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| 8-K - AEROCENTURY CORP. 8-K 3D QUARTER 2020 EARNINGS PR - AEROCENTURY CORP | act8k3q2020earningspr.htm |
EXHIBIT
99.1
AeroCentury
Corp. Reports 3Q2020 Earnings
November
11, 2020
Page
1
Harold
M. Lyons
Chief
Financial Officer
(650)
340-1888
AeroCentury Corp. Reports Third Quarter 2020 Results
BURLINGAME,
California, November 11, 2020 -- 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.
● EBITDA(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.
o
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.
o
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.
o
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.
o
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.
o
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.
o
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.
AeroCentury
Corp. Reports 3Q2020 Earnings
November
11, 2020
Page
2
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
|
AeroCentury
Corp. Reports 3Q2020 Earnings
November
11, 2020
Page 3
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
|
AeroCentury
Corp. Reports 3Q2020 Earnings
November
11, 2020
Page
4
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)
|