November 13, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


☐	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: 001-42298

StandardAero, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	30-1138150
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6710 North Scottsdale Road, Suite 250 Scottsdale, Arizona	85253
(Address of principal executive offices)	(Zip Code)

(480) 377-3100

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common stock, par value $0.01 per share

    SARO

    New York Stock Exchange

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 ☐ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filer	☐	Accelerated 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 ☒

As of November 13, 2024, the registrant had 334,461,630 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents


		Page
	CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS	1

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2024 and December 31, 2023	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2024 and 2023	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholder’s Equity (unaudited) for the nine months ended September 30, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2024 and 2023	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
PART II.	OTHER INFORMATION	48
Item 1.	Legal Proceedings	48
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	79
Signatures		80

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward looking statements that involve substantial risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, you can identify statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would” and/or the negative of these terms, or other comparable terminology intended to identify statements about the future. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include statements regarding our intentions, beliefs or current expectations concerning, among other things, results of operations, financial condition, liquidity, prospects, growth, strategies, the industry in which we operate and other information that is not historical information. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these statements. Although we believe that we have a reasonable basis for each statement contained in this Quarterly Report on Form 10-Q, we cannot assure you that we will achieve or realize these plans, intentions or expectations. statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning our possible or assumed future actions, business strategies, events or results of operations, are statements. Factors that could cause actual results to differ materially from those statements included in this Quarterly Report on Form 10-Q include those described under Part II, Item 1A “Risk Factors” in this Quarterly Report.

As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. You should understand that it is not possible to predict or identify all such factors. These cautionary statements should not be construed as exhaustive and should be read in conjunction with the other cautionary statements included in this Quarterly Report on Form 10-Q, including those under the heading “Risk Factors.” We operate in a competitive and rapidly changing environment. New factors emerge from time to time, and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives, plans or cost savings in any specified time frame or at all. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q. Those results or developments may not be indicative of results or developments in subsequent periods. We caution you not to place undue reliance on these forward-looking statements. All forward looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

SUMMARY RISK FACTORS

We are subject to a number of risks, including risks that may prevent us from achieving our business objectives or that may adversely affect our business, financial condition, results of operations, cash flows and prospects. You should carefully consider the risks discussed in the section entitled “Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q, including the following risks, before investing in our common stock:

•

risks related to conditions that affect the commercial and business aviation industries;

•

decreases in budget, spending or outsourcing by our military end-users;

•

risks from any supply chain disruptions or loss of key suppliers;

•

increased costs of labor, equipment, raw materials, freight and utilities due to inflation;

•

future outbreaks and infectious diseases;

•

risks related to competition in the market in which we participate;

•

loss of an OEM authorization or license;

•

risks related to a significant portion of our revenue being derived from a small number of customers;

•

our ability to remediate effectively the material weaknesses identified in our internal control over financial reporting;

•

our ability to respond to changes in GAAP;

•

our or our third-party partners’ failure to protect confidential information;

•

data security incidents or disruptions to our IT systems and capabilities;

•

our ability to comply with laws relating to the handling of information about individuals;

•

failure to maintain our regulatory approvals;

•

risks relating to our operations outside of North America;

•

failure to comply with government procurement laws and regulations;

•

any work stoppage, hiring, retention or succession issues with our senior management team and employees;

•

any strains on our resources due to the requirements of being a public company;

•

risks related to our substantial indebtedness;

•

risks related to the ownership of our common stock, including the fact that we are a “controlled company”; and

•

other factors set forth under “Risk Factors” elsewhere in this Quarterly Report on Form 10-Q.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(In thousands, except share figures)


	September 30, 2024			December 31, 2023
ASSETS
Current assets:
Cash	$	51,265		$	57,982
Accounts receivable (less allowance for expected credit losses of $14,024 and $14,779, respectively)		621,298			518,334
Contract assets, net		821,083			810,413
Inventories		778,447			698,797
Prepaid expenses and other current assets		44,161			39,126
Advance to related parties		—			138
Income tax receivable		42,253			10,980
Total current assets		2,358,507			2,135,770

Property, plant and equipment, net		552,031			522,169
Operating lease right of use asset, net		179,697			168,513
Customer relationships, net		1,025,986			1,010,747
Other intangible assets, net		252,274			284,979
Goodwill		1,685,923			1,632,496
Deferred income tax assets		4,728			4,728
Total assets	$	6,059,146		$	5,759,402

