AeroCentury Corp. Reports Fourth Quarter 2020 and Fiscal Year 2020 Results
April 14 2021 - 5:00PM
AeroCentury Corp. (“AeroCentury” or the “Company”) (NYSE American:
ACY), an independent aircraft leasing company, today reported a
fourth quarter 2020 net loss of $14.5 million, or ($9.36) per
share, compared to a net loss of $7.0 million, or ($4.55) per
share, for the fourth quarter of 2019. For the full year 2020, the
Company reported a net loss of $42.2 million, or ($27.33) per
share, compared to a net loss of $16.7 million, or ($10.78) per
share, for the full year 2019.
During 2020, the Company sold two aircraft that
had been leased under operating leases. In addition, two lessees
that had leased four aircraft pursuant to sales-type or direct
financing leases exercised purchase options for the aircraft.
Results for the fourth quarter and the year ended December 31, 2020
included impairment losses on most of the Company’s aircraft
totaling $11.9 million and $28.8 million, respectively, based on
third-party appraised or expected sales proceeds. During the same
periods, the Company recorded bad debt expense of $0.3 million and
$1.5 million, respectively, as a result of payment delinquencies
and reductions in the appraised value of the Company’s two
remaining aircraft subject to sales-type leases.
In the third quarter of 2019, the Company
terminated the leases for, and repossessed, four aircraft from one
of the Company’s lessees (“Repossessed Aircraft”), which had a
substantial adverse impact on the Company’s 2019 and 2020
results. As a result of those events, the Company
recognized maintenance reserves revenue of $17.0 million at the
time of repossession, but also recorded impairment losses for the
Repossessed Aircraft of $28.4 million during 2019, based on
third-party appraised values or expected sales proceeds. In 2020,
the loss of operating lease revenues from those aircraft and an
additional $10.9 million of impairment losses also negatively
impacted earnings.
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 has been sold in parts.
The results for the year ended December 31, 2019
included a $2.9 million bad debt allowance related to three finance
leases secured by three aircraft, one of which aircraft was
purchased by 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 that the Company received
from the lessees in the first quarter of 2020.
Fourth Quarter 2020 Highlights and Comparative
Data
- Net loss was $14.5 million compared
to a loss of $4.1 million in the preceding quarter and a loss of
$7.0 million a year ago.
- EBITDA1(1) was ($9.8) million
compared to $0.9 million in the preceding quarter and ($2.9)
million a year ago.
- Average portfolio utilization was
87% during the fourth quarter of 2020, compared to 89% in the
preceding quarter and 83% in the fourth quarter of 2019. The
decrease from the third quarter of 2020 was due to an aircraft that
was on lease in the third quarter, but off lease in the fourth
quarter. The increase from the year-ago quarter was due to assets
that were off lease in the 2019 period and were sold in late 2019
or early 2020.
- Revenues in the fourth quarter and
full year of 2020 consisted primarily of operating lease revenue.
Operating lease revenue of $3.1 million in the fourth quarter was
5% less than the $3.2 million in revenue recorded in the third
quarter as a result of a decrease in rent revenue for two assets
that were sold in October 2020. The results for the third and
fourth quarter of 2020 reflected reduced rent for two aircraft
due to rent reduction concessions granted to one of the
Company’s customers as a result of the COVID-19 pandemic.
Fourth quarter operating lease revenue in 2020 of $3.1 million was
36% lower than the $4.8 million in the fourth quarter of 2019
primarily due to (i) decreased rent associated with the two
aircraft that were sold in October 2020, (ii) rent reduction
concessions granted to one of the Company’s customers as
a result of the COVID-19 pandemic, and (iii) reduced rent for an
aircraft that was on lease in the 2019 quarter but off lease in the
fourth quarter of 2020.
- Total operating expenses increased
by 160% to $18.1 million in the fourth quarter of 2020 from $7.0
million in the preceding quarter, and increased 32% from $13.8
million in the fourth quarter of 2019. The principal cause for the
increase in operating expenses was a substantial increase in asset
impairments in the fourth quarter of 2020 when compared to either
the third quarter of 2020 or the fourth quarter of 2019.
- During the fourth quarter of 2020,
the Company recognized asset impairments of $11.9 million, based on
third-party appraised or expected sales proceeds. 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. 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.
