AeroCentury Corp. Reports Third Quarter 2020 Results
November 11 2020 - 8:00PM
AeroCentury Corp. (“AeroCentury” or the “Company”) (NYSE American:
ACY), an independent aircraft leasing company, today reported a
third quarter 2020 net loss of $4.1 million, or ($2.64) per share,
compared to a net loss of $8.2 million, or ($5.32) per share, for
the third quarter of 2019.
In the first nine months of 2020, the Company
reported a net loss of $27.8 million, or $(17.97) per share,
compared to a net loss of $9.6 million, or $(6.22) per share, in
the first nine months of 2019.
Results for the quarter ended September 30, 2020
included impairment losses totaling $0.3 million, which were
recognized as a result of a write-down of the fair value, based on
estimated future cash flow, with respect to two regional jet
aircraft that were then held for lease and which were subsequently
sold in October 2020. Results also included a $0.1 million
write-down of an older turboprop aircraft that is held for sale and
that the Company anticipates selling during the fourth quarter of
2020.
Third Quarter
2020 Highlights and Comparative
Data
- Net loss was $4.1 million compared to a loss of $13.5 million
in the preceding quarter and a loss of $8.2 million a year
ago.
- EBITDA1(1) was $0.9 million compared to ($8.3) million in the
preceding quarter and ($5.2) million a year ago.
- Average portfolio utilization was 89% during the third quarter
of 2020, compared to 91% in the preceding quarter and 97% in the
third quarter of 2019. The year-to-year decrease was due to
aircraft that were on lease in the 2019 period, but off lease in
the 2020 period.
- Revenues in the third quarter of 2020 and the first nine months
of 2020 consisted primarily of operating lease revenue. Operating
lease revenue of $3.2 million in the third quarter was 26% less
than the $4.4 million in revenue recorded in the second quarter as
a result of a decrease in rent revenue for two assets that were
sold in October 2020 and for which proceeds received from the
lessee were allocated to past due rent as of June 30, 2020 and
purchase of the aircraft. The second quarter reflected reduced
rent for two aircraft due to concessions granted to one
of the Company’s customers as a result of the COVID-19
pandemic, for which rent returned to normal levels in the third
quarter. Third quarter operating lease revenue in the current year
was 52% lower than the $6.7 million in the third quarter of 2019
primarily due to reduced rent income resulting from the early
termination of four aircraft leases with one of the Company’s
customers in the third quarter of 2019 and the decreased rent
associated with the two aircraft that were sold in October 2020.
During the third quarter of 2019, the Company recorded $17.0
million of maintenance reserves revenue related to the lease
terminations.
- Total operating expenses decreased by 64% to $7.0 million in
the third quarter of 2020 from $19.2 million in the preceding
quarter, and decreased 80% from $34.5 million in the third quarter
a year ago.
- During the third quarter of 2020,
the Company recognized asset impairments of $0.3 million, which
were recognized as a result of a write-down of the fair value,
based on estimated future cash flow, with respect to two regional
jet aircraft that were held for lease at September 30, 2020 and
which were subsequently sold in October 2020. The Company also
recorded a $0.1 million write-down of an older turboprop aircraft
that is held for sale and that the Company anticipates selling
during the fourth quarter of 2020.
- During the second quarter of 2020,
the Company recognized asset impairments of $9.7 million as a
result of appraised values on three regional jet aircraft held for
sale and estimated sales proceeds for three aircraft, one of which
is held for sale. During the third quarter of 2019, the
Company recognized $23.4 million in impairments for four aircraft
repossessed from one of the Company’s lessees, based on appraised
values for three of the aircraft and expected sales proceeds for
the fourth aircraft along with two other assets that were held for
sale, based on expected sales proceeds.
- Depreciation expense decreased by
33% to $1.3 million in the third quarter of 2020 from $2.0 million
in the preceding quarter and decreased by 55% from $3.0 million in
the third quarter a year ago, due to the reclassification of
several aircraft from held for lease to held for sale during the
third quarter of 2019 and because the Company did not record
depreciation in the third quarter of 2020 for two aircraft that
were written down to the net sale value at June 30, 2020.
- Interest expense decreased by 32%
to $3.0 million in the third quarter of 2020 from $4.5 million in
the preceding quarter, primarily because the second quarter
included a $1.5 million write-off of a portion of the Company’s
unamortized debt issuance costs, which resulted from the conversion
of the Company’s revolving credit facility to a term loan in May
2020. Interest expense increased 29% from $2.3 million in the third
quarter of 2019, primarily as a result of a higher average interest
rate, the effect of which was partially offset by a lower average
outstanding balance.
- The Company recorded no bad debt
expense during the second or third quarters of 2020. 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.
- Salaries, employee benefits and
professional fees and other expenses decreased 28% to $2.1 million
in the third quarter of 2020 from $2.9 million in preceding
quarter, primarily due to lower legal fees related to the May 2020
conversion of the Company revolving credit facility to a term loan
in May 2020 and litigation related to an activist shareholder, as
well as lower consulting expenses related to the May 2020 debt
conversion and decreased amortization related to the Company’s
office lease right of use. Such expenses increased by 28% from $1.6
million in the third quarter of 2019, primarily due to increased
legal expenses and consulting expenses related to the debt
conversion and activist shareholder.
- Book value per share was $(2.35) as
of September 30, 2020, compared to $0.22 at June 30, 2020 and
$19.48 a year ago.
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of
eleven aircraft, spread over five different aircraft types. Nine of
the aircraft, comprised of seven regional jets and two turboprops,
are held for lease. Two additional turboprops are held under
sales-type 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 six customers operating in four 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.
This press release contains forward-looking
statements within the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. All statements in this
press release other than statements that are purely historical are
forward-looking statements. Forward-looking statements in this
press release include statements regarding the anticipated sale of
an aircraft in the fourth quarter of 2020. The Company’s beliefs,
expectations, forecasts, objectives and strategies for the future
are not guarantees of future performance and are subject to risks
and uncertainties that could cause actual results to differ
materially from the results contemplated by the forward-looking
statements, including the Company’s failure to meet closing
conditions set forth in purchase agreement for the aircraft,
further disruptions to the airline industry due to the COVID
pandemic, and other unforeseen events or general economic
conditions. The forward-looking statements in this press release
and the Company’s future results of operations are subject to
additional risks and uncertainties set forth under the heading
“Factors that May Affect Future Results and Liquidity” in documents
filed by the Company with the Securities and Exchange Commission,
including the Company's quarterly reports on Form 10-Q and the
Company’s latest annual report on Form 10-K, and are based on
information available to the Company on the date hereof. The
Company does not intend, and assumes no obligation, to update any
forward-looking statements made in this press release. Readers are
cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date of this press
release.
Condensed Consolidated Statements of Income (in
thousands, except share and per share data) (Unaudited)
|
For the Three Months Ended |
For the Nine Months Ended |
|
September 30, |
June 30, |
September 30, |
September 30, |
September 30, |
|
|
2020 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
Operating lease revenue |
$ |
3,249 |
|
$ |
4,379 |
|
$ |
6,706 |
|
$ |
12,396 |
|
$ |
20,820 |
|
Maintenance reserves
revenue |
|
221 |
|
|
- |
|
|
16,968 |
|
|
221 |
|
|
16,968 |
|
Finance lease revenue |
|
- |
|
|
- |
|
|
269 |
|
|
56 |
|
|
765 |
|
Net gain on disposal of
assets |
|
20 |
|
|
13 |
|
|
44 |
|
|
9 |
|
|
322 |
|
Loss on sales-type finance
leases |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(171 |
) |
Other (loss)/income |
|
- |
|
|
- |
|
|
- |
|
|
(23 |
) |
|
12 |
|
|
|
3,490 |
|
|
4,392 |
|
|
23,987 |
|
|
12,659 |
|
|
38,716 |
|
|
|
|
|
|
|
Interest |
|
3,020 |
|
|
4,460 |
|
|
2,348 |
|
|
13,493 |
|
|
7,745 |
|
Professional fees and
other |
