SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
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(State of Incorporation) |
| (I.R.S. Employer Identification No.) |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).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. ☐
Item 2.02: Earnings Announcement
On August 20, 2021, AeroCentury Corp. (the "Company") announced via press release the Company's unaudited operating results for the fiscal quarter ended June 30, 2021. A copy of the Company's press release is attached hereto as Exhibit 99.1. This Form 8-K and the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but not filed with, the Securities and Exchange Commission.
Item 9.01: Financial Statements and Exhibits
(d) Exhibits
Exhibit No. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| AEROCENTURY CORP. |
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Date: September 20, 2021 | By: | /s/ Harold M. Lyons |
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| Harold M. Lyons |
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| Senior Vice President, Finance |
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EXHIBIT 99.1
Hal Lyons
Chief Financial Officer
(650) 340-1888
FOR IMMEDIATE RELEASE
AeroCentury Corp. Reports Second Quarter 2021 Results
BURLINGAME, California, August 20, 2021 -- AeroCentury Corp. (“AeroCentury” or the “Company”) (NYSE American: ACY), an independent aircraft leasing company, today reported a second quarter 2021 net loss of $3.2 million, or ($2.07) per share, compared to a net loss of $13.5 million, or ($8.74) per share, for the second quarter of 2020.
Revenues and other income decreased by 66% to $1.5 million in the second quarter of 2021 from $4.4 million in the second quarter of 2020. As discussed below, the decrease was primarily a result of a 66% decrease in operating lease revenues to $1.5 million in the second quarter of 2021 from $4.4 million in the second quarter of 2020.
Expenses decreased by 76% to $4.7 million in the second quarter of 2021 from $19.2 million in the second quarter of 2020. As discussed below, the decrease was primarily a result of decreases in asset impairment losses, interest expense, professional fees, general and administrative expenses, and depreciation, the effects of which were partially offset by increases in reorganization costs and bad debt expense. Expenses in the second quarter of 2021 also were net of ($0.3) million of Paycheck Protection Program (“PPP”) Loan forgiveness.
The Company’s results in the second quarter of 2021 reflect the effect of its reorganization in bankruptcy, including disposition of aircraft in connection with the expected full discharge of its secured debt.
Second Quarter 2021 Highlights and Comparative Data
| · | Net loss was $3.2 million compared to a loss of $5.4 million in the preceding quarter and a loss of $13.5 million in the second quarter a year ago. |
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| · | EBITDA(1) was ($2.7) million compared to ($2.7) million in the preceding quarter and ($8.3) million in the second quarter a year ago. |
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| · | Average portfolio utilization was 81% compared to 86% during the preceding quarter and 91% in the second quarter a year ago. |
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| · | Total revenues decreased 42% to $1.5 million compared to $2.5 million in the preceding quarter and decreased 66% from $4.4 million in the second quarter a year ago. |
| o | Operating lease revenue decreased 46% to $1.5 million from $2.7 million in the preceding quarter and decreased 66% from $4.4 million in the second quarter a year ago as a result of reduced rent income as a result of the sale of aircraft during the fourth quarter of 2020 and first quarter of 2021 and reduced rent for three assets in the 2021 quarter as a result of lease extensions and related rent reductions, the effects of which were partially offset by reduced rent for two assets in the 2020 period as a result of lease amendments related to the COVID-19 Outbreak. |
| · | Total operating expenses decreased 41% to $4.7 million from $7.9 million in the preceding quarter and decreased 76% from $19.2 million in the second quarter a year ago. |
| o | During the second quarter of 2021, the Company recorded an impairment loss of $2.3 million on five assets held for sale, based on appraised values or expected sales proceeds that had an aggregate fair value of $29.3 million. During the second quarter of 2020, the Company recorded impairment charges of (i) $6.7 million on two assets held for lease, based on estimated future cash flow, (ii) $2.9 million on three assets held for sale, based on appraised values and (iii) $0.1 million on a fourth asset held for sale, based on expected net sales proceeds. |
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| o
| Interest expense decreased by 100% to $2,000 from $1.9 million in the preceding quarter and decreased 100% from $4.5 million in the second quarter a year ago, as a result of the Company’s Chapter 11 filing in late March 2021, after which the Company did not accrue interest on its debt due to Drake Asset Management Jersey Limited. The second quarter of 2020 included a $1.5 million write-off of a portion of the Company’s unamortized debt issuance costs related to the MUFG Credit Facility. |
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| o
| Professional fees and other expenses decreased by 81% to $0.4 million from $1.9 million in the preceding quarter and decreased 85% from $2.4 million in the second quarter a year ago, primarily as a result of decreases in legal fees and consulting related to the May 2020 amendment to the Company’s credit facility with MUFG Bank, Ltd., litigation brought by an activist shareholder, and amortization related to the Company’s office lease right of use. |
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| Depreciation expense decreased by 33% to $0.5 million from $0.7 million in the preceding quarter and decreased by 77% from $2.0 million in the second quarter a year ago, primarily as a result of the reclassification of aircraft from held for lease to held for sale during the fourth quarter of 2020 and second quarter of 2021, as well as a decrease in depreciation for two aircraft that were written down to their estimated sale values during the second quarter of 2020 and were sold during the fourth quarter of 2020. |
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| o | During the second quarter of 2021, the Company recorded $1.0 million of reorganization costs as a result of its March 29, 2021 Chapter 11 filing, compared to $0 of reorganization costs in both the second quarter of 2020 and the first quarter of 2021. |
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| During the first quarter of 2021, the Company recorded a bad debt allowance of $0.8 million related to one of its sales-type finance leases as a result of its agreement to sell the aircraft to the customer, which sale closed in the second quarter of 2021. Based on an agreement to sell an aircraft that secures a sales-type finance lease receivable, the Company recorded bad debt expense totaling $0.3 million during the second quarter of 2021. The Company recorded no such expense during the second quarter of 2020. |
| · | Book value per share was ($16.96) as of June 30, 2021, compared to ($11.40) at December 31, 2020 and $0.22 as of June 30, 2020. |
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of six aircraft, spread over three different aircraft types: (i) three regional jets and two turboprops that are held for sale and are on lease to two customers operating in two countries and (ii) one turboprop that is financed under a sales-type lease. The Company also owns an inventory of spare engine parts that are held for sale. With the exception of the aircraft that is subject to a sales-type lease, during the second quarter of 2021, the Company reclassified all of its aircraft to held for sale as a result of a sale order approved by the Bankruptcy Court.
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 are leased to regional airlines and commercial users worldwide.
(1) EBITDA is a non-GAAP measure. See below for its method of calculation and reconciliation to its most directly comparable GAAP measure, as well as other information about the use of non-GAAP measures generally, at the end of this press release.
Condensed Consolidated Statements of Income
(in thousands, except share and per share data) (Unaudited)
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| For the Three Months Ended |
