What changed in this filing

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Item 1. Financial Statements

2023-07-27 compared with 2023-04-27 · 285 added, 135 removed, 692 unchanged (38% of the section changed)

3 unchanged sentences

(Dollars in thousands, except share and per share data)

Notes March 31, 2023 December 31, 2022

Notes June 30, 2023 December 31, 2022

Cash and cash equivalents 2 $ 21,134 $ 33,565

17 unchanged sentences

2,000,000,000 shares authorized;

99,728,786 and 99,716,621 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

99,737,046 and 99,716,621 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)

Preferred shares ($ 0.01 par value per share;

200,000,000 shares authorized;

15,920,000 and 13,320,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)

15,920,000 and 13,320,000 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)

Additional paid in capital 331,080 343,350

8 unchanged sentences

(Dollars in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

Notes 2023 2022 2023 2022

14 unchanged sentences

Total expenses 217,765 129,344 477,733 415,264

Other income (expense)

Other (expense) income

Equity in (losses) earnings of unconsolidated entities 5 ( 380 ) 35 ( 1,715 ) 233

1 unchanged sentence

Other income 408 1,118 416 1,246

Total other (expense) income ( 1,327 ) 16,614

Total other income (expense) 28 64,798 ( 1,299 ) 81,412

Income (loss) from continuing operations before income taxes 56,608 47,518 88,031 ( 130,097 )

20 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Net income (loss) $ 54,753 $ 9,760 $ 84,150 $ ( 219,899 )

Other comprehensive income (loss):

Other comprehensive loss:

Other comprehensive loss related to equity method investees, net in discontinued operations — ( 47,714 ) — ( 142,493 )

4 unchanged sentences

Comprehensive income (loss) attributable to shareholders $ 54,753 $ ( 29,474 ) $ 84,150 $ ( 346,446 )

________________________________________________________

(1) Net of deferred tax expense of $ 0 for the three months ended March 31, 2022.

See accompanying notes to consolidated financial statements.

FTAI AVIATION LTD.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)

Three Months Ended March 31, 2023

Three and Six Months Ended June 30, 2023

Ordinary Shares (1)

11 unchanged sentences

Equity - March 31, 2023 $ 997 $ 159 $ 368,681 $ ( 296,205 ) $ 524 $ 74,156

Three Months Ended March 31, 2022

Net income 54,753 — 54,753

Other comprehensive income —

Total comprehensive income 54,753 — 54,753

Contributions from non-controlling interest 10 10

Issuance of ordinary shares 159 159

Dividends declared - ordinary shares ( 29,935 ) ( 29,935 )

Dividends declared - preferred shares ( 8,335 ) ( 8,335 )

Equity-based compensation 510 510

Equity - June 30, 2023 $ 997 $ 159 $ 331,080 $ ( 241,452 ) $ 534 $ 91,318

See accompanying notes to consolidated financial statements.

FTAI AVIATION LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

(Dollars in thousands)

Three and Six Months Ended June 30, 2022

Common Shares (1)

10 unchanged sentences

Equity - March 31, 2022 $ 992 $ 133 $ 1,372,564 $ ( 354,585 ) $ ( 251,160 ) $ ( 6,949 ) $ 760,995

Net income (loss) 18,240 ( 8,480 ) 9,760

Other comprehensive loss ( 47,714 ) ( 47,714 )

Total comprehensive income (loss) 18,240 ( 47,714 ) ( 8,480 ) ( 37,954 )

Acquisition of consolidated subsidiary 3,054 3,054

Contributions from non-controlling interest 1,187 1,187

Issuance of ordinary shares 235 235

Dividends declared - ordinary shares ( 33,040 ) ( 33,040 )

Dividends declared - preferred shares ( 6,791 ) ( 6,791 )

Equity-based compensation 1,585 1,585

Equity - June 30, 2022 $ 992 $ 133 $ 1,332,968 $ ( 336,345 ) $ ( 298,874 ) $ ( 9,603 ) $ 689,271

________________________________________________

5 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Net income (loss) $ 84,150 $ ( 219,899 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Equity in losses of unconsolidated entities 1,715 37,836

17 unchanged sentences

Other liabilities 2,168 ( 5,130 )

Net cash provided by operating activities 38,697 1,923

Net cash provided by (used in) operating activities 67,241 ( 48,569 )

Cash flows from investing activities:

Investment in unconsolidated entities ( 19,500 ) ( 2,232 )

Principal collections on notes receivable 1,624 —

Principal collections on finance leases 1,939 575

Acquisition of business, net of cash acquired — ( 3,819 )

Acquisition of leasing equipment ( 325,462 ) ( 320,766 )

