Blueprint
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
1
Toni
Perazzo
Chief
Financial Officer
(650)
340-1888
AeroCentury Corp. Reports Third Quarter 2019 Results
BURLINGAME,
California, November 14, 2019 -- AeroCentury Corp.
(“AeroCentury” or the “Company”) (NYSE
American: ACY), an independent aircraft leasing company, today
reported a third quarter 2019 net loss of $8.2 million, or $(5.32)
per share, compared to a net loss of $4.5 million, or $(3.16) per
share, for the third quarter of 2018. In the first nine months of
2019, the Company reported a net loss of $9.6 million, or $(6.22)
per share, compared to net loss of $4.2 million, or $(3.00) per
share, in the first nine months of 2018.
Third
quarter and year-to-date 2019 results reflect the combined
operations of AeroCentury and its subsidiary, JetFleet Holding
Corp. (“JetFleet”), which was acquired by the Company
on October 1, 2018.
The
third quarter 2019 termination of the leases for and repossession
of four aircraft from one of the Company’s lessees had a
substantial impact on the Company’s results. As a result of
those events, the Company recognized maintenance reserves revenue
of $17.0 million with respect to the four aircraft. The Company also recorded
impairment losses for the four aircraft of $22.3 million,
based on appraised values for three of the aircraft and expected
sales proceeds for the fourth aircraft. Two of the repossessed
aircraft were reclassified to held for sale during the third
quarter. During the third quarter, the Company also recorded
impairment losses totaling $1.0 million for two other assets that
are held for sale, based on expected sales proceeds.
The
nine months ended September 30, 2019 also included $1.6 million of
impairment losses, based on appraised values or expected sales
proceeds, for two older turboprop aircraft and a spare engine. One
aircraft and the engine were sold during the third quarter and one
aircraft is on a short-term operating lease.
The
results for the third quarter and first nine months of 2019
included a $3.9 million bad debt allowance related to three of the
Company’s aircraft that are leased pursuant to finance
leases. Results for the third quarter and first nine months of 2019
also included $3,700 and $455,100, respectively, of non-cash
charges related to interest rate swaps the Company entered into
during the first quarter of 2019.
The
quarter and nine months ended September 30, 2018 included $2.7
million and $3.0 million, respectively, of asset impairments on
four of the Company’s assets held for sale, three of which
were subsequently sold. The first nine months of 2018 also included
$1.6 million of maintenance reserves revenue resulting from
payments received from a lessee that returned three leased aircraft
to the Company in 2017.
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
2
Third Quarter 2019 Highlights and Comparative Data
●
Net loss was $8.2
million compared to a $78,000 loss in the preceding quarter and net
loss of $4.5 million a year ago.
● EBITDA(1) was ($5.2) million compared to $5.3
million in the preceding quarter and $0.1 million a year
ago.
●
Average portfolio
utilization was 97% during the third quarter of 2019, compared to
98% during the second quarter and 93% in the third quarter of 2018.
The decrease from the second quarter was a result of the return of
four aircraft in late September 2019. The increase from the
previous year was a result of the purchase of two on-lease aircraft
during the second quarter of 2018 and sales of off-lease assets during the
second half of 2018.
●
Total revenues
increased 235% to $24.0 million for the third quarter of 2019,
compared to $7.2 million in the preceding quarter, and increased
375% from $5.1 million in the third quarter a year
ago.
o
Operating lease
revenue decreased 4% in the third quarter of 2019 from $7.0 million
in the second quarter of 2019 as a result of the return of four
aircraft in late September 2019. Operating lease revenue decreased
7% from $7.2 million in the third quarter of 2018 as a result of an
asset sale in March 2019 and the return of the four aircraft in
September 2019, the effects of which were partially offset by
assets purchased during 2018.
o
The Company
recorded $17.0 million of maintenance reserves revenue in the third
quarter of 2019. The Company recorded no such revenue during the
first six months of 2019 or third quarter of 2018.
o
During the third
quarter of 2019, the Company recognized gains of $44,000 related to
the sale of aircraft parts, an aircraft and a spare engine. During
the second quarter of 2019, the Company recognized gains of
$100,000 related to the sale of aircraft parts and a loss on sale
of an aircraft of $171,000 as a result of a lease amendment that
converted an operating lease to a sales-type finance lease, under
which the customer agreed to purchase the aircraft at lease
expiration in November 2019. During the third quarter of 2018, the
Company recognized $2.4 million in losses from disposal of
assets.