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	552,615		$	468,625
Accrued expenses and other current liabilities		115,375			115,999
Accrued employee costs		76,145			76,121
Operating lease liabilities, current		18,752			17,040
Contract liabilities		322,318			355,651
Income taxes payable, current		3,108			9,337
Long-term debt, current portion		30,609			26,676
Total current liabilities		1,118,922			1,069,449

Long-term debt		3,391,411			3,172,108
Operating lease liabilities, non-current		170,356			159,482
Deferred income tax liabilities		185,823			182,303
Income taxes payable, non-current		—			3,108
Other non-current liabilities		28,772			26,240
Total liabilities		4,895,284			4,612,690

Commitments and contingencies (Note 10)

Stockholder’s equity
Common stock ($0.01 par value, 3,500,000,000 voting shares authorized; 281,211,630 shares issued and outstanding; 70,000,000 non-voting shares authorized, convertible to voting shares immediately prior to an underwritten public offering of common stock)		2,812			2,812
Additional paid-in capital		2,725,157			2,725,157
Accumulated deficit		(1,549,268	)		(1,574,295	)
Accumulated other comprehensive (loss) income		(14,839	)		(6,962	)
Total stockholder’s equity		1,163,862			1,146,712
Total liabilities and stockholder’s equity	$	6,059,146		$	5,759,402

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(In thousands, except per share figures)


	Three Months Ended September 30,					Nine Months Ended September 30,
	2024		2023			2024		2023
Revenue	$	1,244,627	$	1,099,441		$	3,827,548	$	3,405,513
Cost of revenue		1,058,396		948,040			3,275,300		2,928,226
Selling, general and administrative expense		62,895		53,020			171,744		148,221
Amortization of intangible assets		23,965		23,613			70,550		70,068
Acquisition costs		1,323		9			1,323		1,514
Operating income		98,048		74,759			308,631		257,484
Interest expense		79,898		79,188			235,496		230,515
Refinancing costs		1,503		19,921			6,441		19,921
Loss on debt extinguishment		—		6,182			3,577		6,182
Other income		—		—			—		(3,509	)
Income (loss) before income taxes		16,647		(30,532	)		63,117		4,375
Income tax expense (benefit)		211		(12,599	)		38,090		34,877
Net income (loss)	$	16,436	$	(17,933	)	$	25,027	$	(30,502	)
Net income (loss) per share attributable to the shareholder, basic and diluted	$	0.06	$	(0.06	)	$	0.09	$	(0.11	)
Weighted-average common shares outstanding		281,211,630		281,211,630			281,211,630		281,211,630

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(In thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net income (loss)	$	16,436		$	(17,933	)	$	25,027		$	(30,502	)
Other comprehensive income (loss), net of tax:
Unrealized income (loss) on cash flow hedges, net of income tax benefit (expense) of $2,603 and $(1,308) for the three months ended September 30, 2024 and 2023, respectively, and $(105) and $(4,647) for the nine months ended September 30, 2024 and 2023, respectively		(9,955	)		3,231			311			15,645
Cash flow hedge gain reclassified to the statement of operations, net of income tax expense $532 and $1,526 for the three months ended September 30, 2024 and 2023, respectively, and $2,269 and $3,028 for the nine months ended September 30, 2024 and 2023, respectively		(1,923	)		(3,974	)		(8,341	)		(9,656	)
Foreign currency translation adjustment		476			(279	)		153			(67	)
Total other comprehensive income (loss), net of tax		(11,402	)		(1,022	)		(7,877	)		5,922
Comprehensive income (loss) attributable to the shareholder	$	5,034		$	(18,955	)	$	17,150		$	(24,580	)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(unaudited)

(In thousands, except share figures)


	For the nine months ended September 30, 2023
	Common Stock
	Number of Shares		Par Value		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholder's Equity
Balance as at December 31, 2022		281,211,630	$	2,812	$	2,725,157	$	(1,539,234	)	$	10,293		$	1,199,028
Net loss		—		—		—		(11,731	)		—			(11,731	)
Other comprehensive loss, net of tax		—		—		—		—			(5,471	)		(5,471	)
Balance as at March 31, 2023		281,211,630		2,812		2,725,157		(1,550,965	)		4,822			1,181,826
Net loss		—		—		—		(838	)		—			(838	)
Other comprehensive income, net of tax		—		—		—		—			12,415			12,415
Balance as at June 30, 2023		281,211,630		2,812		2,725,157		(1,551,803	)		17,237			1,193,403
Net Loss		—		—		—		(17,933	)		—			(17,933	)
Other comprehensive loss, net of tax		—		—		—		—			(1,022	)		(1,022	)
Balance as at September 30, 2023		281,211,630	$	2,812	$	2,725,157	$	(1,569,736	)	$	16,215		$	1,174,448