1 unchanged sentence

Acquisition of lease intangibles ( 10,795 ) ( 5,282 )

Investment in promissory notes ( 11,500 ) —

Purchase deposits for acquisitions ( 11,200 ) ( 7,100 )

2 unchanged sentences

Proceeds for deposit on sale of aircraft and engine 1,817 8,245

Receipt of deposits for sale of aircraft and engine 300 —

Net cash used in investing activities $ ( 101,846 ) $ ( 306,784 )

3 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from financing activities:

6 unchanged sentences

Release of maintenance deposits — ( 878 )

Capital contributions from non-controlling interests 10 1,187

Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs 61,729 —

Cash dividends - ordinary shares ( 29,919 ) ( 32,749 )

Cash dividends - common shares ( 59,854 ) ( 65,789 )

Cash dividends - preferred shares ( 15,126 ) ( 13,582 )

Net cash (used in) provided by financing activities $ ( 38,445 ) $ 145,810

Net cash provided by financing activities 2,674 212,097

Net decrease in cash and cash equivalents and restricted cash ( 31,931 ) ( 143,256 )

3 unchanged sentences

Acquisition of leasing equipment $ 50,100 $ 105,635

Acquisition of property, plant and equipment ( 148 ) ( 1,346 )

Security deposits, maintenance deposits, other assets and other liabilities settled in the sale of leasing equipment 20,062 —

2 unchanged sentences

Non-cash change in equity method investment — ( 142,493 )

Conversion of interests in unconsolidated entities — ( 21,302 )

Issuance of ordinary shares 389 399

21 unchanged sentences

These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary.

Principles of Consolidation — We consolidate all entities in which we have a controlling financial interest and control over significant operating decisions.

All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

14 unchanged sentences

Restricted Cash — Restricted cash consists of funds required for the Company’s investment in Quick Turn, as described in Note 5, of $ 19.5 million as of December 31, 2022.

The Company had no restricted cash as of March 31, 2023.

The Company had no restricted cash as of June 30, 2023.

Inventory — We hold aircraft engine modules, spare parts and used material inventory for trading and to support operations.

20 unchanged sentences

Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance deposits in our Consolidated Balance Sheets.

All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues.

All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenue on our Consolidated Statements of Operations.

Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions.

6 unchanged sentences

The lease payments are segregated into principal and interest components similar to a loan.

Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income.

Unearned income is recognized on an effective interest method over the lease term and is recorded as lease income.

The principal component of the lease payment is reflected as a reduction to the net investment in finance leases.

29 unchanged sentences

We attempt to limit our credit risk by performing ongoing credit evaluations.

We earned 18 % and 10 % of our revenue from two customers in the Aviation Leasing segment during the three months ended March 31, 2023.

No single customer accounted for greater than 10% of total revenue during the three months ended March 31, 2022.

As of March 31, 2023, there was one customer in the Aviation Leasing segment that represented 15 % of total accounts receivable, net.

We earned 10 % and 11 % of our revenue from one customer in the Aviation Leasing segment during the three and six months ended June 30, 2023, respectively.

No single customer accounted for greater than 10% of total revenue during the three and six months ended June 30, 2022.

As of June 30, 2023, there were three customers in the Aviation Leasing segment that represented 15 %, 14 %, and 11 % of total accounts receivable, net.

As of December 31, 2022, there were two customers in the Aviation Leasing segment that represented 20 % and 12 % of total accounts receivable, net.

2 unchanged sentences

Allowance for Doubtful Accounts — We determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis.

The allowance for doubtful accounts was $ 66.1 million and $ 65.6 million as of March 31, 2023 and December 31, 2022, respectively.

There was provision for credit losses of $ 0.5 million and $ 47.9 million for the three months ended March 31, 2023 and 2022, respectively, which is included in Operating expenses in the Consolidated Statements of Operations.

The allowance for doubtful accounts was $ 66.6 million and $ 65.6 million as of June 30, 2023 and December 31, 2022, respectively.

There was provision for credit losses of $ 0.6 million and a bad debt reversal of $ 0.7 million for the three months ended June 30, 2023 and 2022, respectively.

There was a provision for credit losses of $ 1.0 million and a provision for credit losses of $ 47.2 million for the six months ended June 30, 2023 and 2022, respectively, and is included in Operating expenses in the Consolidated Statements of Operations.

Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the first quarter of 2022.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful accounts at March 31, 2023 includes all accounts receivable exposure to Russian and Ukrainian customers.

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful accounts at June 30, 2023 includes all accounts receivable exposure to Russian and Ukrainian customers.

Comprehensive Loss — Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners.

