10-KPeriod: FY2018

FTAI Aviation Ltd. Annual Report, Year Ended Dec 31, 2018

Filed February 28, 2019For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2018, on February 28, 2019. The report details the company's financial performance, operational segments, and forward-looking risk factors. FTAI is a public company subject to Sarbanes-Oxley Act requirements, including an auditor's attestation on internal controls over financial reporting, which it complied with for 2018. The company's total revenues grew significantly to $379.9 million in 2018, up from $217.7 million in 2017, driven primarily by strong performance in the Aviation Leasing segment, which saw increased lease income and maintenance revenue. The Infrastructure segment also contributed to revenue growth, particularly the Jefferson Terminal segment due to crude marketing activities. Despite revenue growth, the company reported a net loss attributable to shareholders of $5.9 million for 2018, compared to a net income of $0.1 million in 2017. This was largely due to increased total expenses, which rose to $401.5 million in 2018 from $256.9 million in 2017, driven by higher operating expenses, depreciation and amortization, and interest expense. FTAI's financial strategy involves utilizing leverage for asset acquisitions, which can impact returns and cash available for distributions. The company's dividend policy is at the discretion of the board, with a stated long-term goal of a 50-60% payout ratio of funds available for distribution. Investors should note the potential for dilution from equity awards granted under the Incentive Plan and risks associated with future equity issuances or debt incurrence impacting share price. The company also highlighted anti-takeover provisions in its operating agreement and Delaware law that could affect control changes, and potential differences in director/officer exculpation and indemnification compared to DGCL.

Financial Highlights

45 data points
Beta

Revenue

$342.11M

Net Income

$5.88M

1.7% Net Margin

EPS (Diluted)

$0.07

Total Assets

$2.64B

Cash & Equivalents

$120.84M

Free Cash Flow

-$96.27M

Financial Statements
Beta
Revenue$342.11M
Operating Expenses$367.14M
Operating Income$1.82M
Interest Expense$56.84M
Net Income$5.88M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)83.65M
Shares Outstanding (Diluted)83.66M

Key Highlights

  • 1Total revenues increased by 74.5% to $379.9 million in 2018, driven by growth across most segments, particularly Aviation Leasing and Jefferson Terminal.
  • 2FTAI reported a net loss attributable to shareholders of $5.9 million in 2018, a deterioration from a net income of $0.1 million in 2017, primarily due to higher operating, depreciation, and interest expenses.
  • 3The company's Aviation Leasing segment showed robust growth, with revenues up 56% to $244.3 million in 2018, supported by an increased number of aircraft and engines on lease.
  • 4Jefferson Terminal segment revenues surged by 594% to $71.0 million in 2018, largely due to new crude marketing initiatives.
  • 5Total expenses increased by 56.3% to $401.5 million in 2018, with significant rises in operating expenses, depreciation & amortization, and interest expense.
  • 6FTAI's debt levels increased substantially in 2018, with total debt, net, rising to $1.24 billion from $0.70 billion in 2017, mainly due to new debt issuances for financing activities.
  • 7The company paid $1.32 per share in dividends for 2018, consistent with the prior year, but noted that dividend policy is at the board's discretion and future payments are not assured.

Frequently Asked Questions

FTAI's revenue growth in 2018 was primarily driven by its Aviation Leasing segment, which benefited from an increase in aircraft and engine leases and associated maintenance revenue. The Jefferson Terminal segment also contributed significantly due to the initiation of crude marketing activities.

Despite a substantial increase in total revenues, FTAI reported a net loss attributable to shareholders in 2018. This was primarily due to a significant increase in total expenses, including higher operating expenses, depreciation and amortization, and interest expenses, which outpaced the revenue gains.

FTAI's debt increased significantly in 2018. Total debt, net, grew from $703.3 million at the end of 2017 to $1.24 billion at the end of 2018. This increase was driven by new issuances of Senior Notes due 2025 and borrowings under the Revolving Credit Facility and Jefferson Revolver, reflecting the company's strategy to finance operations and acquisitions through debt.

FTAI's board of directors declared a quarterly dividend of $0.33 per share for the fourth quarter of 2018, aligning with its stated intention to pay regular quarterly dividends. However, the company explicitly states that the declaration and payment of dividends are at the discretion of the board, and there is no assurance that dividends will continue to be paid in the future or at current levels. The long-term goal is to maintain a payout ratio of 50-60% of funds available for distribution.

FTAI highlighted several risks, including potential dilution from equity awards granted to its Manager and future equity issuances. The company also noted the potential adverse effect of future debt or equity issuances on its share price. Additionally, risks related to the effectiveness of internal controls over financial reporting, the potential for material weaknesses, and the costs associated with compliance as a public company were emphasized. The use of leverage to finance acquisitions and its impact on returns and distributions were also noted as a key consideration.