What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-26 compared with 2023-07-27 · 148 added, 146 removed, 297 unchanged (50% of the section changed)

9 unchanged sentences

We are externally managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortress”), which has a dedicated team of experienced professionals focused on the acquisition of transportation assets since 2002.

As of June 30, 2023, we had total consolidated assets of $2.5 billion and total equity of $91.3 million.

As of September 30, 2023, we had total consolidated assets o f $2.6 billion and total equity of $95.1 million.

Impact of Russia’s Invasion of Ukraine

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As a result, during the six months ended June 30, 2022, 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.

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

Our lessees are required to provide insurance coverage with respect to leased aircraft and engines, and we are named as insureds under those policies in the event of a total loss of an aircraft or engine.

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Operating Segments

As a result of the spin-off of FTAI Infrastructure effective August 1, 2022, the Company reevaluated its operating segments.

The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services.

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The Aerospace Products segment develops and manufactures through a joint venture, and repairs and sells, through exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines.

The interim period discloses the reportable segments on this basis, and prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting .

Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees.

12 unchanged sentences

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.

Comparison of the three and six months ended June 30, 2023 and 2022

Comparison of the three and nine months ended September 30, 2023 and 2022

The following table presents our consolidated results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

14 unchanged sentences

Total expenses 246,591 209,066 37,525 724,324 624,330 99,994

Other (expense) income

Equity in (losses) earnings of unconsolidated entities (380) 35 (415) (1,715) 233 (1,948)

Other income (expense)

Equity in earnings (losses) of unconsolidated entities 46 (358) 404 (1,669) (125) (1,544)

Gain on sale of assets, net — — — — 79,933 (79,933)

Other income 408 1,118 (710) 416 1,246 (830)

Loss on extinguishment of debt — (19,861) 19,861 — (19,861) 19,861

Other income (expense) 461 (1,038) 1,499 877 208 669

Total other income (expense) 507 (21,257) 21,764 (792) 60,155 (60,947)

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

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

12 unchanged sentences

642 (241) 883 96 165 (69)

Equity in losses (earnings) of unconsolidated entities 380 (35) 415 1,715 (233) 1,948

Equity in (earnings) losses of unconsolidated entities (46) 358 (404) 1,669 125 1,544

Non-controlling share of Adjusted EBITDA — — — — — —

1 unchanged sentence

___________________________________________________

( 1) Includes the following items for the three months ended June 30, 2023 and 2022:

( 1) Includes the following items for the three months ended September 30, 2023 and 2022:

(i) depreciation and amortization expense of $43,959 and $34,853, (ii) lease intangible amortization of $3,726 and $3,291 and (iii) amortization for lease incentives of $11,695 and $3,185, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

Includes the following items for the nine months ended September 30, 2023 and 2022:

(i) depreciation and amortization expense of $123,399 and $115,461, (ii) lease intangible amortization of $11,325 and $10,259 and (iii) amortization for lease incentives of $22,360 and $20,034, respectively.

(2) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net (loss) income of $(380) and $35, (ii) depreciation and amortization expense of $435 and $117 and (iii) acquisition and transaction expense of $95 and $0, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net (loss) income of $(1,715) and $233, (ii) depreciation and amortization expense of $835 and $173 and (iii) acquisition and transaction expense of $334 and $0, respectively.

(2) Includes the following items for the three months ended September 30, 2023 and 2022:

(i) net income (loss) of $46 and $(358), (ii) depreciation and amortization expense of $367 and $117 and (iii) acquisition and transaction expense of $229 and $0, respectively.

Includes the following items for the nine months ended September 30, 2023 and 2022:

(i) net loss of $1,669 and $125, (ii) depreciation and amortization expense of $1,202 and $290 and (iii) acquisition and transaction expense of $563 and $0, respectively.

Presentation of assets sales

4 unchanged sentences

Generally, assets sold were included in Leasing equipment, net, on the Consolidated Balance Sheets.

Comparison of the three months ended June 30, 2023 and 2022

Total revenues increased $162.3 million primarily due to an increase in Asset sales revenue, Aerospace products revenue and Lease income.

Asset sales reven ue increased $101.5 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation Leasing segment during 2023.

See above discussion regarding presentation of asset sales.

Comparison of the three months ended September 30, 2023 and 2022

Total revenues increased $60.7 million primarily due to an increase in Aerospace products revenue and Maintenance revenue, partially offset by a decrease in Asset sales revenue.

Aerospace products revenue increased $53.7 million primarily driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023.

Lease income increased $19.9 million primarily due to an increase in the number of aircraft placed on lease and an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Comparison of the six months ended June 30, 2023 and 2022

Total revenues increased $363.3 million primarily due to an increase in Asset sales revenue, Aerospace products revenue, Lease income and Other revenue.

Asset sales reven ue increased $210.2 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation Leasing segment during 2023.

Maintenance revenue increased $28.4 million primarily due to the recognition of maintenance deposits due to the early redelivery of four aircraft, an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation.