1 unchanged sentence

The cash flow impact of commodity derivatives held by our consolidated subsidiaries is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.

Other Assets— Other assets is primarily comprised of lease incentives of $ 43.0 million and $ 37.9 million, purchase deposits of $ 10.2 million and $ 6.7 million, notes receivable of $ 53.2 million and $ 49.2 million, operating lease right-of-use assets, net of $ 2.8 million and $ 3.0 million, finance leases, net of $ 5.9 million and $ 6.4 million, maintenance right assets of $ 8.8 million and $ 6.8 million and prepaid expenses of $ 1.5 million and $ 1.9 million as of March 31, 2023 and December 31, 2022, respectively.

Other Assets— Other assets is primarily comprised of lease incentives of $ 49.4 million and $ 37.9 million, purchase deposits of $ 11.2 million and $ 6.7 million, notes receivable of $ 71.6 million and $ 49.2 million, operating lease right-of-use assets, net o f $ 2.6 million and $ 3.0 million, finance leases, net of $ 4.1 million and $ 6.4 million, maintenance right assets of $ 9.4 million and $ 6.8 million and prepaid expenses of $ 3.1 million and $ 1.9 million, as of June 30, 2023 and December 31, 2022, respectively.

Dividends— Dividends are recorded if and when declared by the Board of Directors.

For the three months ended March 31, 2023 and 2022, the Board of Directors declared cash dividends of $ 0.30 and $ 0.33 , per ordinary share, respectively.

Additionally, in the quarter ended March 31, 2023, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares of $ 0.52 , $ 0.50 and $ 0.52 per share, respectively.

Recent Accounting Pronouncements — The Company has evaluated all recent accounting pronouncements and none are expected to have a material impact on the Company’s consolidated financial statements.

For the three months ended June 30, 2023 and 2022, the Board of Directors declared cash dividends of $ 0.30 and $ 0.33 per ordinary share, respectively.

For the six months ended June 30, 2023 and 2022, the Board of Directors declared cash dividends of $ 0.60 and $ 0.66 per ordinary share, respectively.

Additionally, in the quarter ended June 30, 2023, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares of $ 0.52 , $ 0.50 , $ 0.52 and $ 0.59 per share, respectively.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

DISCONTINUED OPERATIONS

5 unchanged sentences

Under ASC 205-20, Presentation of Financial Statements – Discontinued Operations , the spin-off met the criteria to be reported as a discontinued operation.

Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company’s financial statements for the three months ended March 31, 2022.

Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company’s financial statements for the three and six months ended June 30, 2022.

FTAI Infrastructure is a corporation for U.S.

12 unchanged sentences

The following table presents the significant components of net loss from discontinued operations:

Three Months Ended

March 31, 2022

Three Months Ended Six Months Ended

June 30, 2022 June 30, 2022

Total revenues $ 65,868 $ 112,016

14 unchanged sentences

Net loss attributable to shareholders $ ( 27,449 ) $ ( 70,688 )

The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the three months ended March 31, 2022.

The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items from discontinued operations:

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

Three Months Ended

March 31, 2022

The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the six months ended June 30, 2022.

The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items from discontinued operations:

Six Months Ended

June 30, 2022

Operating activities:

7 unchanged sentences

Non-cash change in equity method investment ( 142,493 )

The Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the three months ended March 31, 2022 included above, using the equity method of accounting.

Non-cash conversion of interest in unconsolidated entities ( 21,302 )

The Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the three and six months ended June 30, 2022 included above, using the equity method of accounting.

Summarized financial data for Long Ridge Terminal LLC are shown in the following table.

Three Months Ended

Income Statement March 31, 2022

Three Months Ended Six Months Ended

Income Statement June 30, 2022 June 30, 2022

Total revenue $ 19,801 $ 15,043

5 unchanged sentences

Net loss $ ( 25,892 ) $ ( 68,566 )

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

LEASING EQUIPMENT, NET

Leasing equipment, net is summarized as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Leasing equipment $ 2,396,594 $ 2,413,230

3 unchanged sentences

As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines.

We determined that it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered from Ukraine and Russia.

As a result, during the three months ended March 31, 2022, we recognized an impairment charge totaling $ 122.8 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia.

As of March 31, 2023, four aircraft and one engine were still located in Ukraine and eight aircraft and seventeen engines were still located in Russia.

Additionally, we identified certain assets in our leasing equipment portfolio with indicators of impairment.

As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $ 1.2 million, net of redelivery compensation during the three months ended March 31, 2023.

