact of provision for income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

    The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA for the three months ended and years ended December 31, 2018 and December 31, 2017:

     Three Months Ended December 31, Year Ended December 31,
    (in thousands)2018 2017 2018 2017
    Net income attributable to shareholders$1,037  $3,010  $5,882  $134 
    Add: (Benefit) provision for income taxes(208) 369  1,372  1,954 
    Add: Equity-based compensation expense232  648  901  1,343 
    Add: Acquisition and transaction expenses2,234  2,242  6,968  7,306 
    Add: Losses on the modification or extinguishment of debt and capital lease obligations      2,456 
    Add: Changes in fair value of non-hedge derivative instruments(6,090) 14  (5,523) (1,022)
    Add: Asset impairment charges       
    Add: Incentive allocations(146) 514  407  514 
    Add: Depreciation and amortization expense (3)48,531  28,842  163,013  96,417 
    Add: Interest expense17,984  17,535  57,854  38,827 
    Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (4)(27) (34) 359  (243)
    Less: Equity in losses of unconsolidated entities410  140  1,008  1,601 
    Less: Non-controlling share of Adjusted EBITDA (5)(829) (5,491) (10,004) (12,763)
    Adjusted EBITDA (non-GAAP)$63,128  $47,789  $222,237  $136,524 


    (3) 
    Includes the following items for the three months ended December 31, 2018 and 2017: (i) depreciation and amortization expense of $39,501 and $25,728, (ii) lease intangible amortization of $2,675 and $1,221 and (iii) amortization for lease incentives $6,355 and $1,893, respectively.

    Includes the following items for the years ended December 31, 2018 and 2017: (i) depreciation and amortization expense of $136,354 and $88,110, (ii) lease intangible amortization of $8,588 and $4,716 and (iii) amortization for lease incentives of $18,071 and $3,591, respectively.

    (4)  Includes the following items for the three months ended December 31, 2018 and 2017: (i) net loss of $463 and $187, (ii) interest expense of $174 and $135 and (iii) depreciation and amortization expense of $262 and $18, respectively.

    Includes the following items for the years ended December 31, 2018 and 2017: (i) net loss of $1,196 and $1,786, (ii) interest expense of $477 and $785, and (iii) depreciation and amortization expense of $1,078 and $758, respectively.

    (5)  Includes the following items for the three months ended December 31, 2018 and 2017: (i) equity based compensation of $35 and $51, (ii) (benefit) provision for income taxes of $(57) and $4, (iii) interest expense of $899 and $3,542, (iv) depreciation and amortization expense of $1,200 and $1,894 and (iv) changes in fair value of non-hedge derivative instruments of $(1,248) and $0, respectively.

    Includes the following items for the years ended December 31, 2018 and 2017: (i) equity based compensation of $131 and $169, (ii) (benefit) provision for income taxes of $(47) and $16, (iii) interest expense of $4,722 and $5,030, (iv) depreciation and amortization expense of $6,297 and $7,144, and (v) changes in fair value of non-hedge derivative instruments of $(1,099) and $404, respectively.

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

    We define FAD as: Net Cash Provided by Operating Activities plus principal collections on finance leases, proceeds from sale of assets, and return of capital distributions from unconsolidated entities, less required payments on debt obligations and capital distributions to non-controlling interest, and excluding changes in working capital.

    The following table sets forth a reconciliation of Net Cash Provided by Operating Activities to FAD for the years ended December 31, 2018 and 2017:

     Year Ended December 31,
    (in thousands)2018 2017
    Net Cash Provided by Operating Activities$133,697  $68,497 
    Add: Principal Collections on Finance Leases1,981  473 
    Add: Proceeds from Sale of Assets44,085  121,419 
    Add: Return of Capital Distributions from Unconsolidated Entities2,085   
    Less: Required Payments on Debt Obligations (1)(7,793) (8,368)
    Less: Capital Distributions to Non-Controlling Interest  (254)
    Exclude: Changes in Working Capital7,610  (4,515)
    Funds Available for Distribution (FAD)$181,665  $177,252 

    (1)  Required payments on debt obligations for the year ended December 31, 2018 exclude $175,000 repayment of the Revolving Credit Facility and $36,026 repayment of the CMQR Credit Agreement, and for the year ended December 31, 2017 exclude $100,000 repayment of the Term Loan, $95,000 repayment of the Revolving Credit Facility and $21,855 repayment of the CMQR Credit Agreement.

    The following tables set forth a reconciliation of Net Cash Provided by Operating Activities to FAD for the three months ended and year ended December 31, 2018:

     Three Months Ended December 31, 2018
    (in thousands)Equipment Leasing Infrastructure Corporate Total
    Funds Available for Distribution (FAD)$82,924  $(1,769) $(23,426) $57,729 
    Less: Principal Collections on Finance Leases      (1,323)
    Less: Proceeds from Sale of Assets      (13,598)
    Less: Return of Capital Distributions from Unconsolidated Entities      (1,213)
    Add: Required Payments on Debt Obligations      1,562 
    Add: Capital Distributions to Non-Controlling Interest       
    Include: Changes in Working Capital      4,125 
    Net Cash Provided by Operating Activities      $47,282 


     Year Ended December 31, 2018
    (in thousands)Equipment Leasing Infrastructure Corporate Total
    Funds Available for Distribution (FAD)$289,777  $(34,177) $(73,935) $181,665 
    Less: Principal Collections on Finance Leases      (1,981)
    Less: Proceeds from Sale of Assets      (44,085)
    Less: Return of Capital Distributions from Unconsolidated Entities      (2,085)
    Add: Required Payments on Debt Obligations      7,793 
    Add: Capital Distributions to Non-Controlling Interest       
    Include: Changes in Working Capital      (7,610)
    Net Cash Provided by Operating Activities      $133,697 

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

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

    • FAD does not give pro forma effect to prior acquisitions, certain of which cannot be quantified.
    • While FAD reflects the cash inflows from sale of certain assets, FAD does not reflect the cash outflows to acquire assets as the Company relies on alternative sources of liquidity to fund such purchases.
    • FAD does not reflect expenditures related to capital expenditures, acquisitions and other investments as the Company has multiple sources of liquidity and intends to fund these expenditures with future incurrences of indebtedness, additional capital contributions and/or future issuances of equity.
    • FAD does not reflect any maintenance capital expenditures necessary to maintain the same level of cash generation from our capital investments.
    • FAD does not reflect changes in working capital balances as management believes that changes in working capital are primarily driven by short term timing differences, which are not meaningful to the Company’s distribution decisions.
    • Management has significant discretion to make distributions, and the Company is not bound by any contractual provision that requires it to use cash for distributions.

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

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