What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-09 · 234 added, 185 removed, 252 unchanged (62% of the section changed)

4 unchanged sentences

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.

We also develop and manufacture through a joint venture, and repair and sell, through our maintenance facilities and exclusivity arrangements, aftermarket components for aircraft engines.

Additionally, we own and lease offshore energy equipment.

1 unchanged sentence

We believe that there is a large number of acquisition opportunities in our markets and that our expertise and business and financing relationships, together with our access to capital, will allow us to take advantage of these opportunities.

As of June 30, 2024, we had total consolidated assets of $3.4 billion and total equity of $69.6 million.

As of September 30, 2024, we had total consolidated assets of $3.7 billion and total equity of $118.5 million.

Internalization of Management

5 unchanged sentences

In connection with the termination of the Management Agreement, the Company also entered into a Transition Services Agreement with the Former Manager.

Under the Transition Services Agreement, the Former Manager is required to continue to provide the Company and its affiliates with all of the Services for a transition period during which the Company will procure replacements for the Services.

The Services will be provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%).

The Company is required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions.

Unless the Transition Services Agreement is terminated earlier or the Company elects to terminate a Service by providing written notice to the Former Manager, the Former Manager is required to provide certain Services to the Company until October 31, 2024.

Under the Transition Services Agreement, the Former Manager was required to continue to provide the Company and its affiliates with all of the Services for a transition period until October 31, 2024, during which the Company procured replacements for the Services.

The Services were provided to the Company for a fee equal to the Former Manager’s cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation, rent and related real estate expenses and actually incurred out-of-pocket expenses, plus a mark-up of ten percent (10%).

The Company was required to use commercially reasonable efforts to make available to the Former Manager certain employees of the Company who were previously employees of the Former Manager to provide the Reverse Services, subject to certain exceptions.

In addition, the Former Manager is required to continue to provide the services that are reasonably required by the Company to prepare its quarterly and annual financial statements until May 31, 2025.

1 unchanged sentence

The Transition Services Agreement may be terminated earlier (x) by mutual agreement of the parties, (y) by either the Former Manager or the Company in the event of a material breach by the non-terminating party that is not cured within thirty (30) days following written notification thereof, or (z) by the Former Manager if the Company fails to pay any undisputed sum overdue and payable for a period of at least thirty (30) days.

We incurred $3.4 million in costs for Transition Services during the three and six months ended June 30, 2024, and these costs are reported in Acquisition and transaction expenses in the Consolidated Statements of Operations.

Impact of Russia’s Invasion of Ukraine

3 unchanged sentences

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

As of June 30, 2024, eight aircraft and seventeen engines were still located in Russia.

As of September 30, 2024, 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.

8 unchanged sentences

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, and repairs and sells, through our maintenance facility and exclusivity arrangements, aircraft engines and aftermarket components for aircraft engines.

The Aerospace Products segment, through our maintenance facilities, equity method investment and exclusivity arrangements, develops and manufactures, repairs/refurbishes and sells aircraft engines and aftermarket components primarily for the CFM56-7B, CFM56-5B and V2500 commercial aircraft engines.

During the fourth quarter of 2023, the Company changed the composition of its operating segments to include product offerings for V2500 engines within the Aerospace Products segment.

10 unchanged sentences

Adjusted EBITDA is defined as net income (loss) attributable to shareholders, 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, internalization fee to affiliate, (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, 2024 and 2023

Comparison of the three and nine months ended September 30, 2024 and 2023

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) 2024 2023 2024 2023

13 unchanged sentences

Asset impairment — — — 962 1,220 (258)

Interest expense 55,196 38,499 16,697 102,903 77,791 25,112

Total expenses 316,515 206,406 110,109 1,156,464 606,348 550,116

Other (expense) income

Equity in losses of unconsolidated entities (694) (380) (314) (1,361) (1,715) 354

Equity in (losses) earnings of unconsolidated entities (438) 46 (484) (1,799) (1,669) (130)

Interest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864)

Loss on extinguishment of debt — — — (13,920) — (13,920)

Other (expense) income (498) 408 (906) 136 416 (280)

Total other (expense) income (15,112) 28 (15,140) (15,145) (1,299) (13,846)

(Loss) Income from before income taxes (232,903) 56,608 (289,511) (187,709) 88,031 (275,740)

(Benefit from) provision for income taxes (13,033) 1,855 (14,888) (7,461) 3,881 (11,342)

Net (loss) income (219,870) 54,753 (274,623) (180,248) 84,150 (264,398)

Other income 2,909 461 2,448 3,045 877 2,168

Total other expense (55,466) (39,678) (15,788) (173,514) (118,768) (54,746)

Income (loss) from before income taxes 93,813 45,012 48,801 (93,896) 133,043 (226,939)

Provision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716)

Net income (loss) 86,482 41,307 45,175 (93,766) 125,457 (219,223)

Dividends on preferred shares 8,335 8,334 1 25,005 23,460 1,545

Net (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (274,623) $ (196,918) $ 69,024 $ (265,942)

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

Three Months Ended June 30, Change Six Months Ended

June 30, Change

Net income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768)

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

Three Months Ended September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2024 2023 2024 2023

Net (loss) income attributable to shareholders $ (228,205) $ 46,418 $ (274,623) $ (196,918) $ 69,024 $ (265,942)

(Benefit from) provision for income taxes (13,033) 1,855 (14,888) (7,461) 3,881 (11,342)

Net income (loss) attributable to shareholders $ 78,147 $ 32,973 $ 45,174 $ (118,771) $ 101,997 $ (220,768)

Provision for (benefit from) income taxes 7,331 3,705 3,626 (130) 7,586 (7,716)

Equity-based compensation expense 1,430 510 920 2,578 1,128 1,450

10 unchanged sentences

(382) 642 (1,024) (1,547) 96 (1,643)

Equity in losses of unconsolidated entities 694 380 314 1,361 1,715 (354)

Equity in losses (earnings) of unconsolidated entities 438 (46) 484 1,799 1,669 130

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

1 unchanged sentence

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2024 and 2023:

(1) Includes the following items for the three months ended September 30, 2024 and 2023:

(i) depreciation and amortization expense of $56,775 and $43,959, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively.