	For the nine months ended September 30, 2024
	Common Stock
	Number of Shares		Par Value		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholder's Equity
Balance as at December 31, 2023		281,211,630	$	2,812	$	2,725,157	$	(1,574,295	)	$	(6,962	)	$	1,146,712
Net income		—		—		—		3,187			—			3,187
Other comprehensive income, net of tax		—		—		—		—			2,795			2,795
Balance as at March 31, 2024		281,211,630		2,812		2,725,157		(1,571,108	)		(4,167	)		1,152,694
Net income		—		—		—		5,404			—			5,404
Other comprehensive income, net of tax		—		—		—		—			730			730
Balance as at June 30, 2024		281,211,630		2,812		2,725,157		(1,565,704	)		(3,437	)		1,158,828
Net income		—		—		—		16,436			—			16,436
Other comprehensive loss, net of tax		—		—		—		—			(11,402	)		(11,402	)
Balance as at September 30, 2024		281,211,630	$	2,812	$	2,725,157	$	(1,549,268	)	$	(14,839	)	$	1,163,862

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(In thousands)


	Nine Months Ended September 30,
	2024			2023
Operating activities:
Net income (loss)	$	25,027		$	(30,502	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization		140,021			147,801
Amortization of deferred finance charges and discounts		9,989			11,811
Amortization of loss on derivative instruments		(304	)		(1,095	)
Amortization of interest cap premiums		7,078			4,384
Payment of interest rate cap premiums		(7,044	)		(4,203	)
Loss on debt extinguishment		3,577			6,182
(Gain) loss from disposals, net		(17	)		222
Non-cash lease expense		1,376			1,186
Deferred income taxes		(9,248	)		(13,815	)
Foreign exchange (gain) loss		(207	)		2,085
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net		(98,898	)		36,954
Contract assets, net		1,749			(200,490	)
Inventories		(69,437	)		44,642
Prepaid expenses and other current assets		(10,041	)		23,158
Accounts payable, accrued expenses, and other current liabilities		54,271			(71,999	)
Contract liabilities		(34,538	)		(18,016	)
Due to/from related parties		138			(276	)
Income taxes payable and receivable		(45,511	)		(33,889	)
Net cash used in operating activities		(32,019	)		(95,860	)
Investing activities:
Acquisitions, net of cash		(114,074	)		(31,311	)
Capital expenditures		(70,422	)		(35,367	)
Purchase of intangible assets		(214	)		(30,180	)
Proceeds from disposals		571			3,146
Net cash used in investing activities		(184,139	)		(93,712	)
Financing activities:
Proceeds from issuance of long-term debt		765,000			1,479,568
Repayment of long-term debt		(555,032	)		(1,331,728	)
Payment of deferred financing charges		(391	)		(2,892	)
Repayments of long-term agreements		(466	)		(1,696	)
Net cash provided by financing activities		209,111			143,252
Effect of exchange rate changes on cash		330			(2,519	)
Net decrease in cash		(6,717	)		(48,839	)
Cash at the beginning of the period		57,982			120,065
Cash at the end of the period	$	51,265		$	71,226
Supplemental disclosure of non-cash investing activities:
Acquisition of property, plant and equipment, liability incurred but not paid	$	—		$	390
Contingent consideration for acquisition of ATI		15,150			—

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Nature of operations and basis of presentation

Operations

StandardAero, Inc. (formerly Dynasty Parent Co., Inc.) (the “Company”) was incorporated on September 5, 2018, in the state of Delaware and is an independent provider of aftermarket services for fixed and rotary wing aircraft gas turbine engines and auxiliary power units (“APUs”) to the commercial, business and military aircraft markets. The Company also provides aftermarket and upgrade services for business aviation and helicopter airframes and avionics, providing customers within those markets with comprehensive value-added solutions. On September 5, 2024, the Company changed its name from Dynasty Parent Co., Inc. to StandardAero, Inc.

Basis of presentation

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of StandardAero, Inc. (formerly Dynasty Parent Co., Inc.) and its subsidiaries. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of September 30, 2024, and its results of operations for the three and nine months ended September 30, 2024 and 2023, and cash flows for the nine months ended September 30, 2024, and 2023. The condensed balance sheet at December 31, 2023, was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.