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| For the Six Months Ended |
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| June 30, |
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| March 31, |
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| June 30, |
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| June 30, |
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| 2021 |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Operating lease revenue |
| $ | 1,470 |
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| $ | 2,737 |
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| $ | 4,379 |
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| $ | 4,208 |
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| $ | 9,147 |
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Finance lease revenue |
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| - |
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| - |
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| - |
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| - |
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| 56 |
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Net gain/((loss) on disposal of assets |
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| 7 |
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| (202 | ) |
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| 13 |
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| (195 | ) |
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| (11 | ) |
Other (loss)/income |
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| 4 |
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| (1 | ) |
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| - |
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| 2 |
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| (23 | ) |
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| 1,481 |
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| 2,534 |
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| 4,392 |
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| 4,015 |
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| 9,169 |
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Impairment |
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| 2,264 |
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| 1,940 |
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| 9,727 |
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| 4,204 |
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| 16,382 |
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Reorganization costs |
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| 953 |
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| - |
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| - |
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| 953 |
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| - |
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Salaries and employee benefits |
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| 487 |
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| 506 |
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| 518 |
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| 993 |
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| 1,035 |
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Depreciation |
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| 466 |
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| 699 |
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| 2,002 |
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| 1,166 |
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| 4,173 |
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Professional fees and other |
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| 362 |
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| 1,869 |
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| 2,398 |
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| 2,229 |
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| 3,461 |
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Bad debt expense |
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| 326 |
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| 821 |
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| - |
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| 1,147 |
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| 1,170 |
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PPP loan forgiveness |
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| (279 | ) |
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| - |
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| - |
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| (279 | ) |
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| - |
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Maintenance costs |
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| 94 |
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| 145 |
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| 88 |
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| 240 |
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| 168 |
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Interest |
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| 2 |
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| 1,915 |
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| 4,460 |
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| 1,917 |
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| 10,472 |
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| 4,675 |
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| 7,895 |
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| 19,193 |
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| 12,570 |
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| 36,861 |
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Loss before income tax benefit |
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| (3,194 | ) |
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| (5,361 | ) |
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| (14,801 | ) |
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| (8,555 | ) |
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| (27,692 | ) |
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Income tax benefit |
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| 4 |
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| 49 |
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| (1,283 | ) |
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| 53 |
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| (3,996 | ) |
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Net loss |
| $ | (3,198 | ) |
| $ | (5,410 | ) |
| $ | (13,518 | ) |
| $ | (8,608 | ) |
| $ | (23,696 | ) |
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Loss per share: |
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Basic |
| $ | (2.07 | ) |
| $ | (3.50 | ) |
| $ | (8.74 | ) |
| $ | (5.57 | ) |
| $ | (15.33 | ) |
Diluted |
| $ | (2.07 | ) |
| $ | (3.50 | ) |
| $ | (8.74 | ) |
| $ | (5.57 | ) |
| $ | (15.33 | ) |
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Shares used in per share computations: |
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Basic |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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Diluted |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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| 1,545,884 |
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Condensed Consolidated Balance Sheets
(in thousands) (Unaudited)
ASSETS | ||||||||
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| June 30, |
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| December 31, |
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| 2021 |
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| 2020 |
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Cash and cash equivalents |
| $ | 2,709 |
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| $ | 2,409 |
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Accounts receivable |
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| 108 |
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| 257 |
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Finance leases receivable, net of allowance for doubtful accounts |
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| 700 |
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| 2,547 |
