FTAI Aviation Ltd 10-Q for FY2022 Q3

FTAI Aviation Ltd. (FTAI)

10-Q 2022-11-17 For: 2022-09-30

Added on April 05, 2026

About this 10-Q

FTAI Aviation Ltd filed this 10-Q on November 17, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $218.25M; up 132.3% from $93.94M a year earlier
Net income: $58.8M; up 26.3% from net income of $46.54M a year earlier
Diluted EPS: $558.92; up 20.1% from $465.38 a year earlier

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Cayman Islands		98-1420784
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, 45th Floor	New York	NY		10105
(Address of principal executive offices)				(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class:	Trading Symbol:	Name of exchange on which registered:
Ordinary shares, $0.01 par value per share	FTAI	The Nasdaq Global Select Market
8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred Shares	FTAIP	The Nasdaq Global Select Market
8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred Shares	FTAIO	The Nasdaq Global Select Market
8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred Shares	FTAIN	The Nasdaq Global Select Market

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	PART I - FINANCIAL INFORMATION

Item 1.	Unaudited Consolidated Financial Statements of FTAI Aviation Ltd.	5
	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	5
	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	6
	Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2022 and 2021	7
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	8
	Notes to Consolidated Financial Statements	10
	Note 1: Background and Basis of Presentation	10
	Note 2: Summary of Significant Accounting Policies	11
	Note 3: Leasing Equipment, net	15
	Note 4: Finance Leases, net	16
	Note 5: Investments	16
	Note 6: Intangible Assets and Liabilities, net	17
	Note 7: Loan Payable to Affiliate	18
	Note 8: Fair Value Measurements	18
	Note 9: Revenues	19
	Note 10: Income Taxes	21
	Note 11: Management Agreement and Affiliate Transactions	21
	Note 12: Segment Information	24
	Note 13: Earnings per Share and Equity	31
	Note 14: Commitments and Contingencies	31
	Note 15: Subsequent Events	31
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	46

	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3.	Defaults Upon Senior Securities	65
Item 4.	Mine Safety Disclosures	65
Item 5.	Other Information	65
Item 6.	Exhibits	65

		(Unaudited) September 30,		December 31,
	Notes	2022		2021
Assets
Cash and cash equivalents	2	$	15,597	$	2,158
Accounts receivable, net	2		82,877		121,257
Leasing equipment, net	3		1,559,575		1,714,136
Finance leases, net	4		7,094		7,583
Investments	5		22,280		22,917
Intangible assets, net	6		29,416		30,962
Inventory, net	2		160,019		100,308
Other assets	2		141,294		97,531
Total assets		$	2,018,152	$	2,096,852

Liabilities
Accounts payable and accrued liabilities		$	26,982	$	32,058
Management fees payable to affiliate	11		46,095		43,477
Loans payable to affiliate	7		27,090		25,181
Maintenance deposits	2		51,430		106,164
Security deposits	2		25,905		38,639
Other liabilities			47,383		31,274
Total liabilities		$	224,885	$	276,793

Commitments and contingencies	14

Equity
Ordinary shares ($1.00 par value per share; 50,000 shares authorized; 105.2 and 100.0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)			—		—
Additional paid in capital			1,087,534		1,139,628
Retained earnings			705,733		680,431
Total equity			1,793,267		1,820,059
Total liabilities and equity		$	2,018,152	$	2,096,852

		Three Months Ended September 30,						Nine Months Ended September 30,
	Notes	2022			2021			2022			2021
Revenues	9	$	218,249		$	93,938		$	412,205		$	228,482

Expenses
Operating expenses	2		14,612			10,130			83,651			20,641
Cost of sales	2		95,948			5,367			120,139			8,577
General and administrative			3,354			2,862			9,125			7,166
Acquisition and transaction expenses			2,848			1,132			5,449			3,710
Management fees and incentive allocation to affiliate	11		539			2,116			4,692			7,027
Depreciation and amortization	3		32,877			34,825			106,567			102,194
Asset impairment	3		4,495			859			128,171			3,048
Interest expense			644			584			1,910			1,734
Total expenses			155,317			57,875			459,704			154,097

Other income (expense)
Equity in losses of unconsolidated entities	5		(358	)		(369	)		(125	)		(1,050	)
Gain on sale of assets, net			—			12,685			79,933			17,467
Other income (expense)			42			(1,341	)		245			(717	)
Total other income (expense)			(316	)		10,975			80,053			15,700
Income before income taxes			62,616			47,038			32,554			90,085
Provision for income taxes	10		3,818			500			7,252			1,037
Net income attributable to shareholders		$	58,798		$	46,538		$	25,302		$	89,048

Earnings per share:	13
Basic		$	558.92		$	465.38		$	244.46		$	890.48
Diluted		$	558.92		$	465.38		$	244.46		$	890.48
Weighted average shares outstanding:
Basic			105.2			100.0			103.5			100.0
Diluted			105.2			100.0			103.5			100.0

	Three and Nine Months Ended September 30,2022
	Additional Paid In Capital			Retained Earnings			Total Equity
Equity - December 31, 2021	$	1,139,628		$	680,431		$	1,820,059
Net loss		—			(33,496	)		(33,496	)
Capital contributions		230,766			—			230,766
Capital distributions		(104,821	)		—			(104,821	)
Equity - June 30, 2022	$	1,265,573		$	646,935		$	1,912,508
Net income		—			58,798			58,798
Capital contributions		11,365			—			11,365
Capital distributions		(189,404	)		—			(189,404	)
Equity - September 30, 2022	$	1,087,534		$	705,733		$	1,793,267

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
Furniture and fixtures	3 - 6 years from date of purchase	None

	September 30,			December 31,
	2022			2021
Leasing equipment		1,990,115		$	2,122,428
Less: Accumulated depreciation		(430,540	)		(408,292	)
Leasing equipment, net	$	1,559,575		$	1,714,136

Acquisitions:
Aircraft			23
Engines			45
Dispositions:
Aircraft			5
Engines			50

				Carrying Value
	Investment	Ownership Percentage		September 30, 2022		December 31, 2021
Advanced Engine Repair JV	Equity method		25%	$	20,439	$	21,317
Falcon MSN 177 LLC	Equity method		50%		1,841		1,600
				$	22,280	$	22,917

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Advanced Engine Repair JV	$	(314	)	$	(369	)	$	(879	)	$	(1,050	)
Falcon MSN 177 LLC		(44	)		—			754			—
Total	$	(358	)	$	(369	)	$	(125	)	$	(1,050	)

	September 30, 2022			December 31, 2021
Intangible assets
Acquired favorable lease intangibles	$	59,789		$	67,013
Less: Accumulated amortization		(30,373	)		(36,051	)
Total intangible assets, net	$	29,416		$	30,962

Intangible liabilities
Acquired unfavorable lease intangibles	$	13,114		$	14,795
Less: Accumulated amortization		(2,216	)		(6,068	)
Acquired unfavorable lease intangibles, net	$	10,898		$	8,727

	Classification in Consolidated Statements of Operations	Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Lease intangibles	Revenues	$	3,291	$	1,266	$	10,259	$	3,216

Remainder of 2022		3,323
2023		8,398
2024		4,848
2025		1,962
2026		519
Thereafter		(532	)
Total	$	18,518

	Three Months Ended September 30, 2022
	Aviation Leasing		Aerospace Products		Total
Revenues
Lease income	$	40,273	$	—	$	40,273
Maintenance revenue		35,507		—		35,507
Finance lease income		119		—		119
Asset sales revenue		85,488		—		85,488
Aerospace products revenue		—		53,401		53,401
Other revenue		3,461		—		3,461
Total revenues	$	164,848	$	53,401	$	218,249

	Three Months Ended September 30, 2021
	Aviation Leasing		Aerospace Products		Total
Revenues
Lease income	$	40,392	$	—	$	40,392
Maintenance revenue		40,252		—		40,252
Finance lease income		439		—		439
Aerospace products revenue		—		7,730		7,730
Other revenue		5,125		—		5,125
Total revenues	$	86,208	$	7,730	$	93,938

	Nine Months Ended September 30, 2022
	Aviation Leasing		Aerospace Products		Total
Revenues
Lease income	$	111,316	$	—	$	111,316
Maintenance revenue		112,171		—		112,171
Finance lease income		332		—		332
Asset sales revenue		85,488		—		85,488
Aerospace products revenue		—		94,211		94,211
Other revenue		8,687		—		8,687
Total revenues	$	317,994	$	94,211	$	412,205

	Nine Months Ended September 30, 2021
	Aviation Leasing		Aerospace Products		Total
Revenues
Lease income	$	120,389	$	—	$	120,389
Maintenance revenue		87,763		—		87,763
Finance lease income		1,285		—		1,285
Aerospace products revenue		—		13,284		13,284
Other revenue		5,761		—		5,761
Total revenues	$	215,198	$	13,284	$	228,482

	September 30, 2022
Remainder of 2022	$	32,414
2023		104,995
2024		70,428
2025		43,890
2026		24,835
Thereafter		65,820
Total	$	342,382

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share data)	2022		2021		2022		2021
Net income attributable to shareholders	$	58,798	$	46,538	$	25,302	$	89,048
Weighted average shares outstanding:
Basic		105.2		100.0		103.5		100.0
Diluted		105.2		100.0		103.5		100.0
Basic and Diluted Net earnings per share	$	558.92	$	465.38	$	244.46	$	890.48

	Three Months Ended September 30,									Nine Months Ended September 30,
(in thousands)	2022			2021			Change			2022			2021			Change
Revenues
Lease income	$	40,273		$	40,392		$	(119	)	$	111,316		$	120,389		$	(9,073	)
Maintenance revenue		35,507			40,252			(4,745	)		112,171			87,763			24,408
Finance lease income		119			439			(320	)		332			1,285			(953	)
Aerospace products revenue		53,401			7,730			45,671			94,211			13,284			80,927
Asset sales revenue		85,488			—			85,488			85,488			—			85,488
Other revenue		3,461			5,125			(1,664	)		8,687			5,761			2,926
Total revenues		218,249			93,938			124,311			412,205			228,482			183,723

Expenses
Operating expenses		14,612			10,130			4,482			83,651			20,641			63,010
Cost of sales		95,948			5,367			90,581			120,139			8,577			111,562
General and administrative		3,354			2,862			492			9,125			7,166			1,959
Acquisition and transaction expenses		2,848			1,132			1,716			5,449			3,710			1,739
Management fees and incentive allocation to affiliate		539			2,116			(1,577	)		4,692			7,027			(2,335	)
Depreciation and amortization		32,877			34,825			(1,948	)		106,567			102,194			4,373
Asset impairment		4,495			859			3,636			128,171			3,048			125,123
Interest expense		644			584			60			1,910			1,734			176
Total expenses		155,317			57,875			97,442			459,704			154,097			305,607

Other (expense) income
Equity in losses of unconsolidated entities		(358	)		(369	)		11			(125	)		(1,050	)		925
Gain on sale of assets, net		—			12,685			(12,685	)		79,933			17,467			62,466
Other income (expense)		42			(1,341	)		1,383			245			(717	)		962
Total other (expense) income		(316	)		10,975			(11,291	)		80,053			15,700			64,353
Income before income taxes		62,616			47,038			15,578			32,554			90,085			(57,531	)
Provision for income taxes		3,818			500			3,318			7,252			1,037			6,215
Net income attributable to shareholders		58,798			46,538			12,260			25,302			89,048			(63,746	)