Includes the following items for the six months ended June 30, 2024 and 2023:

Includes the following items for the nine months ended September 30, 2024 and 2023:

(i) depreciation and amortization expense of $163,386 and $123,399, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.

(2) Includes the following items for the three months ended June 30, 2024 and 2023:

(i) net loss of $694 and $380, (ii) depreciation and amortization expense of $77 and $435, and (iii) acquisition and transaction expenses of $0 and $95, respectively.

Includes the following items for the six months ended June 30, 2024 and 2023:

(2) Includes the following items for the three months ended September 30, 2024 and 2023:

(i) net (loss) income of $(438) and $46, (ii) depreciation and amortization expense of $56 and $367, and (iii) acquisition and transaction expenses of $0 and $229, respectively.

Includes the following items for the nine months ended September 30, 2024 and 2023:

(i) net loss of $1,799 and $1,669, (ii) depreciation and amortization expense of $252 and $1,202, and (iii) acquisition and transaction expenses of $0 and $563, respectively.

Comparison of the three months ended June 30, 2024 and 2023

Total revenues increased $169.2 million primarily due to an increase in Aerospace products revenue, Lease income, and Maintenance revenue partially offset by decreases in Asset sales revenue.

Aerospace products revenue increased $152.5 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 2024.

Lease income increased $11.2 million primarily due to an increase in the number of engines placed on lease during the year, partially offset by an increase in the number of aircraft and engines redelivered and sold.

Maintenance reve nue increased $9.1 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

Asset sales reven ue decreased $4.4 million primarily due to a decrease in the sale of commercial aircraft and engines in our Aviation Leasing segment.

Comparison of the six months ended June 30, 2024 and 2023

Total revenues increased $203.2 million primarily due to an increase in Aerospace products revenue, Maintenance revenue, and Lease income partially offset by decreases in Asset sales revenue and Other revenue.

Aerospace products revenue increased $256.4 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 2024.

Maintenance reve nue increased $19.8 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

Lease income increased $8.4 million primarily due to an i ncrease 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.

Asset sales reven ue decreased $74.5 million primarily due to a decrease in the sale of commercial aircraft and engines in our Aviation Leasing segment.

Other revenue decreased $6.9 million primarily due to a decrease in end-of-lease redelivery compensation.

Comparison of the three months ended June 30, 2024 and 2023

Total expenses increased $443.6 million, primarily due to higher (i) Internalization fee to affiliate, (ii) Cost of sales, (iii) Depreciation and amortization, (iv) Interest expense, (v) Acquisition and transaction expenses, and (vi) Operating expenses.

This increase was partially offset by lower (vii) Management fees and incentive allocation to affiliate.

Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.

Cost of sales increased $101.3 million primarily as a result of an increase in Aerospace Products Sales.

Depreciation and amortization increased $18.2 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.

Interest expense increased $16.7 million, which reflects an increase in the average debt outstanding of approximately $756.8 million primarily due to an increase in the (i) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, (ii) Senior Notes due 2030 of $496.8 million, which were issued in November 2023, (iii) Senior Notes due 2032 of $266.7 million, which were issued in June 2024, and the (iv) Revolving Credit Facility of $33.3 million, partially offset by decreases in the (v) Senior Notes due 2025 of $650.0 million, which were redeemed in April 2024, and the (vi) Senior Notes due 2027 of $89.7 million, which were partially redeemed in June 2024.

Acquisition and transaction expenses increased $5.3 million primarily due to higher professional fees related to strategic transactions and fees associated with the Internalization.

Operating expenses increased $4.3 million which primarily reflects an increase in commission expenses due to higher sales from the used material program, increases in shipping and storage fees, professional fees and other operating expenses in the Aerospace Products segment, an increase in professional fees and repairs and maintenance expenses in the Aviation Leasing Segment.

Management fees and incentive allocation to affiliate decreased $2.0 million primarily due to the Internalization of the Company as of May 28, 2024.

Comparison of the six months ended June 30, 2024 and 2023

Total expenses increased $465.1 million, primarily due to higher (i) Internalization to affiliate, (ii) Cost of Sales, (iii) Depreciation and amortization, (iv) Interest expense, (v) Acquisition and transaction expenses, and (vi) Operating expenses.

This increase was partially offset by lower (vii) General and administrative, (viii) Asset impairment, and (ix) Management fees and incentive allocation to affiliate.

Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.

Cost of sales increased $98.5 million primarily as a result an increase in Aerospace Product Sales, partially offset by a decrease in Asset sales.

Depreciation and amortization increased $27.2 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.

Interest expense increased $25.1 million, which reflects an increase in the average debt outstanding of approximately $585.6 million primarily due to an increase in the (i) Senior Notes due 2030 of $496.8 million, (ii) Senior Notes due 2031 of $350.0 million issued in April 2024, (iii) Senior Notes due 2032 of $133.3 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $326.8 million, which were redeemed in April 2024, the (v) Senior Notes due 2027 of $44.8 million, which were partially redeemed in June 2024, and a decrease in the (vi) Revolving Credit Facility of $22.5 million.

Acquisition and transaction expenses increased $8.3 million primarily due to higher professional fees related to strategic transactions and fees associated with the Internalization.

Operating expenses increased $7.1 million which primarily reflects an increase in commission expenses due to higher sales from the used material program, increases in shipping and storage fees, professional fees and other operating expenses in the Aerospace Products segment, an increase in professional fees and repairs and maintenance expenses in the Aviation Leasing Segment.

Comparison of the three months ended September 30, 2024 and 2023

Total revenues increased by $174.7 million, driven by the following:

• Aerospace products revenue increased by $184.8 million, primarily due to a $164.3 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $9.6 million increase in parts inventory sales, and other sales revenue of $7.7 million from the QuickTurn and LMCES acquisitions.

• Lease income increased by $19.8 million, primarily due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in lease incentive amortization of $4.1 million.

Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 compared to Q3 2023.

This was partially offset by a decrease of $1.5 million in the Offshore Energy business driven by one of our vessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023.

• Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.

Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.

• Maintenance revenue decreased by $4.0 million.

Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024, due to $18.2 million of higher maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023.

