What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-06-25 compared with 2020-06-26 · 182 added, 175 removed, 237 unchanged (60% of the section changed)

Risk Factors.

General Business Risks

The novel coronavirus (COVID-19) and other possible pandemics and similar outbreaks could result in material adverse effects on our business, financial position, results of operations and cash flows.

The outbreak of the COVID-19 virus that has rapidly spread to a growing number of countries, including the United States, has created considerable instability and disruption in the U.S.

The outbreak of the COVID-19 virus in the United States and elsewhere created considerable instability and disruption in the U.S.

and world economies.

Substantial uncertainty still surrounds COVID-19 and its potential effects, as well as the extent and effectiveness of any responses taken on a national and local level.

However, measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures and other restrictions on travel, congregation and business operations have already resulted in significant negative impacts in the United States and world economies and in relation to our business.

Measures taken to limit the impact of COVID-19, including shelter-in-place orders, social distancing measures and other restrictions on travel, congregation and business operations resulted in significant negative impacts in the United States and world economies and in relation to our business.

The long-term impact of COVID-19 on the U.S.

and world economies remains uncertain, but is likely to result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted.

The extent to which our financial condition, results of operations and overall value will continue to be affected by the COVID-19 pandemic will largely depend on future developments, which are highly uncertain and cannot be accurately predicted, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

As a result of measures taken to limit the impact of COVID-19, self-quarantines or actual viral health issues, we initially experienced a substantial number of disruptions, and have experienced and continue to experience a reduction in demand for commercial aircraft, jet engines and parts which have negatively affected our sales and could materially and adversely affect the financial performance and value of our inventory.

All of the markets in which our businesses are located are subject to some level of restrictions on business operations.

Even after travel advisories and restrictions are modified or lifted, demand for air travel may remain weak for a significant length of time, which may be a function of continued concerns over safety, unwillingness to travel, and decreased consumer spending due to economic conditions, including job losses.

and world economies remains uncertain and the duration and scope of the world-wide economic downturn cannot currently be predicted.

As a result of measures taken to limit the impact of COVID-19, self-quarantines or actual viral health issues, we initially experienced a substantial number of disruptions, and experienced a reduction in demand for commercial aircraft, jet engines and parts which negatively affected our sales and materially and adversely affected the financial performance and value of our inventory.

All of the markets in which our businesses are located were subject to some level of restrictions on business operations.

Even as travel advisories and restrictions are modified or lifted, demand for air travel could remain weak or not recover to pre-pandemic levels for a significant length of time, which may be a function of continued concerns over safety, unwillingness to travel, and decreased consumer spending due to economic conditions, including job losses.

We cannot predict if and when the demand for our commercial aircraft, jet engines and parts will return to pre-outbreak levels of volume and pricing.

The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, have adversely affected, and may continue to adversely affect our returns and profitability.

Additionally, market fluctuations may affect our ability to obtain necessary funds for the operation of our businesses from current lenders or new borrowings.

The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, adversely affected, and could continue to adversely affect our returns and profitability.

As a result, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial condition and results of operations.

In addition, if in the future there is an outbreak of another highly infectious or contagious disease or other health concern, our company may be subject to similar risks as posed by COVID-19.

Market fluctuations may affect our operations.

Market fluctuations may affect our ability to obtain necessary funds for the operation of our businesses from current lenders or new borrowings.

In addition, we may be unable to obtain financing on satisfactory terms, or at all.

1 unchanged sentence

The occurrence of any of the foregoing events or any other related matters could materially and adversely affect our business, financial condition, results of operation and the overall value of our assets.

The global impact of the COVID-19 pandemic continues to evolve rapidly, and the extent of its effect on our operational and financial performance will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others.

As a result, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial condition and results of operations.

In addition, if in the future there is an outbreak of another highly infectious or contagious disease or other health concern, our company may be subject to similar risks as posed by COVID-19.

Labor inflation could impact our profitability.

The Company operates in industries that are heavily impacted by the workforce’s labor rates.

Significant examples include mechanics and pilots, both of which expose the Company to the possibility of material increases in labor costs.

We could experience significant increases in operating costs and reduced profitability due to competition for skilled management and staff employees in our operating businesses.

We compete with many other organizations for skilled management and staff employees, including organizations that operate in different market sectors than us.

Costs to recruit and retain adequate personnel could adversely affect results of operations.

Legacy technology systems require a unique technical skillset which is becoming scarcer.

The Company deploys legacy technology systems in several significant business units.

As technology continues to rapidly change, the available pool of individuals technically trained in and able to repair or perform maintenance on these legacy systems shrinks.

