feb2608pressrelease.htm

Toni Perazzo

Chief Financial Officer

(650) 340-1888 FOR IMMEDIATE RELEASE

AEROCENTURY CORP. REPORTS FOURTH QUARTER 2007 AND FULL YEAR 2007 RESULTS AND RESTATED 2006 AND 2007 QUARTERLY RESULTS

(BURLINGAME, CA), February 26, 2008 — AeroCentury Corp. (ASE:ACY), an independent aircraft leasing company, today reported its operating results for the fourth quarter and the year ended December 31, 2007.

In connection with the year-end audit of 2007 consolidated financial results, the Audit Committee and management of the Company determined that two $450,000 non-contingent termination payments due from a lessee at lease-end in October 2007 and February 2008, respectively, should have been recognized as operating lease revenue ratably over the three-year term of the leases. As a result of this timing difference, operating lease revenue has been understated by approximately $627,000 cumulatively through December 31, 2006, and by approximately $229,000 for the nine months ended September 30, 2007.

Accordingly, on February 14, 2008, the Board of Directors, in consultation with management of the Company and the Company's independent registered public accounting firm, determined that its previously issued consolidated financial statements for the years ended December 31, 2004, 2005 and 2006 and the quarters ended March 31, 2005, June 30, 2005, September 30, 2005, March 31, 2006, June 30, 2006, September 30, 2006, March 31, 2007, June 30, 2007 and September 30, 2007 should no longer be relied upon because of the error described above. The Company has restated its consolidated financial statements for the 2007 and 2006 quarters, the effects of which are shown in the tables below. The adjustments do not change the total amount of operating lease revenue recognized from the two lease termination payments, only the timing of the recognition of such revenue.

As discussed and shown in the tables below, comparative information for the third quarter of 2006 and first nine months of 2006 has been restated in connection with the Company’s adoption of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”) and Financial Accounting Standard Board Staff Position AUG AIR-1, Accounting for Planned Major Maintenance Activities (“FSP AUG AIR-1”).

Due to the recent adoption of FSP AUG AIR-1, the Company was required to discontinue the accrue-in-advance method of accounting for planned major maintenance for financial reporting periods beginning on January 1, 2007. The Company has adopted the direct expensing method, under which actual costs incurred are expensed directly when maintenance is performed and the accrual of non-refundable maintenance reserves from the Company’s lessees for planned major maintenance is reflected as income. Because the net effect of recognizing income when maintenance reserves are billed and accruing maintenance expense as incurred within any given period will vary, it is likely that the new accounting method will result in uneven effects on the Company’s results of operations.

2007 Results

For the quarter ended December 31, 2007, the Company reported total revenues of $7.2 million compared with revenues of $4.9 million for the same period a year ago. For the year ended December 31, 2007, the Company reported revenues of $23.8 million compared with revenues of $18.8 million for 2006.

The Company reported net income of $1,124,000 or $0.73 per basic share and $0.69 per diluted share for the fourth quarter of 2007, compared to net income of $709,000 or $0.46 per basic and diluted share for the fourth quarter of 2006. The Company had net income of $3,775,000 or $2.45 per basic share and $2.36 per diluted share for 2007 versus $1,009,000 or $0.65 per basic and diluted share for 2006.

Operating lease revenue was approximately $1,470,000 and $3,601,000 higher in the fourth quarter and full year of 2007, respectively, versus 2006, primarily because of additional lease revenue from aircraft purchased in the fourth quarter of 2006 and during 2007 and re-leases during 2007 at increased rental rates for several of the Company’s aircraft. In addition, in 2007 the Company recorded revenue from several aircraft that were off lease for part of 2006. The aggregate effect of these increases was partially offset by a decrease in revenue related to aircraft that were off lease for part of 2007.

Maintenance reserves income represents non-refundable reserves which are earned based on lessee aircraft usage. As a result of an increase in total aircraft usage in 2007, primarily due to aircraft acquisitions during the year, maintenance reserves income was approximately $751,000 and $1,319,000 higher in the fourth quarter and year ended December 31, 2007, respectively, than in 2006.

