Attached files
| file | filename |
|---|---|
| 8-K - AEROCENTURY CORP. REPORT OF FORM 8-K - AEROCENTURY CORP | acy8k2021EarningsPR.htm |
AeroCentury
Corp. Reports 4Q2020 Earnings
April
14, 2021
Harold
M. Lyons
Chief
Financial Officer
(650)
340-1888
AeroCentury Corp. Reports Fourth Quarter 2020 and Fiscal Year 2020
Results
BURLINGAME, California, April
14, 2021 -- 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.
● EBITDA(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.
o
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.
o
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.
o
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.
o
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.
o
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.
o
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)
|