Asset sales revenue decreased $12.5 million primarily due to a decrease in the sale of commercial aircraft and engines.

Comparison of the nine months ended September 30, 2023 and 2022

Total revenues increased $424.0 million primarily due to an increase in Asset sales revenue, Aerospace products revenue, Lease income and Maintenance revenue

Asset sales reven ue increased $197.7 million primarily due to an increase in the sale of commercial aircraft and engines.

See above discussion regarding presentation of asset sales.

Aerospace products revenue increased $166.1 million primarily driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023.

Lease income increased $36.6 million primarily due to an increase in the number of aircraft placed on lease and an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Other revenue increased $3.7 million primarily due to an increase in end-of-lease redelivery compensation in the Aviation Leasing segment and an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Comparison of the three months ended June 30, 2023 and 2022

Total expenses increased $88.4 million , primarily due to higher (i) Cost of sales, (ii) Operating expenses and (iii) Management fees and incentive allocation to affiliate, partially offset by lower (iv) Interest expense.

Cost of sales increased $89.4 million primarily as a result of an increase in asset sales and Aerospace Products sales and the gross presentation of Asset sales revenue and Aerospace products revenue as described above.

Operating expenses increased $5.8 million, primarily due to an increase of $5.1 million in the Offshore Energy business which reflects increases in crew expenses, project costs and other operating expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel as well as increased number of days on-hire.

Management fees and incentive allocation to affiliate increased $5.6 million primarily due to an increase in incentive fee due to the Manager.

Interest expense decreased $9.4 million which reflects a decrease in the average outstanding debt of approximately $581.0 million due to decreases in (i) the 2021 Bridge Loans of $339.8 million, (ii) the Senior Notes due 2025 of $199.4 million, which were partially redeemed in August 2022, and (iii) the Revolving Credit Facility of $41.8 million.

Comparison of the six months ended June 30, 2023 and 2022

Total expenses increased $62.5 million , primarily due to higher (i) Cost of sales and (ii) Management fees and incentive allocation to affiliate, partially offset by lower (iii) Asset impairment, (iv) Operating expenses and (v) Interest expense.

Lease income increased $32.0 million primarily due to an increase in the number of aircraft and engines placed on lease and an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Maintenance revenue increased $29.0 million primarily due to the recognition of maintenance deposits due to the early redelivery of four aircraft, an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation.

Comparison of the three months ended September 30, 2023 and 2022

Total expenses increased $37.5 million, primarily due to higher (i) Cost of sales, (ii) Operating expenses and (iii) Depreciation and amortization.

Cost of sales increased $20.8 million primarily as a result of an increase in Aerospace product sales, partially offset by a decrease in the sale of commercial aircraft and engines.

Operating expenses increased $6.5 million, driven by an increase in commission expenses due to the increase in sales from the used material program and an increase in provision for credit losses, partially offset by a decrease in insurance expense, shipping and storage fees and other operating expenses.

Depreciation and amortization increased $9.1 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

Comparison of the nine months ended September 30, 2023 and 2022

Total expenses increased $100.0 million, primarily due to higher (i) Cost of sales and (ii) Management fees and incentive allocation to affiliate, partially offset by lower (iii) Asset impairment, and (iv) Operating expenses.

Cost of sales increased $246.8 million primarily as a result of an increase in asset sales and Aerospace Products sales and the gross presentation of Asset sales revenue and Aerospace products revenue as described above.

Management fees and incentive allocation to affiliate increased $13.1 million primarily due to an increase in incentive fee due to the Manager.

Asset impairment decreased $122.5 million p rimarily due to the write down in 2022 of aircraft and engines located in Ukraine and Russia that may not be recoverable.

Asset impairment decreased $127.0 million primarily due to the write down in 2022 of aircraft and engines located in Ukraine and Russia that may not be recoverable.

See Note 4 to the consolidated financial statements for additional information.

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• an increase of $11.8 million in the Offshore Energy business which reflects increases in offshore crew expenses, project costs and other operating expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel as well as increased number of days on-hire.

• an incr ease of $2.3 million in the Aerospace Products segment primarily due to an increase in commission expenses due to the increase in sales from the used material program.

Interest expense decreased $14.2 million, which reflects a decrease in the average outstanding debt of approximately $503.5 million due to decreases in (i) the 2021 Bridge Loans of $299.9 million and (ii) the Senior Notes due 2025 of $199.3 million, which were partially redeemed in August 2022, and (iii) the Revolving Credit Facility of $4.3 million.

• an increase of $4.7 million in the Aerospace Products segment primarily due to an increase in commission expenses due to the increase in sales from the used material program.

Other income (expense)

Total other income decreased $64.8 million during the three months ended June 30, 2023 which primarily reflects (i) a decrease of $63.6 million in Gain on sale of assets, net in the Aviation Leasing and Aerospace Products segments due to the change in presentation of asset sales as described above and (ii) a decrease of $0.4 million in Aviation Leasing’s and Aerospace Products’ proportionate share of unconsolidated entities’ net loss.