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Aircraft, net of accumulated depreciation |
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| - |
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| 45,763 |
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Property, equipment and furnishings, net of accumulated depreciation |
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| 10 |
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| 15 |
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Office lease right of use, net of accumulated amortization |
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| 109 |
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| 142 |
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Deferred tax asset |
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| 5 |
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| 1,151 |
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Taxes receivable |
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| 1,235 |
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| - |
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Prepaid expenses and other assets |
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| 368 |
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| 255 |
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Assets held for sale |
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| 53,409 |
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| 40,839 |
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Total assets |
| $ | 58,653 |
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| $ | 93,378 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: |
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Accounts payable and accrued expenses |
| $ | 736 |
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| $ | 368 |
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Accrued payroll |
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| 241 |
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| 190 |
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Notes payable and accrued interest, net of unamortized debt issuance costs |
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| - |
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| 88,793 |
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Derivative termination liability |
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| - |
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| 3.075 |
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Lease liability |
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| 137 |
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| 172 |
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Maintenance reserves |
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| - |
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| 2,001 |
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Accrued maintenance costs |
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| 19 |
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| 46 |
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Security deposits |
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| - |
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| 716 |
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Unearned revenues |
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| - |
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| 1,027 |
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Income taxes payable |
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| 4 |
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| 1 |
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Total liabilities not subject to compromise |
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| 1,137 |
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| 96,389 |
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Liabilities subject to compromise |
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| 80,278 |
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| - |
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Liabilities held for sale |
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| 3,460 |
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| 14,605 |
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Total liabilities |
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| 84,875 |
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| 110,994 |
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Stockholders’ equity: |
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Preferred stock, $0.001 par value |
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| - |
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| - |
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Common stock, $0.001 par value |
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| 2 |
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| 2 |
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Paid-in capital |
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| 16,783 |
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| 16,783 |
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Accumulated deficit |
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| (39,970 | ) |
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| (31,362 | ) |
Accumulated other comprehensive loss |
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| - |
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| (2 | ) |
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| (23,185 | ) |
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| (14,579 | ) |
Treasury stock |
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| (3,037 | ) |
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| (3,037 | ) |
Total stockholders’ deficit |
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| (26,222 | ) |
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| (17,616 | ) |
Total liabilities and stockholders’ deficit |
| $ | 58,653 |
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| $ | 93,378 |
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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.
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| For the Three Months Ended (in thousands) |
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| June 30, |
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| March 31, |
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| June 30, |
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| 2020 |
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Reconciliation of Net loss to EBITDA: |
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Net loss |
| $ | (3,198 | ) |
| $ | (5,410 | ) |
| $ | (13,518 | ) |
Depreciation |
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| 466 |
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| 699 |
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| 2,002 |
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Interest |
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| 2 |
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| 1,915 |
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| 4,460 |
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Income tax provision/(benefit) |
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| 4 |
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| 49 |
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| (1,283 | ) |
EBITDA |
| $ | (2,726 | ) |
| $ | (2,747 | ) |
| $ | (8,339 | ) |
Cover |
Aug. 20, 2021 |
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Cover [Abstract] | |
Entity Registrant Name | AEROCENTURY CORP. |
Entity Central Index Key | 0001036848 |
Document Type | 8-K |
Amendment Flag | false |
Entity Emerging Growth Company | false |
Document Period End Date | Aug. 20, 2021 |
Entity File Number | 000-1036848 |
Entity Incorporation State Country Code | DE |
Entity Tax Identification Number | 94-3263974 |
Entity Address Address Line 1 | 1440 Chapin Avenue |
Entity Address Address Line 2 | Suite 310 |
Entity Address City Or Town | Burlingame |
Entity Address State Or Province | CA |
Entity Address Postal Zip Code | 94010 |
City Area Code | 650 |
Written Communications | false |
Soliciting Material | false |
Pre Commencement Tender Offer | false |
Pre Commencement Issuer Tender Offer | false |
Local Phone Number | 340-1888 |
Security 12b Title | Common Stock, par value $0.001 per share |
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