10-QPeriod: Q2 FY2019

FTAI Aviation Ltd. Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 2, 2019For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd.'s (FTAI) 10-Q filing for the period ending August 2, 2019, highlights significant considerations for investors regarding corporate governance and capital structure. As a company that has transitioned from an emerging growth company, FTAI is now subject to the full requirements of Section 404 of the Sarbanes-Oxley Act, necessitating rigorous internal control assessments and independent audits. The company acknowledges potential costs and adverse effects on operations and liquidity stemming from these compliance efforts and any identified control deficiencies. Investors should also note the potential for equity dilution due to the company's Manager compensation structure and its Incentive Plan. Future equity issuances, whether for acquisitions or general financing, can lead to dilution of existing shareholders' stakes. The company's strategy of utilizing leverage for acquisitions is another key point, as it can impact returns on assets and available funds for distributions. Furthermore, while FTAI currently intends to pay dividends, this policy is discretionary and subject to various factors, including the company's financial performance and restrictions, with a stated long-term payout ratio target of 50-60% of funds available for distribution.

Financial Highlights

45 data points
Beta

Revenue

$149.85M

Net Income

$20.33M

13.6% Net Margin

EPS (Diluted)

$0.24

Total Assets

$3.09B

Cash & Equivalents

$174.38M

Free Cash Flow

-$40.17M

Financial Statements
Beta
Revenue$149.85M
Operating Expenses$164.80M
Operating Income$12.99M
Interest Expense$25.39M
Net Income$20.33M
EPS (Basic)$0.24
EPS (Diluted)$0.24
Shares Outstanding (Basic)85.99M
Shares Outstanding (Diluted)85.99M

Key Highlights

  • 1FTAI is now fully subject to Sarbanes-Oxley Section 404 compliance, requiring enhanced internal control assessments and independent auditor attestations, which may incur costs and impact financial reporting.
  • 2The company anticipates potential dilution of existing shareholders' ownership due to equity awards granted to its Manager and future equity issuances under its Incentive Plan.
  • 3FTAI utilizes leverage to finance acquisitions, which can impact asset returns and funds available for shareholder distributions.
  • 4Dividend policy is discretionary and may change; current intentions aim for a 50-60% payout ratio of funds available for distribution, with the remainder for future growth.
  • 5The company's structure and Delaware law contain anti-takeover provisions that could deter acquisition attempts and potentially affect share price.
  • 6Provisions in the operating agreement regarding director and officer exculpation and indemnification may offer less protection to shareholders compared to standard Delaware General Corporation Law.
  • 7The market price of FTAI's common shares can be adversely affected by potential future sales of substantial amounts of shares or the perception thereof.

Frequently Asked Questions

As FTAI is no longer an emerging growth company, it must now comply with the full requirements of Section 404 of the Sarbanes-Oxley Act. This includes having its independent registered public accounting firm attest to the effectiveness of its internal controls over financial reporting. This compliance may lead to increased costs and potential adverse effects on the company's operations, financial condition, and liquidity.

Your ownership percentage could be diluted through equity awards granted to the company's Manager, as well as through future equity issuances. Specifically, the company has an Incentive Plan that allows for grants of equity-based awards, and future equity offerings or acquisitions may result in the issuance of additional shares, which can dilute existing shareholders' stakes. The company also grants options to its Manager tied to the number of shares sold in future offerings.

FTAI utilizes leverage to finance many of its asset acquisitions. While the company's Manager targets reasonable leverage, there are no strict limits on the amount of leverage that can be used for specific assets. The use of leverage can reduce the funds available for distribution to shareholders and may affect returns on assets, especially if financing costs increase relative to asset income.

FTAI currently intends to pay regular quarterly dividends, but this policy is at the discretion of the board of directors and can be changed at any time. The declaration and payment of dividends depend on various factors, including financial results, liquidity, and legal restrictions. The company's long-term goal is to maintain a payout ratio between 50-60% of funds available for distribution, with remaining funds used for future acquisitions and opportunities. However, there is no assurance that dividends will continue to be paid as they have been.