See above discussion regarding presentation of asset sales and impact on Gain on sales of assets, net.

Total other income decreased $82.7 million during six months ended June 30, 2023 which primarily reflects (i) a decrease of $79.9 million in Gain on sale of assets, net in the Aviation Leasing and Aerospace Products segments due to the change in presentation of asset sales as described above and (ii) an increase of $1.9 million in Aviation Leasing’s and Aerospace Products’ proportionate share of unconsolidated entities’ net loss.

See above discussion regarding presentation of asset sales and impact on Gain on sales of assets, net.

Total other expense decreased $21.8 million during the three months ended September 30, 2023 which primarily reflects a Loss on extinguishment of debt of $19.9 million recognized during the three months ended September 30, 2022 related to the pay-down of the 2021 Bridge Loan issued in December 2021 and February 2022 and the partial redemption of the Senior Notes due 2025.

Total other income decreased $60.9 million during nine months ended September 30, 2023 which primarily reflects (i) a decrease of $79.9 million in Gain on sale of assets, net in the Aviation Leasing and Aerospace Products segments due to the change in presentation of asset sales as described above and (ii) Loss on extinguishment of debt of $19.9 million recognized during the three months ended September 30, 2022 related to the pay-down of the 2021 Bridge Loan issued in December 2021 and February 2022 and the partial redemption of the Senior Notes due 2025.

Net income from continuing operations

Net income from continuing operations increased $9.1 million for the three months ended June 30, 2023 and increased $217.4 million for the six months ended June 30, 2023 as compared to prior years primarily due to the changes noted above.

Net income from continuing operations increased $45.5 million and $262.9 million for the three and nine months ended September 30, 2023, respectively, as compared to prior years primarily due to the changes noted above.

Net loss from discontinued operations

Net loss from discontinued operations decreased $35.9 million and $86.6 million for the three and six months ended June 30, 2023, respectively, compared to the prior year as these businesses have spun off and there is no corresponding activity in the current period.

Net loss from discontinued operations decreased $14.8 million and $101.4 million for the three and nine months ended September 30, 2023, respectively, compared to the prior year as these businesses have spun off and there is no corresponding activity in the current period.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $2.3 million and $85.0 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $45.4 million and $130.4 million during the three and nine months ended September 30, 2023, respectively, primarily due to the changes noted above.

Aviation Leasing Segment

As of June 30, 2023, in our Aviation Leasing segment, we own and manage 344 aviation assets, consisting of 97 commercial aircraft and 247 engines, including four aircraft that were still located in Ukraine and eight aircraft and seventeen engines that were still located in Russia.

As of June 30, 2023, 77 of our commercial aircraft and 148 of our engines were leased to operators or other third parties.

As of September 30, 2023, in our Aviation Leasing segment, we own and manage 351 aviation assets, consisting of 92 commercial aircraft and 259 engines, including four aircraft that were still located in Ukraine and eight aircraft and seventeen engines that were still located in Russia.

As of September 30, 2023, 73 of our commercial aircraft and 163 of our engines were leased to operators or other third parties.

Aviation assets currently off lease are either undergoing repair and/or maintenance, being prepared to go on lease or held in short term storage awaiting a future lease.

Our aviation equipment was approximately 77% utilized during the three months ended June 30, 2023, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes.

Our aviation equipment was approximately 77% utilized during the three months ended September 30, 2023, based on the percent of days on-lease in the quarter weighted by the monthly average equity value of our aviation leasing equipment, excluding airframes.

Our aircraft currently have a weighted average remaining lease term of 47 months, and our engines currently on-lease have an average remaining lease term of 14 months.

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Transfers (1) (32) (33)

Assets at June 30, 2023 5 92 97

Assets at September 30, 2023 5 87 92

Assets at January 1, 2023 40 184 224

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Transfers 2 (7) (5)

Assets at June 30, 2023 38 209 247

Assets at September 30, 2023 36 223 259

The following table presents our results of operations for our Aviation Leasing segment:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

10 unchanged sentences

Total expenses 112,812 112,858 (46) 366,974 374,932 (7,958)

Other income (expense)

Equity in (losses) earnings of unconsolidated entities (108) (45) (63) (242) 753 (995)

1 unchanged sentence

Other income 444 42 402 860 245 615

Total other income 373 55,068 (54,695) 282 62,372 (62,090)

Income (loss) before income taxes 78,386 92,127 (13,741) 137,191 (46,556) 183,747

Total other income (expense) 336 (3) 339 618 62,369 (61,751)

Income before income taxes 60,502 51,987 8,515 197,693 5,431 192,262

Provision for income taxes 2,332 926 1,406 4,414 2,116 2,298

Net income (loss) 77,299 91,412 (14,113) 135,109 (48,257) 183,366

Net income 58,170 51,061 7,109 193,279 3,315 189,964

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

Net income (loss) attributable to shareholders from continuing operations $ 77,299 $ 91,412 $ (14,113) $ 135,109 $ (48,257) $ 183,366

