FTAI Aviation Ltd. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help you understand FTAI Aviation Ltd. Our MD&A should be read in conjunction with our consolidated financial statements and the accompanying notes, and with Part I, Item 1A, “Risk Factors” and “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K. A discussion of our cash flows for 2022 compared to 2021 is included in our Annual Report on Form 10-K for the year ended December 31, 2022, under Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview We own, lease and sell aviation equipment. We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facility and exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We target assets that, on a combined basis, generate strong cash flows with potential for earnings growth and asset appreciation. We believe that there is a large number of acquisition opportunities in our markets and that our Manager’s expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities. We are externally managed by FIG LLC (the “Manager”), an affiliate of Fortress Investment Group LLC (“Fortr ess”), which has a dedicated team of experienced professionals focused on the acquisition of transportation assets since 2002. As of December 31, 2023, we had total consolidated assets of $3.0 billion and total equity of $175.9 million. Impact of Russia’s Invasion of Ukraine Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31, 2022. 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, we recognized an impairment charge totaling $120.0 million, net of maintenance deposits for the year ended December 31, 2022, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of December 31, 2023, 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. We also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee’s policy fails to indemnify us. The insured value of the aircraft and engines that remain in Russia is approximately $210.7 million. We intend to pursue all our claims under these policies. However, the timing and amount of any recoveries under these policies are uncertain. The extent of the impact of Russia’s invasion of Ukraine and the related sanctions on our operational and financial performance, including the ability for us to recover our leasing equipment in the region, will depend on future developments, including the duration of the conflict, sanctions and restrictions imposed by Russian and international governments, all of which remain uncertain. Spin-Off of FTAI Infrastructure Inc. (“FTAI Infrastructure”) On August 1, 2022, Fortress Transportation and Infrastructure Investors LLC (“we”, “us”, “our”, “FTAI” or the “Company” pre-Merger, as defined below, and FTAI Aviation Ltd. post-Merger) effected a spin-off of the Company’s infrastructure business held by FTAI Infrastructure (a wholly-owned subsidiary of the Company) as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company’s ordinary shares as of July 21, 2022. FTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company’s previously held interests in the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-level debt of those entities. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to the Company. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50% senior unsecured notes due 2025, and approximately $175.0 million of the outstanding borrowings under its revolving credit facility. FTAI retained the aviation business and certain other assets, and FTAI’s remaining outstanding corporate indebtedness. In connection with the spin-off, the Company and the Manager assigned the Company’s then-existing management agreement to FTAI Infrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement. The Company and certain of its subsidiaries executed a new management agreement with the Manager. The new management agreement has an initial term of six years. The Manager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements with the Manager, which were assigned to FTAI Infrastructure. Prior to the Merger described below, our Manager remained entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they existed prior to spin-off. Following the Merger, the Company entered into a Services and Profit Sharing Agreement (the “Services and Profit Sharing Agreement”), with a subsidiary of the Company and 31 Fortress Worldwide Transportation and Infrastructure Master GP LLC (“Master GP”), pursuant to which Master GP is entitled to incentive payments on substantially similar terms as the previous arrangements. On November 10, 2022, the Company completed the transactions set forth in the Agreement and Plan of Merger (the “Merger”) between Fortress Transportation and Infrastructure Investors LLC (“FTAI”) and FTAI Aviation Ltd. (“FTAI Aviation”) and certain other parties, with FTAI becoming a subsidiary of the Company. As a result of the merger, the FTAI became a Cayman Islands exempted company. Upon merger completion, Fortress Transportation and Infrastructure Investors LLC public common shareholders’ shares of the Company were exchanged automatically for shares of FTAI Aviation Ltd. without any further action from the shareholders. 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. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment develops and manufactures through a joint venture, repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines. During the fourth quarter of 2023, the Company changed the co mposition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment. Prior periods have been restated to reflect the change in accordance with the requirements of ASC 280, Segment Reporting . See Note 2 for additional information. Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases. Our Manager On May 22, 2023, Fortress and Mubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital (“Mubadala”), announced that they have entered into definitive agreements pursuant to which, among other things, certain members of Fortress management and affiliates of Mubadala will acquire 100% of the equity of Fortress that is currently indirectly held by SoftBank Group Corp. (“SoftBank”). After the closing of the transaction, Fortress will continue to operate as an independent investment manager under the Fortress brand, with autonomy over investment processes and decision making, personnel and operations. Results of Operations Adjusted EBITDA (Non-GAAP) The chief operating decision maker (“CODM”) utilizes Adjusted EBITDA as the key performance measure. Adjusted EBITDA is not a financial measure in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). This performance measure provides the CODM with the information necessary to assess operational performance and make resource and allocation decisions. We believe Adjusted EBITDA is a useful metric for investors and analysts for similar purposes of assessing our operational performance. 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. 