The following table presents information related to our acquisitions and dispositions of aviation leasing equipment during the three months ended March 31, 2023:

Acquisitions:

Dispositions:

We determined that it is unlikely that we will regain possession of the aircrafts and engines that had not yet been recovered from Ukraine and Russia.

As a result, we recognized an impairment charge totaling $ 120.0 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia.

As of June 30, 2023, four aircraft were still located in Ukraine and eight aircraft and seventeen engines were still located in Russia.

Additionally, we identified certain assets in our leasing equipment portfolio with indicators of impairm ent.

As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $ 1.2 million , net of redelivery compensation during the six months ended June 30, 2023.

Depreciation expense for leasing equipment is summarized as follows:

Three Months Ended March 31,

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Depreciation expense for leasing equipment $ 38,336 $ 39,168 $ 79,102 $ 80,371

1 unchanged sentence

Carrying Value

Investment Ownership Percentage March 31, 2023 December 31, 2022

Investment Ownership Percentage June 30, 2023 December 31, 2022

Advanced Engine Repair JV Equity method 25 % $ 20,480 $ 20,207

2 unchanged sentences

$ 39,822 $ 22,037

We did not recognize any other-than-temporary impairments for the three months ended March 31, 2023 and 2022.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

We did not recognize any other-than-temporary impairments for the three and six months ended June 30, 2023 and 2022.

The following table presents our proportionate share of equity in (losses) income:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Advanced Engine Repair JV $ 681 $ ( 212 ) $ 273 $ ( 566 )

5 unchanged sentences

In December 2016, we invested $ 15 million for a 25 % interest in an advanced engine repair joint venture.

We focus on developing new cost savings programs for engine repairs.

This joint venture is focused on developing new cost savings programs for engine repairs.

We exercise significant influence over this investment and account for this investment as an equity method investment.

12 unchanged sentences

Intangible assets and liabilities, net are summarized as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Intangible assets

9 unchanged sentences

Amortization of intangible assets and liabilities is as follows:

Classification in Consolidated Statements of Operations Three Months Ended March 31,

Classification in Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Lease intangibles Lease income $ 3,616 $ 3,310 $ 7,599 $ 6,968

As of March 31, 2023, estimated net annual amortization of intangibles is as follows:

As of June 30, 2023, estimated net annual amortization of intangibles is as follows:

Remainder of 2023 6,371

5 unchanged sentences

Our debt, net is summarized as follows:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Outstanding Borrowings Stated Interest Rate Maturity Date Outstanding Borrowings

18 unchanged sentences

(1) Requires a quarterly commitment fee at a rate of 0.50 % on the average daily unused portion, as well as customary letter of credit fees and agency fees.

(2) Includes an unamortized discount of $ 1,207 and $ 1,318 at March 31, 2023 and December 31, 2022, respectively, and an unamortized premium of $ 4,001 and $ 4,354 at March 31, 2023 and December 31, 2022, respectively.

(3) Includes an unamortized premium of $ 2,006 and $ 2,091 at March 31, 2023 and December 31, 2022, respectively.

We were in compliance with all debt covenants as of March 31, 2023.

(2) Includes an unamortized discount of $ 1,096 and $ 1,318 at June 30, 2023 and December 31, 2022, respectively, and an unamortized premium of $ 3,643 and $ 4,354 at June 30, 2023 and December 31, 2022, respectively.

(3) Includes an unamortized premium of $ 1,921 and $ 2,091 at June 30, 2023 and December 31, 2022, respectively.

We were in compliance with all debt covenants as of June 30, 2023.

FAIR VALUE MEASUREMENTS

14 unchanged sentences

(Dollars in tables in thousands, unless otherwise noted)

The fair values of our bonds payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified as Level 2 within the fair value hierarchy:

March 31, 2023 December 31, 2022

The fair value of our bonds payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified as Level 2 within the fair value hierarchy:

June 30, 2023 December 31, 2022

Senior Notes due 2025 642,688 613,152

1 unchanged sentence

Senior Notes due 2028 915,590 853,490

The fair values of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy.

The fair value of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy.

The Company has contingent obligations under ASC 460, Guarantees , in connection with certain sales of aircraft on lease, which are measured at fair value.

The guarantees are valued at $ 6.3 million and $ 3.8 million as of March 31, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities on the Consolidated Balance Sheets.

The fair values of the guarantees are determined based on the estimated condition of the engines at the end of each lease term, the estimated cost of replacement and applicable discount rates, and are classified as Level 3.

During the three months ended March 31, 2023, the Company recorded a $ 4.3 million increase in guarantees related to the sale of six aircraft and a $ 1.8 million decrease related to the change in fair value, which is recorded as Asset sales revenue in the Consolidated Statements of Operations.