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

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Net income attributable to shareholders from continuing operations $ 58,170 $ 51,061 $ 7,109 $ 193,279 $ 3,315 $ 189,964

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

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

Net income (loss) attributable to shareholders from continuing operations $ 77,299 $ 91,412 $ (14,113) $ 135,109 $ (48,257) $ 183,366

Net income attributable to shareholders from continuing operations $ 58,170 $ 51,061 $ 7,109 $ 193,279 $ 3,315 $ 189,964

Provision for income taxes 2,332 926 1,406 4,414 2,116 2,298

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________________________________________________________

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(1) Includes the following items for the three months ended September 30, 2023 and 2022:

(i) depreciation expense of $41,141 and $32,728, (ii) lease intangible amortization of $3,726 and $3,291 and (iii) amortization for lease incentives of $11,695 and $3,185, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

Includes the following items for the nine months ended September 30, 2023 and 2022:

(i) depreciation expense of $114,994 and $109,147, (ii) lease intangible amortization of $11,325 and $10,259 and (iii) amortization for lease incentives of $22,360 and $20,034, respectively.

(2) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net (loss) income of $(35) and $246 and (ii) depreciation and amortization of $63 and $61, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(2) Includes the following items for the three months ended September 30, 2023 and 2022:

(i) net loss of $108 and $45 and (ii) depreciation and amortization of $63 and $61, respectively.

Includes the following items for the nine months ended September 30, 2023 and 2022:

(i) net (loss) income of $(242) and $753 and (ii) depreciation and amortization of $189 and $122, respectively.

Comparison of the three months ended June 30, 2023 and 2022

Total revenue increased $109.6 million driven by an increase in Asset sales revenue, Lease income and Maintenance revenue, partially offset by a decrease in Other revenue.

• Asset sales revenue increased $101.5 million primarily due to an increase in the sale of commercial aircraft and engines.

See above discussion regarding presentation of asset sales.

• Lease income increased $10.9 million primarily due to an increase in the number of aircraft and engines placed on lease.

• Maintenance revenue increased $2.1 million primarily due an increase in the number of aircraft and engines placed on lease, and higher aircraft and engine utilization, partially offset by lower end-of-lease return compensation.

Comparison of the three months ended September 30, 2023 and 2022

Total revenue increased $8.1 million driven by an increase in Maintenance revenue, partially offset by a decrease in Asset sales revenue, Lease income and Other revenue.

• Maintenance revenue increased $28.4 million primarily due to the recognition of maintenance deposits due to the early redelivery of four aircraft, an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation.

• Asset sales revenue decreased $12.5 million primarily due to a decrease in the sale of commercial aircraft and engines.

• Lease income decreased $4.4 million primarily due to an increase in the number of aircraft and engines redelivered, partially offset by additional aircraft and engines placed on lease.

• Other revenue decreased $3.4 million primarily due to lower end-of-lease redelivery compensation.

Comparison of the six months ended June 30, 2023 and 2022

Total revenue increased $237.9 million driven by an increase in Asset sales revenue, Lease income and Other revenue.

• Asset sales revenue increased $210.2 million primarily due to an increase in the sale of commercial aircraft and engines.

Comparison of the nine months ended September 30, 2023 and 2022

Total revenue increased $246.1 million driven by an increase in Asset sales revenue, Maintenance revenue and Lease income, partially offset by Other revenue.

• Asset sales revenue increased $197.7 million primarily due to an increase in the sale of commercial aircraft and e ngines.

See above discussion regarding presentation of asset sales.

• Lease income increased $25.7 million primarily due to primarily due to an increase in the number of aircraft and engines placed on lease.

• Other revenue increased $1.5 million primarily due to an increase in end-of-lease redelivery compensation.

Comparison of the three months ended June 30, 2023 and 2022

Total expenses increased $68.6 million primarily driven by an increase in Cost of sales, partially offset by a decrease in Depreciation and amortization expense.

• Cost of sales increased $69.6 million primarily as a result of an increase in asset sales and the gross presentation of Asset sales revenues and related costs of sales as described above.

• Depreciation and amortization expense decreased $1.5 million driven by an increase in the number of aircraft redelivered and parted out into our engine leasing pool, partially offset by an increase in the number of assets owned and on lease.

Comparison of the six months ended June 30, 2023 and 2022

• Lease income increased $21.3 million primarily due to an increase in the number of aircraft and engines placed on lease.

• Maintenance revenue increased $29.0 million primarily due to the recognition of maintenance deposits due to the early redelivery of four aircraft, an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation.

• Other revenue decreased $1.9 million primarily due to a decrease in end-of-lease redelivery compensation.

Comparison of the three months ended September 30, 2023 and 2022

Total expenses decrea sed $0.1 million primarily driven by a decrease in Cost of sales and Asset impairment, partially offset by an increase in Depreciation and amortization, Operating expenses and Acquisition and transaction expenses.