This decrease in aircraft maintenance revenue was partially offset by increased engine maintenance revenue of $10.8 million, driven by an increased number of engines on lease in Q3 2024 generating maintenance revenue as compared to Q3 2023.

Comparison of the nine months ended September 30, 2024 and 2023

Total revenues increased by $377.9 million, driven by the following:

• Aerospace products revenue increased by $441.2 million, primarily due to a $387.2 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $26.0 million increase in parts inventory sales, and other sales revenue of $22.5 million from the QuickTurn and LMCES acquisitions.

• Lease income increased by $28.2 million, primarily due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease, and a decrease in lease amortization of $6.6 million, partially offset by a $7.7 million decrease in the Offshore Energy business due to one of our vessels having fewer days on-hire in 2024 compared to 2023 and a decrease in aircraft lease revenue of $0.9 million.

• Maintenance revenue increased by $15.8 million.

Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in 2024 as compared to 2023.

This increase was partially offset by a decrease in aircraft maintenance revenue of $25.5 million, primarily due to $20.1 million of higher maintenance reserves taken into revenue in 2023 as well as lower utilization.

• Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.

Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023.

• Other revenue decreased by $6.3 million, primarily due to a decrease in assets with end-of-lease redelivery compensation.

During 2024, one aircraft and six engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.

Comparison of the three months ended September 30, 2024 and 2023

Total expenses increased by $110.1 million, driven by the following:

• Cost of sales increased by $102.8 million, driven by a $128.6 million increase in the Aerospace Products segment, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period.

This increase was partially offset by a $25.8 million decrease in the Aviation Leasing segment, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue.

Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.

• Depreciation and amortization increased by $12.8 million, primarily driven by an increase in the number of assets owned and on lease, the acquisitions of LMCES and QuickTurn, partially offset by an increase in the number of aircraft redelivered.

• Acquisition and transaction expenses increased by $5.1 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on September 9, 2024.

• General and administrative expense increased by $1.0 million, primarily due to higher reimbursements to the Former Manager for certain services provided to the Company subsequent to the Internalization effective May 28, 2024.

• Operating expenses decreased by $7.0 million, primarily due to a $3.9 million decrease in the Aviation Leasing segment, driven by a decrease in bad debt expense of $5.6 million, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million.

The Aerospace Products segment contributed a $3.3 million decrease, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees, and a $0.5 million decrease in insurance expense.

• Management fees and incentive allocation to affiliate decreased by $4.6 million, due to the absence of any management or incentive fee to the Former Manager in the current quarter, since the Internalization was effective May 28, 2024.

Comparison of the nine months ended September 30, 2024 and 2023

Total expenses increased by $550.1 million, driven by the following:

• Internalization fee to affiliate increased by $300.0 million relating to the Internalization effective May 28, 2024.

• Cost of sales increased by $201.2 million, primarily due to an increase of $278.0 million in our Aerospace Products segment, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period.

This was partially offset by a decrease of $76.8 million in the Aviation Leasing segment primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, which is in line with an overall decrease in the corresponding asset sales revenue.

Specifically, one aircraft and 12 engines were sold in 2024 compared to 11 aircraft and 18 engines sold in 2023.

• Depreciation and amortization increased by $40.0 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.

• Acquisition and transaction expenses increased by $13.3 million, primarily due to higher professional fees incurred in evaluating and completing strategic transactions and fees associated with the Internalization and the acquisition of LMCES on September 9, 2024.

• Management fees and incentive allocation to affiliate decreased by $4.7 million, due to a decrease in management and incentive fees to the Former Manager during 2024, with the Internalization effective May 28, 2024, as compared to fees paid for the full nine months ended September 30, 2023.

Other (expense) income

Total other expense increased $15.1 million during the three months ended June 30, 2024 primarily due to a $13.9 million increase in the loss on extinguishment of debt, a $0.9 million increase in other expense and a $0.3 million increase in the proportionate share of unconsolidated entities’ net loss.

Total other expense increased $13.8 million during the six months ended June 30, 2024 primarily due to a $13.9 million increase in the loss on extinguishment of debt.

(Benefit from) provision for income taxes

The benefit from income taxes increased $14.9 million and $11.3 million during the three and six months ended June 30, 2024, respectively, primarily due to the expected tax benefit from the Internalization fee paid to affiliate.

Total other expense increased by $15.8 million during the three months ended September 30, 2024, due to the following:

• Interest expense increased by $17.8 million, reflecting an increase in the average debt outstanding of approximately $913.0 million, primarily due to increases in the (i) Senior Notes due 2032 of $800.0 million, which were issued in June 2024, (ii) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, and the (iii) Senior Notes due 2030 of $497.0 million, which were issued in November 2023, partially offset by decreases in the (iv) Senior Notes due 2025 of $652.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $269.5 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $161.7 million.

• Other income increased by $2.4 million primarily driven by $1.6 million of interest income earned on financing receivables within our Aviation Leasing Segment and $0.9 million of interest income from the Company’s investments in money market funds.

Total other expense increased by $54.7 million during the nine months ended September 30, 2024, due to the following:

• Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i) Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024, and (iii) Senior Notes due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million

• Loss on extinguishment of debt increased by $13.9 million driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027.

• Other income increased by $2.2 million primarily driven by $1.6 million of interest income generated from the Company’s investments in money market funds and $0.6 million of interest income earned on financing receivables within our Aviation Leasing Segment.

Provision for (benefit from) income taxes

The provision for income taxes increased by $3.6 million during the three months ended September 30, 2024.

This increase is primarily attributable to an increase in income generated from leasing and aerospace activities in jurisdictions subject to taxes.

As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes.

The benefit from income taxes increased by $7.7 million during the nine months ended September 30, 2024.

This increase was primarily attributable to a substantial tax benefit arising from the Internalization fee paid to the affiliate.

The fee provided a favorable impact on the Company's overall tax position, despite being partially offset by higher income from leasing and aerospace activities.

As the Aviation Leasing and Aerospace Products segments experienced growth, the associated income increased, leading to a greater tax expense that reduced the tax benefit received from the Internalization fee.

Net income (loss)

Net income decreased $274.6 million and $264.4 million for the three and six months ended June 30, 2024 as compared to prior years primarily due to the changes noted above.

Net income increased by $45.2 million and decreased $219.2 million for the three and nine months ended September 30, 2024 as compared to prior years, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBIT DA in creased $60.8 million and $97.3 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased by $77.8 million and $175.1 million during the three and nine months ended September 30, 2024, respectively, primarily due to the changes noted above.

Aviation Leasing Segment

As of June 30, 2024, in our Aviation Leasing segment, we own and manage 391 aviation assets, consisting of 99 commercial aircraft and 292 engines, including eight aircraft and seventeen engines that were still located in Russia.

As of June 30, 2024, 88 of our commercial aircraft and 175 of our engines were leased to operators or other third parties.

As of September 30, 2024, in our Aviation Leasing segment, we own and manage 393 aviation assets, consisting of 96 commercial aircraft and 297 engines, including eight aircraft and seventeen engines that were still located in Russia.

As of September 30, 2024, 86 of our commercial aircraft and 184 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 81% utilized during the six months ended June 30, 2024, 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 79% utilized during the nine months ended September 30, 2024, based on the percentage 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 45 months, and our engines currently on lease have an average remaining lease term of 21 months.

3 unchanged sentences

Purchases — 27 27

Sales — (1) (1)

Transfers — (26) (26)

Assets at June 30, 2024 5 94 99

Assets at September 30, 2024 5 91 96

Assets at January 1, 2024 32 235 267

2 unchanged sentences

Transfers — (50) (50)

Assets at June 30, 2024 25 267 292

Assets at September 30, 2024 27 270 297

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) 2024 2023 2024 2023

10 unchanged sentences

Total expenses 85,754 103,925 (18,171) 298,049 338,127 (40,078)

Other (expense) income

Other income (expense)

Equity in losses of unconsolidated entities — (108) 108 (207) (242) 35

Other (expense) income (911) 408 (1,319) (542) 416 (958)

Total other (expense) income (972) 373 (1,345) (749) 282 (1,031)

Other income 1,982 444 1,538 1,440 860 580

Total other income 1,982 336 1,646 1,233 618 615

Income before income taxes 68,494 57,799 10,695 175,197 190,300 (15,103)

2 unchanged sentences

The following table sets forth a reconciliation of net income attributable to shareholders 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) 2024 2023 2024 2023

17 unchanged sentences

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2024 and 2023:

(1) Includes the following items for the three months ended September 30, 2024 and 2023:

(i) depreciation expense of $52,455 and $41,141, (ii) lease intangible amortization of $3,720 and $3,726 and (iii) amortization for lease incentives of $8,958 and $11,695, respectively.

Includes the following items for the six months ended June 30, 2024 and 2023:

Includes the following items for the nine months ended September 30, 2024 and 2023:

(i) depreciation expense of $151,211 and $114,994, (ii) lease intangible amortization of $11,482 and $11,325 and (iii) amortization for lease incentives of $19,516 and $22,360, respectively.

(2) Includes the following items for the three months ended June 30, 2024 and 2023:

(2) Includes the following items for the three months ended September 30, 2024 and 2023:

(i) net loss of $0 and $108 and (ii) depreciation and amortization of $0 and $63, respectively.

Includes the following items for the six months ended June 30, 2024 and 2023:

Includes the following items for the nine months ended September 30, 2024 and 2023:

(i) net loss of $207 and $242 and (ii) depreciation and amortization of $84 and $189, respectively.

Comparison of the three months ended June 30, 2024 and 2023

Total reven ue in creased $17.1 million driven by an increase in Lease income and Maintenance revenue, partially offset by a decrease in Asset sales revenue.

• Leas e income increased $12.6 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 .

• Maintenance revenue increased $9.1 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

• Asset sales revenue decreased $4.4 million primarily due to a decrease in the sale of commercial aircraft and engines.

Comparison of the six months ended June 30, 2024 and 2023

Total reven ue decreased $46.7 million driven by a decrease in Asset sales revenue and Other revenue, partially offset by an increase in Maintenance revenue and Lea se income .

• Asset sales revenue decreased $74.5 million primarily due to a decrease in the sale of commercial aircraft and engines.

• Other revenue decreased $6.6 million primarily due to a decrease in end-of-lease redelivery compensation.

• Maintenance revenue increased $19.8 million primarily due to an increase in the number of aircraft and engines placed on lease and higher aircraft and engine utilization.

• Leas e income increased $14.6 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.

Comparison of the three months ended June 30, 2024 and 2023

Total expenses increased $28.3 million primarily driven by an increase in Depreciation and amortization, Cost of sales, Operating expenses, and Acquisition and transaction expenses.

• Depreciation and amortization expense increased $17.0 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.

• Cost of sales increased $9.4 million primarily as a result of an increase in asset sales.

• Operating expenses increased $1.2 million driven by an increase in professional fees and repairs and maintenance expenses, partially offset by a decrease in shipping and storage fees and insurance expense.

• Acquisition and transaction expenses increased $0.8 million driven by r elated costs associated with the acquisition of aviation leasing equipment.

Comparison of the six months ended June 30, 2024 and 2023

Total exp enses decreased $21.9 million primarily driven by a decrease in Cost of sales, partially offset by an increase in Depreciation and amortization, Operating expenses, and Acquisition and transaction expenses.

• Cost of sales decreased $51.0 million primarily as a result of a decrease in asset sales .

• Depreciation and amor tization expense increased $24.9 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 exp enses increased $2.3 million driven by an increase in professional fees, shipping and storage fees and repairs and maintenance expenses, partially offset by a decrease in insurance expense.

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

Other (expense) income

Total other expense increased $1.3 million and $1.0 million during the three and six months ended June 30, 2024 primarily due to an increase in other expense and an increase in the proportionate share of unconsolidated entities’ net loss.

Comparison of the three months ended September 30, 2024 and 2023

Total reven ues de creased by $9.1 million, driven by the following:

• Asset sales revenue decreased by $26.4 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.

Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.

• Maintenance revenue de creased by $4.0 million.

Aircraft maintenance revenue decreased by $14.8 million from Q3 2023 to Q3 2024 , due to $18.2 million of higher maintenance reserves taken into revenue in Q3 2023, partially offset by an increased number of aircraft on lease in Q3 2024 as compared to Q3 2023.

• Leas e income increased by $21.3 million, due to increases in aircraft lease revenue of $10.0 million, engine lease revenue of $7.2 million, and a decrease in lease amortization of $4.1 million .

Aircraft and engine revenue both increased due to an increased number of assets on lease in Q3 2024 as compared to Q3 2023.

Comparison of the nine months ended September 30, 2024 and 2023

Total reven ue decreased by $55.8 million, driven by the following:

• Asset sales revenue decreased by $100.9 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines.

Specifically, one aircraft and 12 engines were sold in 2024 as compared to 11 aircraft and 18 engines sold in 2023.

• Other revenue decreased by $6.6 million, primarily due to a decrease in assets with end-of-lease redelivery compensation.

During 2024, one aircraft and five engines had end-of-lease redelivery compensation, as compared to eight aircraft and four engines in 2023.

• Lease income increased by $35.9 million, due to an increase in engine lease revenue of $30.4 million, driven by an increased number of engines on lease, and a decrease in lease amortization of $6.6 million.

This increase was partially offset by a slight decrease in aircraft lease revenue of $0.9 million.

• Maintenance revenue increased by $15.8 million.

Engine maintenance revenue increased by $41.2 million, driven by an increased number of engines on lease in 2024 as compared to 2023.

Comparison of the three months ended September 30, 2024 and 2023

To tal expenses decreased by $18.2 million, driven by the following:

• Cost of sales decreased by $25.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line with an overall decrease in the corresponding asset sales revenue.

Specifically, one aircraft was sold in Q3 2024 as compared to one aircraft and eight engines sold in Q3 2023.

• Operating expenses decreased by $3.9 million, primarily driven by a decrease in bad debt expense of $5.6 million in connection with the termination of four aircraft leases in Q3 2023, partially offset by increases in insurance expense of $0.9 million and repairs and maintenance expense of $0.3 million.

• Depreciation and amortization expense increased by $11.3 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.

Comparison of the nine months ended September 30, 2024 and 2023

Total exp enses decreased by $40.1 million, driven by the following:

• Cost of sales decreased by $76.8 million, primarily due to an overall decrease in the number of sales transactions of commercial aircraft and engines, and is in line with an overall decrease in the corresponding asset sales revenue.

Specifically, one aircraft and 12 engines were sold in 2024 compared to 11 aircraft and 18 engines sold in 2023.

• Operating expenses decreased by $1.6 million, primarily driven by a decrease in bad debt expense of $5.9 million, partially offset by increases in legal fees of $1.5 million, repairs and maintenance expense of $1.1 million, technical consulting expense of $1.0 million and payroll-related expenses of $0.7 million.

• Depreciation and amortization expense increased by $36.2 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.

• Acquisition and transaction expenses increased by $2.4 million, primarily due to higher legal fees incurred in evaluating and completing strategic transactions.

Total other income increased by $1.6 million and $0.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to interest income earned on financing receivables during 2024.

Provision for income taxes

The provision for income taxes increased $7.2 million and $9.2 million during the three and six months ended June 30, 2024, respectively, primarily due to taxable income in each period.

Net income decreased $19.8 million and $35.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

The provision for income taxes increased by $6.6 million an d $15.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to increases in income from leasing activities in jurisdictions subject to taxes.

As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes.

Net income increased by $4.1 million and decreased by $30.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITD A in creased $3.8 million and $1.1 million primarily due to the changes noted above.

Adjusted EBITD A in creased by $19.6 million and $20.6 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, 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.

Our engine, module and parts sales are facilitated through a dedicated commercial maintenance program, designed to focus on modular and parts repair and refurbishment of CFM56-7B and CFM56-5B engines.

In September 2024, we acquired LMCES to further enhance this business and establish permanent engine and module manufacturing capabilities.

Refer to Note 3 “Acquisition of Lockheed Martin Commercial Engine Solutions”, for additional information.

In addition, other serviceable used modules and parts are sold through our ex clusive partnership, who is responsible for the teardown, repair, marketing and sales of 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.

2 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) 2024 2023 2024 2023

5 unchanged sentences

Total expenses 204,835 76,368 128,467 479,173 192,839 286,334

Other expense

Equity in losses of unconsolidated entities (633) (345) (288) (1,154) (1,581) 427

Total other expense (633) (345) (288) (1,154) (1,581) 427

Other (expense) income

Equity in (losses) earnings of unconsolidated entities (438) 154 (592) (1,592) (1,427) (165)

Total other (expense) income (438) 154 (592) (1,592) (1,427) (165)

Income before income taxes 98,196 42,461 55,735 256,961 102,247 154,714

2 unchanged sentences

The following table sets forth a reconciliation of net income attributable to shareholders 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) 2024 2023 2024 2023

12 unchanged sentences

(382) 687 (1,069) (1,424) 149 (1,573)

Equity in losses of unconsolidated entities 633 345 288 1,154 1,581 (427)

Equity in losses (earnings) of unconsolidated entities 438 (154) 592 1,592 1,427 165

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

1 unchanged sentence

________________________________________________________

(1) Includes the following items for the three months ended June 30, 2024 and 2023:

(i) net loss of $633 and $345, (ii) depreciation and amortization expense of $56 and $372, and (iii) acquisition and transaction expenses of $0 and $95, respectively.

Includes the following items for the six months ended June 30, 2024 and 2023:

(1) Includes the following items for the three months ended September 30, 2024 and 2023:

(i) net (loss) income of $(438) and $154, (ii) depreciation and amortization expense of $56 and $304, and (iii) acquisition and transaction expenses of $0 and $229, respectively.

Includes the following items for the nine months ended September 30, 2024 and 2023:

(i) net loss of $1,592 and $1,427, (ii) depreciation and amortization expense of $168 and $1,013, and (iii) acquisition and transaction expenses of $0 and $563, respectively.

Tot al Aerospace Products revenue increased $152.5 million and $256.4 million during the three and six months ended June 30, 2024 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 2024.

Comparison of the three months ended June 30, 2024 and 2023

Tota l expenses increased $96.2 million primarily due to a n increase in Costs of sales and Operating expenses.

• Cost of sale s increased $92.0 million primarily as a result of an increase in Aerospace Product sales.