Total expenses were approximately $1,994,000 higher in the three months ended December 31, 2007, versus the same period in 2006, primarily because of increases in interest, depreciation and management fee expenses as a result of aircraft purchases, as well as maintenance expense. The Company’s maintenance expense is dependent on the aggregate maintenance claims amount submitted by lessees for reimbursement and expenses incurred in connection with off-lease aircraft. As a result of higher total lessee claims and the replacement of a damaged engine on one of the Company’s leased aircraft, the Company incurred approximately $721,000 more in maintenance expense in the three months ended December 31, 2007, versus the same period in 2006.

Total expenses were approximately $1,283,000 higher in the year ended December 31, 2007 versus 2006, primarily because of increases in interest, depreciation and management fee expenses, all of which resulted from aircraft purchases during 2006 and 2007, as well as an increase in other taxes. Those increases were partially offset by a decrease in the amount of maintenance expense. As a result of lower total lessee claims and less expense incurred for off-lease aircraft in 2007, the Company incurred approximately $1,584,000 less in maintenance expense in 2007 compared to 2006.

AeroCentury is an aircraft operating lessor and finance company specializing in leasing regional aircraft and engines utilizing triple net leases. The Company’s aircraft and engines are on lease to regional airlines and commercial users worldwide.

(See tables following.)

AeroCentury Corp.

Selected Financial Information

(Unaudited)

(000’s)

	For the Quarters Ended				For the Years Ended
	December 31, 2007		December 31, 2006		December 31, 2007		December 31, 2006
			(as restated)				(as restated)
Operating lease revenue	$	5,600	$	4,130	$	19,412	$	15,811
Maintenance reserves income		1,483		732		4,310		2,990
Gain on sale of aircraft and aircraft engines		97		-		97		34
Other		11		4		31		8
		7,191		4,866		23,850		18,843

Depreciation		1,890		1,204		5,615		4,692
Interest		1,629		1,267		6,260		4,954
Management fees		856		686		3,017		2,743
Maintenance		1,094		373		2,395		3,979
Other taxes		13		8		327		31
Professional fees and other		242		192		882		814
		5,724		3,730		18,496		17,213

Income before taxes		1,467		1,136		5,354		1,630
Tax provision		343		427		1,579		621
Net income	$	1,124	$	709	$	3,775	$	1,009
Earnings per share:
Basic	$	0.73	$	0.46	$	2.45	$	0.65
Diluted	$	0.69	$	0.46	$	2.36	$	0.65
Weighted average common shares outstanding		1,543,257		1,543,257		1,543,257		1,543,257
Weighted average diluted common shares outstanding		1,628,501		1,543,257		1,598,516		1,543,257

Summary Balance Sheet:

	December 31,	December 31,
	2007	2006
		(as restated)
Total assets	$126,653	$97,366
Total liabilities	$ 94,513	$70,558
Shareholders’ equity	$ 32,140	$26,808

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AeroCentury Corp.

Condensed Consolidated Statements of Operations (Unaudited)

(000’s)

	For the Three Months Ended
	March 31, 2007				June 30, 2007				September 30, 2007
	(as previously reported)		(as restated)		(as previously reported)		(as restated)		(as previously reported)		(as restated)

Operating lease revenue	$	4,207	$	4,284	$	4,152	$	4,228	$	5,224	$	5,300
Maintenance reserves income		827		827		847		847		1,152		1,152
Gain on sale of aircraft		-		-		-		-		-		-
Other		7		7		1		1		12		12
		5,041		5,118		5,000		5,076		6,388		6,464

Depreciation		1,235		1,235		1,258		1,258		1,493		1,493
Interest		1,222		1,222		1,424		1,424		1,724		1,724
Management fees		683		683		684		684		794		794
Maintenance		225		225		701		701		375		375
Other taxes		-		12		14		14		292		292
Professional fees and other		211		199		219		219		218		218
		3,576		3,576		4,300		4,300		4,896		4,896

Income before taxes		1,465		1,542		700		776		1,492		1,568
Tax provision		492		518		237		263		428		454
Net income	$	973	$	1,024	$	463	$	513	$	1,064	$	1,114
Earnings per share:
Basic	$	0.63	$	0.66	$	0.30	$	0.33	$	0.69	$	0.72
Diluted	$	0.63	$	0.66	$	0.29	$	0.32	$	0.66	$	0.69
Weighted average common shares outstanding		1,543,257		1,543,257		1,543,257		1,543,257		1,543,257		1,543,257
Weighted average diluted common shares outstanding		1,543,257		1,543,257		1,601,423		1,601,423		1,618,674		1,618,674

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AeroCentury Corp.

Condensed Consolidated Statements of Operations (Unaudited)

(000’s)

	For the Three Months Ended
	March 31, 2006						June 30, 2006						September 30, 2006				December 31, 2006
	(as previously reported1)			(as restated)			(as previously reported1)			(as restated)			(as previously reported1)		(as restated)		(as restated under FSP AUG AIR-12)		(as restated)
Operating lease revenue	$	3,701		$	3,776		$	3,833		$	3,908		$	3,920	$	3,996	$	4,053	$	4,130
Maintenance reserves income		792			792			756			756			710		710		732		732
Gain on sale of aircraft		-			-			34			34			-		-		-		-
Other		(9	)		(9	)		4			4			10		10		4		4
		4,484			4,559			4,627			4,702			4,640		4,716		4,789		4,866

Depreciation		1,155			1,155			1,160			1,160			1,173		1,173		1,204		1,204
Interest		1,164			1,164			1,251			1,251			1,272		1,272		1,267		1,267
Management fees		696			696			683			683			677		677		686		686
Maintenance		1,092			1,092			1,644			1,644			869		869		373		373
Professional fees and other		294			294			174			174			178		178		200		200
		4,401			4,401			4,912			4,912			4,169		4,169		3,730		3,730

Income/(loss) before taxes		83			158			(285	)		(210	)		471		547		1,059		1,136
Tax provision/ (benefit)		31			57			(78	)		(52	)		163		189		401		428
Net income/(loss)	$	52		$	101		$	(207	)	$	(158	)	$	308	$	358	$	658	$	708
Earnings/(loss) per share:
Basic	$	0.03		$	0.07		$	(0.13	)	$	(0.10	)	$	0.20	$	0.23	$	0.43	$	0.46
Diluted	$	0.03		$	0.07		$	(0.13	)	$	(0.10	)	$	0.20	$	0.23	$	0.43	$	0.46
Weighted average common shares outstanding		1,543,257			1,543,257			1,543,257			1,543,257			1,543,257		1,543,257		1,543,257		1,543,257
Weighted average diluted common shares outstanding		1,543,257			1,543,257			1,543,257			1,543,257			1,543,257		1,543,257		1,543,257		1,543,257

1 Results for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, as reported in the Company’s quarterly reports on Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and September 30, 2007, included the effects of the adoption of SAB 108 and FSP AUG AIR-1.

2 The effects of the Company’s adoption of SAB 108 were included in the results reported in the Company’s Form 8-K filings on February 6, 2007 and March 9, 2007.

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AeroCentury Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(000’s)

	March 31, 2007						June 30, 2007						September 30, 2007
	(as previously reported)			(as restated)			(as previously reported)			(as restated)			(as previously reported)			(as restated)
Assets:
Cash and cash equivalents	$	3,131		$	3,131		$	2,558		$	2,558		$	2,869		$	2,869
Accounts receivable		758			1,461			937			1,716			1,010			1,865
Aircraft and aircraft engine held for lease, net		90,788			90,788			103,358			103,358			114,122			114,122
Prepaid expenses and other		887			887			1,461			1,461			1,682			1,682
Total assets	$	95,564		$	96,267		$	108,314		$	109,093		$	119,683		$	120,538

Liabilities:
Notes payable and accrued interest		54,552			54,552			62,944			62,944			70,886			70,886
Maintenance reserves and accrued costs		3,837			3,837			4,692			4,692			4,997			4,997
Deferred income taxes		4,584			4,826			4,788			5,056			5,243			5,537
All other liabilities		5,216			5,216			6,496			6,496			8,099			8,099
		68,189			68,431			78,920			79,188			89,225			89,519

Stockholders’ equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		-			-			-			-			-			-
Common stock, $0.001 par value, 3,000,000 shares authorized, 1,606,557 shares issued and outstanding		2			2			2			2			2			2
Paid in capital		13,821			13,821			15,377			15,377			15,377			15,377
Retained earnings		14,056			14,517			14,519			15,030			15,583			16,144
		27,879			28,340			29,898			30,409			30,962			31,523
Treasury stock at cost, 63,300 shares		(504	)		(504	)		(504	)		(504	)		(504	)		(504	)
Total stockholders’ equity		27,375			27,836			29,394			29,905			30,458			31,019
	$	95,564		$	96,267		$	108,314		$	109,093		$	119,683		$	120,538