32 The following table presents our consolidated results of operations: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Revenues Lease income $ 207,936 $ 179,314 $ 173,864 $ 28,622 $ 5,450 Maintenance revenue 191,347 148,846 128,819 42,501 20,027 Asset sales revenue 303,141 183,535 — 119,606 183,535 Aerospace products revenue 454,970 178,515 23,301 276,455 155,214 Other revenue 13,502 18,201 9,599 (4,699) 8,602 Total revenues 1,170,896 708,411 335,583 462,485 372,828 Expenses Cost of sales 502,132 248,385 14,308 253,747 234,077 Operating expenses 110,163 132,264 59,615 (22,101) 72,649 General and administrative 13,700 14,164 13,448 (464) 716 Acquisition and transaction expenses 15,194 13,207 17,911 1,987 (4,704) Management fees and incentive allocation to affiliate 18,037 3,562 684 14,475 2,878 Depreciation and amortization 169,877 152,917 147,740 16,960 5,177 Asset impairment 2,121 137,219 10,463 (135,098) 126,756 Interest expense 161,639 169,194 155,017 (7,555) 14,177 Total expenses 992,863 870,912 419,186 121,951 451,726 Other income (expense) Equity in losses of unconsolidated entities (1,606) (369) (1,403) (1,237) 1,034 Gain on sale of assets, net — 77,211 49,015 (77,211) 28,196 Loss on extinguishment of debt — (19,859) (3,254) 19,859 (16,605) Other income (expense) 7,590 207 (490) 7,383 697 Total other income 5,984 57,190 43,868 (51,206) 13,322 Income (loss) from continuing operations before income taxes 184,017 (105,311) (39,735) 289,328 (65,576) (Benefit from) provision for income taxes (59,800) 5,300 3,126 (65,100) 2,174 Net income (loss) from continuing operations 243,817 (110,611) (42,861) 354,428 (67,750) Net loss from discontinued operations, net of income taxes — (101,416) (87,845) 101,416 (13,571) Net income (loss) 243,817 (212,027) (130,706) 455,844 (81,321) Less: Net income (loss) attributable to non-controlling interest in consolidated subsidiaries: Continuing operations — — — — — Discontinued operations — (18,817) (26,472) 18,817 7,655 Less: Dividends on preferred shares 31,795 27,164 24,758 4,631 2,406 Net income (loss) attributable to shareholders $ 212,022 $ (220,374) $ (128,992) $ 432,396 $ (91,382) 33 The following table sets forth a reconciliation of net income (loss) attributable to shareholders from continuing operations to Adjusted EBITDA: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Net income (loss) attributable to shareholders from continuing operations $ 212,022 $ (137,775) $ (67,619) $ 349,797 $ (70,156) Add: (Benefit from) provision for income taxes (59,800) 5,300 3,126 (65,100) 2,174 Add: Equity-based compensation expense 1,638 — — 1,638 — Add: Acquisition and transaction expenses 15,194 13,207 17,911 1,987 (4,704) Add: Losses on the modification or extinguishment of debt and capital lease obligations — 19,859 3,254 (19,859) 16,605 Add: Changes in fair value of non-hedge derivative instruments — — — — — Add: Asset impairment charges 2,121 137,219 10,463 (135,098) 126,756 Add: Incentive allocations 17,116 3,489 — 13,627 3,489 Add: Depreciation & amortization expense (1) 213,641 190,031 175,718 23,610 14,313 Add: Interest expense and dividends on preferred shares 193,434 196,358 179,775 (2,924) 16,583 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) 310 40 (1,203) 270 1,243 Less: Equity in losses of unconsolidated entities 1,606 369 1,403 1,237 (1,034) Less: Non-controlling share of Adjusted EBITDA — — — — — Adjusted EBITDA (non-GAAP) $ 597,282 $ 428,097 $ 322,828 $ 169,185 $ 105,269 __________________________________________________ (1) Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) depreciation and amortization expense of $169,877, $152,917 and $147,740, (ii) lease intangible amortization of $15,126, $13,913 and $4,993 and (iii) amortization for lease incentives of $28,638, $23,201 and $22,985, respectively. (2) Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net loss of $1,606, $369 and $1,403, (ii) depreciation and amortization expense of $1,488, $409 and $200 and (iii) acquisition and transaction expense of $428, $0 and $0, respectively. Revenues Presentation of assets sales During the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in Revenues in the Consolidated Statement of Operations beginning in the third quarter of 2022 and is accounted for in accordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain (loss) on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets. Generally, assets sold were included in Leasing equipment, net, on the Consolidated Balance Sheets. Comparison of the years ended December 31, 2023 and 2022 Total revenues increased $462.5 million, primarily due to an increase in Aerospace Products revenue, Asset sales revenue, maintenance revenue and lease income. Aerospace Products revenue increased $276.5 million driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023. See above discussion regarding presentation of asset sales. Asset sales revenue increased $119.6 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. Lease income increased $28.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the year and an inc rease in the Offshore Energy business as one of our vessels was on-hire longer in 2023 compared to 2022 and at higher rates. Maintenance revenue increased $42.5 million primarily due to the recognition of maintenance deposits due to the early redelivery of five 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. 34 Other revenue decreased $4.7 million primarily due to a decreas e in end-of-lease redelivery compensation. Expenses Total expenses increased $122.0 million primarily due to higher (i) cost of sales, (ii) management fees and incentive allocation to affiliate and(iii) depreciation and amortization, partially offset by lower (iv) asset impairment, (v) operating expenses and (vi) interest expense. Cost of sales increased $253.7 million primarily as a result of an increase in asset sales and Aerospace Product sales and the gross presentation of Asset sales revenue and Aerospace products revenues as described above. Management fees and incentive allocation to affiliate increased $14.5 million primarily due to an increase in incentive fee due to the Manager driven by an increase in net income. Depreciation and amortization increased $17.0 million primarily driven by an increase i n 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. Asset impairment decreased $135.1 million primarily due t o the 2022 write down of aircraft and engines located in Russia and Ukraine that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information. Operating expenses decreased $22.1 million primarily due to: • an decrease of $43.4 million in the Aviation Leasing segment primarily as a result of decrease in provision for credit losses as a result of the sanctions imposed on Russian airlines in 2022, shipping and storage fees and repairs and maintenance expenses, partially offset by increases in insurance expenses. • an increase of $12.8 million in the Offshore Energy business which reflects increases in offshore crew expenses, project costs and other operating expenses as our vessels were on-hire longer in 2023 compared to 2022. • an increase of $8.5 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 as well as an increase in shipping and storage fees as operations continued to ramp-up in 2023. Interest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million primarily due to decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which were partially redeemed in August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the Senior Notes due 2030 of $82.8 million, which were issued in November 2023. Other income (expense) Total other income decreased $51.2 million primarily due to (i) a d ecrease of $77.2 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 described above, partially offset by (ii) 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 Senior Notes due 2025. (Benefit from) provision for income taxes The benefit from income taxes increase d $65.1 million primarily due to the Company establishing a deferred tax asset of $72.2 million in connection with a tax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11 to the consolidated financial statements for additional information. Net income (loss) from continuing operations Net income from continuing operations increased $354.4 million primarily due to the changes noted above. Net loss from discontinued operations Net loss from discontinued operations decreased $101.4 million for the year ended December 31, 2023, 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 $169.2 million primarily due to the changes noted above. Comparison of the years ended December 31, 2022 and 2021 Total revenues increased $372.8 million , primarily due to an increase in Asset sales revenue, Aerospace Products revenue, maintenance revenue and other revenue. 