Forward Stock Split

On September 20, 2024, the Company effected a 103-for-one forward stock split of its issued and outstanding shares of common stock. Accordingly, all share and per share amounts for all periods presented in these unaudited condensed consolidated financial statements and notes have been adjusted retroactively, where applicable, to reflect this stock split.

Authorized Shares

On September 20, 2024, the Company amended its certificate of incorporation to increase the number of authorized voting common stock from 5,000,000 to 3,500,000,000 and authorized non-voting common stock from 100,000 to 70,000,000. Accordingly, the authorized share amounts disclosed in the unaudited condensed consolidated balance sheets have been adjusted to retroactively reflect this change.

Initial Public Offering

Subsequent to the end of the fiscal quarter ended September 30, 2024, the Company completed its initial public offering (“IPO”) of ordinary shares at a price of $24.00 per share. The offering included 69,000,000 registered ordinary shares, of which, the Company issued and sold 53,250,000 ordinary shares and the selling existing stockholders sold 15,750,000 ordinary shares, including 9,000,000 ordinary shares issued pursuant to the full exercise of the underwriters option to purchase additional shares from the selling existing stockholders. The ordinary shares sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S-1 (the “IPO Registration Statement”), which was declared effective by the SEC on October 1, 2024. The IPO generated net proceeds from the issuance of primary shares of $1,202.8 million after deducting underwriting discounts and commissions of approximately $67.1 million as well as estimated offering expenses of $8.1 million.

Summary of significant accounting policies

Recently issued accounting pronouncements – not yet adopted

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses with disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss. The update also requires disclosure regarding the chief operating decision maker and expands the interim segment disclosure requirements. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact on its consolidated financial statements.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures primarily related to the tax rate reconciliation and income taxes paid information. For public companies the amendments in this ASU are effective for annual periods beginning after December 15, 2024 and for all other entities the amendments are effective for annual periods beginning after December 15, 2025. The amendments should be applied on a prospective basis. Early adoption and retrospective application are permitted.

In November 2024, the FASB issued ASU 2024-03, “Income Statement (Topic 220): Disaggregation of Income Statement Expenses” which requires additional disclosures of certain amounts included in the expense captions presented on the Statement of Operations as well as disclosures about selling expenses. The ASU is effective on a prospective basis, with the option for retrospective application, for annual periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, and early adoption is permitted. The Company is currently evaluating the impacts of adopting this guidance on its financial statement disclosures.

In 2021, the Organization for Economic Cooperation and Development (“OECD”) released Pillar Two Global Anti-Base Erosion model rules (“Pillar Two Rules”), designed to ensure large corporations are taxed at a minimum rate of 15% in all countries of operation. On June 20, 2024, as part of Bill C-69, Canada enacted its Pillar Two legislation effective January 1, 2024. Canada Bill C-59 was also enacted on June 20, 2024 and included the excessive interest and financing expenses limitation (EIFEL) regime effective for tax years beginning on or after September 30, 2023. The Company is continuing to evaluate the potential impact by the Pillar Two legislation and the new EIFEL regime.

Acquisitions

AERO Turbine, Inc.

On August 23, 2024, the Company acquired 100% of the shares of AERO Turbine, Inc. (“ATI”) for a purchase price of approximately $132.0 million, subject to post-closing adjustments, comprised of an initial cash purchase price of $116.8 million and $15.2 million representing the estimated fair value of additional consideration contingently payable based upon the achievement of gross profit in excess of certain gross profit targets for the period from January 1, 2024, to December 31, 2026. The maximum contingent consideration payable from the Company to the Seller is $21.0 million. The current portion of the contingent consideration liability is recorded in Accrued and other current liabilities and the non-current portion is recorded in Other non-current liabilities. ATI is a provider of engine component repair, overhaul services and other engineering services for U.S. and foreign military customers.

The results of operations of ATI have been included in the condensed consolidated financial statements of the Company from August 23, 2024, the closing date of the acquisition. For the three and nine months ended September 30, 2024, results of operations included $8.4 million in revenues and $2.5 million in net income, respectively. ATI is reported within the Component Repair Services segment.