• Cost of sales decreased $9.5 million primarily as a result of a decrease in the sale of commercial aircraft and engines.

• Asset impairment decreased $4.5 million primarily due to the adjustment of the carrying value of leasing equipment to fair value in 2022.

• Depreciation and amortization expense increased $8.4 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

• Operating expenses increased $3.4 million driven by an increase in provision for credit losses, partially offset by a decrease in insurance expense, shipping and storage fees and other operating expenses.

• Acquisition and transaction expenses increased $2.1 million driven by higher compensation and related costs associated with the acquisition of aviation leasing equipment.

Comparison of the nine months ended September 30, 2023 and 2022

Total expenses decreased $8.0 million primarily driven by a decrease in Asset impairment and Operating expenses, partially offset by an increase in Cost of sales.

2 unchanged sentences

• Operating expenses decreased $43.5 million primarily as a result of decreases in provision for credit losses and other expenses as a result of the sanctions imposed on Russian airlines in 2022.

• Cost of sales increased $161.8 million as a result of an increase in asset sales and the gross presentation of Asset sales revenues and related costs of sales as described above.

• Cost of sales increased $152.3 million as a result of an increase in assets sales and the gross presentation of Asset sales revenues and related costs of sales as described above.

• Depreciation and amortization expense increased $5.8 million driven by an increase in the number of assets owned and on lease, partially offset by an increase in the number of aircraft redelivered and parted out into our engine leasing pool.

• Acquisition and transaction expenses increased $4.3 million driven by higher compensation and related costs associated with the acquisition of aviation leasing equipment.

Other income (expense)

Total other income decreased $54.7 million during the three months ended June 30, 2023 primarily due to a decrease of $54.8 million in Gain on sale of assets, net in 2022 due to the change in presentation of asset sales as described above.

Total other income decreased $62.1 million during the six months ended June 30, 2023 primarily due to a decrease of $61.4 million in Gain on sale of assets, net in 2022 due to the change in presentation of asset sales as described above and a decrease of $0.9 million in Aviation Leasing’s proportionate share of unconsolidated entities’ net income.

Total other income increased $0.3 million during the three months ended September 30, 2023 primarily due to an increase of $0.4 million in interest income.

Total other income decreased $61.8 million during the nine months ended September 30, 2023 primarily due to a decrease of $61.4 million in Gain on sale of assets, net in 2022 due to the change in presentation of asset sales.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA decreased $16.4 million and increased $55.6 million during the three and six months ended June 30, 2023, respectively, primarily due to lower gain on sales period over period and the changes noted above.

Adjusted EBITDA increased $23.6 million and $79.2 million during the three and nine months ended September 30, 2023, respectively, primarily due to the changes noted above.

Aerospace Products Segment

4 unchanged sentences

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

5 unchanged sentences

Total expenses 67,481 34,676 32,805 163,992 63,571 100,421

Other (expense) income

Equity in losses of unconsolidated entities (345) (211) (134) (1,581) (565) (1,016)

Other income (expense)

Equity in earnings (losses) of unconsolidated entities 154 (313) 467 (1,427) (878) (549)

Gain on sale of assets, net — — — — 18,562 (18,562)

Total other (expense) income (345) 8,650 (8,995) (1,581) 17,997 (19,578)

Total other income (expense) 154 (313) 467 (1,427) 17,684 (19,111)

Income before income taxes 39,758 18,412 21,346 94,854 48,324 46,530

4 unchanged sentences

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

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

11 unchanged sentences

687 (257) 944 149 (710) 859

Equity in losses of unconsolidated entities 345 211 134 1,581 565 1,016

Equity in (earnings) losses of unconsolidated entities (154) 313 (467) 1,427 878 549

Non-controlling share of Adjusted EBITDA — — — — — —

1 unchanged sentence

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2023 and 2022:

(i) net loss of $345 and $211, (ii) depreciation and amortization expense of $372 and $56 and (iii) acquisition and transaction expense of $95 and $0, respectively.

Includes the following items for the six months ended June 30, 2023 and 2022:

(i) net loss of $1,581 and $565, (ii) depreciation and amortization expense of $709 and $112 and (iii) acquisition and transaction expense of $334 and $0, respectively .

Total Aerospace products revenue increased $41.6 million and $112.4 million during the three and six months ended June 30, 2023 primarily driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023.

Total expenses increased $20.4 million during the three months ended June 30, 2023 primarily due to an increase in Cost of sales of $19.8 million as a result of an increase in Aerospace product sales and the gross presentation described above.

Total expenses increased $67.6 million primarily due to an increase in Cost of sales and Operating expenses during the six months ended June 30, 2023.

(1) Includes the following items for the three months ended September 30, 2023 and 2022:

(i) net income (loss) of $154 and $(313), (ii) depreciation and amortization expense of $304 and $56 and (iii) acquisition and transaction expense of $229 and $0, respectively.