35 Asset sales revenue increased $183.5 million primarily due to an increase in the sale of commercial aircraft and engines in our Aviation Leasing segment during 2022. See above discussion regarding presentation of asset sales. Aerospace Products revenue increased $155.2 million driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations ramped up in 2022. See above discussion regarding presentation of asset sales. Maintenance revenue increased $20.0 million primarily due to an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation, partially offset by a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft in the prior year and lower maintenance billings from early termination of aircraft leases with Russian airlines as a result of the sanctions imposed on Russian airlines during the first quarter of 2022. Other revenue increased $8.6 million primarily due to an increase in end-of lease redelivery compensation. Lease income decreased $5.5 million primarily due to a $4.7 million decrease in the Aviation leasing segment driven by the early termination of aircraft and engine leases as a result of the sanctions imposed on Russian airlines during the first quarter of 2022. Basic lease revenues from our owned aircraft and engines leased to Russian airlines was approximately $39.8 million for the year ended December 31, 2021. This decrease is partially offset by an increase in the number of aircraft and engines placed on lease during the year, and a $10.1 million increase in the Offshore Energy business as two of our vessels were on-hire longer in 2022 compared to 2021. Expenses Total expenses increased $451.7 million primarily due to higher (i) cost of sales, (ii) asset impairment charges, (iii) operating expenses, (iv) interest expense, (v) depreciation and amortization, and (vi) management fees and incentive allocation to affiliate partially offset by lower (vii) acquisition and transaction expenses. Cost of sales increased $234.1 million primarily as a result of an increase in asset sales and Aerospace Product sales and the gross presentation of asset sales revenue and Aerospace Product revenues as described above. Asset impairment increased $126.8 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information. Operating expenses increased $72.6 million primarily due to: • an increase of $48.5 million in the Aviation Leasing segment primarily as a result of an increase in provision for credit losses as a result of the sanctions imposed on Russian airlines in 2022, and increases in insurance expense, shipping and storage fees, professional fees, and repairs and maintenance expenses. • an increase of $17.6 million in the Offshore Energy business which reflects increases in offshore crew expenses, project costs and other operating expenses as our vessels were on-hire longer in 2022 compared to 2021, as well as crane repairs on one of our vessels. • an increase of $6.5 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 as well as an increase in professional fees and other operating expenses due to the ramp-up of Aerospace Products. Interest expense increased $14.2 million, which reflects an increase in the average outstanding debt of approximately $354.7 million due to increases in (i) the Senior Notes due 2028 of $459.7 million, (ii) the 2021 Bridge Loans issued in December 2021 and February 2022 of $169.9 million and (iii) the Revolving Credit Facility of $49.7 million, partially offset by a decrease in (iv) the Bridge Loans of $108.3 million, (v) the Senior Notes due 2022 of $133.1 million, which was redeemed in full in May 2021, and (vi) the Senior Notes due 2025 of $83.2 million, which were partially redeemed in August 2022. Depreciation and amortization increased $5.2 million primarily 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. Management fees and incentive allocation to affiliate increased $2.9 million primarily due to an increase in incentive fee due to the Manager. Acquisition and transaction expenses decreased $4.7 million primarily due to a decrease in professional fees related to the Transtar acquisition in 2021. Other income (expense) Total other income increased $13.3 million primarily due to (i) an increase of $28.2 million in Gain on sale of assets, net in the Aviation Leasing and Aerospace Products segments from more opportunistic asset sales transactions, partially offset by (ii) an increase of $16.6 million in loss on extinguishment of debt primarily related to the 2022 paydown of the 2021 Bridge Loan and the partial redemption of the Senior Notes due 20 25 in connection with the spin-off of FTAI Infrastructure. See above discussion regarding presentation of asset sales and impact on Gain on sales of assets, net. Provision for income taxes The provision for income taxes increased $2.2 million primarily due to a higher provision in the Aerospace Products segment. 36 Net loss from continuing operations Net loss from continuing operations increased $67.8 million primarily due to the changes noted above. Net loss from discontinued operations Net loss from discontinued operations increased $13.6 million primarily due to: • An increase in net loss of $34.7 million in the Ports and Terminals business in 2022 of which $32.6 million relates to our equity pick-up in net losses for the Long Ridge investment. • An increase in acquisition and transaction expense of $11.9 million during 2022 related to the spin-off of the infrastructure business; • Offset by a decrease in net loss of $22.6 million in the Jefferson business in 2022 which is primarily driven by seven months of activity during 2022 compared to a full year of activity in 2021; and • An increase in net income of $8.4 million on the Transtar business, which was acquired on July 28, 2021. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $105.3 million primarily due to the changes noted above. Aviation Leasing Segment As of December 31, 2023, in our Avi ation Leasing segment, we own and manage 363 aviation assets, consisting of 96 commercial aircraft and 267 engines, including eight aircraft and seventeen engines that were still located in Russia. As of December 31, 2023 , 76 of our commercial aircraft and 175 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 December 31, 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 16 months. The table below provides additional information on the assets in our Aviation Leasing segment: Aviation Assets Widebody Narrowbody Total Aircraft Assets at January 1, 2023 8 98 106 Purchases — 40 40 Sales (2) (11) (13) Transfers (1) (36) (37) Assets at December 31, 2023 5 91 96 Engines Assets at January 1, 2023 40 184 224 Purchases 7 94 101 Sales (17) (24) (41) Transfers 2 (19) (17) Assets at December 31, 2023 32 235 267 37 The following table presents our results of operations for our Aviation Leasing segment: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Revenues Lease income $ 179,704 $ 159,068 $ 163,733 $ 20,636 $ (4,665) Maintenance revenue 191,347 148,846 128,819 42,501 20,027 Asset sales revenue 303,141 183,535 — 119,606 183,535 Other revenue 7,419 11,499 5,569 (4,080) 5,930 Total revenues 681,611 502,948 298,121 178,663 204,827 Expenses Cost of sales 221,852 138,904 — 82,948 138,904 Operating expenses 37,876 81,232 32,757 (43,356) 48,475 Acquisition and transaction expenses 7,150 1,923 982 5,227 941 Depreciation and amortization 158,354 144,258 139,678 14,096 4,580 Asset impairment 2,121 137,219 10,463 (135,098) 126,756 Total expenses 427,353 503,536 183,880 (76,183) 319,656 Other income (expense) Equity in (losses) earnings of unconsolidated entities (148) 740 — (888) 740 Gain on sale of assets, net — 59,048 28,631 (59,048) 30,417 Other income (expense) 1,300 246 (527) 1,054 773 Total other income 1,152 60,034 28,104 (58,882) 31,930 Income before income taxes 255,410 59,446 142,345 195,964 (82,899) (Benefit from) provision for income taxes (36,193) 2,502 2,073 (38,695) 429 Net income 291,603 56,944 140,272 234,659 (83,328) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — Net income attributable to shareholders $ 291,603 $ 56,944 $ 140,272 $ 234,659 $ (83,328) 38 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Net income attributable to shareholders $ 291,603 $ 56,944 $ 140,272 $ 234,659 $ (83,328) Add: (Benefit from) provision for income taxes (36,193) 2,502 2,073 (38,695) 429 Add: Equity-based compensation expense 337 — — 337 — Add: Acquisition and transaction expenses 7,150 1,923 982 5,227 941 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — Add: Asset impairment charges 2,121 137,219 10,463 (135,098) 126,756 Add: Incentive allocations — — — — — Add: Depreciation and amortization expense (1) 202,118 181,372 167,656 20,746 13,716 Add: Interest expense and dividends on preferred shares — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (2) 104 925 — (821) 925 Less: Equity in losses (earnings) of unconsolidated entities 148 (740) — 888 (740) Less: Non-controlling share of Adjusted EBITDA — — — — — Adjusted EBITDA (non-GAAP) $ 467,388 $ 380,145 $ 321,446 $ 87,243 $ 58,699 __________________________________________________ (1) Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) depreciation expense of $158,354, $144,258 and $139,678, (ii) lease intangible amortization of $15,126, $13,913 and $4,993 and (iii) amortization for lease incentives of $28,638, $23,201 and $22,985, respectively. (2) Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net (loss) income of $(148), $740 and $0 and (ii) depreciation and amortization of $252, $185 and $0, respectively. Comparison of the years ended December 31, 2023 and 2022 Revenues Total revenues increased $178.7 million driven by an increase in asset sales revenue, maintenance revenue and lease income, partially offset by a decrease in other revenue. • Asset sales revenue increased $119.6 million primarily due to an increase in the sale of commercial aircraft and engines. See above discussion regarding presentation of asset sales. • Maintenance revenue increased $42.5 million primarily due to the recognition of maintenance deposits due to the early redelivery of five 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. • Lease income increased $20.6 million primarily due to an increase in the number of aircraft and engines placed on lease during the year, partially offset by an increase in the number of aircraft and engines redelivered. • Other revenue decreased $4.1 million primarily due to a decrease in end-of-lease redelivery compensation. Expenses Total expenses decreased $76.2 million primarily driven by a decrease in asset impairment and operating expenses, partially offset by an increase in cost of sales, depreciation and amortization and acquisition and transaction expenses. 39 • Asset impairment decreased $135.1 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information. • Operating expenses decreased $43.4 million primarily as a re sult of decreases in provision for credit losses as a result of the sanctions imposed on Russian airlines in 2022, shipping and storage fees and repairs and maintenance expenses, partially offset by an increase in insurance expense. • Cost of sales increased $82.9 million primarily as a result of a n increase in asset sales and the gross presentation of asset sales revenues and related costs of sales as described above. • Depreciation and amortization expense increased $14.1 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. • Acquisition and transaction expenses increased $5.2 million driven by higher compensation and related costs associated with the acquisition of aviation leasing equipment. Other income (expense) Total other income decreased $58.9 million primarily due to a decrease of $59.0 million in Gain on sale of assets, net due to the change in presentation of asset sales. (Benefit from) provision for income taxes The benefit from income taxes increased $38.7 million primarily due to the Company establishing a deferred tax asset of $46.6 million in connection with a tax law change in Bermuda , which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11 to the consolidated financial statements for additional information. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $87.2 million primarily due to the changes noted above. Comparison of the years ended December 31, 2022 and 2021 Revenues Total revenues increased $204.8 million driven by an increase in asset sales revenue, maintenance revenue and other revenue, partially offset by a decrease in lease income. • Asset sales revenue increas ed $183.5 million primarily due to an increase in the sale of commercial aircraft and engines during 2022. See above discussion regarding presentation of asset sales. • Maintenance revenue increased $20.0 million primarily due to an increase in the number of aircraft and engines placed on lease, higher aircraft and engine utilization and higher end-of-lease return compensation, partially offset by a decrease in the recognition of maintenance deposits due to the early redelivery of aircraft in the prior year and lower maintenance billings from the early termination of aircraft leases with Russian airlines as a result of the sanctions imposed on Russian airlines during the first quarter of 2022. • Other revenue increased $5.9 million primarily due to an increase in end-of-lease redelivery compensation. • Lease income decreased $4.7 million primarily due to the early termination of aircraft and engine leases as a result of the sanctions imposed on Russian airlines during the first quarter of 2022. Basic lease revenues from our owned aircraft and engines leased to Russian airlines was approximately $39.8 