- Depreciation expense increased by
13% to $1.5 million in the fourth quarter of 2020 from $1.3 million
in the preceding quarter, as a result of a change in the expected
holding period for three aircraft and the related residual values.
Depreciation expense decreased by 38% from $2.4 million in the
fourth quarter of 2019, 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 or fourth quarters of 2020 for two aircraft that were
written down to the net sale value at June 30, 2020.
- Interest expense increased by 10%
to $3.3 million in the fourth quarter of 2020 from $3.0 million in
the preceding quarter, primarily due to interest related to the
Company’s expectation that it would dispose of its remaining
interest rate swaps. Interest expense decreased 7% from $3.6
million in the fourth quarter of 2019, primarily as a result of
lower debt costs amortization.
- Bad debt expense in the fourth
quarter of 2020 was $0.3 million, related to the Company’s two
sales-type finance leases. The Company did not record bad debt
expense in the third quarter of 2020. In the fourth quarter of
2019, the Company reversed $1.0 million of bad debt expense related
to the same sales-type finance leases previously recorded.
- Salaries, employee benefits and
professional fees and other expenses decreased 53% to $1.0 million
in the fourth quarter of 2020 from $2.1 million in preceding
quarter, primarily due to lower legal fees related to litigation
related to an activist shareholder during the third quarter and the
reversal of legal fees related to the Company’s debt that were
accrued in the third quarter but subsequently paid by the Company’s
lenders, as well as lower lender-required consulting expenses. Such
expenses decreased by 56% from $2.2 million in the fourth quarter
of 2019, primarily due to decreased legal expenses related to the
debt modification and activist shareholder, as well as decreased
amortization of the right of use of the Company’s office
lease.
- Book value per share was ($11.40)
as of December 31, 2020, compared to ($2.35) at September 30, 2020
and $15.05 as of December 31, 2019.
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of
eight aircraft, spread over four different aircraft types. Six of
the aircraft, comprised of four regional jets and two turboprops,
are held for lease. Two additional turboprops are financed 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 includes
five 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 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 Year Ended |
|
December 31, |
September 30, |
|
December 31, |
December 31, |
December 31, |
|
|
2020 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
Operating lease revenue |
$ |
3,072 |
|
$ |
3,249 |
|
$ |
4,789 |
|
$ |
15,468 |
|
$ |
25,609 |
|
Maintenance reserves
revenue |
|
- |
|
|
221 |
|
|
- |
|
|
221 |
|
|
16,968 |
|
Finance lease revenue |
|
- |
|
|
- |
|
|
88 |
|
|
56 |
|
|
853 |
|
Net gain on disposal of
assets |
|
124 |
|
|
20 |
|
|
5 |
|
|
133 |
|
|
327 |
|
Loss on sales-type finance
leases |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(171 |
) |
Other income |
|
302 |
|
|
- |
|
|
1 |
|
|
278 |
|
|
13 |
|
|
|
3,498 |
|
|
3,490 |
|
|
4,883 |
|
|
16,156 |
|
|
43,599 |
|
|
|
|
|
|
|
Provision for impairment |
|
11,931 |
|
|
439 |
|
|
6,084 |
|
|
28,752 |
|
|
31,007 |
|
Depreciation |
|
1,512 |
|
|
1,342 |
|
|
2,447 |
|
|
7,027 |
|
|
11,588 |
|
Interest |
|
3,326 |
|
|
3,020 |
|
|
3,559 |
|
|
16,819 |
|
|
11,303 |
|
Salaries and employee
benefits |
|
510 |
|
|
499 |
|
|
618 |
|
|
2,044 |
|
|
2,368 |
|