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AeroCentury Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(000’s)

	March 31, 2006									June 30, 2006
	(as previously filed)			(as restated under SAB 108 and FSP AUG AIR-1)			(as restated)			(as previously filed)			(as restated under SAB 108 and FSP AUG AIR-1)			(as restated)
Assets:
Cash and cash equivalents	$	2,220		$	2,220		$	2,220		$	3,420		$	3,420		$	3,420
Accounts receivable		736			750			1,150			609			624			1,099
Aircraft and aircraft engine held for lease, net		91,940			89,701			89,698			91,294			89,127			89,127
Aircraft and aircraft engine held for sale, net		1,026			1,023			1,026			-			-			-
Prepaid expenses and other		1,088			1,088			1,088			759			759			759
Total assets	$	97,010		$	94,782		$	95,182		$	96,082		$	93,930		$	94,405

Liabilities:
Notes payable and accrued interest		58,191			58,191			58,191			57,108			57,108			57,108
Maintenance reserves and accrued costs		13,481			2,031			2,031			13,282			2,319			2,319
Deferred income taxes		1,100			3,780			3,917			1,140			3,692			3,855
All other liabilities		5,143			5,143			5,143			5,371			5,381			5,381
		77,915			69,145			69,282			76,901			68,500			68,663

Stockholders’ equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		-			-			-			-			-			-
Common stock, $0.001 par value, 3,000,000 shares authorized, 1,606,557 shares issued and outstanding		2			2			2			2			2			2
Paid in capital		13,821			13,821			13,821			13,821			13,821			13,821
Retained earnings		5,776			12,318			12,581			5,862			12,111			12,423
		19,599			26,141			26,404			19,685			25,934			26,246
Treasury stock at cost, 63,300 shares		(504	)		(504	)		(504	)		(504	)		(504	)		(504	)
Total stockholders’ equity		19,095			25,637			25,900		$	19,181			25,430		$	25,742
	$	97,010		$	94,782		$	95,182		$	96,082		$	93,930		$	94,405

(more)

AeroCentury Corp.

Condensed Consolidated Balance Sheets (Unaudited)

(000’s)

	September 30, 2006									December 31, 2006
	(as previously filed)			(as restated under SAB 108 and FSP AUG AIR-1)			(as restated)			(as previously filed)			(as restated under FSP AUG AIR-1)			(as restated)
Assets:
Cash and cash equivalents	$	3,245		$	3,245		$	3,245		$	3,384		$	3,384		$	3,384
Accounts receivable		947			965			1,515			864			871			1,498
Aircraft and aircraft engine held for lease, net		90,045			87,951			87,951			93,675			91,902			91,902
Prepaid expenses and other		731			731			731			582			582			582
Total assets	$	94,968		$	92,892		$	93,442		$	98,505		$	96,739		$	97,366

Liabilities:
Notes payable and accrued interest		54,813			54,813			54,813			57,907			57,907			57,907
Maintenance reserves and accrued costs		13,996			2,970			2,970			14,111			3,168			3,168
Deferred income taxes		1,243			3,855			4,043			1,127			4,256			4,471
All other liabilities		5,516			5,516			5,516			5,012			5,012			5,012
		75,568			67,154			67,342			78,157			70,343			70,558

Stockholders’ equity:
Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding		-			-			-			-			-			-
Common stock, $0.001 par value, 3,000,000 shares authorized, 1,606,557 shares issued and outstanding		2			2			2			2			2			2
Paid in capital		13,821			13,821			13,821			13,821			13,821			13,821
Retained earnings		6,081			12,419			12,781			7,029			13,077			13,489
		19,904			26,242			26,604			20,852			26,900			27,312
Treasury stock at cost, 63,300 shares		(504	)		(504	)		(504	)		(504	)		(504	)		(504	)
Total stockholders’ equity		19,400			25,738			26,100			20,348			26,396			26,808
	$	94,968		$	92,892		$	93,442		$	98,505		$	96,739		$	97,366

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