As this scarcity increases, the Company’s ability to efficiently and quickly repair its legacy systems becomes increasingly difficult, which could have a significant impact on the Company’s day-to-day operations.

Our business may be adversely affected by information technology disruptions.

Our business may be impacted by information technology disruptions, including information technology attacks.

Cybersecurity attacks, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and corruption of data (our own or that of third parties).

compromising of confidential or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The failure of our information technology systems could adversely impact our reputation and financial performance.

We operate in businesses that are dependent on information systems and technology.

Our information systems and technology may not continue to be able to accommodate our growth, and/or the cost of maintaining such systems may increase from its current level.

Either scenario could have a material adverse effect on us.

We rely on third-party service providers to manage certain aspects of our business, including for certain information systems and technology, data processing systems, and the secure processing, storage and transmission of information.

Any interruption or deterioration in the performance of these third parties or failures of their information systems and technology could impair the quality of our operations and could adversely affect our business and reputation.

We may not be able to insure certain risks adequately or economically.

We cannot be certain that we will be able to insure all risks that we desire to insure economically or that all of our insurers or reinsurers will be financially viable if we make a claim.

If an uninsured loss or a loss in excess of insured limits should occur, or if we are required to pay a deductible for an insured loss, results of operations could be adversely affected.

Legal liability may harm our business.

Many aspects of our businesses involve substantial risks of liability, and, in the normal course of business, we have been named as a defendant or co-defendant in lawsuits involving primarily claims for damages.

The risks associated with potential legal liabilities often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time.

The expansion of our businesses, including expansions into new products or markets, impose greater risks of liability.

In addition, unauthorized or illegal acts of our employees could result in substantial liability.

Substantial legal liability could have a material adverse financial effect or cause us significant reputational harm, which in turn could seriously harm our businesses and our prospects.

Although our current assessment is that there is no pending litigation that could have a significant adverse impact, if our assessment proves to be in error, then the outcome of such litigation could have a significant impact on our consolidated financial statements.

Our business might suffer if we were to lose the services of certain key employees.

Our business operations depend upon our key employees, including our executive officers.

Loss of any of these employees, particularly our Chief Executive Officer, could have a material adverse effect on our business as our key employees have knowledge of our industry and customers that would be difficult to replace.

Risks Related to Our Segment Operations

The operating results of our four segments may fluctuate, particularly our commercial jet engine and parts segment.

The operating results of our four segments have varied from period to period and comparisons to results for preceding periods may not be meaningful.

Due to a number of factors, including the risks described in this section, our operating results may fluctuate.

These fluctuations may also be caused by, among other things:

the economic health of the economy and the aviation industry in general;

the timing and number of purchases and sales of engines or aircraft;

the timing and amount of maintenance reserve revenues recorded resulting from the termination of long term leases, for which significant amounts of maintenance reserves may have accumulated;

the termination or announced termination of production of particular aircraft and engine types;

the retirement or announced retirement of particular aircraft models by aircraft operators;

the operating history of any particular engine, aircraft or engine or aircraft model;

the length of our operating leases;

the timing of necessary overhauls of engines and aircraft.

These risks may reduce our commercial jet engines and parts segment's engine utilization rates, lease margins, maintenance reserve revenues and proceeds from engine sales, and result in higher legal, technical, maintenance, storage and insurance costs related to repossession and the cost of engines being off-lease.

As a result of the foregoing and other factors, the availability of engines for lease or sale periodically experiences cycles of oversupply and undersupply of given engine models and generally.

The incidence of an oversupply of engines may produce substantial decreases in engine lease rates and the appraised and resale value of engines and may increase the time and costs incurred to lease or sell engines.

We anticipate that supply fluctuations from period to period will continue in the future.

As a result, comparisons to results from preceding periods may not be meaningful and results of prior periods should not be relied upon as an indication of our future performance.

Our Air Cargo Segment is dependent on a significant customer.

We are significantly dependent on our contractual relationship with FedEx Corporation (“ FedEx ”), the loss of which would have a material adverse effect on our business, results of operations and financial position.

Our Air Cargo business is significantly dependent on a contractual relationship with FedEx Corporation (“ FedEx ”), the loss of which would have a material adverse effect on our business, results of operations and financial position.

In the fiscal year ended March 31, 2021, 37% of our consolidated operating revenues, and 99% of the operating revenues for our overnight air cargo segment, arose from services we provided to FedEx.

While FedEx has been our customer since 1980 under similar terms, our current agreements may be terminated by FedEx upon 90 days’ written notice and FedEx may at any time terminate the lease of any particular aircraft thereunder upon 10 days’ written notice.