Professional fees and
other |
|
470 |
|
|
1,588 |
|
|
1,614 |
|
|
5,518 |
|
|
4,740 |
|
Bad debt expense |
|
333 |
|
|
- |
|
|
(1,009 |
) |
|
1,503 |
|
|
2,909 |
|
Maintenance costs |
|
56 |
|
|
78 |
|
|
478 |
|
|
302 |
|
|
851 |
|
|
|
18,138 |
|
|
6,966 |
|
|
13,791 |
|
|
61,965 |
|
|
64,766 |
|
|
|
|
|
|
|
Loss before income tax
(benefit)/provision |
|
(14,640 |
) |
|
(3,476 |
) |
|
(8,908 |
) |
|
(45,809 |
) |
|
(21,167 |
) |
|
|
|
|
|
|
Income tax
(benefit)/provision |
|
(174 |
) |
|
605 |
|
|
(1,867 |
) |
|
(3,565 |
) |
|
(4,508 |
) |
|
|
|
|
|
|
Net loss |
$ |
(14,466 |
) |
$ |
(4,081 |
) |
$ |
(7,041 |
) |
$ |
(42,244 |
) |
$ |
(16,659 |
) |
|
|
|
|
|
|
Loss per share: |
|
|
|
|
|
Basic |
$ |
(9.36 |
) |
$ |
(2.64 |
) |
$ |
(4.55 |
) |
$ |
(27.33 |
) |
$ |
(10.78 |
) |
Diluted |
$ |
(9.36 |
) |
$ |
(2.64 |
) |
$ |
(4.55 |
) |
$ |
(27.33 |
) |
$ |
(10.78 |
) |
|
|
|
|
|
|
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 |
|
December 31, |
December 31, |
|
|
2020 |
|
|
2019 |
|
|
|
|
Cash and cash equivalents |
$ |
2,409 |
|
$ |
2,350 |
|
Cash and cash equivalents held
for sale |
|
346 |
|
|
- |
|
Restricted cash |
|
- |
|
|
1,077 |
|
Restricted cash held for
sale |
|
2,346 |
|
|
Accounts receivable |
|
257 |
|
|
1,140 |
|
Finance leases receivable, net
of allowance for doubtful accounts |
|
2,547 |
|
|
8,802 |
|
Aircraft, net of accumulated
depreciation |
|
45,763 |
|
|
108,369 |
|
Assets held for sale |
|
38,147 |
|
|
26,036 |
|
Property, equipment and
furnishings, net of accumulated depreciation |
|
15 |
|
|
63 |
|
Office lease right of use, net
of accumulated amortization |
|
142 |
|
|
948 |
|
Deferred tax asset |
|
1,151 |
|
|
518 |
|
Prepaid expenses and other
assets |
|
255 |
|
|
293 |
|
Total assets |
$ |
93,378 |
|
$ |
149,596 |
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)/EQUITY |
Liabilities: |
|
|
Accounts payable and accrued
expenses |
$ |
368 |
|
$ |
736 |
|
Accrued payroll |
|
190 |
|
|
164 |
|
Notes payable and accrued
interest, net of unamortized debt issuance costs |
|
88,793 |
|
|
111,638 |
|
Notes payable and accrued
interest held for sale, net of unamortized debt issuance costs |
|
13,837 |
|
|
- |
|
Derivative liability |
|
- |
|
|
1,825 |
|
Derivative liability held for
sale |
|
768 |
|
|
- |
|
Derivative termination
liability |
|
3,075 |
|
|
- |
|
Lease liability |
|
172 |
|
|
337 |
|
Maintenance reserves |
|
2,001 |
|
|
4,413 |
|
Accrued maintenance costs |
|
46 |
|
|
446 |
|
Security deposits |
|
716 |
|
|
1,034 |
|
Unearned revenues |
|
1,027 |
|
|
3,039 |
|
Deferred income taxes |
|
- |
|
|
2,530 |
|
Income taxes payable |
|
1 |
|
|
175 |
|
Total liabilities |
|
110,994 |
|
|
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 |
|
(31,362 |
) |
|
10,882 |
|
Accumulated other
comprehensive loss |
|
(2 |
) |
|
(1,371 |
) |
Treasury stock |
|
(3,037 |
) |
|
(3,037 |
) |
Total stockholders’
(deficit)/equity |
|
(17,616 |
) |
|
23,259 |
|
Total liabilities and
stockholders’ (deficit)/equity |
$ |
93,378 |
|
$ |
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) |
|
December 31, |
September 30, |
December 31, |
|
|
2020 |
|
|
2020 |
|
|
2019 |
|
Reconciliation of Net loss to
EBITDA: |
|
|
|
Net loss |
$ |
(14,466 |
) |
$ |
(4,081 |
) |
$ |
(7,041 |
) |
Depreciation |
|
1,512 |
|
|
1,342 |
|
|
2,447 |
|
Interest |
|
3,326 |
|
|
3,020 |
|
|
3,559 |
|
Income tax provision/(benefit) |
|
(174 |
) |
|
605 |
|
|
(1,867 |
) |
EBITDA |
|
(9,802 |
) |
|
886 |
|
|
(2,902 |
) |
(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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