We measure the fair value of certain assets on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.

Assets subject to these measurements include intangible assets, property, plant and equipment, leasing equipment and inventory.

The guarantees are valued a t $ 6.7 million and $ 3.8 million as of June 30, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities on the Consolidated Balance Sheets.

The fair values of the guarantees are determined based on the estimated condition of the e ngines at the end of each lease term, the estimated cost of replacement and applicable discount rates, and are classified as Level 3.

During the six months ended June 30, 2023, the Company recorded a $ 4.9 million increase in guarantees related to the sale of seven a ircraft and a $ 1.9 million de crease related to the change in fair value, which is recorded as Asset sales revenue in the Consolidated Statements of Operations.

We measure the fair value of certain assets on a non-recurring basis when U.S.

GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable.

Assets subject to these measurements include intangible assets, property, plant and equipment and leasing equipment.

We record such assets at fair value when it is determined the carrying value may not be recoverable.

2 unchanged sentences

In 2015, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to grant equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors.

As of March 31, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares.

As of June 30, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares.

We account for equity-based compensation expense in accordance with ASC 718 Compensation-Stock Compensation and is reported within operating expenses and general and administrative in the Consolidated Statements of Operations.

The Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:

Three Months Ended March 31, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years)

Three Months Ended June 30, Six Months Ended June 30, Remaining Expense To Be Recognized, If All Vesting Conditions Are Met Weighted Average Remaining Contractual Term (in years)

2023 2022 2023 2022

Restricted Shares $ 510 $ — $ 618 $ — $ 8,153 3.5 years

2 unchanged sentences

a 3.471 % risk-free rate, a 6.263 % dividend yield, a 37.879 % volatility and a ten-year term.

During the three months ended March 31, 2023, the Manager did not transfer any options to employees.

During the six months ended June 30, 2023, the Manager did not transfer any options to employees.

Restricted Shares

During the three months ended March 31, 2023, we issued restricted shares of the Company to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) that had a grant date fair value of $ 8.8 million and vest over 4.3 years.

During the six months ended June 30, 2023, we issued restricted shares of the Company to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) that had a grant date fair value of $ 8.8 million and vest over 4.3 years.

These awards are subject to continued employment, and the compensation expense is recognized ratably over the vesting periods, with 50 % of the units vesting on June 30, 2026 and the remaining units vesting on June 30, 2027.

4 unchanged sentences

The current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Cayman Islands $ — $ — $ — —

2 unchanged sentences

State and local ( 32 ) 154 ( 19 ) 511

Total current provision 334 1,027

544 ( 225 ) 818 68

Total current provision (benefit) 420 ( 113 ) 754 914

Cayman Islands — — — —

2 unchanged sentences

State and local 54 306 498 306

791 34 1,806 346

Total deferred provision 1,435 1,942 3,127 2,254

11 unchanged sentences

corporate tax rates, or being deemed to be foreign sourced and thus either not taxable or taxable at effectively lower tax rates.

As of and for the three months ended March 31, 2023, we had not established a liability for uncertain tax positions as no such positions existed.

As of and for the six months ended June 30, 2023, we had not established a liability for uncertain tax positions as no such positions existed.

In general, our tax returns and the tax returns of our corporate subsidiaries are subject to U.S.

26 unchanged sentences

The following table summarizes the management fees, income incentive allocation and capital gains incentive allocation from continuing operations:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Management fees $ 239 $ — $ 294 $ —

8 unchanged sentences

The following table summarizes our reimbursements to the Manager from continuing operations:

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

Classification in the Consolidated Statements of Operations:

2 unchanged sentences

Total $ 1,708 $ 2,100 $ 3,713 $ 4,196

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

If we terminate the Management Agreement, we will generally be required to pay the Manager a termination fee.

2 unchanged sentences

The Incentive Allocation Fair Value Amount is an amount equal to the Income Incentive Allocation and the Capital Gains Incentive Allocation that would be paid to Master GP if our assets were sold for cash at their then current fair market value (as determined by an appraisal, taking into account, among other things, the expected future value of the underlying investments).

Upon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we grant the Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering (or if the issuance relates to equity securities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of a ordinary share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of a ordinary share as of the date of the equity issuance if it relates to equity securities other than our ordinary shares).

Upon the successful completion of an offering of our ordinary shares or other equity securities (including securities issued as consideration in an acquisition), we grant the Manager options to purchase ordinary shares in an amount equal to 10% of the number of ordinary shares being sold in the offering (or if the issuance relates to equity securities other than our ordinary shares, options to purchase a number of ordinary shares equal to 10% of the gross capital raised in the equity issuance divided by the fair market value of an ordinary share as of the date of issuance), with an exercise price equal to the offering price per share paid by the public or other ultimate purchaser or attributed to such securities in connection with an acquisition (or the fair market value of an ordinary share as of the date of the equity issuance if it relates to equity securities other than our ordinary shares).