Includes the following items for the nine months ended September 30, 2023 and 2022:

(i) net losses of $1,427 and $878, (ii) depreciation and amortization expense of $1,013 and $168 and (iii) acquisition and transaction expense of $563 and $0, respectively.

Total Aerospace products revenue increased $53.7 million and $166.1 million during the three and nine months ended September 30, 2023 primarily driven by an increase in sales relating to the CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023.

Total expenses increased $32.8 million primarily due to an increase in Cost of sales and Operating expenses during the three months ended September 30, 2023.

• Cost of sales increased $30.2 million as a result of an increase in Aerospace product sales.

• Operating expenses increased $2.5 million primarily due to an increase in commission expenses due to the increase in sales from the used material program.

Total expenses increased $100.4 million primarily due to an increase in Cost of sales and Operating expenses during the nine months ended September 30, 2023.

• Cost of sales increased $94.4 million primarily as a result of an increase in Aerospace products sales and the gross presentation described above.

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Other income (expense)

Total other income decreased $9.0 million primarily due to a decrease of $8.9 million in Gain on sale of assets, net during the three months ended June 30, 2023.

See above discussion regarding presentation of asset sales.

Total other income decreased $19.6 million primarily due to a decrease of $18.6 million in Gain on sale of assets, net and an increase of $1.0 million in our proportionate share of unconsolidated entities’ net loss during the six months ended June 30, 2023.

Total other income increased $0.5 million primarily due to an increase of in our proportionate share on unconsolidated entities’ net income during the three months ended September 30, 2023.

Total other income decreased $19.1 million primarily due to a decrease of $18.6 million in Gain on sale of assets, net and an increase of $0.5 million in our proportionate share of unconsolidated entities’ net loss during the nine months ended September 30, 2023.

See above discussion regarding presentation of asset sales.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $13.0 million and $27.3 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased $22.0 million and $49.3 million during the three and nine months ended September 30, 2023, respectively, primarily due to the changes noted above.

Corporate and Other

The following table presents our results of operations:

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

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Total expenses 66,298 61,532 4,766 193,358 185,827 7,531

Other income — 1,080 (1,080) — 1,043 (1,043)

Total other income — 1,080 (1,080) — 1,043 (1,043)

Other income (expense)

Loss on extinguishment of debt — (19,861) 19,861 — (19,861) 19,861

Other income (expense) 17 (1,080) 1,097 17 (37) 54

Total other income (expense) 17 (20,941) 20,958 17 (19,898) 19,915

Loss before income taxes (55,248) (70,357) 15,109 (159,504) (183,810) 24,306

Provision for (benefit from) income taxes 184 (773) 957 299 (491) 790

Provision for income taxes 242 677 (435) 541 186 355

Net loss (55,490) (71,034) 15,544 (160,045) (183,996) 23,951

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

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 2023 2022

Net loss attributable to shareholders from continuing operations $ (63,824) $ (77,825) $ 14,001 $ (183,505) $ (204,369) $ 20,864

Provision for (benefit from) income taxes 184 (773) 957 299 (491) 790

Provision for income taxes 242 677 (435) 541 186 355

Equity-based compensation expense 335 — 335 741 — 741

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Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — —

Equity in losses (earnings) of unconsolidated entities — — — — — —

Equity in (earnings) losses of unconsolidated entities — — — — — —

Non-controlling share of Adjusted EBITDA — — — — — —

Adjusted EBITDA (non-GAAP) $ (5,929) $ (5,691) $ (238) $ (16,042) $ (17,915) $ 1,873

Total revenues increased $11.1 million and $13.0 million during the three and six months ended June 30, 2023 primarily due to an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Comparison of the three months ended June 30, 2023 and 2022

Total expenses decreased $0.6 million primarily due to lower Interest expense and Acquisition and transaction expenses, partially offset by higher Management fees and incentive allocation to affiliate and Operating expenses.

• Interest expense decreased $9.4 million, which reflects a decrease in the average outstanding debt of approximately $581.0 million due to decreases in (i) the 2021 Bridge Loans of $339.8 million, (ii) the Senior Notes due 2025 of $199.4 million, which were partially redeemed in August 2022, and (iii) the Revolving Credit Facility of $41.8 million.

• Acquisition and transaction expense decreased $1.8 million primarily due to lower professional fees related to strategic transactions.

Total revenues decreased $1.1 million during the three months ended September 30, 2023 primarily due to a crane repair on one of our vessels.

Total revenues increased $11.9 million during the nine months ended September 30, 2023 primarily due to an increase in the Offshore Energy business driven by increased number of days on-hire for one of our vessels.

Comparison of the three months ended September 30, 2023 and 2022

Total expenses increased $4.8 million primarily due to highe r Management fees and incentive allocation to affiliate.

• Management fees and incentive allocation to affiliate increased $4.6 million primarily due to an increase in incentive fee due to the Manager.

• Operating expenses increased $5.1 million which reflects increases in offshore crew expenses, project costs and other operating expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel as well as increased number of days on-hire.

