10-QPeriod: Q1 FY2019

FTAI Aviation Ltd. Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 3, 2019For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) is navigating the complexities of being a public company, with a significant focus on internal control over financial reporting and potential shareholder dilution. As an "emerging growth company" no longer, FTAI is subject to stringent Sarbanes-Oxley Act (SOX) Section 404 requirements, including an independent auditor's attestation on internal controls. The company warns that identifying control deficiencies or material weaknesses could negatively impact its financial results, condition, liquidity, and stock price, and potentially impair its ability to raise capital. Investors should be aware of potential dilution from equity awards granted to the Manager under the Management Agreement and Incentive Plan, as well as future equity issuances or acquisitions. Furthermore, FTAI's capital structure, including the potential for future debt and equity issuances, carries risks. While the company currently intends to pay regular quarterly dividends, this policy is discretionary and subject to change. The net cash provided by operating activities has been less than distributions, and dividend payments are contingent on various factors, including subsidiary cash flows and incentive allocations to the General Partner. The company utilizes leverage for acquisitions, which may impact returns and available funds for distribution. Additionally, anti-takeover provisions in its operating agreement and Delaware law may deter potential acquisition offers that could be beneficial to shareholders.

Financial Highlights

45 data points
Beta

Revenue

$114.89M

Net Income

-$6.38M

-5.6% Net Margin

EPS (Diluted)

$-0.07

Total Assets

$2.95B

Cash & Equivalents

$228.57M

Free Cash Flow

-$60.97M

Financial Statements
Beta
Revenue$114.89M
Operating Expenses$123.40M
Operating Income-$6.59M
Interest Expense$20.73M
Net Income-$6.38M
EPS (Basic)$-0.07
EPS (Diluted)$-0.07
Shares Outstanding (Basic)85.99M
Shares Outstanding (Diluted)85.99M

Key Highlights

  • 1FTAI is now subject to full Sarbanes-Oxley Act (SOX) Section 404 compliance, including independent auditor attestation on internal controls.
  • 2The company warns that identified control deficiencies or material weaknesses could adversely affect financial results, liquidity, and stock price.
  • 3Potential for shareholder dilution exists due to equity awards granted to the Manager and future equity issuances, including those related to acquisitions.
  • 4Future incurrence or issuance of debt or equity securities could negatively impact the market price of common shares and dilute existing shareholders' holdings.
  • 5The company's dividend policy is discretionary and may change; dividend payments are not guaranteed and are dependent on various financial factors and subsidiary cash flows.
  • 6Leverage is used for acquisitions, which could reduce returns on assets and funds available for distribution.
  • 7Anti-takeover provisions in the operating agreement and Delaware law may discourage unsolicited acquisition offers.

Frequently Asked Questions

As FTAI is no longer an 'emerging growth company' (having ceased this status at the end of 2017), it must now comply with the full requirements of Section 404 of the Sarbanes-Oxley Act (SOX). This includes an independent registered public accounting firm's attestation and report on the effectiveness of the company's internal control over financial reporting. This increased regulatory scrutiny may lead to additional costs and potential identification of control deficiencies, which could negatively impact the company's financial health and stock performance.

Your percentage ownership in FTAI could be diluted through several mechanisms. The company has granted equity awards to its Manager and has an Incentive Plan that allows for the grant of various equity-based awards. Additionally, future equity offerings, acquisitions financed with equity, or the exercise of outstanding options will increase the total number of outstanding shares, thereby diluting existing shareholders' ownership stake. The company is also obligated to grant options to its Manager upon future equity issuances.

FTAI currently intends to pay regular quarterly dividends. However, this policy is discretionary and can be changed at any time by the board of directors. Dividend declarations are subject to numerous factors, including the company's financial results, liquidity, operating cash flows (which have been less than distributions), and any restrictions imposed by law or financing agreements. Furthermore, the company's structure means dividends are paid from available cash, and distributions from subsidiaries can be limited. The General Partner also receives incentive allocations before common shareholders receive distributions.

FTAI utilizes leverage to finance many of its asset acquisitions. While this can enhance returns, it also means that lenders have a claim on cash flows prior to shareholders receiving returns on their assets. Changes in market conditions could increase financing costs relative to asset income, potentially reducing returns on assets and the funds available for distribution to shareholders.