• Operating expenses increased $3.2 million primarily driven by an increase in commission expenses due to the increase in sales from the used material program as well as increases in shipping and storage fees, professional fees and other operating expenses.

Comparison of the six months ended June 30, 2024 and 2023

Tota l expenses increased $157.9 million primarily due to an increase in Costs of sales and Operating expenses.

• Cost of sales increased $149.4 million primarily as a result of an increase in Aerospace Product sales.

• Op erating expenses increased $7.0 million primarily driven by an increase in commission expenses due to the increase in sales from the used material program as well as increases in shipping and storage fees, professional fees and other operating expenses.

Other expense

Total other expense in creased $0.3 million during the three months ended June 30, 2024 due to an in crease in our proportionate share of unconsolidated entities’ net loss.

Total other expense decreased $0.4 million during the six months ended June 30, 2024 due to a decrease in our proportionate share of unconsolidated entities’ net loss.

Tot al Aerospace produ cts revenue increased by $184.8 million during the three months ended September 30, 2024 as compared to 2023, primarily due to a $164.3 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $9.6 million increase in parts inventory sales, and other sales revenues of $7.7 million from the QuickTurn and LMCES acquisitions.

Total Aerospace products revenue increased by $441.2 million during the nine months ended September 30, 2024 as compared to 2023, primarily due to a $387.2 million increase in CFM56-7B, CFM56-5B and V2500 engine and module sales, a $26.0 million increase in parts inventory sales, and other sales revenues of $22.5 million from the QuickTurn and LMCES acquisitions.

Comparison of the three months ended September 30, 2024 and 2023

Tota l expenses increased by $128.5 million, due to the following:

• Cost of sales increased by $128.6 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period.

• Acquisition and transaction expenses increased by $2.0 million, primarily driven by higher professional fees incurred in evaluating and completing strategic transactions.

• Depreciation and amortization increased by $1.2 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023.

• Operating expenses decreased by $3.3 million, primarily due to a $1.1 million decrease in shipping and storage fees, a $0.6 million decrease in professional fees, and a $0.5 million decrease in insurance expense.

Comparison of the nine months ended September 30, 2024 and 2023

Tota l expenses increased by $286.3 million, due to the following:

• Cost of sales increased by $278.0 million, primarily due to increases in CFM56-7B, CFM56-5B and V2500 engine and module sales, parts inventory sales, and directly corresponds to components of increases in Aerospace products revenue over the same period .

• Op erating expenses increased by $3.7 million, primarily driven by a $2.0 million increase in compensation and benefits expense and a $1.3 million increase in insurance expense.

• Depreciation and amortization increased by $2.9 million due to the acquisitions of LMCES in Q3 2024 and QuickTurn in Q4 2023.

• Acquisition and transaction expenses increased by $1.7 million, primarily driven by higher professional fees incurred in evaluating and completing strategic transactions.

Provision for income taxes

The provision for income taxes increased $4.3 million and $6.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the increase in net income.

Net income increased $51.6 million and $93.0 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

The provision for income taxes increased by $3.3 million and $9.2 million during the three and nine months ended September 30, 2024, respectively, primarily due to an increase in income from aerospace activities in jurisdictions subject to taxes.

As the Company’s operations in these areas grew, so did the corresponding tax obligations, resulting in a higher provision for income taxes.

Net income increased by $52.5 million and $145.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITD A increased $56.5 million and $99.4 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

Adjusted EBITD A increased by $58.5 million and $157.9 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, 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) 2024 2023 2024 2023

8 unchanged sentences

Depreciation and amortization 3,014 2,703 311 8,998 8,107 891

Interest expense 55,196 38,499 16,697 102,903 77,791 25,112

Total expenses 25,926 26,113 (187) 379,242 75,382 303,860

1 unchanged sentence

Loss on extinguishment of debt — — — (13,920) — (13,920)

Interest expense (57,937) (40,185) (17,752) (160,840) (117,976) (42,864)

Other income 927 17 910 1,605 17 1,588

6 unchanged sentences

The following table sets forth a reconciliation of net loss attributable to shareholders 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) 2024 2023 2024 2023

14 unchanged sentences

Adjusted EBITDA (non-GAAP) $ (6,207) $ (5,929) $ (278) $ (19,507) $ (16,042) $ (3,465)

Total revenues decreased $0.3 million and $6.5 million during the three and six months ended June 30, 2024 primarily due to a decrease in the Offshore Energy business as one of our vessels was off-hire in 2024 compared to on-hire in 2023.

Comparison of the three months ended June 30, 2024 and 2023

Total expense s increased $319.1 million primarily due to higher (i) Internalization fee to affiliate, (ii) Interest expense, and (iii) Acquisition and Transaction expenses partially offset by lower (iv) Management Fees and incentive allocation to affiliate, and (v) Operating expenses.

• Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.

• Interest expense increased $16.7 million, which reflects an increase in the average debt outstanding of approximately $756.8 million primarily due to an increase in the (i) Senior Notes due 2031 of $700.0 million, which were issued in April 2024, (ii) Senior Notes due 2030 of $496.8 million, which were issued in November 2023, (iii) Senior Notes due 2032 of $266.7 million, which were issued in June 2024, and the (iv) Revolving Credit Facility of $33.3 million, partially offset by decreases in the (v) Senior Notes due 2025 of $650.0 million, which were redeemed in April 2024, and the (vi) Senior Notes due 2027 of $89.7 million, which were partially redeemed in June 2024.

• Acquisition and transaction expense increased $4.3 million primarily due to higher professional fees associated with the Internalization.

• Management fees and incentive allocation to affiliate decreased $2.0 million, primarily due to a decrease in the incentive fee due to the Former Manager, driven by the Internalization effective May 28, 2024.

• Operating expenses decreased $0.1 million primarily due to decreases in the Offshore Energy business in crew expenses, project costs and other operating expenses as one of our vessels was off-hire in Q1 2024.

Comparison of the six months ended June 30, 2024 and 2023

Total expenses increased $329.2 million primarily due to higher (i) Internalization fee to affiliate, (ii) Interest expense, and (iii) Acquisition and transaction expenses, partially offset by lower (v) Operating expenses.

• Internalization fee to affiliate increased $300.0 million relating to the Internalization effective May 28, 2024.