While FedEx has been our customer since 1980 under similar terms, our current agreements may be terminated by FedEx upon 90 days’ written notice and FedEx may at any time terminate the lease of

any particular aircraft thereunder upon 10 days’ written notice.

In addition, FedEx may terminate the dry-lease agreement with MAC or CSA upon written notice if 60% or more of MAC or CSA’s revenue (excluding revenues arising from reimbursement payments under the dry-lease agreement) is derived from the services performed by it pursuant to the respective dry-lease agreement, FedEx becomes its only customer, or either MAC or CSA employs less than six employees.

1 unchanged sentence

The loss of these contracts with FedEx would have a material adverse effect on our business, results of operations and financial position.

In April 2019, FedEx informed the Company of a strategic realignment in the Caribbean region.

The change affected the service provided by the Company’s wholly-owned subsidiary, MAC, in that region and MAC assets and services were transferred to a new carrier.

As a result of this realignment approximately 11 aircraft were transitioned to a different carrier resulting in an approximate $1.7 million reduction in revenue and an approximate $0.1 million reduction in net income at this segment during the fiscal year ended March 31, 2020.

Our dry-lease agreements with FedEx subject us to greater operating risks.

Our dry-lease agreements with FedEx subject us to operating risks.

Our dry-lease agreements with FedEx provide for the lease of specified aircraft by us in return for the payment of monthly rent with respect to each aircraft leased.

4 unchanged sentences

Because of our dependence on FedEx, we are subject to the risks that may affect FedEx’s operations.

These risks are discussed in “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Risk Factors” in FedEx’s Annual Report on Form 10-K for the fiscal year ended May 31, 2019 (updated as necessary for the Q3 Form 10-Q for the period ended February 29, 2020).

These risks are discussed in FedEx’s periodic reports filed with the SEC including its Annual Report on Form 10-K for the fiscal year ended May 31, 2020.

These risks include but are not limited to the following:

Economic conditions in the global markets in which it operates;

The negative effect of the COVID-19 pandemic;

Economic conditions and anti-trade measures/trade policies and relations in the global markets in which it operates;

Dependence on its strong reputation and value of its brand;

Potential disruption to operations resulting from a significant data breach or other disruption to FedEx’s technology infrastructure;

The failure to efficiently integrate the business and operations of FedEx Express and TNT Express;

The price and availability of fuel;

Its ability to manage capital and its assets, including aircraft, to match shifting and future shipping volumes;

FedEx's ability to manage capital and its assets, including aircraft, to match shifting and future shipping volumes;

Changes in international trade policies and relations could significantly reduce the volume of goods transported globally;

1 unchanged sentence

Changes in governmental regulations that may affect its business;

Its ability to operate, integrate, leverage and grow acquired businesses;

Adverse changes in regulations and interpretations and challenges to its tax positions relating to the Tax Cuts and Jobs Act;

Its ability to maintain good relationships with its employees and prevent attempts by labor organizations to organize groups of its employees;

FedEx's ability to operate, integrate, leverage and grow acquired businesses;

Adverse changes in regulations and interpretations and challenges to its tax positions;

Failure to attract and maintain employee talent or maintain company culture and its ability to maintain good relationships with its employees and prevent attempts by labor organizations to organize groups of its employees;

Disruptions or modifications in service by the United States Postal Service, a significant customer and vendor of FedEx;

The continued classification of owner-operators in its ground delivery business as independent contractors rather than as employees;

The impact of proposed pilot flight and duty time regulations;

The impact of the United Kingdom's withdrawal from the European Union;

3 unchanged sentences

Adverse weather or localized natural or man-made disasters in key locations, including its Memphis, Tennessee super-hub;

Constraints, volatility or disruption in the capital markets and any failure to maintain credit ratings and to meet credit agreement covenants;

Widespread outbreak of an illness or other communicable disease or any other public health crisis.

4 unchanged sentences

A temporary reduction in any period could materially adversely affect our results of operations for that period.

Our holding company structure may increase risks related to our operations.

Our business, financial condition and results of operations are dependent upon those of our individual businesses, and our aggregate investment in particular industries.

We are a holding company with investments in businesses and assets in a number of industries.

Our business, financial condition and results of operations are dependent upon our various businesses and investments and these businesses generally operate independently and in a decentralized manner.

Additionally, in the ordinary course of business we guarantee the obligations of other entities that we manage and/or invest in.

Any material adverse change in one of our businesses or investments, or in a particular industry in which we operate or invest, may cause material adverse changes to our business, financial condition and results of operations.

The more capital we devote to a particular investment or industry may increase the risk that such investment could significantly impact our financial condition and results of operations, possibly in a material adverse way.

Sales of deicing equipment can be affected by weather conditions.