●
Total operating
expenses increased 374% to $34.5 million from $7.3 million in the
preceding quarter, and increased 220% from $10.8 million in the
year-ago quarter.
o
During the third
quarter of 2019, the Company recognized asset impairments of $23.4
million, based on appraised values or expected sales proceeds,
compared to the second quarter of 2019, when the Company recognized
a $160,000 asset impairment based on third-party appraisals.
During the quarter ended
September 30, 2018, the Company recorded an impairment loss
totaling $2.7 million on four of its aircraft held for sale, based
on appraised values.
o
As a result of
payment delinquencies by two customers that leased three of the
Company’s aircraft subject to finance leases, during the
third quarter of 2019, the Company recorded a bad debt expense of
$3.9 million. The Company recorded no bad debt expense during the
second quarter of 2019 or third quarter of 2018.
o
The second quarter of 2019 included
a $400,000 decrease in salaries, employee benefits and
professional fees and other expenses compared to the management
fees and professional fees and other expenses incurred in the
year-ago quarter before the Company acquired JetFleet. Such
expenses were approximately the same in the second quarter of
2019.
●
Book value per
share was $19.48 as of September 30, 2019, compared to $24.88 at
June 30, 2019 and $30.44 a year ago.
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
3
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of twenty
aircraft, spread over nine different aircraft types. Thirteen of
the aircraft, comprised of eleven regional jets and two turboprops,
are held for lease. Three additional regional jets and four
turboprops are held under sales-type or direct finance leases. The
Company also has four turboprop aircraft and two regional jet
aircraft that are held for sale, two of which are being sold in
parts. The current customer base comprises nine customers operating
in seven countries.
About AeroCentury: AeroCentury is an independent global
aircraft operating lessor and finance company specializing in
leasing regional jet and turboprop aircraft and related engines.
The Company's aircraft and engines are leased to regional airlines
and commercial users worldwide.
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
4
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(Unaudited)
|
For the Three
Months Ended
|
For the Nine
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
revenue
|
$6,706
|
$6,966
|
$7,173
|
$20,820
|
$20,460
|
Maintenance
reserves revenue(2)
|
16,968
|
-
|
-
|
16,968
|
1,629
|
Finance lease
revenue
|
269
|
260
|
262
|
765
|
1,002
|
Gain/(loss) on
disposal of assets
|
44
|
100
|
(2,384)
|
322
|
(2,375)
|
Loss on sales-type
finance leases
|
-
|
(171)
|
-
|
(171)
|
-
|
Other
income
|
-
|
6
|
1
|
12
|
4
|
|
23,987
|
7,161
|
5,052
|
38,716
|
20,720
|
|
|
|
|
|
|
Provision for
impairment
|
23,355
|
160
|
2,673
|
24,923
|
2,971
|
Bad debt
expense
|
3,918
|
-
|
-
|
3,918
|
-
|
Depreciation
|
2,970
|
2,970
|
3,328
|
9,141
|
9,421
|
Interest
|
2,348
|
2,485
|
2,467
|
7,745
|
7,087
|
Professional fees
and other
|
1,100
|
1,021
|
521
|
3,125
|
1,676
|
Salaries and
employee benefits
|
529
|
621
|
-
|
1,749
|
-
|
Maintenance
costs
|
256
|
10
|
245
|
373
|
405
|
Management
fees
|
-
|
-
|
1,534
|
-
|
4,483
|
|
34,476
|
7,267
|
10,768
|
50,974
|
26,043
|
|
|
|
|
|
|
Loss before income
taxes
|
(10,489)
|
(106)
|
(5,716)
|
(12,258)
|
(5,323)
|
|
|
|
|
|
|
Income tax
benefit
|
(2,258)
|
(28)
|
(1,232)
|
(2,641)
|
(1,075)
|
|
|
|
|
|
|
Net
loss
|
$(8,231)
|
$(78)
|
$(4,484)
|
$(9,617)
|
$(4,248)
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
Basic
|
$(5.32)
|
$(0.05)
|
$(3.16)
|
$(6.22)
|
$(3.00)
|
Diluted
|
$(5.32)
|
$(0.05)
|
$(3.16)
|
$(6.22)
|
$(3.00)
|
|
|
|
|
|
|
Shares
used in per share computations:
|
|
|
|
|
Basic
|
1,545,884
|
1,545,884
|
1,416,699
|
1,545,884
|
1,416,699
|
Diluted
|
