AeroCentury Corp. Reports Fourth Quarter 2019 and Fiscal Year 2019 Results
March 30 2020 - 4:30PM
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.
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.◦ 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.◦ 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.◦ 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.◦ 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.◦ 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.◦ 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.◦ 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.◦ 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.
_____________________________(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.
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.
|
Condensed
Consolidated Statements of Income (in thousands, except
share and per share data) (Unaudited) |
|
|
|
|
|
For the Three Months Ended |
|
For the Years Ended |
|
December 31, |
September 30, |
December 31, |
|
December 31, |
December 31, |
|
2019 |
2019 |
2018 |
|
2019 |
2018 |
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________________(2) Maintenance
reserves revenue is dependent upon the amount of reserves retained
upon lease terminations. The three months ended September 30, 2019
and year ended December 31, 2019 included $17.0 million of
maintenance reserves revenue resulting from reserves retained upon
termination of four aircraft leases. The year ended December 31,
2018 included $1.6 million of maintenance reserves revenue
resulting from payments received by the Company during the first
two quarters of 2018 from a lessee that returned three leased
aircraft to the Company in 2017.
|
Condensed Consolidated Balance Sheets(in
thousands) (Unaudited) |
|
ASSETS |
|
December 31, |
December 31, |
|
2019 |
2018 |
|
|
|
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 |
|
|
|
|
|
|
|
|
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) |
|
December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
|
2019 |
2019 |
2018 |
2019 |
2018 |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hal LyonsChief Financial Officer(650) 340-1888
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