AeroCentury Corp. (“AeroCentury” or the “Company”) (NYSE American:
ACY), an independent aircraft leasing company, today reported a
first quarter 2020 net loss of $10.2 million, or ($6.58) per share,
compared to a net loss of $1.3 million, or ($0.85) per share, for
the first quarter of 2019.
Results for the quarter ended March 31, 2020
included impairment losses totaling $6.7 million, arising from
revised estimated sales proceeds for three regional jet aircraft
and an older turboprop aircraft that is being sold in
parts. Results also included a $1.2 million
bad debt allowance related to two of the Company’s aircraft that
are subject to finance leases and a $1.9 million non-cash charge
related to the Company’s interest rate swaps, which is included in
interest expense.
The results for the first quarter ended March
31, 2019 included $1.4 million of impairment provisions related to
the write-down of two older off-lease turboprop aircraft and a
spare engine to their estimated sales values, and a non-cash charge
of $0.4 million related to the Company’s interest rate swaps, which
was included in interest expense.
During the first quarter ended March 31, 2020,
the COVID-19 pandemic had a significant impact on the Company’s
financial circumstances, mainly due to the impact on the Company’s
primary customers, regional airlines. The Company’s customers
have experienced a steep decline in revenue, and some requested
lease payment concessions and/or deferrals from the
Company.
On May 1, 2020, the Company and its credit
facility lenders entered into a Fourth Amended and
Restated Loan and Security Agreement, which converted the
Company’s revolving credit facility with MUFG Union Bank as Agent,
into a term loan with an initial principal balance of
$83,689,900. The amendment provides for a forbearance of the
existing defaults and events of default under the Company’s
indebtedness to at least June 29, 2020, which is the milestone for
the Company entry into a written agreement for a strategic
transaction that would enable repayment of the MUFG
indebtedness. The loan has a stated final maturity date
of March 31, 2021, but also requires that the Company close on
such strategic transaction by August 15, 2020. A more
detailed description of the agreement, as well as the full text of
the agreement, is available in the Company’s Current Report on Form
8-K filed with the Securities and Exchange Commission on May 5,
2020.
“The COVID pandemic has had a severe negative
impact on the airline industry and our lessees and their compliance
with lease obligations,” explained Michael Magnusson, President of
AeroCentury Corp. “We were, however, with the cooperation of our
lenders, able to consummate in early May an amendment to our MUFG
loan agreement,” Magnusson continued. “We believe the terms
of the amendment make it possible for the Company to negotiate
and execute a strategic transaction aimed at resolving our
MUFG loan default, and puts the Company in a better position
to weather the COVID impact as it plays out in the coming
quarters. The Company faces many challenges outside of
its control, but we remain steadfast in our aim to preserve
shareholder value as much as possible as we work through these
unprecedented times for the aircraft leasing industry.”
First Quarter 2020 Highlights and Comparative
Data
- Net loss was $10.2 million compared
to a loss of $7.0 million in the preceding quarter and a loss of
$1.3 million a year ago.
- EBITDA(1) was ($4.7) million
compared to ($2.9) million in the preceding quarter and $4.4
million a year ago.
- Average portfolio utilization was
83% during the first quarter of 2020 and fourth quarter of 2019,
compared to 98% in the first 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.
- Total revenues decreased 2% to $4.8
million for the first quarter of 2020, compared to $4.9 million in
the preceding quarter, and decreased 37% from $7.6 million in the
first quarter a year ago.
- Operating lease revenue was approximately the same in the first
quarter of 2020 and fourth quarter of 2019 and decreased 33% to
$4.8 million in the first quarter of 2020 from $7.1 million in the
first 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
sale of an asset in the first quarter of 2019 that had been on
lease until the time of sale.
- During the first quarter of 2020, the Company recorded losses
totaling $41,800 on the sale of four aircraft, which was partially
offset by $17,600 of gains on the sale of aircraft parts.
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 first quarter of 2019, the Company
recorded gains totaling approximately $0.2 million on the sale of
an aircraft and aircraft parts.
- Total operating expenses increased
28% to $17.7 million from $13.8 million in the preceding quarter,
and increased 91% from $9.2 million in the first quarter a year
ago.
