acy2020pr24q2019earnings
Hal
Lyons
Chief
Financial Officer
(650)
340-1888
AeroCentury Corp. Reports Fourth Quarter 2019 and Fiscal Year 2019
Results
BURLINGAME, California, March
30, 2020 -- AeroCentury Corp. (“AeroCentury” or the
“Company”) (NYSE American: ACY), an independent
aircraft leasing company, today reported a fourth quarter 2019 net
loss of $7.0 million, or ($4.55) per share, compared to a net loss
of $3.8 million, or ($2.48) per share, for the fourth quarter of
2018. Net loss for the year ended December 31, 2019 was $16.7
million or ($10.78) per share, as compared to a net loss of $8.1
million, or ($5.58) per share in 2018. The results for the fourth
quarter of 2018 and subsequent periods reflect the combined
operations of AeroCentury and its subsidiary, JetFleet Holding
Corp. (“JetFleet”), which was acquired by the Company
on October 1, 2018.
The
termination of the leases for, and repossession of, four aircraft
from one of the Company’s lessees (“Repossessed
Aircraft”) in the third quarter of 2019 had a substantial
adverse 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 Repossessed Aircraft at the time
of repossession, but
also recorded impairment losses for the Repossessed Aircraft
of $22.3 million and $6.1 million during the third and fourth
quarters, respectively, based on third-party appraised values for
three of the aircraft and expected sales proceeds for the fourth
aircraft. Results for the year ended December 31, 2019 also
included impairment losses totaling $2.6 million, based on
third-party appraised values or expected sales proceeds, for three
older turboprop aircraft, a spare engine and an older turboprop
aircraft that is being sold in parts.
The
results for the year ended December 31, 2019 included a $2.9
million bad debt allowance related to three of the Company’s
aircraft that are leased pursuant to finance leases, one of which
was sold to the lessee in January 2020. Although the Company
recorded a bad debt allowance of $3.9 million during the third
quarter of 2019, the Company reduced its allowance by $1.0 million
during the fourth quarter of 2019 as a result of cash received
during the quarter and anticipated cash to be received from the
lessees in the first quarter of 2020. Results for the quarter and
year ended December 31, 2019 also included ($199,900) and $255,200,
respectively, of non-cash amounts related to interest rate swaps
the Company entered into during the first quarter of
2019.
The
results for the fourth quarter and the year ended December 31, 2018
included a settlement loss of $2.5 million in connection with the
acquisition of JetFleet, the parent of the management company for
the Company, which closed on October 1, 2018. The 2018 fourth
quarter and full year results also included $1.0 million and $3.4
million, respectively, of net losses related to the sale of
off-lease, older turboprop aircraft. The 2018 full year results
also included impairment provisions totaling $3.0 million on five
off-lease turboprop aircraft that were identified as held for sale,
two of which were sold during the year, as well as $1.6 million of
maintenance reserves revenue resulting from payments received from
a lessee that returned three leased aircraft to the Company in 2017
which payments the Company has recorded as they were
received.
As a
result of the asset impairments and bad debt allowances discussed
above, the Company is in default of several provisions of its
credit facility, under which approximately $84 million in
borrowings are currently outstanding. While in default, the Company
is unable to borrow any additional amounts under the credit
facility. Further, the default has given rise to a number of
remedies in favor of the lenders, including but not limited to the
acceleration of maturity of all amounts owing under the credit
facility and the ability to act upon the security interests of the
lenders in substantially all of the Company’s aircraft
assets. The Company is currently in negotiations with its credit
facility lenders in an attempt to convert the credit facility into
a term loan facility.
AeroCentury
Corp. Reports 4Q2019 Earnings
March
30, 2020
Page
2
Fourth Quarter 2019 Highlights and Comparative Data
●
Net loss was $7.0
million compared to a loss of $8.2 million in the preceding quarter
and a loss of $3.8 million a year ago.
● EBITDA(1) was ($2.9) million compared to ($5.2)
million in the preceding quarter and $1.9 million a year
ago.
●
Average portfolio
utilization was 83% during the fourth quarter of 2019, compared to
97% during the third quarter and 95% in the fourth quarter of 2018.
The decreases from the third quarter of 2019 and fourth quarter of
2018 were primarily a result of the return of the four Repossessed
Aircraft in late September 2019.