Any ultimate purchaser of ordinary shares for which such options are granted may be an affiliate of the Manager.

The following table summarizes amounts due to the Manager, which are included within accounts payable and accrued liabilities in the Consolidated Balance Sheets:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Accrued management fees $ 238 $ 53

Other payables 6,394 4,688

As of March 31, 2023 and December 31, 2022, there were no receivables from the Manager.

As of June 30, 2023 and December 31, 2022, there were no receivables from the Manager.

SEGMENT INFORMATION

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Prior period Adjusted EBITDA amounts and the reconciliation to net income (loss) attributable to shareholders from continuing operations have been recast to reflect this change in the measure of segment profit.

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

Adjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of provision for (benefit from) 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, dividends on preferred shares 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 (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA.

1 unchanged sentence

GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted EBITDA.

Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with U.S.

Adjusted EBITDA should not be considered as an

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

alternative to net income (loss) attributable to shareholders as determined in accordance with U.S.

The following tables set forth certain information for each reportable segment:

For the Three Months Ended March 31, 2023

Three Months Ended March 31, 2023

For the Three Months Ended June 30, 2023

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

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Depreciation and amortization 35,713 97 2,704 38,514

Asset impairment 1,220 — — 1,220

Interest expense — — 38,499 38,499

3 unchanged sentences

Other income 408 — — 408

Total other expense ( 91 ) ( 1,236 ) — ( 1,327 )

Total other income (expense) 373 ( 345 ) — 28

Income (loss) from continuing operations before income taxes 78,386 29,151 ( 50,929 ) 56,608

7 unchanged sentences

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders:

Three Months Ended March 31, 2023

The following table sets forth a reconciliation of Adjusted EBITDA to net income attributable to shareholders from continuing operations:

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

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Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

4 unchanged sentences

South America 6,940 3,170 — 10,110

Total $ 192,031 $ 68,075 $ 14,239 $ 274,345

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

For the Six Months Ended June 30, 2023

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 96,997 $ — $ 18,522 $ 115,519

Maintenance revenue 77,206 — — 77,206

Asset sales revenue 210,177 — — 210,177

Aerospace products revenue — 153,188 — 153,188

Other revenue 6,691 — 4,282 10,973

Total revenues 391,071 153,188 22,804 567,063

Presented below are the contracted minimum future annual revenues to be received under existing operating leases as of March 31, 2023:

Cost of sales 161,792 88,410 — 250,202

Operating expenses 14,666 6,891 25,774 47,331

General and administrative — — 7,255 7,255

Acquisition and transaction expenses 2,631 1,027 2,276 5,934

Management fees and incentive allocation to affiliate — — 8,560 8,560

Depreciation and amortization 73,853 183 5,404 79,440

Asset impairment 1,220 — — 1,220

Interest expense — — 77,791 77,791

Total expenses 254,162 96,511 127,060 477,733

Other income (expense)

Equity in losses of unconsolidated entities ( 134 ) ( 1,581 ) — ( 1,715 )

Other income 416 — — 416

Total other income (expense) 282 ( 1,581 ) — ( 1,299 )

Income (loss) before income taxes 137,191 55,096 ( 104,256 ) 88,031

Provision for income taxes 2,082 1,500 299 3,881

Net income (loss) 135,109 53,596 ( 104,555 ) 84,150

Net loss attributable to non-controlling interests in consolidated subsidiaries — — — —

Dividends on preferred shares — — 15,126 15,126

Net income (loss) attributable to shareholders from continuing operations $ 135,109 $ 53,596 $ ( 119,681 ) $ 69,024

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 233,412 $ 57,434 $ ( 10,113 ) $ 280,733

Non-controlling share of Adjusted EBITDA —

Equity in losses of unconsolidated entities ( 1,715 )

Pro-rata share of Adjusted EBITDA from unconsolidated entities 546

Interest expense and dividends on preferred shares ( 92,917 )

Depreciation and amortization expense ( 97,704 )

Incentive allocations ( 8,266 )

Asset impairment charges ( 1,220 )

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations —

Acquisition and transaction expenses ( 5,934 )

Equity-based compensation expense ( 618 )

Provision for income taxes ( 3,881 )

Net loss attributable to shareholders from continuing operations $ 69,024

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Six Months Ended June 30, 2023