million for the year ended December 31, 2021. This decrease is partially offset by an increase in the number of aircraft and engines placed on lease during the year. Expenses 40 Total expenses increased $319.7 million primarily driven by an increase in cost of sales, asset impairment, operating expenses and depreciation and amortization expense. • Cost of sales increased $138.9 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. • Asset impairment increased $126.8 million primarily due to the 2022 write down of aircraft and engines located in Russia and Ukraine that were deemed not recoverable. See Note 5 to the consolidated financial statements for additional information. • Operating expenses increased $48.5 million primarily as a result of an increase in provision for credit losses as a result of the sanctions imposed on Russian airlines in 2022, and increases in insurance expense, shipping and storage fees, professional fees, and repairs and maintenance expenses. • Depreciation and amortization expense increased $4.6 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. Other income (expense) Total other income increased $31.9 million primarily due to an increase of $30.4 million in G ain on the sale of assets, net due to more opportunistic sales transactions. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $58.7 million primarily due to the changes noted above. Aerospace Products Segment The Aerospace Products segment develops and manufactures through a joint venture , repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines. Our engine and module sales are facilitated through The Module Factory, a dedicated commercial maintenance program, designed to focus on modular repair and refurbishment of CFM56-7B and CFM56-5B engines, performed by a third party. Used serviceable material is sold through our exclusive partnership with AAR Corp, who is responsible for the teardown, repair, marketing and sales of spare parts from our CFM56 engine pool. In December 2023, we acquired the remaining interest in Quick Turn Engine Center LLC or “QuickTurn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. Refer to Note 4 “Acquisition of QuickTurn”, for additional information. We also hold a 25% interest in the Advanced Engine Repair JV which focuses on developing new cost savings programs for engine repairs. The following table presents our results of operations: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Aerospace products revenue $ 454,970 $ 178,515 $ 23,301 $ 276,455 $ 155,214 Expenses Cost of sales 280,280 109,481 14,308 170,799 95,173 Operating expenses 20,459 11,967 5,429 8,492 6,538 Acquisition and transaction expenses 1,722 243 — 1,479 243 Depreciation and amortization 661 258 66 403 192 Total expenses 303,122 121,949 19,803 181,173 102,146 Other income (expense) Equity in losses of unconsolidated entities (1,458) (1,109) (1,403) (349) 294 Gain on sale of assets, net — 18,163 20,384 (18,163) (2,221) Other income 5,347 — — 5,347 — Total other income 3,889 17,054 18,981 (13,165) (1,927) Income before income taxes 155,737 73,620 22,479 82,117 51,141 (Benefit from) provision for income taxes (24,440) 2,961 1,135 (27,401) 1,826 Net income 180,177 70,659 21,344 109,518 49,315 Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — Net income attributable to shareholders $ 180,177 $ 70,659 $ 21,344 $ 109,518 $ 49,315 41 The following table sets forth a reconciliation of net income attributable to shareholders to Adjusted EBITDA: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Net income attributable to shareholders $ 180,177 $ 70,659 $ 21,344 $ 109,518 $ 49,315 Add: (Benefit from) provision for income taxes (24,440) 2,961 1,135 (27,401) 1,826 Add: Equity-based compensation expense 225 — — 225 — Add: Acquisition and transaction expenses 1,722 243 — 1,479 243 Add: Losses on the modification or extinguishment of debt and capital lease obligations — — — — — Add: Changes in fair value of non-hedge derivative instruments — — — — — Add: Asset impairment charges — — — — — Add: Incentive allocations — — — — — Add: Depreciation and amortization expense 661 258 66 403 192 Add: Interest expense and dividends on preferred shares — — — — — Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities (1) 206 (885) (1,203) 1,091 318 Less: Equity in losses of unconsolidated entities 1,458 1,109 1,403 349 (294) Less: Non-controlling share of Adjusted EBITDA — — — — — Adjusted EBITDA (non-GAAP) $ 160,009 $ 74,345 $ 22,745 $ 85,664 $ 51,600 __________________________________________________ (1) Includes the following items for the years ended December 31, 2023, 2022 and 2021: (i) net loss of $ 1,458 , $1,109 and $1,403 (ii) depreciation and amortization of $1,236 , $224 and $200 and (iii) acquisition and transaction expense of $428, $0, $0, respectively. Comparison of the years ended December 31, 2023 and 2022 Revenues Total Aerospace Products revenue increased $276.5 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations continued to ramp-up in 2023. See above discussion regarding presentation of asset sales. Expenses Total expenses increased $181.2 million primarily due to an increase in costs of sales and operating expenses. • Cost of sales increased $170.8 million primarily as a result of an increase in Aerospace Product sales and the gross presentation described above. • Operating expenses increased $8.5 million primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in shipping and storage fees as operations continued to ramp-up in 2023. Other income (expense) Total other income decreased $13.2 million which primarily reflects a decrease of $18.2 million in Gain on sale of assets, net, partially offset by an increase of $5.3 million in gain on consolidation of investment in connection with the QuickTurn acquisition, and an increase of $0.3 million in our proportionate share of unconsolidated entities’ net loss. See above discussion regarding presentation of asset sales. (Benefit from) provision for income taxes The benefit from income taxes increase d $27.4 million primarily due to the Company establishing a deferred tax asset of $25.6 million in connection with a tax law change in Bermuda, which was recorded as a benefit from income taxes during the fourth quarter of 2023. See Note 11 to the consolidated financial statements for additional information. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $85.7 million primarily due to the changes noted above. 42 Comparison of the years ended December 31, 2022 and 2021 Revenues Total Aerospace Products revenue increased $155.2 million primarily driven by an increase in sales relating to the CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory as operations ramped up in 2022. See above discussion regarding presentation of asset sales. Expenses Total expenses increased $102.1 million primarily due to an increase in costs of sales and operating expenses. • Cost of sales increased $95.2 million primarily as a result of an increase in Aerospace Product sales and the gross presentation described above. • Operating expenses increased $6.5 million primarily due to an increase in commission expenses due to the increase in sales from the used material program as well as an increase in professional fees and other operating expenses due to the ramp-up of Aerospace Products. Other income (expense) Total other income decreased $1.9 million, which primarily reflects a decrease of $2.2 million in Gain on sale of assets, net. See above discussion regarding presentation of asset sales. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA increased $51.6 million primarily due to the changes noted above. Corporate and Other The following table presents our results of operations: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Revenues Lease income $ 28,232 $ 20,246 $ 10,131 $ 7,986 $ 10,115 Other revenue 6,083 6,702 4,030 (619) 2,672 Total revenues 34,315 26,948 14,161 7,367 12,787 Expenses Operating expenses 51,828 39,065 21,429 12,763 17,636 General and administrative 13,700 14,164 13,448 (464) 716 Acquisition and transaction expenses 6,322 11,041 16,929 (4,719) (5,888) Management fees and incentive allocation to affiliate 18,037 3,562 684 14,475 2,878 Depreciation and amortization 10,862 8,401 7,996 2,461 405 Interest expense 161,639 169,194 155,017 (7,555) 14,177 Total expenses 262,388 245,427 215,503 16,961 29,924 Other income (expense) Loss on extinguishment of debt — (19,859) (3,254) 19,859 (16,605) Other income (expense) 943 (39) 37 982 (76) Total other income (expense) 943 (19,898) (3,217) 20,841 (16,681) Loss before income taxes (227,130) (238,377) (204,559) 11,247 (33,818) Provision for (benefit from) income taxes 833 (163) (82) 996 (81) Net loss (227,963) (238,214) (204,477) 10,251 (33,737) Less: Net loss attributable to non-controlling interest in consolidated subsidiaries — — — — — Less: Dividends on preferred shares 31,795 27,164 24,758 4,631 2,406 Net loss attributable to shareholders from continuing operations $ (259,758) $ (265,378) $ (229,235) $ 5,620 $ (36,143) 43 The following table sets forth a reconciliation of net loss attributable to shareholders to Adjusted EBITDA: Year Ended December 31, Change (in thousands) 2023 2022 2021 '23 vs '22 '22 vs '21 Net loss attributable to shareholders from continuing operations $ (259,758) $ (265,378) $ (229,235) $ 5,620 $ (36,143) Add: Provision for (benefit from) income taxes 833 (163) (82) 996 (81) Add: Equity-based compensation expense 1,076 — — 1,076 — Add: Acquisition and transaction expenses 6,322 11,041 16,929 (4,719) (5,888) Add: Losses on the modification or extinguishment of debt and capital lease obligations — 19,859 3,254 (19,859) 16,605 Add: Changes in fair value of non-hedge derivative instruments — — — — — Add: Asset impairment charges — — — — — Add: Incentive allocations 17,116 3,489 — 13,627 3,489 Add: Depreciation and amortization expense 10,862 8,401 7,996 2,461 405 Add: Interest expense and dividends on preferred shares 193,434 196,358 179,775 (2,924) 16,583 Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities — — — — — Less: Equity in (earnings) losses of unconsolidated entities — — — — — Less: Non-controlling share of Adjusted EBITDA — — — — — Adjusted EBITDA (non-GAAP) $ (30,115) $ (26,393) $ (21,363) $ (3,722) $ (5,030) Comparison of the years ended December 31, 2023 and 2022 Revenues Total revenues increased $7.4 million primarily due to an increase in the Offshore Energy business, as one of our vessels was on-hire longer in 2023 compared to 2022, and at higher rates. Expenses Total expenses increased $17.0 million primarily due to higher management fees and incentive allocation to affiliate, operating expenses, depreciation and amortization, partially offset by lower interest expense and lower acquisition and transaction expenses. • Management fees and incentive allocation to affiliate increased $14.5 million primarily due to an increase in incentive fee due to the Manager driven by an increase in net income. • Operating expenses increased $12.8 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. Additionally, repairs and maintenance expense increased due to repairs on one of our vessels. • Depreciation and amortization increased $2.5 million primarily due to new assets being placed into service in the Offshore Energy business. • Interest expense decreased $7.6 million, which reflects a decrease in the average outstanding debt of approximately $183.8 million primarily due to decreases in (i) the 2021 Bridge Loans of $178.3 million and (ii) the Senior Notes due 2025 of $116.7 million, which were partially redeemed in August 2022, partially offset by increases in (iii) the Revolving Credit Facility of $28.7 million and (iv) the Senior Notes due 2030 of $82.8 million, which were issued in November 2023. • Acquisition and transaction expenses decreased $4.7 million primarily due to lower professional fees related to strategic transactions. Other income (expense) Total other expense decreased $20.8 million which primarily reflects $19.9 million decrease in loss on extinguishment of debt primarily related to the 2022 pay-down of the 2021 Bridge Loans and the partial redemption of the Senior Notes due 2025. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $3.7 million primarily due to the changes noted above. Comparison of the years ended December 31, 2022 and 2021 Revenues 44 Total revenues in creased $12.8 million primarily due to an increase in the Offshore Energy business as two of our vessels were on-hire longer in 2022 compared to 2021. Expenses Total expenses increased $29.9 million primarily due to higher interest expense, operating expenses, management fees and incentive allocation to affiliate partially offset by lower acquisition and transaction expenses. • Interest expense increased $14.2 million , which reflects an increase in the average outstanding debt of approximately $354.7 million due to increases in (i) the Senior Notes due 2028 of $459.7 million, (ii) the 2021 Bridge Loans issued in December 2021 and February 2022 of $169.9 million and (iii) the Revolving Credit Facility of $49.7 million, partially offset by a decrease in (iv) the Bridge Loans of $108.3 million, (v) the Senior Notes due 2022 of $133.1 million, which was redeemed in full in May 2021, and (vi) the Senior Notes due 2025 of $83.2 million, which were partially redeemed in August 2022. • Operating expenses increased $17.6 million which reflects increases in offshore crew expenses, project costs and other operating expenses as our vessels were on-hire longer in 2022 compared to 2021, as well as crane repairs on one of our vessels. • Management fees and incentive allocation to affiliate increased $2.9 million primarily due to an increase in incentive fee due to the Manager. • Acquisition and transaction expenses decreased $5.9 million primarily due to a decrease in professional fees related to the Transtar acquisition in 2021. Other income (expense) Total other expense increased $16.7 million which primarily reflects a $16.6 million increase in loss on extinguishment of debt primarily related to the 2022 pay-down of the 2021 Bridge Loans and the partial redemption of the Senior Notes due 2025. Adjusted EBITDA (Non-GAAP) Adjusted EBITDA decreased $5.0 million primarily due to the changes noted above. Transactions with Affiliates and Affiliated Entities We are managed by the Manager, an affiliate of Fortress, pursuant to the Management Agreement which provides for us to bear obligations for management fees and expense reimbursements payable to the Manager. Our Management Agreement requires our Manager to manage our business affairs in conformity with a broad asset acquisition