AeroCentury Corp. Reports Third Quarter 2019 Results
November 14 2019 - 5:00PM
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.
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.° 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.° 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.° 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.° 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.° 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.° 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.
__________________(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
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.
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, |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
__________________(2) Maintenance reserves
revenue is dependent upon the amount of reserves retained upon
lease terminations. The three months and nine months ended
September 30, 2019 included $17.0 million of maintenance reserves
revenue resulting from reserves retained upon termination of four
aircraft leases. The nine months ended September 30, 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 |
|
September 30, |
December 31, |
|
|
2019 |
|
|
2018 |
|
|
|
|
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 |
|
|
|
|
|
|
|
|
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, |
|
|
2019 |
|
|
2019 |
|
|
2018 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
Toni PerazzoChief Financial Officer(650) 340-1888
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