3 unchanged sentences

As a result, airports may be able to extend the useful lives of their existing units, reducing the demand for new units.

Our results of operations may be affected by the value of securities we hold for investment and we may be unable to liquidate our investments in a timely manner or at full value.

We invest a significant portion of our capital not needed for operations in marketable securities, including equity securities of publicly-traded companies.

At March 31, 2020, the fair value of these marketable securities was approximately $3.2 million.

The value of our investment portfolio fluctuates and we have sustained losses in our investment portfolio in the past and could in the future.

Such declines in value of available-for-sale securities will be recognized as losses upon the sale of such securities or if such declines are deemed to be other than temporary.

Our results of operations may be affected by gains or losses recognized upon such a decline in value of our investments or the sale of these investments and the Company may not be able to realize the fair value of such investments under then-market conditions if liquidation is necessary in a short period of time.

Our business may be adversely affected by information technology disruptions.

Our business may be impacted by information technology disruptions, including information technology attacks.

Although we have adopted certain measures to mitigate potential risks to our systems from information technology-related disruptions, given the unpredictability of the timing, nature and scope of such disruptions, we could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromising of confidential or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our systems or networks, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Labor inflation could impact our profitability.

The Company operates in industries that are heavily impacted by the workforce’s labor rates.

Significant examples include mechanics and pilots, both of which are exposed to the possibility of material increases in labor costs.

Legacy technology systems require a unique technical skillset which is becoming scarcer.

The Company deploys legacy technology systems in several significant business units.

As technology continues to rapidly change, the available pool of individuals technically trained in these legacy systems shrinks.

Future acquisitions and dispositions of businesses and investments are possible, changing the components of our assets and liabilities, and if unsuccessful or unfavorable, could reduce the value of the Company and its securities.

Any future acquisitions or dispositions may result in significant changes in the composition of our assets and liabilities, as well as our business mix and prospects.

Consequently, our financial condition, results of operations and the trading price of our securities may be affected by factors different from those affecting our financial condition, results of operations and trading price at the present time.

We face numerous risks and uncertainties as we expand our business.

We expect the growth and development of our business to come primarily from internal expansion and through acquisitions, investments, and strategic partnering.

As we expand our business, there can be no assurance that financial controls, the level and knowledge of personnel, operational abilities, legal and compliance controls and other corporate support systems will be adequate to manage our business and growth.

The ineffectiveness of any of these controls or systems could adversely affect our business and prospects.

In addition, if we acquire new businesses and introduce new products, we face numerous risks and uncertainties concerning the integration of their controls and systems, including financial controls, accounting and data processing systems, management controls and other operations.

A failure to integrate these systems and controls, and even an inefficient integration of these systems and controls, could adversely affect our business and prospects.

Rapid business expansions or new business initiatives may increase risk.

Certain business initiatives, including expansions of existing businesses such as the relatively recent substantial expansion at our commercial jet engines and parts segment, may bring us into contact, directly or indirectly, with individuals and entities that are not within our traditional client and counterparty base and may expose us to new asset classes, new business plans and new markets.

These business activities expose us to new and enhanced risks, greater regulatory scrutiny of these activities, increased credit-related, sovereign and operational risks, and reputational concerns regarding the manner in which these assets are being operated or held.

There is no assurance that prior year activity and results will occur in future periods.

The failure of our information technology systems could adversely impact our reputation and financial performance.

We operate in businesses that are dependent on information systems and technology.

Our information systems and technology may not continue to be able to accommodate our growth, and/or the cost of maintaining such systems may increase from its current level.

Either scenario could have a material adverse effect on us.

We may not be able to insure certain risks adequately or economically.

We cannot be certain that we will be able to insure all risks that we desire to insure economically or that all of our insurers or reinsurers will be financially viable if we make a claim.

If an uninsured loss or a loss in excess of insured limits should occur, or if we are required to pay a deductible for an insured loss, results of operations could be adversely affected.

We could experience significant increases in operating costs and reduced profitability due to competition for skilled management and staff employees in our operating businesses.

We compete with many other organizations for skilled management and staff employees, including organizations that operate in different market sectors than us.

Costs to recruit and retain adequate personnel could adversely affect results of operations.

Legal liability may harm our business.

The risks associated with potential legal liabilities often may be difficult to assess or quantify and their existence and magnitude often remain unknown for substantial periods of time.

The expansion of our businesses, including expansions into new products or markets, impose greater risks of liability.

In addition, unauthorized or illegal acts of our employees could result in substantial liability.

Substantial legal liability could have a material adverse financial effect or cause us significant reputational harm, which in turn could seriously harm our businesses and our prospects.

Future cash flows from operations or through financings may not be sufficient to enable the Company to meet its obligations.

Future cash flow of the Company’s operations can fluctuate significantly.

If future cash flows are not sufficient to permit the Company to meet its obligations, this would likely have a material adverse effect on the Company, its businesses, financial condition and results of operations.

Additionally, credit market volatility may affect our ability to refinance our existing debt, borrow funds under our existing lines of credit or incur additional debt.

There can be no assurances that the Company or its subsidiaries will continue to have access to their lines of credit if their financial performance does not satisfy the financial covenants set forth in the applicable financing agreements.

If the Company or its subsidiaries do not meet certain of its financial covenants, and if they are unable to secure necessary waivers or other amendments from the respective lenders on terms acceptable to management, their ability to access available lines of credit could be limited, their debt obligations could be accelerated by the respective lenders and liquidity could be adversely affected.

The Company and/or its subsidiaries may be required to seek additional or alternative financing sources if the Company’s or its subsidiaries’ cash needs are significantly greater than anticipated or they do not materially meet their business plans, or there are unanticipated downturns in the markets for the Company’s and its subsidiaries’ products and services.

Future disruption and volatility in credit market conditions could have a material adverse impact on the Company’s ability, or that of its subsidiaries, to refinance debt when it comes due on terms similar to our current credit facilities, to draw upon existing lines of credit or to incur additional debt if needed.

There can be no assurance therefore that such financing will be available or available on acceptable terms.

The inability to generate sufficient cash flows from operations or through financings could impair the Company’s or its subsidiaries’ liquidity and would likely have a material adverse effect on their businesses, financial condition and results of operations.

Our business strategy includes acquisitions, and acquisitions entail numerous risks, including the risk of management diversion and increased costs and expenses, all of which could negatively affect the Company’s ability to operate profitably.

Our business strategy includes, among other things, strategic and opportunistic acquisitions.

This element of our strategy entails several risks, including, but not limited to the diversion of management’s attention from other business concerns and the need to finance such acquisitions with additional equity and/or debt.

In addition, once completed, acquisitions entail further risks, including:

unanticipated costs and liabilities of the acquired businesses, including environmental liabilities, that could materially adversely affect our results of operations;

difficulties in assimilating acquired businesses, preventing the expected benefits from the transaction from being realized or achieved within the anticipated time frame;

negative effects on existing business relationships with suppliers and customers;

and losing key employees of the acquired businesses.

If our acquisition strategy is not successful or if acquisitions are not well integrated into our existing operations, the Company’s profitability could be negatively affected.

We are affected by the risks faced by commercial aircraft operators and maintenance, repair and overhaul companies (“MROs”) because they are our customers.

We are affected by the risks faced by commercial aircraft operators and MRO companies because they are our customers.

Commercial aircraft operators are engaged in economically sensitive, highly cyclical and competitive businesses.

16 unchanged sentences

We face the risk that we may not be able to keep our engines on lease consistently.

Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft and therefore our ability to re-lease the engines and aircraft in a timely manner following termination of the leases.

Failures by lessees to meet their maintenance and recordkeeping obligations under our leases could adversely affect the value of our leased engines and aircraft which could affect our ability to re-lease the engines and aircraft in a timely manner following termination of the leases.

The value and income producing potential of an engine or aircraft depends heavily on it being maintained in accordance with an approved maintenance system and complying with all applicable governmental directives and manufacturer requirements.

13 unchanged sentences

If an engine is damaged during a lease and we are unable to recover from the lessee or though insurance, we may incur a loss.

The operating results of our five segments may fluctuate.

The operating results of our five segments have varied from period to period and comparisons to results for preceding periods may not be meaningful.

Due to a number of factors, including the risks described in this section, our operating results may fluctuate.

These fluctuations may also be caused by:

the economic health of the economy and the airplane industry in general;

timing and number of purchases and sales of engines or aircraft;

the timing and amount of maintenance reserve revenues recorded resulting from the termination of long term leases, for which significant amounts of maintenance reserves may have accumulated;

the termination or announced termination of production of particular aircraft and engine types;

the retirement or announced retirement of particular aircraft models by aircraft operators;

the operating history of any particular engine, aircraft or engine or aircraft model;

the length of our operating leases;

the timing of necessary overhauls of engines and aircraft.

As a result of the foregoing and other factors, the availability of engines for lease or sale periodically experiences cycles of oversupply and undersupply of given engine models and generally.

We anticipate that supply fluctuations from period to period will continue in the future.

As a result, comparisons to results from preceding periods may not be meaningful and results of prior periods should not be relied upon as an indication of our future performance.

We may experience losses and delays in connection with repossession of engines or aircraft when a lessee defaults.