Comparison of the six months ended June 30, 2023 and 2022

Total expenses increased $2.8 million primarily due to higher Operating expenses and Management fees and incentive allocation to affiliate, partially offset by lower Interest expense and Acquisition and transaction expenses.

• Operating expenses increased $11.2 million which reflects increases in offshore crew expenses, project costs and other operating expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel as well as increased number of days on-hire.

Comparison of the nine months ended September 30, 2023 and 2022

Total expenses increased $7.5 million primarily due to higher Management fees and incentive allocation to affiliate, partially offset by lower Interest expense and Acquisition and transaction expenses.

• Management fees and incentive allocation to affiliate increased $13.1 million primarily due to an increase in incentive fee due to the Manager.

• Interest expense decreased $14.2 million, which reflects a decrease in the average outstanding debt of approximately $503.5 million due to decreases in (i) the 2021 Bridge Loans of $299.9 million and (ii) the Senior Notes due 2025 of $199.3 million, which were partially redeemed in August 2022, and (iii) the Revolving Credit Facility of $4.3 million.

• Operating expenses increased $11.8 million which reflects increases in offshore crew expenses, project costs and other operating expenses for one of our vessels driven by increased cost of operations based on the operating location of the vessel as well as increased number of days on-hire.

• Interest expense decreased $14.2 million, which reflects a decrease in the average outstanding debt of approximately $349.5 million due to decreases in (i) the 2021 Bridge Loans of $237.7 million and (ii) the Senior Notes due 2025 of $155.2 million, which were partially redeemed in August 2022, partially offset by an increase in (iii) the Revolving Credit Facility of $43.8 million.

• Acquisition and transaction expense decreased $3.6 million primarily due to lower professional fees related to strategic transactions.

Other income (expense)

Total other expense decreased $21.0 million and $19.9 million during the three and nine months ended September 30, 2023 which primarily reflects a Loss on extinguishment of debt of $19.9 million recognized during 2022 related to the pay-down of the 2021 Bridge Loan issued in December 2021 and February 2022 and the partial redemption of the Senior Notes due 2025.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $5.7 million and $2.1 million during the three and six months ended June 30, 2023, respectively, primarily due to the changes noted above.

Adjusted EBITDA decreased $0.2 million and increased $1.9 million during the three and nine months ended September 30, 2023, respectively, primarily due to the changes noted above.

Liquidity and Capital Resources

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Our principal uses of liquidity have been and continue to be (i) acquisitions of aircraft and engines, (ii) dividends to our ordinary and preferred shareholders, (iii) expenses associated with our operating activities, and (iv) debt service obligations associated with our investments.

• Cash used for the purpose of making investments was $380.8 million and $457.9 million during the six months ended June 30, 2023 and 2022, respectively.

• Dividends to shareholders and holders of eligible participating securities were $75.0 million and $79.4 million during the six months ended June 30, 2023 and 2022, respectively.

• Cash used for the purpose of making investments was $562.8 million and $545.7 million during the nine months ended September 30, 2023 and 2022, respectively.

• Dividends to shareholders and holders of eligible participating securities were $113.2 million and $119.0 million during the nine months ended September 30, 2023 and 2022, respectively.

• Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities.

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Our principal sources of liquidity to fund these uses have been and continue to be (i) revenues from our aviation assets (including finance lease collections and maintenance reserve collections) net of operating expenses, (ii) proceeds from borrowings or the issuance of securities and (iii) proceeds from asset sales.

• Cash flows provided by operating activities, plus the principal collections on finance leases and maintenance reserve collectio ns were $87.3 million during the six months ended June 30, 2023.

Cash flows used in operating activities, plus the principal collections on finance leases and maintenance reserve collectio ns were $23.6 million during the six months ended June 30, 2022

• During the six months ended June 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $325.0 million and $330.0 million, respectively.

During the six months ended June 30, 2022, additional borrowings were obtained in connection with the (i) 2021 Bridge Loa ns of $239.5 million, (ii) Revolving Credit Facility of $255.0 million and (iii) EB-5 Loan Agreement of $9.5 million.

We made total principal repaymen ts of $224.5 million relating t o the Revolving Credit Facility.

• Proceeds from the sale of assets were $273.2 million and $142.3 million d uring the six months ended June 30, 2023 and 2022, respectively.

• Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs were $61.7 million and $0.0 million during the six months ended June 30, 2023 and 2022, respectively.

We are currently evaluating several potential transactions and related financings, which could occur within the next 12 months.

• Cash flows provided by operating activities, plus the principal collections on finance leases and maintenance reserve collectio ns were $143.1 million and $18.5 million during the nine months ended September 30, 2023 and 2022, respectively.

• During the nine months ended September 30, 2023, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $430.0 million and $330.0 million, respectively.

During the nine months ended September 30, 2022, additional borrowings were obtained in connection with the (i) 2021 Bridge Loans of $239.5 million (ii) Revolving Credit Facility of $255.0 million and (iii) EB-5 Loan Agreement of $9.5 million.