- During the first quarter of 2020, the Company recognized asset
impairments of $6.7 million, based on estimated sales proceeds,
compared to the fourth quarter of 2019, when the Company recognized
asset impairments of $6.1 million, based on third-party appraised
values or expected sales proceeds. During the first quarter
of 2019, the Company recognized $1.4 million of asset impairments
on three assets held for sale, based on estimated sales
proceeds.
- Depreciation expense decreased by 11% to $2.2 million in the
first quarter of 2020 from $2.4 million in the preceding quarter
and decreased by 32% from $3.2 million in the first 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 69% to $6.0 million in the first
quarter of 2020 from $3.6 million in the fourth quarter of 2019 and
increased 106% from $2.9 million in the first quarter of 2019,
primarily as a result of a higher average interest rate and charges
related to the Company’s interest rate swaps, the effects of which
were partially offset by a lower average debt balance.
- As a result of payment delinquencies by two customers that
leased two of the Company’s aircraft subject to finance leases, the
Company recorded a bad debt expense of $1.2 million during the
first quarter of 2020 compared to a $1.0 million reversal of bad
debt allowance related to the same to customers in the fourth
quarter of 2019 based on payments made early in the first quarter
of 2020. The Company recorded no bad debt expense during the
first quarter of 2019.
- Salaries, employee benefits and professional fees and other
expenses were approximately the same in the first quarters of 2019
and 2020. Such expenses were $0.6 million higher than in the
fourth quarter of 2019, primarily due to the writeoff of a portion
of the Company’s unamortized legal costs and other legal expenses
related to credit facility in the fourth quarter.
- Book value per share was $8.84 as
of March 31, 2020, compared to $15.05 at December 31, 2019 and
$25.59 a year ago.
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of
thirteen aircraft, spread over six different aircraft types.
Eleven of the aircraft, comprised of nine 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 eight customers operating in six
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 that the terms of the amendment
make it possible for the Company to negotiate and execute a
strategic transaction aimed at resolving its MUFG loan default, and
puts the Company in a better position to weather the COVID
impact as it plays out in the coming quarters; and that the
Company aims to preserve shareholder value as much as possible
while working through unprecedented times for the aircraft leasing
industry. 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 but not
limited to unanticipated further defaults under the Company’s debt
agreements, failure to obtain favorable offers for strategic
transactions or to come to agreement with potential offerors, and
further disruptions to the airline industry due to the COVID
pandemic, 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.
Condensed Consolidated Statements of Income (in
thousands, except share and per share data) (Unaudited)
|
For the Three Months Ended |
|
March 31, |
December 31, |
March 31, |
|
|
2020 |
|
|
2019 |
|
|
2019 |
|
|
|
|
|
Operating lease revenue |
$ |
4,768 |
|
$ |
4,789 |
|
$ |
7,148 |
|
Finance lease revenue |
|
56 |
|
|
88 |
|
|
236 |
|
Net (loss)/gain on disposal of
assets |
|
(24 |
) |
|
5 |
|
|
179 |
|
Other (loss)/income |
|
(23 |
) |
|
1 |
|
|
4 |
|
|
|
4,777 |
|
|
4,883 |
|
|
7,567 |
|
|
|
|
|
Impairment |
|
6,655 |
|
|
6,084 |
|
|
1,408 |
|
Interest |
|
6,013 |
|
|
3,559 |
|
|
2,912 |
|
Depreciation |
|
2,170 |
|
|
2,447 |
|
|
3,201 |
|
Bad debt expense |
|
1,170 |
|
|
(1,009 |
) |
|
- |
|
Professional fees and
other |
|
1,063 |
|
|
1,614 |
|
|
1,004 |
|
Salaries and employee
benefits |
|
517 |
|
|
618 |
|
|
599 |
|
Maintenance costs |
|
80 |
|
|
478 |
|
|
107 |
|
|
|
17,668 |
|
|
13,791 |
|
|
9,231 |
|
|
|
|
|
Loss before income tax
benefit |
|
(12,891 |
) |
|
(8,908 |
) |
|
(1,664 |
) |
|
|
|
|
Income tax benefit |
|
(2,713 |
) |
|
(1,867 |
) |
|
(356 |
) |
|
|
|
|
Net loss |
$ |
(10,178 |
) |
$ |
(7,041 |
) |
$ |
(1,308 |
) |
|
|
|
|
Loss per share: |
|
|
|
Basic |
$ |
(6.58 |
) |
$ |
(4.55 |
) |
$ |
(0.85 |
) |
Diluted |
$ |
(6.58 |
) |
$ |
(4.55 |
) |
$ |
(0.85 |
) |
|
|
|
|
Shares used in per
share computations: |
|
|
Basic |
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
Diluted |
|
1,545,884 |
|
|
1,545,884 |
|
|
1,545,884 |
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets(in
thousands) (Unaudited)
ASSETS |
|
March 31, |
December 31, |
|
|
2020 |
|
|
2019 |
|
|
|
|
Cash and cash equivalents |
$ |
1,746 |
|
$ |
2,350 |
|
Restricted cash |
|
2,252 |
|
|
1,077 |
|
Accounts receivable |
|
2,470 |
|
|
1,140 |
|
Finance leases receivable, net
of allowance for doubtful accounts |
|
2,880 |
|
|
8,802 |
|
Aircraft, net of accumulated
depreciation |
|
106,200 |
|
|
108,369 |
|
Assets held for sale |
|
18,289 |
|
|
26,036 |
|
Property, equipment and
furnishings, net of accumulated depreciation |
|
18 |
|
|
63 |
|
Office lease right of use, net
of accumulated amortization |
|
442 |
|
|
948 |
|
Deferred tax asset |
|
631 |
|
|
518 |
|
Prepaid expenses and other
assets |
|
995 |
|
|
293 |
|
Total assets |
$ |
135,923 |
|
$ |
149,596 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Liabilities: |
|
|
Accounts payable and accrued
expenses |
$ |
1,234 |
|
$ |
736 |
|
Accrued payroll |
|
107 |
|
|
164 |
|
Notes payable and accrued
interest, net of unamortized debt issuance costs |
|
110,958 |
|
|
111,638 |
|
Derivative liability |
|
1,105 |
|
|
1,825 |
|
Derivative termination
liability |
|
3,075 |
|
|
- |
|
Lease liability |
|
36 |
|
|
337 |
|
Maintenance reserves |
|
2,396 |
|
|
4,413 |
|
Accrued maintenance costs |
|
58 |
|
|
446 |
|
Security deposits |
|
666 |
|
|
1,034 |
|
Unearned revenues |
|
2,460 |
|
|
3,039 |
|
Deferred income taxes |
|
- |
|
|
2,530 |
|
Income taxes payable |
|
164 |
|
|
175 |
|
Total liabilities |
|
122,259 |
|
|
126,337 |
|
|
|
|
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 |
|
704 |
|
|
10,882 |
|
Accumulated other
comprehensive income |
|
(788 |
) |
|
(1,371 |
) |
Treasury stock |
|
(3,037 |
) |
|
(3,037 |
) |
Total stockholders’
equity |
|
13,664 |
|
|
23,259 |
|
Total liabilities and
stockholders’ equity |
$ |
135,923 |
|
$ |
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) |
|
March 31, |
December 31, |
March 31, |
|
|
2020 |
|
|
2019 |
|
|
2019 |
|
Reconciliation of Net loss to
EBITDA: |
|
|
|
Net loss |
$ |
(10,178 |
) |
$ |
(7,041 |
) |
$ |
(1,308 |
) |
Depreciation |
|
2,170 |
|
|
2,447 |
|
|
3,201 |
|
Interest |
|
6,013 |
|
|
3,559 |
|
|
2,912 |
|
Income tax benefit |
|
(2,713 |
) |
|
(1,867 |
) |
|
(356 |
) |
EBITDA: |
|
(4,708 |
) |
|
(2,902 |
) |
|
4,449 |
|
|
|
|
|
|
|
|
|
|
|
(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.
Hal LyonsChief Financial Officer(650) 340-1888
Aerocentury (AMEX:ACY)
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