4 unchanged sentences

As a result, the relevant asset may be off-lease or not producing revenue for a prolonged period of time.

In addition, we will incur direct costs associated with repossessing our engine or aircraft, including, but not limited to, legal and similar costs, the direct costs of transporting, storing and insuring the engine or aircraft, and costs associated with necessary maintenance and recordkeeping to make the asset available for lease or sale.

During this time, we will realize no revenue from the leased engine or aircraft, and we will continue to be obligated to pay any debt financing associated with the asset.

1 unchanged sentence

Our ability to recover engines installed on airframes may depend on the cooperation of the airframe owner.

The Company and its customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.

Our commercial jet engine and parts segment and its customers operate in a highly regulated industry and changes in laws or regulations may adversely affect our ability to lease or sell our engines or aircraft.

Certain of the laws and regulations applicable to our business, include:

28 unchanged sentences

Users of engines and aircraft are subject to general civil aviation authorities, including the FAA and the EASA, who regulate the maintenance of engines and issue airworthiness directives.

Airworthiness directives typically set

forth special maintenance actions or modifications to certain engine and aircraft types or a series of specific engines that must be implemented for the engine or aircraft to remain in service.

Airworthiness directives typically set forth special maintenance actions or modifications to certain engine and aircraft types or a series of specific engines that must be implemented for the engine or aircraft to remain in service.

Also, airworthiness directives may require the lessee to make more frequent inspections of an engine, aircraft or particular engine parts.

7 unchanged sentences

Any insurance coverage deficiency or default by lessees under their indemnification or insurance obligations may reduce our recovery of losses upon an event of loss.

An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our profitability.

A portion of our outstanding debt bears interest at floating rates.

As a result, to the extent we have not hedged against rising interest rates, an increase in the applicable benchmark interest rates would increase our cost of servicing our debt and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

In addition, if we refinance our indebtedness and interest rates or our borrowing margins increase between the time an existing financing arrangement was consummated and the time such financing arrangement is refinanced, the cost of servicing our debt would increase and our results of operations, financial condition, liquidity and cash flows could be materially and adversely affected.

The transition away from LIBOR may adversely affect our cost to obtain financing and may potentially negatively impact our interest rate swap agreements.

Central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for the London Interbank Offered Rate (“ LIBOR ”) based on observable market transactions.

It is expected that a transition away from the widespread use of LIBOR to alternative rates will occur over the course of the next few years.

Financial Conduct Authority, which regulates LIBOR, has announced that it has commitments from panel banks to continue to contribute to LIBOR through the end of 2021, but that it will not use its powers to compel contributions beyond such date.

Accordingly, there is uncertainty regarding the publication of such rates beyond 2021.

The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S.

dollar LIBOR.

The full impact of such reforms and actions, together with any transition away from LIBOR, including the potential or actual discontinuance of LIBOR publication, remains unclear.

These changes may have a material adverse impact on the availability and cost of our financing, including LIBOR-based loans, as well as our interest rate swap agreements.

We have risks in managing our portfolio of aircraft and engines to meet customer needs.

1 unchanged sentence

We seek to manage these risks by trying to anticipate demand for particular engine and aircraft types, maintaining a portfolio mix of engines that we believe is diversified, has long-term value and will be sought by lessees in the global market for jet engines, and by selling engines and aircraft that we expect will not experience obsolescence or declining usefulness in the foreseeable future.

Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

In addition to being capital intensive and highly leveraged, our aircraft and engine business requires that we maintain sufficient liquidity to enable us to contribute the non-financed portion of engine and aircraft purchases as well as to service our payment obligations to our creditors as they become due, despite the fact that the timing and amounts of our revenues do not match the timing under our debt service obligations.

Our restricted cash is unavailable for general corporate purposes.

Accordingly, our ability to successfully execute our business strategy and maintain our operations depends on our ability to continue to maintain sufficient liquidity, cash and available credit under our credit facilities.

Our liquidity could be adversely impacted if we are subjected to one or more of the following:

• a significant decline in revenues,

• a material increase in interest expense that is not matched by a corresponding increase in revenues,

• a significant increase in operating expenses,

• a reduction in our available credit under our credit facilities, or

• general economic or national events.

If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired.

There is no assurance that the engine and aircraft types owned or acquired by us will meet customer demand.

Liens on our engines or aircraft could exceed the value of such assets, which could negatively affect our ability to repossess, lease or sell a particular engine or aircraft.

2 unchanged sentences

These liens may secure substantial sums that may, in certain jurisdictions or for certain types of liens, exceed the value of the particular engine or aircraft to which the liens have attached.

In some jurisdictions, a lien may give the holder the right to detain or, in limited cases, sell or cause the forfeiture of the engine or aircraft.