Aviation Leasing Aerospace Products Corporate and Other Total

Africa $ — $ 875 $ — $ 875

Asia 33,018 1,785 22,804 57,607

Europe 135,819 45,886 — 181,705

North America 202,050 100,196 — 302,246

South America 20,184 4,446 — 24,630

Total $ 391,071 $ 153,188 $ 22,804 $ 567,063

Presented below are the contracted minimum future annual revenues to be received under existing operating leases across as of June 30, 2023:

Operating Leases

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(Dollars in tables in thousands, unless otherwise noted)

For the Three Months Ended March 31, 2022

Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Three Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

8 unchanged sentences

Acquisition and transaction expenses 168 — 3,051 3,219

Management fees and incentive allocation to affiliate — — 3 3

Depreciation and amortization 37,191 67 2,045 39,303

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Total expenses 45,375 18,188 65,781 129,344

Other income (expense)

Equity in earnings (losses) of unconsolidated entities 246 ( 211 ) — 35

Gain on sale of assets, net 54,784 8,861 — 63,645

Other income (expense) 165 — ( 37 ) 128

Total other income (expense) 7,304 9,347 ( 37 ) 16,614

(Loss) income from continuing operations before income taxes ( 138,683 ) 12,953 ( 51,885 ) ( 177,615 )

Other income 38 — 1,080 1,118

Total other income 55,068 8,650 1,080 64,798

Income (loss) from continuing operations before income taxes 92,127 16,959 ( 61,568 ) 47,518

Provision for (Benefit from) income taxes 715 1,887 ( 773 ) 1,829

Net income (loss) from continuing operations 91,412 15,072 ( 60,795 ) 45,689

Net income (loss) from continuing operations attributable to non-controlling interests in consolidated subsidiaries — — — —

Dividends on preferred shares — — 6,791 6,791

Net income (loss) attributable to shareholders from continuing operations $ 91,412 $ 15,072 $ ( 67,586 ) $ 38,898

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:

Three Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Adjusted EBITDA $ 142,238 $ 17,082 $ ( 8,583 ) $ 150,737

Non-controlling share of Adjusted EBITDA —

Equity in income of unconsolidated entities 35

Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 152 )

Interest expense and dividends on preferred shares ( 54,680 )

Depreciation and amortization expense ( 51,108 )

Incentive allocations —

Asset impairment charges ( 886 )

Changes in fair value of non-hedge derivative instruments —

Losses on the modification or extinguishment of debt and capital lease obligations —

Acquisition and transaction expenses ( 3,219 )

Equity-based compensation expense —

Provision for income taxes ( 1,829 )

Net (loss) income from continuing operations ( 139,669 ) 12,882 ( 52,167 ) ( 178,954 )

Net loss from continuing operations attributable to non-controlling interests in consolidated subsidiaries — — — —

Net loss attributable to shareholders from continuing operations $ 38,898

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Three Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Asia $ 20,953 $ — $ 3,133 $ 24,086

Europe 25,409 6,651 — 32,060

North America 21,056 19,846 — 40,902

South America 15,016 — — 15,016

Total $ 82,434 $ 26,497 $ 3,133 $ 112,064

FTAI AVIATION LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(Dollars in tables in thousands, unless otherwise noted)

For the Six Months Ended June 30, 2022

Six Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

Lease income $ 71,256 $ — $ 7,709 $ 78,965

Maintenance revenue 76,664 — — 76,664

Aerospace products revenue — 40,810 — 40,810

Other revenue 5,226 — 2,090 7,316

Total revenues 153,146 40,810 9,799 203,755

Cost of sales — 24,191 — 24,191

Operating expenses 61,602 4,603 14,595 80,800

General and administrative — — 8,467 8,467

Acquisition and transaction expenses 377 — 5,115 5,492

Management fees and incentive allocation to affiliate — — — —

Depreciation and amortization 76,419 101 4,088 80,608

Asset impairment 123,676 — — 123,676

Interest expense — — 92,030 92,030

Total expenses 262,074 28,895 124,295 415,264

Other income (expense)

Equity in income (losses) of unconsolidated entities 798 ( 565 ) — 233

Gain on sale of assets, net 61,371 18,562 — 79,933

Other income 203 — 1,043 1,246

Total other income 62,372 17,997 1,043 81,412

(Loss) income before income taxes ( 46,556 ) 29,912 ( 113,453 ) ( 130,097 )

Provision for (benefit from) income taxes 1,701 1,958 ( 491 ) 3,168

Net (loss) income ( 48,257 ) 27,954 ( 112,962 ) ( 133,265 )

Net loss attributable to non-controlling interests in consolidated subsidiaries — — — —

