Good day, ladies and gentlemen, and welcome to the Fortress Transportation and Infrastructure Investors' Q2 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Alan Andreini, Managing Director. Sir, you may begin.

Thank you. I would like to welcome you to the Fortress Transportation and Infrastructure second quarter 2017 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 in our press release on our Web site, 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 webcast. In addition, we will be discussing some non-GAAP financial measures during the call today. 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. These statements by their nature are uncertain and may differ materially from actual results. We encourage you to review the disclaimers in our press release and investor presentation regarding 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 the call, I am pleased to announce our ninth dividend as a public company and our 24th consecutive dividend since inception. The dividend of $0.33 per share will be paid on August 28 based on a shareholder record date of August 18. Now let's start with the numbers for the quarter. The key metrics that we look at are adjusted EBITDA and FAD, or Funds Available for Distribution. Adjusted EBITDA for Q2 2017 was $28.8 million compared to Q1 of this year of $22.1 million, and Q2 of last year of $14 million. FAD was $34.6 million in Q2 of 2017 versus $21.7 million in Q1 of 2017 and $13.3 million in Q2 of last year. During the second quarter, the $34.6 million FAD number was comprised of $54.5 million from our equipment leasing portfolio, negative $6.1 million from our infrastructure business, and negative $13.8 million from corporate. The negative infrastructure number was higher than Q1 of this year, and was primarily due to reduced throughput reduction at Jefferson due to construction activity on the terminal. The increase in the negative FAD at corporate compared to Q1 was primarily due to our first full quarter of interest expense from the public bond deal that we did in Q1 of this year, and several one-time deal expenses. Finally, $20.4 million of the $54.5 million for the equipment FAD was the result of a sale of three airframes and six engines for a gain of $2.0 million. Once we normalized the Q2 numbers, one factor is clear, our ability to generate adjusted EBITDA and FAD on a run rate basis continues to strengthen and I see that growth not only continuing but accelerating. Let's turn to Aviation first, our largest business segment. Aviation had another excellent quarter.…

Thanks Joe. Operator, you may now open the call to Q&A. Thank you. [Operator Instructions] Our first question comes from the line of Justin Long of Stephens. Your line is open.

Thanks, good morning and congrats on the quarter. So first thing, I wanted to ask about, I was wondering if you could expand a little bit more on the pipeline and storage opportunities at Jefferson, what's the total amount of capital that could potentially be deployed towards these opportunities and is there any way at this point to ballpark the incremental FAD this could generate for the business?

Sure well it's still early to pinpoint numbers but I'll give you some thoughts on the approximate amounts and if you think about the pipeline opportunity current as I mentioned we've got three or four different options for under consideration and the pipelines for both supply crude in as well as be able to transfer and take crude out to a variety of different locations including export opportunities. So it's a big strategic initiative and it's very important for the long term of the terminal and it enables that growth that I referred to but ballpark I would say pipelines, if you take the three or four of them that might be in the range of about $150 million and then if you think about storage in terms of chunks and others, you don't get 20 million barrels at once but say that connected to the pipeline investment it might be three million barrels of additional storage. On a good ballpark is $50 a barrel, so you're talking about $150 million there, so total investment might be in the range of 300 or approximately that and I think the incremental contribution from that should be in the $40 million to $50 million a year range. That's kind of the that's the rough math that we think is available but it's obviously a big caveat because it is early and it will be more precise as we go forward.

That's really helpful and I think you mentioned the time for construction for the pipeline would be 12 to 18 months for the storage opportunity, how should we think about the timing around construction for that?

It's short, little bit shorter than that. So nine to 12 months as long it doesn't rain as much as it's been raining. So when it gets wet, it's hard to target throughout construction but nine to 12 months is a good ballpark.

Okay, great and as you try to lock down contracts for these pipeline and storage opportunities, could you just talk through the competitive advantages you feel that Jefferson has relative to other terminal locations, I just want to hear some of the key points that you would make as you enter these contract negotiations with the refiners?

Sure I mean when you making of it, you're talking about connectivity and proximity and then I think a big one additionally is that there's a lot of congestion if you think about Houston and the Houston ship channel, so there is a big savings for people to use Port Arthur and Beaumont because you don't have the demurrage charges and the congestion that you have in the Houston market. So there's a bit of Port Arthur versus Houston, so that's one sort of competitive dynamic which is favorable to the expansion of our terminal and then the others are connectivity and proximity and so if you think of that that's what we're trying to achieve with the pipeline connectivity to have the same connectivity as other terminals which we believe is very doable and then proximity you know our locations, so we're very -- we're somewhere between five-iron and nine-iron from Exxon and and then we have the opportunity to easily connect to the other major refineries as well as to the refineries to the east of us in the Lake Charles, St. James and ultimately possibly do reverse the loop the ability to connect directly to that which would give you VLCC access. So we see that connectivity is something that we will we should be as good as anyone else ultimately and then obviously proximity and then the advantage versus Houston and the other big reasons.

Okay and maybe one last quick one on this topic and then I'll pass it on that how should we think about the potential length of contract on this front when you assess these pipeline and storage opportunities, I'm just curious what type of commitment you're hoping to get before you pull the trigger on deploying capital?

The vast majority of these contracts are in the three to five year range and that's been the pattern for both sides to because it provides the owner with historically has provided with re-pricing upside, so it's been a sort of a sweet spot for the two, the two sides to sort of find an area where you have enough coverage but you not locked yourself into something that might be below market in a few years.

Perfect, that's great color, and I appreciate the time.

Thanks.

Thank you. Our next question comes from the line of Devin Ryan of JMP Securities. Your line is open.

Hey great, good morning, Joe. How are you?

Good.

Good. So maybe spend a minute here on aviation, appreciate all the updates that you provided in the other $220 million of pro-forma FAD, obviously it's good to see just kind of mechanically on timing period imbalances were quite a bit higher than the average balances, I'm just trying to think about the contribution kind of coming out of the quarter from the business, how much of the $747 million of assets are on lease now and then just thinking about kind of lease terms like what type of trends are you seeing there I think you provide would be helpful?

Sure. So I think whenever you add assets, it's difficult to get a lot of the contribution in the quarter in which you add it. So I would say that it's more weighted towards the end of the quarter in terms of when it actually produces and which speaks well for Q3 frankly. So that is good, I think trend wise we had mentioned last year that we've been taking advantage of a strong market to push out the lease terms on our aircraft portfolio which I believe today now averages about 42 months in average duration and pro forma for the closings some of the LOIs and extensions we have, it increased about 45 or 46 months. So that's very good market as I mentioned is it's hard to think they could be better, so really strong aviation market globally it's obviously there is always issues in certain countries in time to time but the core fleet that we're focused on is in very, very is in a great, great position and you also have support from the e-commerce market lot of the aircraft that we own are freighters convertible, if you think about the 767, 757, 737-800 now those aircrafts have a very strong from both U.S. e-commerce providers, if you follow Amazon or Alibaba and the Chinese market is growing very, very rapidly. So I feel about the longevity and where our focus is on the engines, so we don't care whether it's passenger or freighter, we just wanted to fly for a long time and I think the outlook for that is exceptionally good, it's knock on wood.

Okay, that's great. So maybe just follow up on that take a step back here, so the long-term opportunity you sound may be more excited incrementally today, how should we think about the pace of capital we see the LOIs and then there is still elevated but you had the bump up the target for 2017 and it seems like the longer term opportunity for FI is bigger in this segment, so how do you think about kind of the end state here but where that goes to and then just a pace of deployment kind of beyond the current LOIs as we maybe look into next year, it would seem that that maybe should remain elevated, if the backup that you talk about continues?

Yes as I said before, I never like to set a budget for new investments because that's a bad way around investment business, it's always subject to pricing but this year as I said we think will add $400 million of net new assets in the markets that also as I mentioned is growing today it's $65 billion of eligible assets growing to $90 billon so, I'm pretty optimistic that, that 12 to 20 year aircraft investment, universe is, is going to get bigger in our deals. That we're looking at are bigger, if you just look at some of the numbers on that the today, 737 market is probably that in the 12 to 20 year range is about 1,700 aircraft. And that will almost double over the next 10 years as those in those planes are already flying so, this is not deliveries or in the air. The 12 year old aircraft is 10 years from now, today is two years old so, it actually in service so, the that's going to happen and on the A320 market it's roughly 2000 airplanes going to 4000. So that it looks pretty, pretty good to me. That we'll be seeing a lot of deal flow and bigger deal flow and well at the same time not changing our pricing parameters are return requirements.

