| SEGMENT INFORMATION | 13. SEGMENT INFORMATION During the third quarter of 2022, as a result of the spin-off of FTAI Infrastructure effective on August 1, 2022, the Company reevaluated its operating segments. The key factors used to identify the reportable segments are the organization and alignment of our internal operations and the nature of our products and services. Our two reportable segments are (i) Aviation Leasing and (ii) Aerospace Products. The Aviation Leasing segment owns and manages aviation assets, including aircraft and aircraft engines, which it leases and sells to customers. The Aerospace Products segment develops, manufactures, repairs, and sells aircraft engines and aftermarket components for aircraft engines. The interim periods will disclose the reportable segments under this basis with prior periods restated to reflect the change in accordance with the requirements of ASC 280. Corporate and Other primarily consists of debt, unallocated corporate general and administrative expenses, shared services costs, and management fees. Additionally, Corporate and Other also includes offshore energy related assets, which consist of vessels and equipment that support offshore oil and gas activities and production which are typically subject to operating leases. Additionally, during the third quarter of 2022, the Company changed its measure of segment profit to include the add back of dividends on preferred shares in Adjusted EBITDA. Prior period Adjusted EBITDA amounts and the reconciliation to net income (loss) attributable to shareholders from continuing operations have been recast to reflect this change in the measure of segment profit. The accounting policies of the segments are the same as those described in the summary of significant accounting policies; however, financial information presented by segment includes the impact of intercompany eliminations. Our Chief Executive Officer is our CODM. Segment information is presented in the same manner that our CODM reviews the operating results in assessing performance and allocating resources. The CODM evaluates performance for each reportable segment primarily based on Adjusted EBITDA. Historically, the CODM’s assessment of segment performance included asset information. During the third quarter of 2022, the CODM determined that segment asset information is not a key factor in measuring performance or allocating resources. Therefore, segment asset information is not included in the tables below as it is not provided to or reviewed by our CODM. Adjusted EBITDA is defined as net income (loss) attributable to shareholders from continuing operations, adjusted (a) to exclude the impact of provision for (benefit from) income taxes, equity-based compensation expense, acquisition and transaction expenses, losses on the modification or extinguishment of debt and capital lease obligations, changes in fair value of non-hedge derivative instruments, asset impairment charges, incentive allocations, depreciation and amortization expense, dividends on preferred shares and interest expense, (b) to include the impact of our pro-rata share of Adjusted EBITDA from unconsolidated entities, and (c) to exclude the impact of equity in earnings (losses) of unconsolidated entities and the non-controlling share of Adjusted EBITDA. We believe that net income (loss) attributable to shareholders from continuing operations, as defined by GAAP, is the most appropriate earnings measurement with which to reconcile Adjusted EBITDA. Adjusted EBITDA should not be considered as an alternative to net income (loss) attributable to shareholders as determined in accordance with GAAP. The following tables set forth certain information for each reportable segment: I. For the Three Months Ended September 30, 2022 Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 164,848 $ 53,401 $ 12,116 $ 230,365 Expenses Operating expenses 10,533 3,491 13,369 27,393 Cost of sales 64,855 31,093 — 95,948 General and administrative — — 3,354 3,354 Acquisition and transaction expenses 247 15 2,586 2,848 Management fees and incentive allocation to affiliate — — 4 4 Depreciation and amortization 32,728 77 2,048 34,853 Asset impairment 4,495 — — 4,495 Interest expense — — 40,171 40,171 Total expenses 112,858 34,676 61,532 209,066 Other income (expense) Equity in losses of unconsolidated entities (45) (313) — (358) Gain on sale of assets, net — — — — Loss on extinguishment of debt — — (19,861) (19,861) Other