strategy adopted and monitored by our board of directors. From time to time, we may engage (subject to our strategy) in material transactions with our Manager or another entity managed by our Manager or one of its affiliates or other affiliates of Fortress, which may include, but are not limited to, certain financing arrangements, acquisition of assets, acquisition of debt obligations, debt, co-investments, and other assets that present an actual, potential or perceived conflict of interest. Please see Note 12 to our consolidated financial statements included elsewhere in this filing for more information. Geographic Information Please refer to Note 13 of our consolidated financial statements included in Item 8 in this Annual Report on Form 10-K for a report, by geographic area for each segment, of revenues from our external customers, for the years ended December 31, 2023, 2022 and 2021, as well as a report of our total property, plant and equipment as of December 31, 2023 and 2022. Liquidity and Capital Resources On November 21, 2023, we issued $500 million aggregate principal amount of 2030 Notes. We used a portion of the proceeds to repay $250 million of outstanding borrowings under the Revolving Credit Facility, and used the remaining proceeds for general corporate purposes, and the funding of acquisitions and investments. We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate during various environments. This includes limiting discretionary spending across the organization and re-prioritizing our investments as necessary. 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 $861.5 million, $831.5 million and $1.5 billion during the years ended December 31, 2023, 2022, and 2021, respectively. • Distributions to shareholders, including cash dividends, were $151.6 million, $155.6 million and $142.8 million during the years ended December 31, 2023, 2022 and 2021, respectively. • Uses of liquidity associated with our operating expenses are captured on a net basis in our cash flows from operating activities. Uses of liquidity associated with our debt obligations are captured in our cash flows from financing activities. 45 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 from operating activities, plus the principal collections on finance leases and maintenance reserve collections were $163.0 million, $29.4 million and $16.9 million during the years ended December 31, 2023, 2022, and 2021, respectively. • During the year ended December 31, 2023, additional borrowings were obtained in connection with the (i) Revolving Credit Facility of $455.0 million and (ii) Senior Notes Due 2030 of $500.0 million. We made total principal repayments of $605.0 million relating to the Revolving Credit Facility. During the year ended December 31, 2022 , additional borrowings were obtained in connection with the (i) 2021 Bridge Loans of $239.5 million (ii) Revolving Credit Facility of $565.0 million and (iii) EB-5 Loan Agreement of $9.5 million. We made total principal repayments of (i) $604.5 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. During the year ended December 31, 2021, additional borrowings were obtained in connection with the (i) Senior Notes due 2028 of $1.0 billion, (ii) Revolving Credit Facility of $690.0 million, (iii) Bridge Loan Agreement of $650.0 million, (iv) Series 2021 Bonds of $425.0 million, (v) 2021 Bridge Loans of $100.5 million and (vi) EB-5 Loan Agreement of $26.1 million. We made principal payments of $1.6 billion related to the Bridge Loan Agreement, Revolving Credit Facility and Senior Notes due 2022. • Proceeds from the sale of assets were $477.9 million, $414.2 million and $163.4 million during the years ended December 31, 2023, 2022, and 2021, respectively. • Proceeds from the issuance of ordinary shares, net of issuance costs were $323.1 million during the year ended December 31, 2021. There were no issuances of ordinary shares in 2023 or 2022. • Proceeds from the issuance of preferred shares, net of underwriters discount and issuance costs, were $61.7 million and $101.2 million during the years ended December 31, 2023 and 2021, respectively. There were no issuances of preferred shares during the year ended December 31, 2022. 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. We cannot assure if or when any such transaction will be consummated or the terms of any such transaction or related financing. Historical Cash Flow The following table presents our historical cash flow from both continuing and discontinued operations: Year Ended December 31, (in thousands) 2023 2022 2021 Cash flow data: Net cash used in operating activities $ 128,982 $ (20,657) $ (22,044) Net cash used in investing activities (373,349) (411,253) (1,286,958) Net cash provided by financing activities 282,208 44,914 1,587,645 Comparison of the years ended December 31, 2023 and 2022 Net cash used in operating activities decreased $149.6 million, which primarily reflects (i) a decrease in our Net loss of $455.8 million and (ii) Changes in working capital of $52.8 million, partially offset by certain adjustments to reconcile net income to cash used in operating activities including decreases in (i) Asset impairment of $135.1 million, (ii) Equity in losses of unconsolidated entities of $45.4 million, (iii) Provision for credit losses of $41.4 million, (iv) Depreciation and amortization of $23.4 million, (v) Loss on extinguishment of debt of $19.9 million, and (vi) an increase in gain on sale of assets of $19.1 million. Net cash used in investing activities decreased $37.9 million primarily due to (i) a decrease in Acquisition of property, plant and equipment of $138.0 million and (ii) higher Proceeds from the sale of leasing equipment of $68.9 million, partially offset by increases in (i) Acquisition of leasing equipment of $111.5 million, (ii) Acquisition of business, net of cash acquired, of $25.8 million, (iii) Purchase deposit for acquisitions of $17.3 million, and (iv) Investment of unconsolidated entities of $12.2 million. Net cash provided by financing activities increased $237.3 million primarily due to (i) a decrease in Repayment of debt of $539.5 million, (ii) an increase in Proceeds from debt of $137.7 million and (iii) an increase in Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs of $61.7 million, partially offset by a decrease in the one-time Dividend from spin-off of FTAI Infrastructure, net of cash transferred of $500.6 million. 46 Cash Flows of Discontinued Operations The cash flows related to discontinued operations have not been segregated and are included in the Consolidated Statements of Cash Flows for all periods presented. Cash used in operating activities from discontinued operations were $63.9 million, and $61.7 million for the years ended December 31, 2022 and 2021, respectively. Cash used in investing activities from discontinued operations were $136.3 million, and $828.7 million for the years ended December 31, 2022 and 2021, respectively. 