In some jurisdictions, a lien may give the holder the right to detain or, in limited

cases, sell or cause the forfeiture of the engine or aircraft.

Such liens may have priority over our interest as well as our creditors’ interest in the engines or aircraft.

8 unchanged sentences

Higher or volatile fuel prices could affect the profitability of the aviation industry and our lessees’ ability to meet their lease payment obligations to us.

Historically, fuel prices have fluctuated widely depending primarily on international market conditions, geopolitical and environmental events and currency exchange rates.

Factors such as natural disasters can also significantly affect fuel availability and prices.

Historically, fuel prices have fluctuated widely depending primarily on international market conditions, geopolitical and environmental factors and events and currency exchange rates.

Natural and other disasters can also significantly affect fuel availability and prices.

The cost of fuel represents a major expense to airlines that is not within their control, and significant increases in fuel costs or hedges that inaccurately assess the direction of fuel costs can materially and adversely affect their operating results.

28 unchanged sentences

We may incur substantial maintenance, refurbishment or repair costs that a defaulting lessee has failed to pay and are necessary to put the aircraft or engines in suitable condition for re-lease or sale.

We may also incur significant costs in retrieving or recreating aircraft records required for registration of the aircraft and in obtaining the certificate of airworthiness for an aircraft.

We may also incur significant costs in retrieving or recreating aircraft records

required for registration of the aircraft and in obtaining the certificate of airworthiness for an aircraft.

It may be necessary to pay to discharge liens or pay taxes and other governmental charges on the aircraft to obtain clear possession and to remarket the aircraft effectively, including, in some cases, liens that the lessee may have incurred in connection with the operation of its other aircraft.

12 unchanged sentences

If we are unable to agree on a restructuring and we terminate the lease, we may not receive all or any payments still outstanding, and we may be unable to re-lease the aircraft or engines promptly and at favorable rates, if at all.

Compliance with the regulatory requirements imposed on us as a public company results in significant costs that may have an adverse effect on our results.

As a public company, we are subject to various regulatory requirements including, but not limited to, compliance with the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Compliance with these regulations results in significant additional costs to us both directly, through increased audit and consulting fees, and indirectly, through the time required by our limited resources to address such regulations.

Withdrawal, suspension or revocation of governmental authorizations or approvals could negatively affect our business.

4 unchanged sentences

With respect to a particular engine or engine component, we utilize FAA and/or EASA certified repair stations to repair and certify engines and components to ensure marketability.

The revocation or suspension of

any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations.

The revocation or suspension of any of our material authorizations or approvals would have an adverse effect on our business, financial condition and results of operations.

New and more stringent government regulations, if enacted, could have an adverse effect on our business, financial condition and results of operations.

1 unchanged sentence

Denial of export licenses could reduce our sales to those countries and could have a material adverse effect on our business.

Risks Related to Our Structure and Financing/Liquidity Risks

Our holding company structure may increase risks related to our operations.

Our business, financial condition and results of operations are dependent upon those of our individual businesses, and our aggregate investment in particular industries.

We are a holding company with investments in businesses and assets in a number of industries.

Our business, financial condition and results of operations are dependent upon our various businesses and investments and their management teams.

Each of our businesses generally operate independently and in a decentralized manner.

Additionally, in the ordinary course of business we guarantee the obligations of entities that we manage and/or invest in.

Any material adverse change in one of our businesses, investments or management teams, or in a particular industry in which we operate or invest, may cause material adverse changes to our business, financial condition and results of operations.

A small number of stockholders has the ability to control the Company.

2 unchanged sentences

As a result, these stockholders have the power to determine the outcome of substantially all matters submitted to our stockholders for approval, including the election of our board of directors.

In addition, future sales by these stockholders of substantial amounts of our common stock, or the potential for such sales, could adversely affect the prevailing market price of our common stock.

Our business might suffer if we were to lose the services of certain key employees.

Our business operations depend upon our key employees, including our executive officers.

In addition, future sales by these stockholders of substantial amounts of our common stock, or the potential for such sales, could adversely affect the prevailing market price of our securities.

An increase in interest rates or in our borrowing margin would increase the cost of servicing our debt and could reduce our cash flow and negatively affect the results of our business operations.

A portion of our outstanding debt bears interest at floating rates.

As a result, to the extent we have not hedged against rising interest rates, an increase in the applicable benchmark interest rates would increase the cost of servicing our debt and could materially and adversely affect our results of operations, financial condition, liquidity and cash flows.

Our inability to maintain sufficient liquidity could limit our operational flexibility and also impact our ability to make payments on our obligations as they come due.