income (expense) 42 — (1,080) (1,038) Total other expense (3) (313) (20,941) (21,257) Income (loss) from continuing operations before income taxes 51,987 18,412 (70,357) 42 Provision for income taxes 926 2,586 677 4,189 Net income (loss) from continuing operations 51,061 15,826 (71,034) (4,147) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 6,791 6,791 Net income (loss) attributable to shareholders from continuing operations $ 51,061 $ 15,826 $ (77,825) $ (10,938) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 95,994 $ 18,560 $ (5,691) $ 108,863 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities (358) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 241 Less: Interest expense and dividends on preferred shares (46,962) Less: Depreciation and amortization expense (41,329) Less: Incentive allocations — Less: Asset impairment charges (4,495) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations (19,861) Less: Acquisition and transaction expenses (2,848) Less: Equity-based compensation expense — Less: Provision for income taxes (4,189) Net loss attributable to shareholders from continuing operations $ (10,938) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Three Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 250 $ — $ — $ 250 Asia 23,496 1,200 12,116 36,812 Europe 41,869 15,511 — 57,380 North America 90,183 36,690 — 126,873 South America 9,050 — — 9,050 Total $ 164,848 $ 53,401 $ 12,116 $ 230,365 II. For the Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 317,994 $ 94,211 $ 21,915 $ 434,120 Expenses Operating expenses 72,135 8,094 27,968 108,197 Cost of sales 64,855 55,284 — 120,139 General and administrative — — 11,821 11,821 Acquisition and transaction expenses 624 15 7,701 8,340 Management fees and incentive allocation to affiliate — — 4 4 Depreciation and amortization 109,147 178 6,136 115,461 Asset impairment 128,171 — — 128,171 Interest expense — — 132,197 132,197 Total expenses 374,932 63,571 185,827 624,330 Other income (expense) Equity in earnings (losses) of unconsolidated entities 753 (878) — (125) Gain on sale of assets, net 61,371 18,562 — 79,933 Loss on extinguishment of debt — — (19,861) (19,861) Other income (expense) 245 — (37) 208 Total other income (expense) 62,369 17,684 (19,898) 60,155 Income (loss) before income taxes 5,431 48,324 (183,810) (130,055) Provision for income taxes 2,116 5,055 186 7,357 Net income (loss) 3,315 43,269 (183,996) (137,412) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 20,373 20,373 Net income (loss) attributable to shareholders from continuing operations $ 3,315 $ 43,269 $ (204,369) $ (157,785) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 273,788 $ 48,685 $ (17,915) $ 304,558 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities (125) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities (165) Less: Interest expense and dividends on preferred shares (152,570) Less: Depreciation and amortization expense (145,754) Less: Incentive allocations — Less: Asset impairment charges (128,171) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations (19,861) Less: Acquisition and transaction expenses (8,340) Less: Equity-based compensation expense — Less: Provision for income taxes (7,357) Net loss attributable to shareholders from continuing operations $ (157,785) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Nine Months Ended September 30, 2022 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 250 $ 850 $ — $ 1,100 Asia 60,111 2,601 21,915 84,627 Europe 94,751 26,410 — 121,161 North America 130,362 64,350 — 194,712 South America 32,520 — — 32,520 Total $ 317,994 $ 94,211 $ 21,915 $ 434,120 III. For the Three Months Ended September 30, 2021 Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 86,208 $ 7,730 $ 5,236 $ 99,174 Expenses Operating expenses 7,282 1,774 6,283 15,339 Cost of sales — 5,367 — 5,367 General and administrative — — 3,679 3,679 Acquisition and transaction expenses 234 — 6,349 6,583 Management fees and incentive allocation to affiliate — — 16 16 Depreciation and amortization 34,181 40 2,016 36,237 Asset impairment 859 — — 859 Interest expense — — 50,096 50,096 Total expenses 42,556 7,181 68,439 118,176 Other income (expense) Equity in losses of unconsolidated entities — (369) — (369) Gain on sale of assets, net 10,961 1,724 — 12,685 Other expense (1,341) — — (1,341) Total other income 9,620 1,355 — 10,975 Income (loss) before income taxes 53,272 1,904 (63,203) (8,027) Provision for (benefit from) income taxes 595 (110) — 485 Net income (loss) 52,677 2,014 (63,203) (8,512) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 6,791 6,791 Net income (loss) attributable to shareholders from continuing operations $ 52,677 $ 2,014 $ (69,994) $ (15,303) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders: Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 94,990 $ 2,001 $ (4,742) $ 92,249 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in income of unconsolidated entities (369) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 312 Less: Interest expense and dividends on preferred shares (56,887) Less: Depreciation and amortization expense (42,681) Less: Incentive allocations — Less: Asset impairment charges (859) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations — Less: Acquisition and transaction expenses (6,583) Less: Equity-based compensation expense — Less: Provision for income taxes (485) Net loss attributable to shareholders from continuing operations $ (15,303) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Three Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Asia $ 36,420 $ — $ 5,236 $ 41,656 Europe 35,709 — — 35,709 North America 10,422 7,730 — 18,152 South America 3,657 — — 3,657 Total $ 86,208 $ 7,730 $ 5,236 $ 99,174 IV. For the Nine Months Ended September 30, 2021 Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues $ 215,198 $ 13,284 $ 8,870 $ 237,352 Expenses Operating expenses 14,177 3,519 16,495 34,191 Cost of sales — 8,577 — 8,577 General and administrative — — 9,618 9,618 Acquisition and transaction expenses 804 — 11,822 12,626 Management fees and incentive allocation to affiliate — — 704 704 Depreciation and amortization 100,381 40 5,953 106,374 Asset impairment 3,048 — — 3,048 Interest expense — — 115,598 115,598 Total expenses 118,410 12,136 160,190 290,736 Other income (expense) Equity in losses of unconsolidated entities — (1,050) — (1,050) Gain on sale of assets, net 15,751 1,716 — 17,467 Loss on extinguishment of debt — — (3,254) (3,254) Other expense (717) — — (717) Total other income (expense) 15,034 666 (3,254) 12,446 Income (loss) before income taxes 111,822 1,814 (154,574) (40,938) Provision for (benefit from) income taxes 909 (11) (74) 824 Net income (loss) 110,913 1,825 (154,500) (41,762) Less: Net loss attributable to non-controlling interests in consolidated subsidiaries — — — — Less: Dividends on preferred shares — — 17,967 17,967 Net income (loss) attributable to shareholders from continuing operations $ 110,913 $ 1,825 $ (172,467) $ (59,729) The following table sets forth a reconciliation of Adjusted EBITDA to net loss attributable to shareholders from continuing operations: Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Adjusted EBITDA $ 237,404 $ 1,998 $ (17,947) $ 221,455 Add: Non-controlling share of Adjusted EBITDA — Add: Equity in losses of unconsolidated entities (1,050) Less: Pro-rata share of Adjusted EBITDA from unconsolidated entities 906 Less: Interest expense and dividends on preferred shares (133,565) Less: Depreciation and amortization expense (127,723) Less: Incentive allocations — Less: Asset impairment charges (3,048) Less: Changes in fair value of non-hedge derivative instruments — Less: Losses on the modification or extinguishment of debt and capital lease obligations (3,254) Less: Acquisition and transaction expenses (12,626) Less: Equity-based compensation expense — Less: Provision for income taxes (824) Net loss attributable to shareholders from continuing operations $ (59,729) Summary information with respect to our geographic sources of revenue, based on location of customer, is as follows: Nine Months Ended September 30, 2021 Aviation Leasing Aerospace Products Corporate and Other Total Revenues Africa $ 235 $ — $ — $ 235 Asia 93,925 — 8,870 102,795 Europe 88,296 812 — 89,108 North America 26,630 12,472 — 39,102 South America 6,112 — — 6,112 Total $ 215,198 $ 13,284 $ 8,870 $ 237,352 V. Location of Long-Lived Assets The following tables sets forth summarized geographic location of property, plant and equipment and leasing equipment, net: September 30, 2022 Total Property, plant and equipment and leasing equipment, net Africa $ 17,776 Asia 401,057 Europe 602,833 North America 393,268 South America 324,917 Total $ 1,739,851 December 31, 2021 Total Property, plant and equipment and leasing equipment, net Asia $ 543,610 Europe 839,555 North America 265,203 South America 245,532 Total $ 1,893,900 |