●
Total revenues
decreased 80% to $4.9 million for fourth quarter of 2019, compared
to $24.0 million in the preceding quarter, and decreased 24% from
$6.4 million in the fourth quarter a year ago.
o
Operating lease
revenue decreased 29% to $4.8 million in the fourth quarter of 2019
from $6.7 million in the third quarter of 2019 as a result of the
return of the Repossessed Aircraft in late September 2019.
Operating lease revenue decreased 33% from $7.2 million in the
fourth quarter of 2018 as a result of the sale of a leased asset in
March 2019 and the return of the Repossessed Aircraft in September
2019, the effects of which were partially offset by revenue from
on-lease 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
fourth quarters of 2019 and 2018.
o
During the fourth
quarter of 2019, the Company recognized net gains of $5,000 related
primarily to the sale of aircraft parts and an aircraft. 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 fourth quarter of 2018, the Company recognized a
$1.0 million loss on sale of an aircraft.
●
Total operating
expenses decreased 60% to $13.8 million from $34.5 million in the
preceding quarter, and increased 36% from $10.1 million in the
fourth quarter a year ago.
o
During the fourth
quarter of 2019, the Company recognized asset impairments of $6.1
million, based on third-party appraised values or expected sales
proceeds, compared to the third quarter of 2019, when the Company
recognized $23.4 million of asset impairments based on third-party
appraisals or expected sales proceeds. The Company recorded no asset
impairments during the quarter ended December 31,
2018.
o
Depreciation
expense decreased by 18% to $2.4 million in the fourth quarter of
2019 from $3.0 million in the preceding quarter and decreased by
24% from $3.2 million in the fourth quarter a year ago, due to
sales of aircraft during 2019 and the reclassification of several
aircraft from held for lease to held for sale.
o
Interest expense
increased by 52% to $3.6 million in the fourth quarter of 2019 from
$2.3 million in the third quarter and increased 47% from $2.4
million in the fourth quarter of 2018, primarily as a result of a
higher average interest rate and a $1.1 million writeoff of a
portion of the Company’s unamortized debt issuance costs related to its credit
facility, the effects of which were partially offset by a lower
average debt balance.
o
As a result of
payment delinquencies by two customers that leased three of the
Company’s aircraft subject to finance leases, the Company
recorded a bad debt expense of $3.9 million during the third
quarter of 2019, $1.0 million of which was reversed during the
fourth quarter. The Company recorded no bad debt expense during the
fourth quarter of 2018.
o
The fourth quarter of 2019 included
a $500,000 increase 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. Such expenses were $600,000 higher than in the
third quarter of 2019. Both increases were primarily due to the
writeoff of a portion of the Company’s unamortized
legal costs related to its credit
facility.
●
Book value per
share was $15.05 as of December 31, 2019, compared to $19.48 at
September 30, 2019 and $26.71 a year ago.
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of sixteen
aircraft, spread over seven different aircraft types. Eleven of the
aircraft, comprised of nine regional jets and two turboprops, are
held for lease. Three additional regional jets and two turboprops
are held under sales-type or direct finance leases. The Company
also has three turboprop aircraft, two of which are being sold in
parts, and three regional jet aircraft that are held for sale. 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 4Q2019 Earnings
March
30, 2020
Page
3
Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
(Unaudited)
|
|
For the Three
Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease
revenue
|
$4,789
|
$6,706
|
$7,177
|
$25,609
|
$27,637
|
Maintenance
reserves revenue(2)
|
-
|
16,968
|
-
|
16,968
|
1,629
|
|
Finance lease
revenue
|
88
|
269
|
249
|
853
|
1,251
|
|
Gain/(loss) on
disposal of assets
|
5
|
44
|
(1,034)
|
327
|
(3,409)
|
|
Loss on sales-type
finance leases
|
-
|
-
|
-
|
(171)
|
-
|
|
Other
income
|
1
|
-
|
4
|
13
|
8
|
|
|
4,883
|
23,987
|
6,396
|
43,599
|
27,116
|
|
|
|
|
|
|
|
|
Provision for
impairment
|
6,084
|
23,355
|
-
|
31,007
|
2,971
|
|
Depreciation
|
2,447
|
2,970
|
3,217
|
11,588
|
12,637
|
|
Interest
|
3,559
|
2,348
|
2,419
|
11,303
|
9,506
|
|
Professional fees
and other
|
1,614
|
1,100
|
1,141
|
4,740
|
2,818
|
|
Bad debt
expense
|
(1,009)
|
3,918
|
-
|
2,909
|
-
|
|
Salaries and
employee benefits
|
618
|
529
|
592
|
2,368
|
592
|
|
Maintenance
costs
|
478
|
256
|
231
|
851
|
636
|
|
Management
fees
|
-
|
-
|
-
|
-
|
4,483
|
|
Settlement
loss
|
-
|
-
|
2,527
|
-
|
2,527
|
|
|
13,791
|
34,476
|
10,127
|
64,766
|
36,170
|
|
|
|
|
|
|
|
|
Loss before income
taxes
|
(8,908)
|
(10,489)
|
(3,731)
|
(21,167)
|
(9,054)
|
|
|
|
|
|
|
|
|
Income tax
benefit
|
(1,867)
|
(2,258)
|
103
|
(4,508)
|
(973)
|
|
|
|
|
|
|
|
|
Net
loss
|
$(7,041)
|
$(8,231)
|
$(3,834)
|
$(16,659)
|
$(8,081)
|
|
|
|
|
|
|
|
|
Loss per
share:
|
|
|
|
|
|
|
Basic
|
$(4.55)
|
$(5.32)
|
$(2.48)
|
$(10.78)
|
$(5.58)
|
|
Diluted
|
$(4.55)
|
$(5.32)
|
$(2.48)
|
$(10.78)
|
$(5.58)
|
|
|
|
|
|
|
|
Shares
used in per share computations:
|
|
|
|
|
|
Basic
|
1,545,884
|
1,545,884
|
1,545,884
|
1,545,884
|
1,449,261
|
|
Diluted
|
1,545,884
|
1,545,884
|
1,545,884
|
1,545,884
|
1,449,261
|
AeroCentury
Corp. Reports 4Q2019 Earnings
March
30, 2020
Page
4
Condensed Consolidated Balance Sheets
(in thousands) (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$2,350
|
$1,543
|
|
Restricted
cash
|
1,077
|
-
|
|
Securities
|
-
|
121
|
|
Accounts
receivable
|
1,140
|
3,967
|
|
Finance leases
receivable
|
8,802
|
15,251
|
|
Aircraft, net of
accumulated depreciation
|
108,369
|
184,020
|
|
Assets held for
sale
|
26,036
|
10,223
|
|
Property, equipment
and furnishings, net of accumulated depreciation
|
63
|
69
|
|
Office lease right
of use, net of accumulated amortization
|
948
|
-
|
|
Favorable lease
acquired, net of accumulated amortization
|
-
|
863
|
|
Deferred tax
asset
|
518
|
255
|
|
Prepaid expenses
and other assets
|
293
|
840
|
|
Total
assets
|
$149,596
|
$217,152
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
Liabilities:
|
|
|
|
Accounts payable
and accrued expenses
|
$736
|
$1,026
|
|
Accrued
payroll
|
164
|
79
|
|
Notes payable and
accrued interest, net of unamortized debt issuance
costs
|
111,638
|
131,092
|
|
Derivative
liability
|
1,825
|
-
|
|
Lease
liability
|
337
|
-
|
|
Maintenance
reserves
|
4,413
|
28,527
|
|
Accrued maintenance
costs
|
446
|
463
|
|
Security
deposits
|
1,034
|
3,368
|
|
Unearned
revenues
|
3,039
|
3,275
|
|
Deferred income
taxes
|
2,530
|
7,537
|
|
Income taxes
payable
|
175
|
497
|
|
Total
liabilities
|
126,337
|
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
|
10,882
|
27,540
|
|
Accumulated other
comprehensive income
|
(1,371)
|
-
|
|
Treasury
stock
|
(3,037)
|
(3,037)
|
|
Total
stockholders’ equity
|
23,259
|
41,288
|
|
Total liabilities
and stockholders’ equity
|
$149,596
|
$217,152
|
AeroCentury
Corp. Reports 4Q2019 Earnings
March
30, 2020
Page
5
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)
|
For
the Years Ended
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net loss to EBITDA:
|
|
|
|
|
|
|
Net
loss
|
$(7,041)
|
$(8,231)
|
$(3,834)
|
$(16,659)
|
$(8,081)
|
|
Depreciation
|
2,447
|
2,970
|
3,217
|
11,588
|
12,637
|
|
Interest
|
3,559
|
2,348
|
2,419
|
11,303
|
9,506
|
|
Income tax
(benefit)/provision
|
(1,867)
|
(2,258)
|
103
|
(4,508)
|
(973)
|
|
EBITDA:
|
(2,902)
|
(5,171)
|
1,905
|
1,724
|
13,089
|