Our restricted cash is unavailable for general corporate purposes.

Our liquidity could be adversely impacted if we are subjected to one or more of the following:

• a significant decline in revenues,

• a material increase in interest expense that is not matched by a corresponding increase in revenues,

• a significant increase in operating expenses,

• a reduction in our available credit under our credit facilities, or

• general economic or national events.

If we do not maintain sufficient liquidity, our ability to meet our payment obligations to creditors or to borrow additional funds could become impaired.

Future cash flows from operations or through financings may not be sufficient to enable the Company to meet its obligations.

Future cash flow of the Company’s operations can fluctuate significantly.

Additionally, credit market volatility may affect our ability to refinance our existing debt, borrow funds under our existing lines of credit or incur additional debt - certain of which mature in the next twelve months.

There can be no assurance that the Company or its subsidiaries will continue to have access to their lines of credit if their financial performance does not satisfy the financial covenants set forth in the applicable financing agreements.

If the Company or its subsidiaries do not meet certain of its financial covenants, and if they are unable to secure necessary waivers or other amendments from the respective lenders on terms acceptable to management and to renew or replace financing arrangements that mature during the current fiscal year, their ability to access available lines of credit could be limited, their debt obligations could be accelerated by the respective lenders and liquidity could be adversely affected.

There can be no assurance therefore that such financing will be available or available on acceptable terms.

The inability to generate sufficient cash flows from operations or through financings or disruptions in the credit markets could impair the Company’s or its subsidiaries’ liquidity and would likely have a material adverse effect on their businesses, financial condition and results of operations.

A large proportion of our capital is invested in physical assets and securities that can be hard to sell, especially if market conditions are poor.

Because our investment strategy can involve public company securities, we may be restricted in our ability to effect sales during certain time periods.

A lack of liquidity could limit our ability to vary our portfolio or assets promptly in response to changing economic or investment conditions.

Additionally, if financial or operating difficulties of other competitors result in distress sales, such sales could depress asset values in the markets in which we operate.

The restrictions inherent in owning physical assets could reduce our ability to respond to changes in market conditions and could adversely affect the performance of our investments, our financial condition and results of operations.

Because there is significant uncertainty in the valuation of, or in the stability of the value of illiquid or non-public investments, the fair values of such investments do not necessarily reflect the prices that would actually be obtained when such investments are realized.

To service our debt and meet our other cash needs, we will require a significant amount of cash, which may not be available.

9 unchanged sentences

These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations or to meet our aircraft or engine purchase commitments as they come due.

Strategic ventures may increase risks applicable to our operations.

We may enter into strategic ventures that pose risks, including a lack of complete control over the enterprise, and other potential unforeseen risks, any of which could adversely impact our financial results.

We may occasionally enter into strategic ventures or investments with third parties in order to take advantage of favorable financing opportunities, to share capital or operating risk, or to earn aircraft management fees.

These strategic ventures and investments may subject us to various risks, including those arising from our possessing limited decision-making rights in the enterprise or over the related aircraft.

If we were unable to resolve a dispute with a strategic partner who controls ultimate decision-making in such a venture or retains material managerial veto rights, we might reach an impasse which may lead to the liquidation of our investment at a time and in a manner that would result in our losing some or all of our original investment and/or the occurrence of other losses, which could adversely impact our financial results.

Our policies and procedures may not be effective in ensuring compliance with applicable law.

Our policies and procedures designed to ensure compliance with applicable laws may not be effective in all instances to prevent violations, and, as a result we may be subject to related governmental investigations.

We could become subject to various governmental investigations, audits and inquiries, both formal and informal.

Such investigations, regardless of their outcome, could be costly, divert management attention, and damage our reputation.

The unfavorable resolution of such investigations could result in criminal liability, fines, penalties or other monetary or non-monetary sanctions and could materially affect our business or results of operations.

The transition away from LIBOR may adversely affect our cost to obtain financing and may potentially negatively impact our interest rate swap agreements.

It is expected that a transition away from the widespread use of London Interbank Offered Rate (“LIBOR") to alternative rates will occur over the course of the next few years.

The Federal Reserve Bank of New York and various other authorities have commenced the publication of reforms and actions relating to alternatives to U.S.

dollar LIBOR.

The full impact of such reforms and actions, together with any transition away from LIBOR remains unclear.

These changes may have a material adverse impact on the availability and cost of our financing, including LIBOR-based loans, as well as our interest rate swap agreements.

Despite our substantial indebtedness, we might incur significantly more debt, and cash may not be available to meet our financial obligations when due or enable us to capitalize on investment opportunities when they arise.

12 unchanged sentences

Regulatory changes may also result in higher borrowing costs and reduced access to credit.