• Interest expense increased $25.1 million, which reflects an increase in the average debt outstanding of approximately $585.6 million primarily due to an increase in the (i) Senior Notes due 2030 of $496.8 million, (ii) Senior Notes due 2031 of $350.0 million, issued in April 2024 (iii) Senior Notes due 2032 of $133.3 million, which were issued in June 2024,

partially offset by decreases in the (iv) Senior Notes due 2025 of $326.8 million, which were redeemed in April 2024, the (v) Senior Notes due 2027 of $44.8 million, which were partially redeemed in June 2024, and a decrease in the (vi) Revolving Credit Facility of $22.5 million.

• Acquisition and transaction expense increased $6.4 million primarily due to higher professional fees associated with the Internalization.

• Operating expenses decreased $2.2 million primarily due to decreases in the Offshore Energy business in crew expenses, project costs and other operating expenses for one of our vessels driven by fewer days on-hire.

Comparison of the three months ended September 30, 2024 and 2023

Total revenues decreased by $1.0 million, primarily due to a $1.5 million decrease in Lease income, partially offset by a $0.5 million increase in Other revenue.

Lease income declined primarily due to one of our vessels in the Offshore Energy business having fewer days on-hire in 2024 compared to 2023.

The increase in Other revenue is driven by higher victualling income for one of our vessels from a new lessee that required additional operational support services in 2024 compared to 2023.

Comparison of the nine months ended September 30, 2024 and 2023

Total revenues decreased by $7.5 million, primarily due to a $7.7 million decrease in the Lease income.

Lease income declined primarily due to one of our vessels in the Offshore Energy business had fewer days on-hire in 2024 compared to 2023.

Comparison of the three months ended September 30, 2024 and 2023

Total expense s decreased by $0.2 million, due to the following:

• Acquisition and transaction expense increased by $2.8 million, primarily due to higher legal and other professional fees incurred for the acquisition of LMCES on September 9, 2024.

• General and administrative expense increased by $1.0 million, primarily due to reimbursements to the Former Manager for certain services provided to the Company subsequent to the Internalization effective May 28, 2024.

Comparison of the nine months ended September 30, 2024 and 2023

Total expenses increased by $303.9 million, due to the following:

• Internalization fee to affiliate increased by $300.0 million for the Internalization effective May 28, 2024.

• Acquisition and transaction expense increased by $9.2 million, primarily due to higher legal and other professional fees incurred for the Internalization on May 28, 2024 and the acquisition of LMCES on September 9, 2024.

• Operating expenses decreased by $2.0 million, primarily due to decreases in the Offshore Energy business, driven by decreases in project costs of $7.0 million and crew expenses of $6.0 million as a result of one of our vessels having fewer days on-hire in 2024 compared to 2023.

This decrease was partially offset by an increase in bad debt expense of $2.1 million.

The decrease was also offset by increases in Corporate expenses, including payroll-related expenses of $2.8 million, IT, marketing, and subscription expenses of $2.7 million and professional fees of $2.1 million.

Other (expense) income

Total other expense increased $13.5 million during the three months ended June 30, 2024, primarily due to a $13.9 million increase in the loss on extinguishment of debt.

Total other expense increased $13.2 million during the six months ended June 30, 2024, primarily due to a $13.9 million increase in the loss on extinguishment of debt.

Total other expense increased by $16.8 million during the three months ended September 30, 2024, due to the following:

• Other income increased by $0.9 million, driven by interest income generated from the Company’s investments in money market funds.

Total other expense increased by $55.2 million during the nine months ended September 30, 2024, due to the following:

• Interest expense increased by $42.9 million, reflecting an increase in the average debt outstanding of approximately $694.8 million, primarily due to increases in the (i) Senior Notes due 2030 of $496.9 million, which were issued in November 2023, (ii) Senior Notes due 2031 of $466.7 million, issued in April 2024 (iii) Senior Notes due 2032 of $355.6 million, which were issued in June 2024, partially offset by decreases in the (iv) Senior Notes due 2025 of $435.4 million, which were redeemed in April 2024, (v) Senior Notes due 2027 of $119.7 million, which were partially redeemed in June 2024, and the (vi) Revolving Credit Facility of $68.9 million.

• Loss on extinguishment of debt increased by $13.9 million, driven by the redemption of Senior Notes due 2025 and a partial redemption of Senior Notes due 2027.

• Other income increased by $1.6 million, driven by interest income generated from the Company’s investments in money market funds.

Benefit from income taxes

The benefit from income taxes increased $26.4 million and $26.5 million during the three and six months ended June 30, 2024, respectively, primarily due to the tax benefit from the Internalization fee paid to affiliate.

Net loss increased $306.4 million and $322.4 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

The benefit from income taxes increased by $6.2 million and $32.8 million during the three and nine months ended September 30, 2024, respectively, primarily due to the tax benefit from the Internalization fee paid to affiliate.

The Internalization fee created a substantial tax benefit, which led to an improved tax position for the Company.

The impact of the fee was notable in both the quarterly and year-to-date financials, as it provided a meaningful offset against taxable income from the leasing and aerospace segments.

Net loss increased by $11.4 million and $333.8 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA increased $0.5 million and decreased $3.2 million during the three and six months ended June 30, 2024, respectively, primarily due to the changes noted above.

Adjusted EBITDA increased by $0.3 million and $3.5 million during the three and nine months ended September 30, 2024, respectively, as compared to prior periods, primarily due to the changes noted above.

Liquidity and Capital Resources

2 unchanged sentences

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 $563.1 million and $380.8 million during the six months ended June 30, 2024 and 2023, respectively.

• Distributions to shareholders, including cash dividends, were $76.8 million and $75.0 million during the six months ended June 30, 2024 and 2023, respectively.

• Cash used for the purpose of making investments was $1.0 billion and $562.8 million during the nine months ended September 30, 2024 and 2023, respectively.

• Distributions to shareholders, including cash dividends, were $115.8 million and $113.2 million during the nine months ended September 30, 2024 and 2023, respectively.

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

1 unchanged sentence

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

• Cash flows used in operating activities, plus the principal collections on finance leases and maintenance reserve collections were $165.3 million during the six months ended June 30, 2024.