Dividends on preferred shares — — 13,582 13,582

3 unchanged sentences

(Dollars in tables in thousands, unless otherwise noted)

The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders:

Three Months Ended March 31, 2022

The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations:

Six Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

1 unchanged sentence

Non-controlling share of Adjusted EBITDA —

Equity in earnings of unconsolidated entities 198

Equity in losses of unconsolidated entities 233

Pro-rata share of Adjusted EBITDA from unconsolidated entities ( 406 )

10 unchanged sentences

Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows:

Three Months Ended March 31, 2022

Six Months Ended June 30, 2022

Aviation Leasing Aerospace Products Corporate and Other Total

7 unchanged sentences

The following tables sets forth the geographic location of property, plant and equipment and leasing equipment, net:

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Property, plant and equipment and leasing equipment, net

4 unchanged sentences

South America 216,055 285,780

Total property, plant and equipment and leasing equipment, net $ 1,861,100 $ 1,923,567

Total $ 1,903,386 $ 1,923,567

EARNINGS PER SHARE AND EQUITY

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Potentially dilutive securities are calculated using the treasury stock method.

The calculation of basic and diluted EPS is presented below:

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

The calculation of basic and diluted EPS is presented below:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except share and per share data) 2023 2022 2023 2022

7 unchanged sentences

Net income (loss) attributable to shareholders $ 46,418 $ 11,449 $ 69,024 $ ( 217,535 )

Weighted Average Ordinary Shares Outstanding - Basic (1)

Weighted Average Common Shares Outstanding - Basic (1)

99,732,179 99,370,301 99,730,223 99,367,597

Weighted Average Ordinary Shares Outstanding - Diluted (1)

Weighted Average Common Shares Outstanding - Diluted (1)

100,462,277 99,805,455 100,314,508 99,367,597

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________________________________________________________

(1) Three months ended March 31, 2022 include participating securities which can be converted into a fixed amount of our shares.

For the three months ended March 31, 2023 and 2022, 57,175 and 771,689 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive.

During the three months ended March 31, 2023 and 2022, we issued 12,165 and 8,311 ordinary shares to certain directors as compensation.

Preferred Shares

In March 2023, in a public offering, we issued 2,600,000 shares of 9.50 % Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares (“Series D Preferred Shares”), par value $ 0.01 per share, with a liquidation preference of $ 25.00 per share for net proceeds before expenses of approximate ly $ 63.0 million .

See Note 9 for information related to options issued to the Manager in connection with such offering.

(1) Three and six months ended June 30, 2022 include participating securities which can be converted into a fixed amount of our shares.

For the three months ended June 30, 2023 and 2022, 0 a nd 407,124 shares, respectively, and for the six months ended June 30, 2023 and 2022, 1,245 and 595,047 shares, respectively, have been excluded from the calculation of Diluted EPS because the impact would be anti-dilutive.

During the six months ended June 30, 2023 and 2022, we issued 18,457 and 19,811 common shares to certain directors as compensation.

COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

Under the agreements, we provide certain guarantees at the end of the lease term for the condition of the aircraft engines that were sold to the buyer.

Given variability in the condition of the engines at the end of the lease terms, which range from 4 to 10 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at March 31, 2023 was $ 33.5 million, which is not reasonably expected.

The guarantees are valued at $ 6.7 million and $ 3.8 million as of June 30, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities on the Consolidated Balance Sheets.

Given variability in the condition of the engines at the end of the lease terms, which range from 4 to 10 years, the maximum potential amount of undiscounted future payments that could be required under the guarantees at June 30, 2023 was $ 34.7 million, which is not reasonably expected.

SUBSEQUENT EVENTS

On July 25, 2023, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $ 0.30 per share for the quarter ended June 30, 2023, payable on August 29, 2023 to the holders of record on August 14, 2023.

FTAI AVIATION LTD.

1 unchanged sentence

(Dollars in tables in thousands, unless otherwise noted)

SUBSEQUENT EVENTS

On April 25, 2023, our Board of Directors declared a cash dividend on our ordinary shares and eligible participating securities of $ 0.30 per share for the quarter ended March 31, 2023, payable on May 23, 2023 to the holders of record on May 12, 2023 .

Additionally, on April 25, 2023, our Board of Directors also declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares of $ 0.52 , $ 0.50 , $ 0.52 and $ 0.59 per share, respectively, payable on June 15, 2023 to the holders of record on June 1, 2023 .

Additionally, on July 25, 2023, our Board of Directors also declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series D Preferred Shares of $ 0.52 , $ 0.50 , $ 0.52 and $ 0.59 per share, respectively, payable on September 15, 2023 to the holders of record on September 1, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements