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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____
Commission file number 001-37386
https://cdn.kscope.io/dc1b16b50f8910c6ab6011d6c977e0eb-FTAI Aviation Logo.jpg
FTAI AVIATION LTD.
(Exact name of registrant as specified in its charter)
Cayman Islands98-1420784
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1345 Avenue of the Americas, 45th FloorNew YorkNY10105
(Address of principal executive offices)(Zip Code)

(Registrant’s telephone number, including area code) (212) 798-6100
(Former name, former address and former fiscal year, if changed since last report) N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbol:Name of exchange on which registered:
Ordinary shares, $0.01 par value per shareFTAI
The Nasdaq Global Select Market
8.25% Fixed-to-Floating Rate Series A Cumulative Perpetual Redeemable Preferred SharesFTAIP
The Nasdaq Global Select Market
8.00% Fixed-to-Floating Rate Series B Cumulative Perpetual Redeemable Preferred SharesFTAIO
The Nasdaq Global Select Market
8.25% Fixed-Rate Reset Series C Cumulative Perpetual Redeemable Preferred SharesFTAIN
The Nasdaq Global Select Market
9.50% Fixed-Rate Reset Series D Cumulative Perpetual Redeemable Preferred Shares
FTAIM
The Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨ 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþAccelerated filer¨
Non-accelerated filer¨Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No þ
There were 99,728,786 ordinary shares outstanding representing limited liability company interests at April 25, 2023.



FORWARD-LOOKING STATEMENTS AND RISK FACTORS SUMMARY
This report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not statements of historical fact but instead are based on our present beliefs and assumptions and on information currently available to us. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “target,” “projects,” “contemplates” or the negative version of those words or other comparable words. Any forward-looking statements contained in this report are based upon our historical performance and on our current plans, estimates and expectations in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us, that the future plans, estimates or expectations contemplated by us will be achieved.
Such forward-looking statements are subject to various risks and uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. The following is a summary of the principal risk factors that make investing in our securities risky and may materially adversely affect our business, financial condition, results of operations and cash flows. This summary should be read in conjunction with the more complete discussion of the risk factors we face, which are set forth in Part II, Item 1A. “Risk Factors” of this report. We believe that these factors include, but are not limited to:
changes in economic conditions generally and specifically in our industry sectors, and other risks relating to the global economy, including, but not limited to, the Russia-Ukraine conflict, and any related responses or actions by businesses and governments;
reductions in cash flows received from our assets, as well as contractual limitations on the use of our aviation assets to secure debt for borrowed money;
our ability to take advantage of acquisition opportunities at favorable prices;
a lack of liquidity surrounding our assets, which could impede our ability to vary our portfolio in an appropriate manner;
the relative spreads between the yield on the assets we acquire and the cost of financing;
adverse changes in the financing markets we access affecting our ability to finance our acquisitions;
customer defaults on their obligations;
our ability to renew existing contracts and enter into new contracts with existing or potential customers;
the availability and cost of capital for future acquisitions;
concentration of a particular type of asset or in a particular sector;
competition within the aviation;
the competitive market for acquisition opportunities;
risks related to operating through joint ventures, partnerships, consortium arrangements or other collaborations with third parties;
our ability to successfully integrate acquired businesses;
obsolescence of our assets or our ability to sell, re-lease or re-charter our assets;
exposure to uninsurable losses and force majeure events;
the legislative/regulatory environment and exposure to increased economic regulation;
exposure to the oil and gas industry’s volatile oil and gas prices;
difficulties in obtaining effective legal redress in jurisdictions in which we operate with less developed legal systems;
our ability to maintain our exemption from registration under the Investment Company Act of 1940 and the fact that maintaining such exemption imposes limits on our operations;
our ability to successfully utilize leverage in connection with our investments;
foreign currency risk and risk management activities;
effectiveness of our internal control over financial reporting;
exposure to environmental risks, including natural disasters, increasing environmental legislation and the broader impacts of climate change;
changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes;
actions taken by national, state, or provincial governments, including nationalization, or the imposition of new taxes, could materially impact the financial performance or value of our assets;
our dependence on our Manager and its professionals and actual, potential or perceived conflicts of interest in our relationship with our Manager;
effects of the merger of Fortress Investment Group LLC with affiliates of SoftBank Group Corp.;
2



volatility in the market price of our shares;
the inability to pay dividends to our shareholders in the future; and
other risks described in the “Risk Factors” section of this report.
These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We do not undertake any obligation to publicly update or review any forward-looking statement except as required by law, whether as a result of new information, future developments or otherwise.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
3



FTAI AVIATION LTD.
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION
Item 1.
Item 2.
Item 3.
Item 4.
PART II - OTHER INFORMATION
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


4




PART I—FINANCIAL INFORMATION
Item 1. Financial Statements

FTAI AVIATION LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
(Unaudited)
NotesMarch 31, 2023December 31, 2022
Assets
Cash and cash equivalents2$40,994 $33,565 
Restricted cash2 19,500 
Accounts receivable, net113,547 99,443 
Leasing equipment, net41,849,662 1,913,553 
Property, plant, and equipment, net11,438 10,014 
Investments540,202 22,037 
Intangible assets, net645,729 41,955 
Inventory, net2192,790 163,676 
Other assets2147,082 125,834 
Total assets$2,441,444 $2,429,577 
Liabilities
Accounts payable and accrued liabilities$105,066 $86,452 
Debt, net72,101,907 2,175,727 
Maintenance deposits293,703 78,686 
Security deposits233,768 32,842 
Other liabilities32,844 36,468 
Total liabilities$2,367,288 $2,410,175 
Commitments and contingencies14
Equity
Ordinary shares ($0.01 par value per share; 2,000,000,000 shares authorized; 99,728,786 and 99,716,621 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)
$997 $997 
Preferred shares ($0.01 par value per share; 200,000,000 shares authorized; 15,920,000 and 13,320,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)
159 133 
Additional paid in capital368,681 343,350 
Accumulated deficit(296,205)(325,602)
Shareholders' equity73,632 18,878 
Non-controlling interest in equity of consolidated subsidiaries524 524 
Total equity74,156 19,402 
Total liabilities and equity$2,441,444 $2,429,577 






See accompanying notes to consolidated financial statements.
5


FTAI AVIATION LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended March 31,
Notes20232022
Revenues
Lease income$55,978 $39,325 
Maintenance revenue35,141 36,732 
Asset sales revenue108,691  
Aerospace products revenue85,113 14,313 
Other revenue7,795 1,321 
Total revenues12292,718 91,691 
Expenses
Cost of sales145,670 9,050 
Operating expenses222,534 61,799 
General and administrative4,067 4,561 
Acquisition and transaction expenses3,262 2,273 
Management fees and incentive allocation to affiliate112,997 3 
Depreciation and amortization4, 640,926 41,305 
Asset impairment1,220 122,790 
Interest expense39,292 44,139 
Total expenses259,968 285,920 
Other income (expense)
Equity in (losses) earnings of unconsolidated entities5(1,335)198 
Gain on sale of assets, net 16,288 
Other income8 128 
Total other (expense) income(1,327)16,614 
Income (loss) from continuing operations before income taxes31,423 (177,615)
Provision for income taxes102,026 1,339 
Net income (loss) from continuing operations29,397 (178,954)
Net loss from discontinued operations, net of income taxes3 (50,705)
Net income (loss) 29,397 (229,659)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries:
Continuing operations  
Discontinued operations3 (7,466)
Less: Dividends on preferred shares6,791 6,791 
Net income (loss) attributable to shareholders$22,606 $(228,984)
Earnings (loss) per share:13
Basic
Continuing operations$0.23 $(1.87)
Discontinued operations$ $(0.43)
Diluted
Continuing operations$0.22 $(1.87)
Discontinued operations$ $(0.43)
Weighted average shares outstanding:
Basic99,728,245 99,366,877 
Diluted100,974,100 99,366,877 
See accompanying notes to consolidated financial statements.
6


FTAI AVIATION LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)
(Dollars in thousands)
Three Months Ended March 31,
20232022
Net income (loss)$29,397 $(229,659)
Other comprehensive income (loss):
Other comprehensive loss related to equity method investees, net (1) in discontinued operations
 (94,779)
Comprehensive income (loss)29,397 (324,438)
Comprehensive loss attributable to non-controlling interest:
Continuing operations  
Discontinued operations (7,466)
Comprehensive income (loss) attributable to shareholders$29,397 $(316,972)
________________________________________________________
(1) Net of deferred tax expense of $0 for the three months ended March 31, 2022.
















































See accompanying notes to consolidated financial statements.
7


FTAI AVIATION LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)
(Dollars in thousands)

Three Months Ended March 31, 2023
Ordinary Shares(1)
Preferred Shares(1)
Additional Paid In CapitalAccumulated Deficit Non-Controlling Interest in Equity of Consolidated SubsidiariesTotal Equity
Equity - December 31, 2022$997 $133 $343,350 $(325,602)$524 $19,402 
Net income29,397  29,397 
Other comprehensive income   
Total comprehensive income29,397  29,397 
Issuance of ordinary shares230 230 
Dividends declared - ordinary shares(29,919)(29,919)
Issuance of preferred shares26 61,703 61,729 
Dividends declared - preferred shares(6,791)(6,791)
Equity-based compensation108 108 
Equity - March 31, 2023$997 $159 $368,681 $(296,205)$524 $74,156 

Three Months Ended March 31, 2022
Common Shares(1)
Preferred Shares(1)
Additional Paid In CapitalAccumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest in Equity of Consolidated SubsidiariesTotal Equity
Equity - December 31, 2021$992 $133 $1,411,940 $(132,392)$(156,381)$(192)$1,124,100 
Net loss(222,193)(7,466)(229,659)
Other comprehensive loss— (94,779)— (94,779)
Total comprehensive loss(222,193)(94,779)(7,466)(324,438)
Issuance of ordinary shares164 164 
Dividends declared - ordinary shares(32,749)(32,749)
Dividends declared - preferred shares(6,791)(6,791)
Equity-based compensation709 709 
Equity - March 31, 2022$992 $133 $1,372,564 $(354,585)$(251,160)$(6,949)$760,995 

________________________________________________
(1) Common and Preferred Shares of Fortress Transportation and Infrastructure Investors LLC were exchanged for Ordinary and Preferred Shares of FTAI Aviation Ltd. when the Merger, as detailed in Note 1, was completed on November 10, 2022.
















See accompanying notes to consolidated financial statements.
8


FTAI AVIATION LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
Three Months Ended March 31,
20232022
Cash flows from operating activities:
Net income (loss)$29,397 $(229,659)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Equity in losses of unconsolidated entities1,335 24,013 
Gain on sale of assets, net(31,657)(16,288)
Security deposits and maintenance claims included in earnings(9,842)(11,592)
Equity-based compensation108 709 
Depreciation and amortization40,926 58,301 
Asset impairment1,220 122,790 
Change in deferred income taxes1,692 2,388 
Change in fair value of non-hedge derivative 766 
Change in fair value of guarantees(1,769) 
Amortization of lease intangibles and incentives7,844 12,013 
Amortization of deferred financing costs2,017 5,771 
Provision for credit losses475 47,914 
Other(326)(208)
Change in:
 Accounts receivable(14,840)8,619 
 Inventory6,984 (6,044)
 Other assets(2,013)(4,221)
 Accounts payable and accrued liabilities6,088 (16,597)
 Management fees payable to affiliate(386)(158)
 Other liabilities1,444 3,406 
Net cash provided by operating activities38,697 1,923 
Cash flows from investing activities:
Investment in unconsolidated entities(19,500)(1,637)
Principal collections on finance leases 67 
Acquisition of leasing equipment(127,513)(219,440)
Acquisition of property, plant and equipment(1,451)(54,661)
Acquisition of lease intangibles(8,640)(5,282)
Purchase deposits for acquisitions(9,940)(3,350)
Proceeds from sale of leasing equipment153,679 51,491 
Proceeds from sale of property, plant and equipment 2,910 
Proceeds for deposit on sale of aircraft and engine1,042 1,775 
Net cash used in investing activities$(12,323)$(228,127)



See accompanying notes to consolidated financial statements.
9


FTAI AVIATION LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
Three Months Ended March 31,
20232022
Cash flows from financing activities:
Proceeds from debt$145,000 $408,980 
Repayment of debt(220,000)(224,473)
Payment of deferred financing costs (10,818)
Receipt of security deposits1,459 1,075 
Return of security deposits(65) 
Receipt of maintenance deposits10,142 10,836 
Release of maintenance deposits (250)
Proceeds from issuance of preferred shares, net of underwriter's discount and issuance costs61,729  
Cash dividends - ordinary shares(29,919)(32,749)
Cash dividends - preferred shares(6,791)(6,791)
Net cash (used in) provided by financing activities$(38,445)$145,810 
Net decrease in cash and cash equivalents and restricted cash(12,071)(80,394)
Cash and cash equivalents and restricted cash, beginning of period53,065 440,061 
Cash and cash equivalents and restricted cash, end of period$40,994 $359,667 
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of leasing equipment$17,104 $9,658 
Security deposits, maintenance deposits, other assets and other liabilities settled in the sale of leasing equipment10,293  
Settled and assumed security deposits(468)(10,198)
Billed, assumed and settled maintenance deposits6,774 (31,594)
Non-cash change in equity method investment (94,779)
Issuance of ordinary shares230 164 



See accompanying notes to consolidated financial statements.
10


FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

1. ORGANIZATION
FTAI Aviation Ltd. (“we”, “us”, “our” or the “Company” and formerly “Fortress Transportation and Infrastructure Investors LLC”) is a Cayman Islands exempted company which through its subsidiaries owns, leases, and sells aviation equipment and also develops and manufactures, through a joint venture, and repairs and sells, through exclusivity arrangements, aftermarket components for aircraft engines. Additionally, we own and lease offshore energy equipment. We have two reportable segments, (i) Aviation Leasing and (ii) Aerospace Products (see Note 12).
On August 1, 2022, the Company completed the spin-off of its infrastructure business into an independent publicly traded company. Accordingly, the operating results of, and costs to separate, the infrastructure business are reported in Net loss from discontinued operations, net of income taxes in the Consolidated Statements of Operations for all periods presented. All amounts and disclosures included in the Notes to Consolidated Financial Statements reflect only the Company's continuing operations unless otherwise noted. For additional information, see Note 3, "Discontinued Operations."
On November 10, 2022, the Company completed a reverse merger transaction pursuant to the Agreement and Plan of Merger (the “Merger”) between Fortress Transportation and Infrastructure Investors LLC (“FTAI LLC”) and the Company and the parties thereto, with FTAI LLC becoming a subsidiary of the Company. This reverse merger represents a transaction between entities under common control. Upon merger completion, FTAI LLC’s shareholders received one share of the Company’s ordinary shares, Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares in exchange for each share of FTAI LLC’s common shares, Series A Preferred Shares, Series B Preferred Shares and Series C Preferred Shares, respectively, with the new Shares of FTAI Aviation Ltd. having substantially similar rights and privileges as the respective FTAI LLC shares being converted. All exchanges were completed without any further action from the shareholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of AccountingThe accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of us and our subsidiaries. These financial statements and related notes should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Principles of ConsolidationWe consolidate all entities in which we have a controlling financial interest and control over significant operating decisions, as well as variable interest entities (“VIEs”) in which we are the primary beneficiary. All adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The ownership interest of other investors in consolidated subsidiaries is recorded as non-controlling interest.
We use the equity method of accounting for investments in entities in which we exercise significant influence but which do not meet the requirements for consolidation. Under the equity method, we record our proportionate share of the underlying net income (loss) of these entities as well as the proportionate interest in adjustments to other comprehensive loss.
Use of EstimatesThe preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Risks and UncertaintiesIn the normal course of business, we encounter several significant types of economic risk including credit, market, and capital market risks. Credit risk is the risk of the inability or unwillingness of a lessee or customer to make contractually required payments or to fulfill its other contractual obligations. Market risk reflects the risk of a downturn or volatility in the underlying industry segments in which we operate, which could adversely impact the pricing of the services offered by us or a lessee’s or customer’s ability to make payments, increase the risk of unscheduled lease terminations and depress lease rates and the value of our leasing equipment or operating assets. Capital market risk is the risk that we are unable to obtain capital at reasonable rates to fund the growth of our business or to refinance existing debt facilities. We, through our subsidiaries, also conduct operations outside of the United States; such international operations are subject to the same risks as those associated with our United States operations as well as additional risks, including unexpected changes in regulatory requirements, heightened risk of political and economic instability, potentially adverse tax consequences and the burden of complying with foreign laws. We do not have significant exposure to foreign currency risk as all of our leasing arrangements are denominated in U.S. dollars.
Cash and Cash EquivalentsWe consider all highly liquid short-term investments with a maturity of 90 days or less when purchased to be cash equivalents.
Restricted Cash—Restricted cash consists of funds required for the Company’s investment in Quick Turn, as described in Note 5, of $19.5 million as of December 31, 2022. The Company had no restricted cash as of March 31, 2023.
InventoryWe hold aircraft engine modules, spare parts and used material inventory for trading and to support operations. Inventory is carried at the lower of cost or net realizable value on our consolidated balance sheets.
11


FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)

RevenuesWe disaggregate our revenue from contracts with customers by products and services. Revenues are within the scope of ASC 842, Leases, and ASC 606, Revenue from contracts with customers, unless otherwise noted. We have elected to exclude sales and other similar taxes from revenues.

During the third quarter of 2022, we updated our corporate strategy based on the opportunities available in the market such that the sale of aircraft and engines is now an output of our recurring, ordinary activities. As a result of this update, the transaction price allocated to the sale of assets is included in Asset sales revenue in the Consolidated Statement of Operations beginning in the third quarter of 2022 and are accounted for in accordance with ASC 606. The corresponding net book values of the assets sold are recorded in Cost of sales in the Consolidated Statement of Operations beginning in the third quarter of 2022. Sales transactions of aircraft and engines prior to the third quarter of 2022 were accounted for in accordance with ASC 610-20, Gains and losses from the derecognition of nonfinancial assets and were included in Gain on sale of assets, net on the Consolidated Statement of Operations, as we were previously only occasionally selling these assets. Generally, assets sold were under leasing arrangements with customers prior to sales and were included in Leasing equipment, net, on the Consolidated Balance Sheets.
Operating Leases—We lease equipment pursuant to operating leases. Operating leases with fixed rentals and step rentals are recognized on a straight-line basis over the term of the lease, assuming no renewals. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.
Generally, under our aircraft lease and engine agreements, the lessee is required to make periodic maintenance payments calculated based on the lessee’s utilization of the leased asset or at the end of the lease. Typically, under our aircraft lease agreements, the lessee is responsible for maintenance, repairs and other operating expenses throughout the term of the lease. These periodic maintenance payments accumulate over the term of the lease to fund major maintenance events, and we are contractually obligated to return maintenance payments to the lessee up to the cost of maintenance events paid by the lessee. In the event the total cost of maintenance events over the term of a lease is less than the cumulative maintenance payments, we are not required to return any unused or excess maintenance payments to the lessee.
Maintenance payments received for which we expect to repay to the lessee are presented as Maintenance Deposits in our Consolidated Balance Sheets. All excess maintenance payments received that we do not expect to repay to the lessee are recorded as Maintenance revenues. Estimates in recognizing revenue include mean time between removal, projected costs for engine maintenance and forecasted utilization of aircraft which are affected by historical usage patterns and overall industry, market and economic conditions. Significant changes to these estimates could have a material effect on the amount of revenue recognized in the period.
For purchase and lease back transactions, we account for the transaction as a single arrangement. We allocate the consideration paid based on the relative fair value of the aircraft and lease. The fair value of the lease may include a lease premium or discount, which is recorded as a favorable or unfavorable lease intangible.
Finance Leases—From time to time we enter into finance lease arrangements that include a lessee obligation to purchase the leased equipment at the end of the lease term, a bargain purchase option, or provides for minimum lease payments with a present value that equals or exceeds substantially all of the fair value of the leased equipment at the date of lease inception. Net investment in finance leases represents the minimum lease payments due from lessee, net of unearned income. The lease payments are segregated into principal and interest components similar to a loan. Unearned income is recognized on an effective interest method over the lease term and is recorded as finance lease income. The principal component of the lease payment is reflected as a reduction to the net investment in finance leases. Revenue is not recognized when collection is not reasonably assured. When collectability is not reasonably assured, the customer is placed on non-accrual status and revenue is recognized when cash payments are received.
Asset sales revenue—Asset sales revenue primarily consists of the transaction price related to the sale of aircraft and aircraft engines from our Aviation Leasing segment. From time to time, the Company may also assign the related lease agreements to the customer as part of the sale of these assets. We routinely sell leasing equipment to customers and such transactions are considered recurring and ordinary in nature to our business. As such, these sales are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over an asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations.
Aerospace Products revenue—Aerospace Products revenue primarily consists of the transaction price related to the sale of repaired CFM56-7B and CFM56-5B engines, engine modules, spare parts and used material inventory, and are accounted for within the scope of ASC 606. Revenue is recognized when a performance obligation is satisfied by transferring control over the related asset to a customer. Revenue is recorded with corresponding costs of sales, presented on a gross basis in the Consolidated Statements of Operations. Aerospace products revenue also consists of engine management service contracts, where the Company has a stand-ready obligation to provide replacement CFM56-7B and CFM56-5B engines to customers as they become unserviceable during the contract term. The Company recognizes revenue over time using a straight-line attribution method and the costs related to fulfilling the performance obligation are expensed as incurred.
12


FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
Leasing ArrangementsAt contract inception, we evaluate whether an arrangement is or contains a lease for which we are the lessee (that is, arrangements which provide us with the right to control a physical asset for a period of time). Operating lease right-of-use (“ROU”) assets and lease liabilities are included in Other assets and Other liabilities in our Consolidated Balance Sheets, respectively. Finance lease ROU assets are recognized in Other assets and lease liabilities are recognized in Other liabilities in our Consolidated Balance Sheets.
All lease liabilities are measured at the present value of the unpaid lease payments, discounted using our incremental borrowing rate based on the information available at commencement date of the lease. ROU assets, for both operating and finance leases, are initially measured based on the lease liability, adjusted for prepaid rent and lease incentives. Operating lease ROU assets are subsequently measured at the carrying amount of the lease liability adjusted for prepaid or accrued lease payments and lease incentives. The finance lease ROU assets are subsequently amortized using the straight-line method.
Operating lease expenses are recognized on a straight-line basis over the lease term. With respect to finance leases, amortization of the ROU asset is presented separately from interest expense related to the finance lease liability and is recorded in Operating expenses in the Consolidated Statements of Operations. Variable lease payments, which are primarily based on usage, are recognized when the associated activity occurs.
We have elected to combine lease and non-lease components for all lease contracts where we are the lessee. Additionally, for arrangements with lease terms of 12 months or less, we do not recognize ROU assets, and lease liabilities and lease payments are recognized on a straight-line basis over the lease term with variable lease payments recognized in the period in which the obligation is incurred.
Concentration of Credit RiskWe are subject to concentrations of credit risk with respect to amounts due from customers. We attempt to limit our credit risk by performing ongoing credit evaluations. We earned 18% and 10% of our revenue from two customers in the Aviation Leasing segment during the three months ended March 31, 2023. No single customer accounted for greater than 10% of total revenue during the three months ended March 31, 2022.
As of March 31, 2023, there was one customer in the Aviation Leasing segment that represented 15% of total accounts receivable, net. As of December 31, 2022, there were two customers in the Aviation Leasing segment that represented 20% and 12% of total accounts receivable, net.
We maintain cash balances, which generally exceed federally insured limits, and subject us to credit risk, in high credit quality financial institutions. We monitor the financial condition of these institutions and have not experienced any losses associated with these accounts.
Allowance for Doubtful AccountsWe determine the allowance for doubtful accounts based on our assessment of the collectability of our receivables on a customer-by-customer basis. The allowance for doubtful accounts was $66.1 million and $65.6 million as of March 31, 2023 and December 31, 2022, respectively. There was provision for credit losses of $0.5 million and $47.9 million for the three months ended March 31, 2023 and 2022, respectively, which is included in Operating expenses in the Consolidated Statements of Operations.
Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the first quarter of 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines and our allowance for doubtful accounts at March 31, 2023 includes all accounts receivable exposure to Russian and Ukrainian customers.
Comprehensive LossComprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances, excluding those resulting from investments by and distributions to owners. Our comprehensive loss represents net income (loss), as presented in the Consolidated Statements of Operations, adjusted for comprehensive loss related to cash flow hedges of our equity method investees of discontinued operations. The cash flow impact of commodity derivatives held by our consolidated subsidiaries is recognized in Change in fair value of non-hedge derivatives in our Consolidated Statements of Cash Flows.
Other Assets—Other assets is primarily comprised of lease incentives of $43.0 million and $37.9 million, purchase deposits of $10.2 million and $6.7 million, notes receivable of $53.2 million and $49.2 million, operating lease right-of-use assets, net of $2.8 million and $3.0 million, finance leases, net of $5.9 million and $6.4 million, maintenance right assets of $8.8 million and $6.8 million and prepaid expenses of $1.5 million and $1.9 million as of March 31, 2023 and December 31, 2022, respectively.
Dividends—Dividends are recorded if and when declared by the Board of Directors. For the three months ended March 31, 2023 and 2022, the Board of Directors declared cash dividends of $0.30 and $0.33, per ordinary share, respectively.
Additionally, in the quarter ended March 31, 2023, the Board of Directors declared cash dividends on the Series A Preferred Shares, Series B Preferred Shares, and Series C Preferred Shares of $0.52, $0.50 and $0.52 per share, respectively.
Recent Accounting PronouncementsThe Company has evaluated all recent accounting pronouncements and none are expected to have a material impact on the Company’s consolidated financial statements.
13


FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
3. DISCONTINUED OPERATIONS
FTAI Infrastructure Inc. (“FTAI Infrastructure”) Spin-Off
On April 28, 2022, the Board of Directors of the Company unanimously approved the previously announced spin-off of the Company’s infrastructure business held by FTAI Infrastructure (a wholly owned subsidiary of the Company). The spin-off was effected as a distribution of all of the shares owned by the Company of common stock of FTAI Infrastructure to the holders of the Company’s ordinary shares as of July 21, 2022. The distribution was completed on August 1, 2022. Under ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the spin-off met the criteria to be reported as a discontinued operation. Therefore, FTAI Infrastructure is presented as a discontinued operation within the Company’s financial statements for the three months ended March 31, 2022.
FTAI Infrastructure is a corporation for U.S. federal income tax purposes and holds, among other things, the Company’s previously held interests in the (i) Jefferson Terminal business, (ii) Repauno business, (iii) Long Ridge investment, and (iv) Transtar business. FTAI Infrastructure retained all related project-level debt of those businesses. In connection with the spin-off, FTAI Infrastructure paid a dividend of $730.3 million to the Company. The Company used these proceeds to repay all outstanding borrowings under its 2021 bridge loans, $200.0 million of its 6.50% senior unsecured notes due 2025, and approximately $175.0 million of the outstanding borrowings under its revolving credit facility. FTAI LLC retained the aviation business and certain other assets, and FTAI LLC’s remaining outstanding corporate indebtedness.
In connection with the spin-off, the Company and the Manager assigned the Company’s then-existing management agreement to FTAI Infrastructure, and FTAI Infrastructure and the Manager executed an amended and restated agreement. The Company and certain of its subsidiaries executed a new management agreement with the Manager. The new management agreement has an initial term of six years. The Manager is entitled to a management fee and reimbursement of certain expenses on substantially similar terms as the previous arrangements with the Manager, which were assigned to FTAI Infrastructure. Prior to the Merger described below, our Manager remained entitled to incentive allocations (comprised of income incentive allocation and capital gains incentive allocation) on the same terms as they existed prior to spin-off. Following the Merger, the Company entered into a Services and Profit Sharing Agreement (the “Services and Profit Sharing Agreement”), with a subsidiary of the Company and Fortress Worldwide Transportation and Infrastructure Master GP LLC (“Master GP”), pursuant to which Master GP is entitled to incentive payments on substantially similar terms as the previous arrangements.
Financial Information of Discontinued Operations
The following table presents the significant components of net loss from discontinued operations:
Three Months Ended
March 31, 2022
Revenues
Total revenues$46,148 
Expenses
Operating expenses38,067 
General and administrative expenses1,130 
Acquisition and transaction expenses3,751 
Management fees and incentive allocation to affiliate4,161 
Depreciation and amortization16,996 
Interest expense6,459 
Total expenses70,564 
Equity in losses of unconsolidated entities (24,211)
Other income69 
Total other expense(24,142)
Loss before income taxes(48,558)
Provision for income taxes2,147 
Net loss from discontinued operations, net of income taxes(50,705)
Less: Net loss attributable to non-controlling interests in consolidated subsidiaries(7,466)
Net loss attributable to shareholders(43,239)
The cash flows related to discontinued operations have not been segregated, and are included in the Consolidated Statements of Cash Flows for the three months ended March 31, 2022. The following table summarizes depreciation and amortization, capital expenditures, and other significant operating and investing noncash items from discontinued operations:
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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
Three Months Ended
March 31, 2022
Operating activities:
Equity in losses of unconsolidated entities$24,211 
Depreciation and amortization16,996 
Equity-based compensation709 
Investing activities:
Acquisition of property, plant and equipment$(52,546)
Investment in unconsolidated entities(1,637)
Proceeds from sale of property, plant and equipment2,910 
Non-cash change in equity method investment(94,779)
The Company accounted for Long Ridge Terminal LLC, included in discontinued operations for the three months ended March 31, 2022 included above, using the equity method of accounting. Summarized financial data for Long Ridge Terminal LLC are shown in the following table.
Three Months Ended
Income StatementMarch 31, 2022
Total revenue$24,411 
Expenses
Operating expenses12,447 
Depreciation and amortization12,544 
Interest expense12,861 
Total expenses37,852 
Other expense(29,234)
Net loss$(42,675)
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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
4. LEASING EQUIPMENT, NET
Leasing equipment, net is summarized as follows:
March 31, 2023December 31, 2022
Leasing equipment$2,346,078 $2,413,230 
Less: Accumulated depreciation(496,416)(499,677)
Leasing equipment, net$1,849,662 $1,913,553 
Economic sanctions and export controls against Russia and Russia’s aviation industry were imposed due to its invasion of Ukraine during the three months ended March 31, 2022. As a result of the sanctions imposed on Russian airlines, we terminated all lease agreements with Russian airlines. We determined that it is unlikely that we will regain possession of the aircraft and engines that had not yet been recovered from Ukraine and Russia. As a result, during the three months ended March 31, 2022, we recognized an impairment charge totaling $122.8 million, net of maintenance deposits, to write-off the entire carrying value of leasing equipment assets that we did not expect to recover from Ukraine and Russia. As of March 31, 2023, four aircraft and one engine were still located in Ukraine and eight aircraft and seventeen engines were still located in Russia. Additionally, we identified certain assets in our leasing equipment portfolio with indicators of impairment. As a result, we adjusted the carrying value of these assets to fair value and recognized transactional impairment charges of $1.2 million, net of redelivery compensation during the three months ended March 31, 2023.
The following table presents information related to our acquisitions and dispositions of aviation leasing equipment during the three months ended March 31, 2023:
Acquisitions:
Aircraft5 
Engines22 
Dispositions:
Aircraft8 
Engines13 
Depreciation expense for leasing equipment is summarized as follows:
Three Months Ended March 31,
20232022
Depreciation expense for leasing equipment$40,766 $41,203 
5. INVESTMENTS
The following table presents the ownership interests and carrying values of our investments:
Carrying Value
InvestmentOwnership PercentageMarch 31, 2023December 31, 2022
Advanced Engine Repair JVEquity method25%$19,799 $20,207 
Falcon MSN 177 LLCEquity method50%1,731 1,830 
Quick Turn Engine Center LLCEquity method50%18,672  
$40,202 $22,037 
We did not recognize any other-than-temporary impairments for the three months ended March 31, 2023 and 2022.
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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
The following table presents our proportionate share of equity in (losses) income:
Three Months Ended March 31,
20232022
Advanced Engine Repair JV$(408)$(354)
Falcon MSN 177 LLC(99)552 
Quick Turn Engine Center LLC(828) 
Total$(1,335)$198 
Equity Method Investments
Advanced Engine Repair JV
In December 2016, we invested $15 million for a 25% interest in an advanced engine repair joint venture. We focus on developing new cost savings programs for engine repairs. We exercise significant influence over this investment and account for this investment as an equity method investment.
In August 2019, we expanded the scope of our joint venture and invested an additional $13.5 million and maintained a 25% interest.
Falcon MSN 177 LLC
In November 2021, we invested $1.6 million for a 50% interest in Falcon MSN 177 LLC, an entity that consists of one Dassault Falcon 2000 aircraft. Falcon MSN 177 LLC leases the aircraft to charter operators on aircraft, crew maintenance, and insurance contracts. We account for our investment in Falcon as an equity method investment as we have significant influence through our interest.
Quick Turn Engine Center LLC
On January 4, 2023, we invested $19.5 million for a 50% interest in Quick Turn Engine Center LLC or “Quick Turn” (previously iAero Thrust LLC), a hospital maintenance and testing facility dedicated to the CFM56 engine. We account for our investment in Quick Turn as an equity method investment as we have significant influence through our interest.

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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
6. INTANGIBLE ASSETS AND LIABILITIES, NET
Intangible assets and liabilities, net are summarized as follows:
March 31, 2023December 31, 2022
Intangible assets
Acquired favorable lease intangibles$60,514 $64,202 
Less: Accumulated amortization(14,785)(22,247)
Acquired favorable lease intangibles, net$45,729 $41,955 
Intangible liabilities
Acquired unfavorable lease intangibles$3,771 $13,152 
Less: Accumulated amortization(1,796)(2,607)
Acquired unfavorable lease intangibles, net$1,975 $10,545 
Intangible assets and liabilities are all held within the Aviation Leasing segment. Intangible liabilities relate to unfavorable lease intangibles and are included as a component of Other liabilities in the Consolidated Balance Sheets.
Amortization of intangible assets and liabilities is as follows:
Classification in Consolidated Statements of OperationsThree Months Ended March 31,
20232022
Lease intangiblesLease income$3,983 $3,658 
As of March 31, 2023, estimated net annual amortization of intangibles is as follows:
Remainder of 2023$14,150 
202410,083 
20258,678 
20263,695 
20274,392 
Thereafter2,756 
Total$43,754 

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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
7. DEBT, NET
Our debt, net is summarized as follows:
March 31, 2023December 31, 2022
Outstanding BorrowingsStated Interest RateMaturity DateOutstanding Borrowings
Loans payable
Revolving Credit Facility (1)
$75,000 
(i) Base Rate + 1.75%; or
(ii) Adjusted Term SOFR Rate + 2.75%
9/20/25$150,000 
Total loans payable75,000 150,000 
Bonds payable
Senior Notes due 2025 (2)
652,794 6.50%10/1/25653,036 
Senior Notes due 2027400,000 9.75%8/1/27400,000 
Senior Notes due 2028 (3)
1,002,006 5.50%5/1/281,002,091 
Total bonds payable2,054,800 2,055,127 
Debt2,129,800 2,205,127 
Less: Debt issuance costs(27,893)(29,400)
Total debt, net$2,101,907 $2,175,727 
Total debt due within one year$ $ 
________________________________________________________
(1) Requires a quarterly commitment fee at a rate of 0.50% on the average daily unused portion, as well as customary letter of credit fees and agency fees.
(2) Includes an unamortized discount of $1,207 and $1,318 at March 31, 2023 and December 31, 2022, respectively, and an unamortized premium of $4,001 and $4,354 at March 31, 2023 and December 31, 2022, respectively.
(3) Includes an unamortized premium of $2,006 and $2,091 at March 31, 2023 and December 31, 2022, respectively.
We were in compliance with all debt covenants as of March 31, 2023.
8. FAIR VALUE MEASUREMENTS
Fair value measurements and disclosures require the use of valuation techniques to measure fair value that maximize the use of observable inputs and minimize use of unobservable inputs. These inputs are prioritized as follows:
Level 1: Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities or market corroborated inputs.
Level 3: Unobservable inputs for which there is little or no market data and which require us to develop our own assumptions about how market participants price the asset or liability.
The valuation techniques that may be used to measure fair value are as follows:
Market approach—Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Income approach—Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts.
Cost approach—Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost).
Our cash and cash equivalents and restricted cash consist largely of demand deposit accounts with maturities of 90 days or less when purchased that are considered to be highly liquid. These instruments are valued using inputs observable in active markets for identical instruments and are therefore classified as Level 1 within the fair value hierarchy.
Except as discussed below, our financial instruments other than cash and cash equivalents and restricted cash consist principally of accounts receivable, notes receivable, accounts payable and accrued liabilities, loans payable, security deposits, maintenance deposits and management fees payable, whose fair values approximate their carrying values based on an evaluation of pricing data, vendor quotes, and historical trading activity or due to their short maturity profiles.
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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
The fair values of our bonds payable reported as Debt, net in the Consolidated Balance Sheets are presented in the table below and classified as Level 2 within the fair value hierarchy:
March 31, 2023December 31, 2022
Senior Notes due 2025651,541 613,152 
Senior Notes due 2027421,516 402,032 
Senior Notes due 2028917,230 853,490 
The fair values of all other items reported as Debt, net in the Consolidated Balance Sheets approximate their carrying values due to their bearing market rates of interest and are classified as Level 2 within the fair value hierarchy.
The Company has contingent obligations under ASC 460, Guarantees, in connection with certain sales of aircraft on lease, which are measured at fair value. The guarantees are valued at $6.3 million and $3.8 million as of March 31, 2023 and December 31, 2022, respectively, and are reflected as a component of Other liabilities on the Consolidated Balance Sheets. The fair values of the guarantees are determined based on the estimated condition of the engines at the end of each lease term, the estimated cost of replacement and applicable discount rates, and are classified as Level 3. During the three months ended March 31, 2023, the Company recorded a $4.3 million increase in guarantees related to the sale of six aircraft and a $1.8 million decrease related to the change in fair value, which is recorded as Asset sales revenue in the Consolidated Statements of Operations.
We measure the fair value of certain assets on a non-recurring basis when GAAP requires the application of fair value, including events or changes in circumstances that indicate that the carrying amounts of assets may not be recoverable. Assets subject to these measurements include intangible assets, property, plant and equipment, leasing equipment and inventory. We record such assets at fair value when it is determined the carrying value may not be recoverable. Fair value measurements for assets subject to impairment tests are based on an income approach which uses Level 3 inputs, which include our assumptions as to future cash flows from operation of the leasing and eventual sale of assets.
9. EQUITY-BASED COMPENSATION
In 2015, we established a Nonqualified Stock Option and Incentive Award Plan (“Incentive Plan”) which provides for the ability to grant equity compensation awards in the form of stock options, stock appreciation rights, restricted stock, and performance awards to eligible employees, consultants, directors, and other individuals who provide services to us, each as determined by the Compensation Committee of the Board of Directors.
As of March 31, 2023, the Incentive Plan provides for the issuance of up to 29.8 million shares. We account for equity-based compensation expense in accordance with ASC 718 Compensation-Stock Compensation and is reported within operating expenses and general and administrative in the Consolidated Statements of Operations.
The Consolidated Statements of Operations includes the following expense related to our stock-based compensation arrangements:
Three Months Ended March 31,Remaining Expense To Be Recognized, If All Vesting Conditions Are MetWeighted Average Remaining Contractual Term (in years)
20232022
Restricted Shares$108 $ $8,663 3.8 years
Options
In connection with our March 2023 offering of preferred shares (see Note 13), we granted options to the Manager related to 248,947 ordinary shares at an exercise price of $26.11, which had a grant date fair value of $2.1 million. The assumptions used in valuing the options were: a 3.471% risk-free rate, a 6.263% dividend yield, a 37.879% volatility and a ten-year term.
During the three months ended March 31, 2023, the Manager did not transfer any options to employees.
Restricted Shares

During the three months ended March 31, 2023, we issued restricted shares of the Company to select employees of FTAI Aviation LLC (a wholly owned subsidiary of the Company) that had a grant date fair value of $8.8 million and vest over 4.3 years. These awards are subject to continued employment, and the compensation expense is recognized ratably over the vesting periods, with 50% of the units vesting on June 30, 2026 and the remaining units vesting on June 30, 2027. The fair value of these awards were calculated based on the closing price of FTAI Aviation Ltd.’s ordinary shares on grant date of March 13, 2023.
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FTAI AVIATION LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(Dollars in tables in thousands, unless otherwise noted)
10. INCOME TAXES
The current and deferred components of the income tax provision included in the Consolidated Statements of Operations are as follows:
Three Months Ended March 31,
20232022
Current:
Cayman Islands$ $ 
United States: — 
Federal47 377 
State and local13 357 
Non-U.S.274 293 
Total current provision334 1,027 
Deferred:
Cayman Islands  
United States: — 
Federal233