10-QPeriod: Q3 FY2019

FTAI Aviation Ltd. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 1, 2019For Securities:FTAIFTAIMFTAIN

Summary

FTAI Aviation Ltd. (FTAI) is navigating its post-emerging growth company status, which brings increased compliance burdens, particularly related to Sarbanes-Oxley Act (SOX) Section 404. The company highlights potential costs and complexities associated with ensuring and reporting on internal controls over financial reporting, with a stated risk of adverse effects on operations, financial condition, and liquidity if deficiencies are found or remediation is costly. Investors should be aware of potential dilution to their ownership stake. FTAI has granted equity awards and has a plan to grant additional options to its Manager based on future equity issuances, which could dilute existing shareholders. Furthermore, the company's capital structure, including potential future debt and equity issuances, may adversely affect the market price of its common shares and dilute existing shareholders' holdings. The company also uses leverage for acquisitions, which could reduce returns and available funds for distribution.

Financial Highlights

45 data points
Beta

Revenue

$152.70M

Net Income

$25.67M

16.8% Net Margin

EPS (Diluted)

$0.30

Total Assets

$3.14B

Cash & Equivalents

$150.58M

Free Cash Flow

-$49.85M

Financial Statements
Beta
Revenue$152.70M
Operating Expenses$169.43M
Operating Income$37.84M
Interest Expense$25.19M
Net Income$25.67M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)86.00M
Shares Outstanding (Diluted)86.01M

Key Highlights

  • 1FTAI is now subject to full Sarbanes-Oxley Act (SOX) Section 404 requirements, including independent auditor attestation on internal controls, increasing compliance costs and potential risks if material weaknesses are identified.
  • 2Potential for significant dilution to existing shareholders exists due to equity awards granted to the Manager and future equity issuances tied to capital raises and acquisitions.
  • 3The company's use of leverage to finance acquisitions may reduce shareholder returns and funds available for distribution.
  • 4FTAI's dividend policy is discretionary and subject to change; past net cash from operations has been less than distributions, and preferred shareholder restrictions may limit common share dividends.
  • 5The company's structure and Delaware law include anti-takeover provisions that could make a change in control more difficult.
  • 6FTAI's operating agreement may offer less protection to shareholders regarding director and officer exculpation and indemnification compared to standard Delaware General Corporation Law.
  • 7The trading price and liquidity of FTAI's common shares can be negatively impacted by analyst coverage, downgrades, or a lack of research reports.

Frequently Asked Questions

As FTAI is no longer an emerging growth company, it must comply with the full requirements of Section 404 of the Sarbanes-Oxley Act, including an independent auditor's attestation on the effectiveness of its internal controls over financial reporting. This increases compliance costs and potential risks related to identifying and remediating control deficiencies.

Dilution can occur through equity awards granted to the company's Manager, including options linked to future equity issuances. Additionally, future debt and equity financings, or the issuance of preferred shares, can dilute existing common shareholders' holdings and potentially impact the market price of the common shares.

FTAI currently intends to pay regular quarterly dividends, but this policy is discretionary and can be changed at any time. The board of directors makes dividend decisions based on various factors, including financial results, liquidity, and legal/contractual restrictions. Importantly, the company's net cash from operations has historically been less than its distributions, and restrictions related to Series A preferred shares may prevent common share dividends.

FTAI utilizes leverage to finance many of its asset acquisitions. While the company aims for reasonable leverage, this strategy means that lenders are entitled to cash flows prior to the company retaining returns on its assets. Changes in market conditions could increase financing costs, potentially reducing the return on assets and the funds available for distribution to shareholders.