|
1,588 |
|
|
2,398 |
|
|
1,100 |
|
|
5,049 |
|
|
3,125 |
|
Depreciation |
|
1,342 |
|
|
2,002 |
|
|
2,970 |
|
|
5,515 |
|
|
9,141 |
|
Salaries and employee
benefits |
|
499 |
|
|
518 |
|
|
529 |
|
|
1,534 |
|
|
1,749 |
|
Impairment |
|
439 |
|
|
9,727 |
|
|
23,355 |
|
|
16,820 |
|
|
24,923 |
|
Maintenance costs |
|
78 |
|
|
88 |
|
|
256 |
|
|
246 |
|
|
373 |
|
Bad debt expense |
|
- |
|
|
- |
|
|
3,918 |
|
|
1,170 |
|
|
3,918 |
|
|
|
6,966 |
|
|
19,193 |
|
|
34,476 |
|
|
43,827 |
|
|
50,974 |
|
|
|
|
|
|
|
Loss before income tax
provision/(benefit) |
|
(3,476 |
) |
|
(14,801 |
) |
|
(10,489 |
) |
|
(31,168 |
) |
|
(12,258 |
) |
|
|
|
|
|
|
Income tax
provision/(benefit) |
|
605 |
|
|
(1,283 |
) |
|
(2,258 |
) |
|
(3,391 |
) |
|
(2,641 |
) |
|
|
|
|
|
|
Net loss |
$ |
(4,081 |
) |
$ |
(13,518 |
) |
$ |
(8,231 |
) |
$ |
(27,777 |
) |
$ |
(9,617 |
) |
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
Basic |
$ |
(2.64 |
) |
$ |
(8.74 |
) |
$ |
(5.32 |
) |
$ |
(17.97 |
) |
$ |
(6.22 |
) |
Diluted |
$ |
(2.64 |
) |
$ |
(8.74 |
) |
$ |
(5.32 |
) |
$ |
(17.97 |
) |
$ |
(6.22 |
) |
|
|
|
|
|
|
Shares used in per
share computations: |
|
|
|
|
Basic |
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
Diluted |
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
Condensed Consolidated Balance Sheets(in
thousands) (Unaudited)
ASSETS |
|
September 30, |
December 31, |
|
|
2020 |
|
|
2019 |
|
|
|
|
Cash and cash equivalents |
$ |
4,864 |
|
$ |
2,350 |
|
Restricted cash |
|
50 |
|
|
1,077 |
|
Accounts receivable |
|
123 |
|
|
1,140 |
|
Finance leases receivable, net
of allowance for doubtful accounts |
|
2,880 |
|
|
8,802 |
|
Aircraft, net of accumulated
depreciation |
|
96,052 |
|
|
108,369 |
|
Assets held for sale |
|
15,332 |
|
|
26,036 |
|
Property, equipment and
furnishings, net of accumulated depreciation |
|
15 |
|
|
63 |
|
Office lease right of use, net
of accumulated amortization |
|
159 |
|
|
948 |
|
Deferred tax asset |
|
1,185 |
|
|
518 |
|
Prepaid expenses and other
assets |
|
361 |
|
|
293 |
|
Total assets |
$ |
121,021 |
|
$ |
149,596 |
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY |
Liabilities: |
|
|
Accounts payable and accrued
expenses |
$ |
1,082 |
|
$ |
736 |
|
Accrued payroll |
|
172 |
|
|
164 |
|
Notes payable and accrued
interest, net of unamortized debt issuance costs |
|
111,575 |
|
|
111,638 |
|
Derivative liability |
|
875 |
|
|
1,825 |
|
Derivative termination
liability |
|
3,075 |
|
|
- |
|
Lease liability |
|
171 |
|
|
337 |
|
Maintenance reserves |
|
1,805 |
|
|
4,413 |
|
Accrued maintenance costs |
|
122 |
|
|
446 |
|
Security deposits |
|
4,160 |
|
|
1,034 |
|
Unearned revenues |
|
1,578 |
|
|
3,039 |
|
Deferred income taxes |
|
- |
|
|
2,530 |
|
Income taxes payable |
|
36 |
|
|
175 |
|
Total liabilities |
|
124,651 |
|
|
126,337 |
|
|
|
|
Stockholders’
(deficit)/equity: |
|
|
Preferred stock, $0.001 par
value |
|
- |
|
|
- |
|
Common stock, $0.001 par
value |
|
2 |
|
|
2 |
|
Paid-in capital |
|
16,783 |
|
|
16,783 |
|
(Accumulated deficit)/retained
earnings |
|
(16,895 |
) |
|
10,882 |
|
Accumulated other
comprehensive loss |
|
(483 |
) |
|
(1,371 |
) |
Treasury stock |
|
(3,037 |
) |
|
(3,037 |
) |
Total stockholders’
(deficit)/equity |
|
(3,630 |
) |
|
23,259 |
|
Total liabilities and
stockholders’ (deficit)/equity |
$ |
121,021 |
|
$ |
149,596 |
|
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) |
|
September 30, |
June 30, |
September 30, |
|
|
2020 |
|
|
2020 |
|
|
2019 |
|
Reconciliation of Net loss to
EBITDA: |
|
|
|
Net loss |
$ |
(4,081 |
) |
$ |
(13,518 |
) |
$ |
(8,231 |
) |
Depreciation |
|
1,342 |
|
|
2,002 |
|
|
2,970 |
|
Interest |
|
3,020 |
|
|
4,460 |
|
|
2,348 |
|
Income tax provision/(benefit) |
|
605 |
|
|
(1,283 |
) |
|
(2,258 |
) |
EBITDA: |
|
886 |
|
|
(8,339 |
) |
|
(5,171 |
) |
(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.
Harold M. LyonsChief Financial Officer(650)
340-1888
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