1,545,884
|
1,545,884
|
1,416,699
|
1,545,884
|
1,416,699
|
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
5
Condensed Consolidated Balance Sheets
(in thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$2,058
|
$1,543
|
Securities
|
-
|
121
|
Accounts
receivable
|
1,437
|
3,967
|
Finance leases
receivable
|
12,073
|
15,251
|
Aircraft, net of
accumulated depreciation
|
130,948
|
184,020
|
Assets held for
sale
|
18,361
|
10,223
|
Property, equipment
and furnishings, net of accumulated depreciation
|
65
|
69
|
Lease right of use,
net of accumulated amortization
|
1,170
|
-
|
Favorable lease
acquired, net of accumulated amortization
|
-
|
863
|
Deferred tax
asset
|
455
|
255
|
Prepaid expenses
and other assets
|
453
|
840
|
Total
assets
|
$167,020
|
$217,152
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
Liabilities:
|
|
|
Accounts payable
and accrued expenses
|
$479
|
$1,026
|
Accrued
payroll
|
97
|
79
|
Notes payable and
accrued interest, net of unamortized debt issuance
costs
|
117,683
|
131,092
|
Derivative
liability
|
2,335
|
-
|
Lease
liability
|
496
|
-
|
Maintenance
reserves
|
6,034
|
28,527
|
Accrued maintenance
costs
|
467
|
463
|
Security
deposits
|
1,234
|
3,368
|
Unearned
revenues
|
3,514
|
3,275
|
Deferred income
taxes
|
4,393
|
7,537
|
Income taxes
payable
|
172
|
497
|
Total
liabilities
|
136,904
|
175,864
|
|
|
|
Stockholders’
equity:
|
|
|
Preferred stock,
$0.001 par value
|
-
|
-
|
Common stock,
$0.001 par value
|
2
|
2
|
Paid-in
capital
|
16,783
|
16,783
|
Retained
earnings
|
17,923
|
27,540
|
Accumulated other
comprehensive income
|
(1,555)
|
-
|
Treasury
stock
|
(3,037)
|
(3,037)
|
Total
stockholders’ equity
|
30,116
|
41,288
|
Total liabilities
and stockholders’ equity
|
$167,020
|
$217,152
|
AeroCentury
Corp. Reports 3Q2019 Earnings
November
14, 2019
Page
6
Use of Non-GAAP Financial Measures
To supplement the Company’s financial information presented
in accordance with accounting principles generally accepted in the
United States of America (“GAAP”), this press release
includes the non-GAAP financial measure of EBITDA. The Company
defines EBITDA as net (loss)/income, plus depreciation expense,
plus interest expense and plus/(minus) income tax
provision/(benefit). The table below
provides a reconciliation of this non-GAAP financial measure to its
most directly comparable financial measure calculated and presented
in accordance with GAAP. This non-GAAP financial measure should not
be considered as an alternative to GAAP measures such as net
(loss)/income or any other measure of
financial performance calculated and presented in accordance with
GAAP. Rather, the Company presents this measure as supplemental
information because it believes it provides meaningful additional
information about the Company’s performance for the following
reasons: (1) this measure allows for greater transparency with
respect to key metrics used by management, as management uses this
measure to assess the Company’s operating performance and for
financial and operational decision-making; (2) this measure
excludes the impact of items management believes are not directly
attributable to the Company’s core operating performance and
may obscure trends in the business; and (3) this measure may be
used by institutional investors and the analyst community to help
analyze the Company’s business. The Company’s non-GAAP
financial measures may not be comparable to similarly-titled
measures of other companies because they may not calculate such
measures in the same manner as the Company
does.
|
For
the Three Months Ended (in
thousands)
|
|
|
|
|
|
|
|
|
Reconciliation of
Net (loss)/income to EBITDA:
|
|
|
|
Net
(loss)/income
|
$(8,231)
|
$(78)
|
$(4,484)
|
Depreciation
|
2,970
|
2,970
|
3,328
|
Interest
|
2,348
|
2,485
|
2,467
|
Income tax
(benefit)/provision
|
(2,258)
|
(28)
|
(1,232)
|
EBITDA:
|
(5,171)
|
5,349
|
79
|
Transmitted on Globenewswire on November 14, 2019 at 2:00 p.m.
PST.