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company has provisionally allocated the purchase price based on the fair values of the assets acquired and liabilities assumed at the ATI acquisition date as follows:


	August 23, 2024
	(In thousands)
Cash	$	2,765
Accounts receivable		4,066
Contract assets		12,419
Inventories		10,213
Prepaid expenses and other current assets		2,517
Property, plant and equipment		5,896
Operating lease right of use asset		999
Customer relationships		75,000
Goodwill		53,427
Total assets acquired		167,302
Accounts payable		5,353
Accrued and other current liabilities		7,913
Contract liabilities		1,205
Current portion operating lease liabilities		111
Income taxes payable		4,901
Long-term portion operating lease liabilities		899
Deferred income tax liabilities		14,932
Total liabilities assumed		35,314
Net assets acquired		131,988
Cash acquired		2,765
Purchase price, net of cash acquired	$	129,223

The fair values presented were estimated by management. The fair value of the assets acquired includes accounts receivable of $4.1 million, of which all is expected to be collectible. The excess of the cost of acquisition over the fair value of the net tangible assets acquired of $128.4 million has been allocated as $75.0 million of customer relationships and $53.4 million of goodwill. The initial accounting for the business combination is incomplete as the valuation of the acquired intangible assets is not yet finalized. As such there may be adjustments to the purchase accounting and those adjustments could be material. The goodwill recognized is attributable to ATI’s workforce, market position, quality, customized repairs and reliable turnaround times. Goodwill will not be amortized but will be reviewed annually for impairment. None of the goodwill is expected to be deductible for income tax purposes. Customer relationships are expected to be amortized over 15 years.

Acquisition related costs of $1.3 million were incurred for the three and nine months ended September 30, 2024. These costs are reported in the Consolidated Statements of Operations as “Acquisition costs”. Such expenses include professional fees and other third-party costs.

The following reflects the pro forma impact of the purchase of ATI on the Company’s results of operations giving effect of the transaction if it had taken place on January 1, 2023:


	Three months ended September 30,					Nine months ended September 30,
	2024		2023			2024		2023
	(in thousands)
Revenue	$	1,256,405	$	1,116,612		$	3,881,952	$	3,447,262
Net income (loss)		17,177		(17,023	)		28,801		(32,283	)

Western Jet Aviation

On February 2, 2023, the Company acquired 100% of the shares of Western Jet Aviation, Inc. (“Western Jet”) for a purchase price of approximately $32.7 million. Western Jet is a certified repair station for business jet maintenance, specializing in Gulfstream aircraft, offering maintenance and interior services, plus heavy avionics support on many business aviation aircraft.

The results of operations of Western Jet have been included in the condensed consolidated financial statements of the Company from February 2, 2023, the closing date of the acquisition. For the three and nine months ended September 30, 2023, results of

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

operations included $8.6 million and $24.4 million in revenues and $0.5 million and $1.9 million net income, respectively. Western Jet is reported within our Engine Services segment.

The Company allocated the purchase price based on the fair values of the assets acquired and liabilities assumed at the Western Jet acquisition date as follows:


	February 2, 2023
	(In thousands)
Cash	$	1,379
Accounts receivable		7,022
Contract assets		4,485
Inventories		2,543
Prepaid expenses and other current assets		987
Property, plant and equipment		2,843
Operating lease right of use asset		9,013
Intangible assets		447
Goodwill		23,493
Deferred income taxes		2,812
Total assets acquired		55,024
Accounts payable		1,845
Accrued and other current liabilities		3,254
Contract liabilities		8,220
Current portion operating lease liabilities		1,072
Long-term portion operating lease liabilities		7,941
Total liabilities assumed		22,332
Net assets acquired		32,692
Cash acquired		1,379
Purchase price, net of cash acquired	$	31,313

The fair values presented were estimated by management. The fair value of the assets acquired included accounts receivable of $7.0 million, the gross amount due under contracts is $7.1 million, of which $0.1 million was expected to be uncollectible. The excess of the cost of acquisition over the fair value of the net tangible assets acquired of $23.5 million has been allocated to goodwill. The goodwill recognized is attributable to Western Jet’s market position, quality, customized repairs and reliable turnaround times. Goodwill will not be amortized but will be reviewed annually for impairment. None of the goodwill is expected to be deductible for income tax purposes.

Acquisition related costs of $0.0 million and $1.5 million were incurred for the three and nine months ended September 30, 2023, respectively. These costs are reported in the Consolidated Statements of Operations as “Acquisition costs”. Such expenses include professional fees and other third-party costs.

The following reflects the pro forma impact of the purchase of Western Jet on the Company’s results of operations giving effect of the transaction if it had taken place on January 1, 2022:


	Three months ended September 30,			Nine months ended September 30,
	2023			2023
	(in thousands)
Revenue	$	1,099,441		$	3,408,652
Net loss		(17,933	)		(28,813	)

STANDARDAERO, INC. (formerly Dynasty Parent Co., Inc.)

Form: 10-Q

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