	Three Months Ended September 30,									Nine Months Ended September 30,
(in thousands)	2022			2021			Change			2022		2021			Change
Net income attributable to shareholders	$	58,798		$	46,538		$	12,260		$	25,302	$	89,048		$	(63,746	)
Add: Provision for income taxes		3,818			500			3,318			7,252		1,037			6,215
Add: Acquisition and transaction expenses		2,848			1,132			1,716			5,449		3,710			1,739
Add: Asset impairment charges		4,495			859			3,636			128,171		3,048			125,123
Add: Depreciation and amortization expense ⁽¹⁾		39,353			41,269			(1,916	)		136,860		123,543			13,317
Add: Interest expense		644			584			60			1,910		1,734			176
Add: Pro-rata share of Adjusted EBITDA from unconsolidated entities ⁽²⁾		(241	)		(312	)		71			165		(906	)		1,071
Less: Equity in losses of unconsolidated entities		358			369			(11	)		125		1,050			(925	)
Adjusted EBITDA (non-GAAP)	$	110,073		$	90,939		$	19,134		$	305,234	$	222,264		$	82,970

Aviation Leasing Assets	Widebody			Narrowbody			Total
Aircraft
Assets at January 1, 2022		13			95			108
Purchases		1			22			23
Sales		(3	)		(2	)		(5	)
Transfers		(2	)		(28	)		(30	)
Assets at September 30, 2022		9			87			96

Engines
Assets at January 1, 2022		68			139			207
Purchases		2			43			45
Sales		(26	)		(24	)		(50	)
Transfers		5			22			27
Assets at September 30, 2022		49			180			229

	Exhibit No.	Description
	2.1	Agreement and Plan of Merger, dated as of August 12, 2022, by and among, FTAI, the Company and FTAI Aviation Merger Sub LLC (incorporated by reference to Annex A to FTAI’s Registration Statement on Form S-4, filed on October 11, 2022).
	2.2	Separation and Distribution Agreement, dated as of August 1, 2022, between FTAI Infrastructure Inc. and Fortress Transportation and Infrastructure Investors LLC (incorporated by reference to Exhibit 2.1 of FTAI’s Current Report on Form 8-K, filed on August 1, 2022).
	3.1	Amended and Restated Memorandum and Articles of Association of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K, filed on November 14, 2022).
	10.1	Services and Profit Sharing Agreement, dated November 10, 2022, by and among FTAI Aviation Holdco Ltd., Fortress Transportation and Infrastructure Investors LLC and Fortress Worldwide Transportation and Infrastructure Master GP LLC (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, filed on November 14, 2022).
†	10.2	Management and Advisory Agreement, dated as of July 31, 2022, between FTAI, FTAI Aviation Ltd., the Subsidiaries of FTAI party thereto and FIG LLC (incorporated by reference to Exhibit 10.1 of FTAI’s Current Report on Form 8-K, filed on August 1, 2022).
†	10.3	Amended and Restated Registration Rights Agreement, dated November 10, 2022, by and among FTAI Aviation Ltd., Fortress Transportation and Infrastructure Investors LLC, Fortress Worldwide Transportation and Infrastructure Master GP LLC and FIG LLC (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, filed on November 14, 2022).
†	10.4	FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-4, filed on October 4, 2022).
	10.5	Form of FTAI Aviation Ltd. Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-4, filed on October 4, 2022).
†	10.6	Form of Director Award Agreement pursuant to the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-4, filed on October 4, 2022).
†	10.7	Form of Award Agreement under the FTAI Aviation Ltd. Nonqualified Stock Option and Incentive Award Plan (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-4, filed on October 4, 2022).
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	101	The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Changes in Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements.
	104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†	Management contracts and compensatory plans or arrangements.

By:	/s/ Joseph P. Adams, Jr.	Date:	November 17, 2022
	Joseph P. Adams, Jr.
	Chairman and Chief Executive Officer

By:	/s/ Eun (Angela) Nam	Date:	November 17, 2022
	Eun (Angela) Nam
	Chief Financial Officer

November 17, 2022		/s/ Joseph P. Adams, Jr.
(Date)		Joseph P. Adams, Jr.
		Chief Executive Officer