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. Contractual Obligations Our material cash requirements include the following contractual and other obligations: Debt Obligations — As of December 31, 2023, we had outstanding principal and interest payment obligations of $2.6 billion and $728.6 million through the maturity date of the debt, respectively, of which only interest payments of $177.4 million are due in the next twelve months. See Note 8 to the consolidated financial statements for additional information about our debt obligations. Lease Obligations — As of December 31, 2023, we had outstanding operating and finance lease obligations of $2.0 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. During 2023, we declared cash dividends of $119.8 million and $31.8 million o n our ordinary shares and preferred shares, respectively. We expect to meet our future short-term liquidity requirements through cash on hand, unused borrowing capacity or future financings and net cash provided by our current operations. We expect that our operating subsidiaries will generate sufficient cash flow to cover operating expenses and the payment of principal and interest on our indebtedness as they become due. We may elect to meet certain long-term liquidity requirements or to continue to pursue strategic opportunities through utilizing cash on hand, cash generated from our current operations and the issuance of securities in the future. Management believes adequate capital and borrowings are available from various sources to fund our commitments to the extent required. Critical Accounting Estimates and Policies The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Note 2 to the consolidated financial statements describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. Operating Leases — We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received. Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee. 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 revenue. 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. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period. For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable lease intangible. Asset sales revenue —Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. See Note 10 for additional information. 47 Aerospace Products revenue —Aerospace Products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B, CFM56-5B and V2500 engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. Shipping costs to deliver assets to customers are included in cost of sales. Aerospace products revenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to customers as they become unserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred. Maintenance Payments —Typically, under an operating lease of aircraft, the lessee is responsible for performing all maintenance and is generally required to make maintenance payments to us for heavy maintenance, overhaul or replacement of certain high-value components of the aircraft or engine. These maintenance payments are based on hours or cycles of utilization or on calendar time, depending on the component, and are generally required to be made monthly in arrears. If a lessee is making monthly maintenance payments, we would typically be obligated to reimburse the lessee for costs they incur for heavy maintenance, overhaul or replacement of certain high-value components to the extent of maintenance payments received in respect of the specific maintenance event, usually shortly following the completion of the relevant work. We record the portion of maintenance payments paid by the lessee that are expected to be reimbursed as maintenance deposits in the Consolidated Balance Sheets. Reimbursements made to the lessee upon the receipt of evidence of qualifying maintenance work are recorded against the maintenance deposit liability. In certain acquired leases, we or the lessee may be obligated to make a payment to the other party at lease termination based on redelivery conditions stipulated at the inception of the lease. When the lessee is required to return the aircraft in an improved maintenance condition, we record a maintenance right asset, as a component of other assets in the Consolidated Balance sheets, for the estimated value of the end-of-life maintenance payment at acquisition. We recognize payments received as end-of-lease compensation adjustments, within lease income or as a reduction to the maintenance right asset, when payment is received or collectability is assured. In the event we are required to make payments at the end of the lease for redelivery conditions, amounts are accrued as additional maintenance liability and expensed when we are obligated and can reasonably estimate such payments. Property, Plant and Equipment, Leasing Equipment and Depreciation —Property, plant and equipment and leasing equipment are stated at cost (inclusive of capitalized acquisition costs, where applicable) and depreciated using the straight-line method, over estimated useful lives, to estimated residual values which are summarized as follows: Asset Range of Estimated Useful Lives Residual Value Estimates Aircraft 25 years from date of manufacture Generally not to exceed 15% of manufacturer’s list price when new Aircraft engines 2 - 6 years, based on maintenance adjusted service life Sum of engine core salvage value plus the estimated fair value of life limited parts Aviation tooling and equipment 3 - 6 years from date of purchase Scrap value at end of useful life Offshore energy vessels 25 years from date of manufacture 10% of new build cost Buildings and improvements 40 to 50 years Scrap value at end of useful life Machinery and equipment 6 - 23 years Scrap value at end of useful life Furniture and fixtures 3 - 6 years from date of purchase None Computer hardware and software 2 - 5 years from date of purchase None Land N/A N/A Construction in progress N/A N/A Other 5 - 7 years N/A Impairment of Long-Lived Assets —We perform a recoverability assessment of each of our long-lived assets whenever events or changes in circumstances, or indicators, indicate that the carrying amount or net book value of an asset may not be recoverable. Indicators may include, but are not limited to, a significant lease restructuring or early lease termination; significant traffic decline; a significant change in market conditions; or the introduction of newer technology aircraft, vessels or engines. When performing a recoverability assessment, we measure whether the estimated future undiscounted net cash flows expected to be generated by the asset exceeds its net book value. The undiscounted cash flows consist of cash flows from currently contracted leases and contracts, future projected leases, transition costs, estimated down time and estimated residual or scrap values. In the event that an asset does not meet the recoverability test, the carrying value of the asset will be adjusted to fair value resulting in an impairment charge. 48 Management develops the assumptions used in the recoverability analysis based on its knowledge of active contracts, current and future expectations of the global demand for a particular asset and historical experience in the leasing markets, as well as information received from third party industry sources. The factors considered in estimating the undiscounted cash flows are impacted by changes in future periods due to changes in contracted lease rates, residual values, economic conditions, technology, demand for a particular asset type and other factors. Recent Accounting Pronouncements Please see Note 2 to our consolidated financial statements included elsewhere in this filing for recent accounting pronouncements.