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

• During the six months ended June 30, 2024, additional borrowings and total principal repayments in connection with the Revolving Credit Facility were $360.0 million and $360.0 million, respectively.

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.

• Proceeds from the sale of assets were $333.7 million and $273.2 million during the six months ended June 30, 2024 and 2023, respectively.

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

• Cash flows used in operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $108.7 million during the nine months ended September 30, 2024.

Cash flows from operating activities, plus Principal collections on finance leases and Receipt of maintenance deposits under operating lease agreements were $143.1 million during the nine months ended September 30, 2023.

• During the nine months ended September 30, 2024, additional borrowings were obtained in connection with the (i) Senior Notes due 2031 of $800.0 million, (ii) Senior Notes due 2030 of $700.0 million and (iii) Revolving Credit Facility of $590.0 million.

We made total principal repayments of (i) $650.0 million related to the Senior Notes due 2025, (ii) $440.0 million relating to the Revolving Credit Facility and (iii) $269.5 million related to the Senior Notes due 2027.

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.

• Proceeds from sales of assets were $542.9 million and $366.1 million during the nine months ended September 30, 2024 and 2023, respectively.

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

On May 28, 2024, we entered into definitive agreements with the Former Manager and Master GP to internalize our management function.

As part of the termination of the Management Agreement, we agreed to pay $150.0 million to the Former

As part of the termination of the Management Agreement, we agreed to pay $150.0 million to the Former Manager.

Following the internalization of management on May 28, 2024, we no longer pay a management fee or incentive distribution to the Former Manager or Master GP.

2 unchanged sentences

We are currently evaluating several potential transactions and related financings, including, but not limited to, certain additional acquisitions of assets and operating companies in the aviation section or 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.

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

Comparison of the six months ended June 30, 2024 and 2023

The following table compares the historical cash flow for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

Comparison of the nine months ended September 30, 2024 and 2023

The following table compares the historical cash flow for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(in thousands) 2024 2023

3 unchanged sentences

Net cash provided by financing activities 610,016 74,140

Net cash used in operating activities increased $254.9 million, which primarily reflects an increase in (i) Net loss of $264.4 million and certain adjustments to reconcile net income to cash provided by operating activities including a decrease in (ii) Changes in net working capital of $106.9 million, an increase in (iii) Gain on sale of net assets of $70.1 million, and a decrease in (iv) Change in deferred income taxes of $12.9 million, partially offset by increases in (v) Non-cash termination fee to affiliate of $150.0 million, (vi) Depreciation and amortization of $27.2 million, (vii) Loss on extinguishment of debt of $13.9 million, and (viii) Security deposits and maintenance claims included in earnings of $6.9 million.

Net cash used in investing activities increased $117.5 million, primarily due to increases in (i) Acquisitions of leasing equipment of $110.7 million, (ii) Purchase deposits for acquisitions of $93.5 million, and (iii) Investments in notes and financing receivable of $19.8 million partially offset by higher (iv) Proceeds from the sale of net assets of $60.4 million, decreases in (v) Investment in unconsolidated entities of $19.5 million, (vi) Acquisitions of lease intangibles of $12.0 million, and (vii) Investment in promissory notes of $11.5 million and higher (viii) Proceeds for deposit on sale of aircraft and engine of $2.8 million.

Net cash provided by financing activities increased $483.1 million, primarily due to increases in (i) Proceeds from debt of $1.5 billion and (ii) Receipt of maintenance deposits of $3.4 million, partially offset by an increase in (iii) Repayment of debt of $957.4 million, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $8.8 million and (vi) Release of maintenance deposits of $3.9 million.

Net cash used in operating activities increased $262.9 million, which primarily reflects an increase in (i) Net loss of $219.2 million and certain adjustments to reconcile net loss to cash provided by operating activities including an increase in (ii) Gain on sale of assets of $133.8 million and decreases in (iii) Changes in net working capital of $126.6 million, (iv) Change in deferred income taxes of $8.4 million and (v) Provision for credit losses of $3.8 million, partially offset by increases in (vi) Non-cash termination fee to affiliate (issuance of ordinary shares) of $150.0 million and (vii) Depreciation and amortization of $40.0 million, a decrease in (viii) Security deposits and maintenance claims included in earnings of $21.0 million and an increase in (ix) Loss on extinguishment of debt of $13.9 million.

Net cash used in investing activities increased $251.6 million, primarily due to increases in (i) Acquisition of business, net of cash acquired of $143.6 million, (ii) Deposits for acquisitions of aircraft and engines of $152.2 million, (iii) Acquisition of leasing equipment of $115.4 million and (iv) Investments in financing receivable of $63.9 million partially offset by higher (v) Proceeds from the sale of assets of $176.9 million, decreases in (vi) Investment in unconsolidated entities of $19.5 million, (vii) Acquisition of lease intangibles of $11.6 million and (viii) Investment in promissory notes of $11.5 million and higher (ix) Proceeds (refunds) from deposits on sale of aircraft and engines of $3.1 million.

Net cash provided by financing activities increased $535.9 million, primarily due to increases in (i) Proceeds from debt of $1.6 billion and (ii) Receipt of maintenance deposits under operating lease agreements of $12.8 million, partially offset by an increase in (iii) Repayment of debt of $1.0 billion, a decrease in (iv) Proceeds from the issuance of preferred shares, net of underwriter’s discount and issuance costs of $61.7 million, and increases in (v) Payment of deferred financing costs of $9.0 million and (vi) Release of maintenance deposits under operating lease agreements of $6.2 million.

Contractual Obligations

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

Debt Obligations — As of June 30, 2024, we had outstanding principal and interest payment obligations of $3.1 billion and $1.3 billion, respectively, of which only interest payments of $208.3 million are due in the next twelve months.

Debt Obligations — As of September 30, 2024, we had outstanding principal and interest payment obligations of $3.3 billion and $1.3 billion, respectively, of which only interest payments of $216.4 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 June 30, 2024, we had outstanding operating and finance lease obligations of $1.9 million, of which $0.9 million is due in the next twelve months.

Lease Obligations —As of September 30, 2024, we had outstanding operating and finance lease obligations of $19.6 million, of which $2.1 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.

9 unchanged sentences

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