We made total principal repayments of (i) $444.5 million relating to the Revolving Credit Facility, (ii) $340.0 million related to the 2021 Bridge Loans and (iii) $200.0 million related to the Senior Notes due 2025.

• Proceeds from the sale of assets were $366.1 million and $267.4 million d uring the nine months ended September 30, 2023 and 2022, respectively.

• Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs were $61.7 million and $0.0 million during the nine months ended September 30, 2023 and 2022, respectively.

We are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional debt and equity financings, which could occur within the next 12 months.

None of these potential transactions, negotiations, or financings are definitive or included within our planned liquidity needs.

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Historical Cash Flow

Comparison of the six months ended June 30, 2023 and 2022

The following table compares the historical cash flow from continuing and discontinued operations for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

Comparison of the nine months ended September 30, 2023 and 2022

The following table compares the historical cash flow from continuing and discontinued operations for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

(in thousands) 2023 2022

2 unchanged sentences

Net cash used in investing activities (191,092) (268,367)

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

Net cash provided by operating activities increased $115.8 million, which primarily reflects (i) an increase in Net income of $304.0 million and (ii) Changes in working capital of $50.9 million, partially offset by certain adjustments to reconcile net income to Cash used in operating activities including, (iii) Asset impairment of $122.5 million , (iv) Provision for credit losses of $46.2 million, (v) Equity in losses of unconsolidated entities of $36.1 million and (vi) Depreciation and amortization of $35.5 million.

Net cash used in investing activities decreased $204.9 million, primarily due to (i) higher Proceeds from the sale of leasing equipment of $135.2 million and (ii) a decrease in Acquisitions of property, plant and equipment of $116.4 million partially offset by (iii) an increase in Investment in unconsolidated entities of $17.3 million , (iv) a decrease in Proceeds for deposit on sale of aircraft and engine of $6.4 million, (v) an increase in Acquisition of lease intangibles of $5.5 million and (vi) an increase in Acquisitions of leasing equipment of $4.7 million.

Net cash provided by financing activities decreased $209.4 million, primarily due to (i) a decrease in Proceeds from debt of $179.0 million, and (ii) an increase in Repayments of debt of $105.3 million partially offset by (iii) an increase in Proceeds from the issuance of preferred shares of $61.7 million, and (iv) a decrease in Payments of deferred financing costs of $13.0 million.

Net cash provided by (used in) financing activities 74,140 (77,653)

Net cash provided by operating activities increased $138.1 million, which primarily reflects (i) an increase in Net income of $364.3 million and (ii) Changes in working capital of $63.9 million, partially offset by certain adjustments to reconcile net income to Cash provided by operating activities including, (iii) Asset impairment of $127.0 million, (iv) Provision for credit losses of $40.6 million, (v) Equity in losses of unconsolidated entities of $45.1 million, (vi) Depreciation and amortization of $32.4 million, (vii) Loss on extinguishment of debt of $19.9 million, and (viii) amortization of deferred financing costs of $10.7 million.

Net cash used in investing activities decreased $77.3 million, primarily due to (i) a decrease in Acquisitions of property, plant and equipment of $134.8 million, (ii) higher Proceeds from the sale of leasing equipment of $104.0 million and partially offset by (iii) an increase in Acquisitions of leasing equipment of $146.3 million and (iv) an increase in Investment in unconsolidated entities of $12.2 million.

Net cash provided by financing activities increased $151.8 million, primarily due to (i) an decrease in Repayments of debt of $654.5 million partially offset by (ii) a decrease in Dividend from spin-off of FTAI Infrastructure, net of cash transferred of $500.6 million.

We also have current availability for borrowing of up to $50.0 million.

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The absence of cash flows from discontinued operations is not expected to adversely affect our liquidity or our ability to fund capital expenditures or working capital needs.

The discontinued operations historically generate negative operating and investing cash flows.

The discontinued operations historically generated negative operating and investing cash flows.

Contractual Obligations

Our material cash requirements include the following contractual and other obligations:

Debt Obligations — As of June 30, 2023, we had outstanding principal and interest payment obligations of $2.2 billion and $0.6 billion, respectively, of which only interest payments of $152.2 million are due in the next twelve months.

Debt Obligations — As of September 30, 2023, we had outstanding principal and interest payment obligations of $2.3 billion and $0.5 billion, respectively, of which only interest payments of $164.2 million are due in the next twelve months.

See Note 7 to the consolidated financial statements for additional information about our debt obligations.

Lease Obligations —As of June 30, 2023, we had outstanding operating and finance lease obligations of $2.5 million, of which $0.8 million is due in the next twelve months.

Lease Obligations —As of September 30, 2023, we had outstanding operating and finance lease obligations of $2.3 million, of which $0.9 million is due in the next twelve months.

Other Cash Requirements —In addition to our contractual obligations, we pay quarterly cash dividends on our ordinary shares and preferred shares, which are subject to change at the discretion of our Board of Directors.

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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 2. Management’s Discussion and Analysis