Okay, all right I forgot to leave it there someone else can. Thanks.

Thanks.

Thank you. Our next question comes from Ariel Rosa of Bank of America. Your line is open.

Good morning guys. Sounds like lot of exciting things going on here. Just to start what's the prospect for potentially raising the dividend given all these developments.

Well, I think last call I said that we wouldn't visit that topic until the end of this year and I'm still we're sticking with that so, we wouldn't look to increase the dividend until early next year.

Okay, fair enough so, it sounds like and, I know there's been addressed on past calls but obviously in terms of the long term outlook there's a pretty broad array of opportunities but as we look to kind of 2018 or at least the next 12 months. Obviously aviation continues to be a larger and larger part of the fact contribution is there a point at which you get kind of concerned about that and maybe if you could speculate for 2018 what the fair contribution. Looks like across, across the business by segment.

Well, I think the two numbers are given is that $220 million of run rate fair from aviation and that's assuming no additional investments behind signed LOIs which I don't think will happen but that, that's what that number is based on and then the other is the $15 million to $20 million of run rate EBITDA from Jefferson and that obviously if we're going to grow the business the way we expect to should also go up and that that's really the extent of the guidance we've given so far.

Okay, fair enough and then looking at the Jefferson pipeline deal could you just discuss a little bit the economics around that in terms of how you guys get paid and what are the value-add services that you're providing is that is it totaling arrangement similar to the crude by rail deals.

Largely yes, when the storage you get paid by storage and that's a per month, per barrel amount that people pay and as I mentioned if you look at the Gulf Coast about 70% of the storage in that areas provided by third party providers like Jefferson and so got 30% of the storage needs the refinery has on their property or does themselves and that number actually has not been growing much over the last 10 years. The 70% number has been growing. With the growth of the, of the industry so the big, big part of the revenue is, is storage which I mentioned is typically on three to five year contracts. And then there's a number of other services that you provide there going being blending so, you can combine multiple types of crude to give the refinery the spec that they need and there's also an immediate story so, refineries often will produce over produce certain intermediate which they need to store until the refinery is the demand to put them back into the refineries there. Then lastly there's a very significant growth in refined products storage so, outbound refined product in places like Mexico, South America, Africa, Europe have been growing significantly and Gulf Coast refineries are keenly focused on that. As they have a big competitor advantage in this part of the world so, that all of those things grow together and as I mentioned with Exxon and Motiva intending to expand their capacity. There's significant need for additional storage just from that alone.

Okay, that's really helpful and good could color around that, just the last question I'll ask before turn it over, given, the economics around the, around the aviation leasing market sound really positive and sounds like there are a lot of positive tailwinds there. Any concerns about increased competition there are potentially eroding some of those returns have you seen any of that, you've seen new entrants in the market just if you could kind of discuss that briefly.

Sure. I mean I always worry that competition as I mentioned in every call but so far most of the new competition is focusing on the newer aircraft and that's where I think this been significant price and yield competition and until large extent a lot of those providers are undifferentiated so, that they don't do anything differently than one another is a cap it's more of a cost of capital business so our strategy focusing on the engine. We now have over hundred engines, pretty big market presence and in a clear strategy if people know what we do and know what were about and I think that's a significant lead and advantage in and of itself and then as I mentioned we're very focused on building up these other competitors damages which will be proprietary and exclusive. SO if we are successful in some of these advanced engine repair initiatives, I don't think anybody will be able to copy us as hard as they might try. So that's what we're trying to do and I think we've got a good lead but I never, I'm never going to assume that somebody won't try to do what we're doing.

Okay, great that, that makes sense. Thanks for the time.

Yes.

Thank you. Our next question comes from the line of Christian Wetherbee of Citigroup Group. Your line is open.

Good morning. This is [indiscernible] on for Chris. Joe, I just wanted to pick up on the last question we talked about aviation in the ramp. Just looking to next year and longer term, as we see the business ramp up I come want to get a sense of the cadence of the, the equipment sales portion of the fab clearly this has been step in the implying, healthy rate for the back half of this year but how should we think about that going forward in this business evolve so, that grow in line does that become a little bit less of a percentage of the fact contribution and the other parts ramp up just wanted to get some color in there.

Yes, it's a really hard thing to forecast because it's generally, we do that on a asset by asset basis and it's opportunistic if we see a price that we think is, is a price that we wouldn't pay ourselves and we like to and I think is that running a business one of the things I've always liked is if you're not selling things periodically you really don't know what things are worse so, that to me as a discipline that, that will always have in the company and I think is important way to run, run the business. So getting back to your question it's the numbers are, are increasing on sales so, which I think of as a good thing how long will that last I don't know. But it's definitely is going to be higher than it has been in the past and will always report to people separately so, it's the South they were including a run rate number but we'll break it out for the people and I think it's a healthy thing.

Okay. That's helpful. And I know you've said that you're going to really are going to do it in discussion if you end of the year and then potentially raise beginning of next year. I just wanted to get a little bit of color on how you think about market yields as you consider that we've seen the market yields come in across the board and transport infrastructure and energy related yield instruments on the equity side. Little bit of a stall out in the last few months but as you look to 2018, how important is it back in the discussion to you in terms of the timing of dividend increase and also the magnitude.

I think it's less about us trying to figure out what the market wants and more about running having a clear policy and as we stated originally we want to have, two to one coverage and when we feel that we feel like that the nice balance of retaining capital and paying our capital and so that, that will drive the decision more than what we think the market reaction would be.

Okay, that makes sense. And I guess just a final question sort of smaller point on railroad. And we saw revenues kind of flat and revenues down and then EBITDA margin basically flat for the quarter when for some other short lines at 2Q at short lines are necessarily enjoy with us as far as [indiscernible]. That could be coming in the back half, do you think that's the market dynamic here as well. I know it's a smaller contribution with, as w think about ramp and back half getting feel like sort of the normalized run rate fill through like Q2 bit of an [indiscernible] there I was wondering if you could just speak to that little bit.

Yes, it was little soften, we saw it in even in our just one little rail road so but so far in Q3 the revenues actually have been pretty strong so, it doesn't seem like it was a sustained, slowdown it may have just been one of those corrections inventory exceeded something I don't know if it was definitely a little bit of a soft spot for us and probably for the industry as well but it is, it is come back. So and I'm not, worried about that we released rail road American and we have rail road always, you had some they were up and some that were down and it depends on your commodity. The rail road is fundamentally a good short line and diversified revenue mix so, I'm not worried about it.

Okay, and that's just one last one turning to Jefferson for the foreign product opportunity kind of marrying up to be acquisition and the target landscape you have out there. Do you see in short line opportunities or real opportunities to further expand into Mexico to move refined products? I know you talked about the pipe opportunity and it was on the transport and other opportunities but terms of building short line maybe out of Texas and across the border is that something that's prospectively in the mix or already sort of occupied other entities.

Well, I mean moving, moving that product into Mexico is in either case, yes or certain that I don't see competing with that that would be quite a big initiative and there are some short lines down in that region or terminals that we've looked at that could be add-ons. That would high end of the Mexican strategy of refined products but not a main line competition with the big guys.

Understand, they came more about the smaller, the small shorter lump a wholes down there. Appreciate the time and thanks very much.

Thank you. Our next question comes from the line of Robert Dodd of Raymond James. Your line is open.

Hi guys. On Jefferson honestly - I mean, time going on I got to say not, not some of those things not the kind of thing I would have and I would say I'm not an expert on that would have envisioned three, four, five years ago. Is the, the possibility that's maybe some of the remediation work at the core facility to cope with all these opportunities in addition to just, to expanding, the offering but some of that the core components of those, easily adjustable or is that going to be a material amount of work necessary and kind of the core. And is there any risk there with disruption as that's ongoing if it.

No everything is functioning very well not a fact we have we're going to have an Investor Day on October 17 at the terminals to everyone can see for themselves but at that point we hope we'll have the construction will be largely completed will have refined products and ethanol both operating and, and crude so there's nothing as part of the core that needs adjusting in anyway.

Okay. Got it. Thank you and then just on the capital needs only 70 huge opportunities as you said in Jefferson you may be $300 million in incremental capital report of a couple Years and you mentioned obviously needing more financing that that's opportunities that, is equity likely to be a component of those financing needs. At least the large growth in, in capital between aviation and Jefferson that growth is impressive.

Well we have as I mentioned, we have lots of options, we've gotten ourselves well positioned to access multiple different markets, we haven't made any decisions yet about how we finance it, obviously we have been conservative in the way we put leverage on the company, so we've had a good mix in a good position right now to be able to think about all those different choices and obviously we do have many financing many capital deployment opportunities but we also have a lot of financing opportunities in Jefferson, I mentioned we have a number of that opportunities to finance Jefferson or power plant with partners, so lots of choices and no decisions.

Okay, thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Nick Chen of Alembic Global Advisors. Your line is now open.

Hi Joe and Alan, thanks for taking our questions this morning and congrats on a nice quarter. Just digging a little bit deeper into the last question about financing, I was also wondering is there any chance that you guys would look at partners for some of the projects or some sort of JV set up like Green Plains, are you really just going to be considering the debt and equity markets?

No and I mentioned specifically on the power plant that's something we're thinking about that Hannibal, so absolutely we for the - if we have the right partner and right structure we're very open to that.

Excellent and then it's a little bit outside of my purview but we've been following some commentary on potential sanctions against Venezuela right now and up potential shortage of heavy crude for fires in the area, have you guys had any conversations about that or do you have any color on how that might benefit Jefferson upon it?

We're following it, I'm not sure we have any better opinion and anybody else that writes articles every day. So it's most people do not think that sanctions will be applied. So but there's obviously there is speculation, if you did have a restriction of Venezuelan crude then very likely you'd have to fill that in with more Canadian crude which for Jefferson is a good thing. But that's so yes it's a little bit forward loop and it's not something that as I said most people believe will happen, so we just have to wait and see.

Got it. And then obviously there's a lot of stuff taking place around Jefferson right now in terms of refinery projects, you talked about some of the big ones that you guys are tracking?

Well the two biggest ones have been announced are the Exxon -- earlier this year announced they were going to invest $20 billion in the Gulf of Mexico, most of which would go into Beaumont, so Beaumont is where we are, that's a good thing when we use the word most. So that's significant, they have not put out detailed plans as to what that would be at. So we can't do anything more than just report that but that's that was -- that's a big development for us and then the other announcement was also $20 billion by Motiva, Motiva is now separated from Shell, it was originally a joint venture with Shell and Saudi Aramco, Motiva refinery is now part of Saudi Aramco and Saudi Aramco has also come out and said they will no longer require the refinery to buy Saudi crude, so the crude sourcing for the Motiva refinery is largely going to be North American and significant portion of that we believe is Canadian and then they've announced that the Saudi Aramco announced that Motiva is going to expand the refinery as well and they've indicated a number of roughly $20 billion they think they would invest also in the Gulf. So very, very strong competitive dynamic, the Gulf is very advantageously positioned with respect to crude, access to crude and you have the people, the know-how, the favorable environment in Texas are getting projects approved to permitted. So as I said the macro on that is outstanding from our point of view.

Great. And then just a final question on turning back to aviation, you guys have mentioned that you sort of target points in the 12 to 20 year out range, I just wonder what the average useful life of those types of assets are, sort of what you do with them at the end of that?

Well typically people will say 20 years for a passenger plane and then in the case of 757, 767 and 747s, 737-800 all of those aircraft are freighter-convertible, so you can take them into a various conversion shops, and they cut a door in the side, they take out the seats, they improve the structure, and [indiscernible] it's a freighter. So -- and freighter aircrafts, package has never complained about how old the plane is, so they fly for a long, long time. You've got 757s that are out there that are 35-40 years old. So, the freighter conversion greatly extends the life of the aircraft. And so, that's -- and as I mentioned, our strategy is around the engines. So if you think about what we are routing for is people to be flying in that airplane whether it'd be passenger or freighter for a long, long time. And so, that's part of our asset selection criteria is looking at that at specific points. So it's a very good dynamic, and the ecommerce market is currently swapping up a lot of freighters.

That's really helpful. Thanks so much guys.

Thanks.

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Alan Andreini for closing remarks.

Thank you all for participating in today's conference call. We look forward to updating you after Q3.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.