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8-K - ACY 8-K EARNINGS PR 1Q21 - AEROCENTURY CORP | act8k3q2020earningspr.htm |
Hal
Lyons
Chief
Financial Officer
(650)
340-1888
BURLINGAME,
California, May 21, 2021 -- AeroCentury Corp.
(“AeroCentury” or the “Company”) (NYSE
American: ACY), an independent aircraft leasing company, today
reported a first quarter 2021 net loss of $5.4 million, or ($3.50)
per share, compared to a net loss of $10.2 million, or ($6.58) per
share, for the first quarter of 2020.
Revenues and other
income decreased by 47% to $2.5 million in the first quarter of
2021 from $4.8 million in the first quarter of 2020. The decrease
was primarily a result of a 43% decrease in operating lease
revenues to $2.7 million in the first quarter of 2021 from $4.8
million in the first quarter of 2020 as a result of reduced rent
income from the sale of aircraft during the fourth quarter of 2020
and first quarter of 2021 and reduced rent for two assets in the
2021 quarter as a result of lease amendments related to the
COVID-19 outbreak.
The
results for the quarter ended March 31, 2021 also reflected reduced
depreciation expense compared to the first quarter of 2020,
primarily as a result of aircraft sales, and increased professional
fees and other expenses, primarily due to higher legal expenses.
During the first quarter of 2021, the Company recorded a bad debt
allowance of $821,000 related to one of its sales-type finance
leases. During the first
quarter of 2021, the Company recorded an impairment loss of
$1,940,400 on its two assets held for sale, based on expected sales
proceeds, which had an aggregate fair value of
$347,400.
The
results for the quarter ended March 31, 2020 included impairment
losses totaling $6.7 million, arising from 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.
As
previously reported, the Company and its subsidiaries, JetFleet
Holding Corp. and JetFleet Management Corp. (“the
Debtors”) filed a voluntary petition for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code in
the U.S. Bankruptcy Court for the District of Delaware on
March 29, 2021. After the bankruptcy filing, the Company has
continued to operate its businesses in the ordinary
course as “debtors-in-possession” under the
jurisdiction of the Court and in accordance with the
applicable provisions of the Bankruptcy Code. The Bankruptcy Court
has granted the Company’s motions designed
primarily to minimize the effect of bankruptcy on the
Company’s operations, customers and employees and make it
possible for the Company to continue existing operations
without interruption during the pendency of the Chapter
11 Case.
The
Bankruptcy Court also approved the conduct of a process to
market and sell the Company’s assets as part of the
Chapter 11 proceeding in order to permit the Company to satisfy
the Company’s obligations to its creditors,
including its sole secured creditor, Drake Asset Management
Jersey Limited (“Drake”). The Company
entered into a stalking horse agreement with Drake for
the sale of certain of the aircraft assets securing the
Drake Indebtedness (the “Drake Collateral”), which if
approved by the Bankruptcy Court as the best and/or highest
offer for the Drake Collateral, will, upon consummation,
lead to full satisfaction of the Company’s
obligations to Drake under the Drake
Indebtedness.
No
third party qualified bids were received for the
Company’s assets in the Court-approved marketing and
sale process, so the proposed auction for assets
will not be conducted, and the Company anticipates that
the sale of the Drake Collateral will proceed under the
terms of the stalking horse agreement. There
were non-qualified third party bids received by the
Company for certain subsets of the
Company’s aircraft assets, and the
Company is currently reviewing and evaluating those offers.
With respect to any asset purchases proposed in such
non-qualified bids that include Drake Collateral, the
Company is consulting with Drake.
First Quarter 2021 Highlights and Comparative Data
●
Net loss was $5.4
million compared to a loss of $14.5 million in the preceding
quarter and a loss of $10.2 million a year ago.
● EBITDA(1) was ($2.7) million compared to ($9.8)
million in the preceding quarter and $(4.7) million a year
ago.
●
Average portfolio
utilization was 86% during the first quarter of 2021 and 87% during
the fourth quarter of 2020, compared to 85% in the first quarter of
2020.
●
Total revenues
decreased 28% to $2.5 million for the first quarter of 2021,
compared to $3.5 million in the preceding quarter, and decreased
47% from $4.8 million in the first quarter a year ago.
o
Operating lease revenue decreased
11% to $2.7 million for the first quarter of 2021 from $3.1 million
in the fourth quarter of 2020 and decreased 43% from $4.8 million
in the first quarter of 2020 as a result of reduced rent
income from the sale of aircraft during the fourth quarter of 2020
and first quarter of 2021 and reduced rent for two assets in the
2021 quarter as a result of lease amendments related to the
COVID-19 outbreak.
●
Total operating
expenses decreased 56% to $7.9 million from $18.1 million in the
preceding quarter, and decreased 55% from $17.7 million in the
first quarter a year ago.
o
During the first
quarter of 2021, the Company recorded an impairment loss of
$1,940,400 on its two assets held for sale, based on expected sales
proceeds, which had an aggregate fair value of $347,400. During the
first quarter of 2020, the Company recorded impairment charges
totaling $6.7 million on four assets held for sale, based on
expected sales proceeds.
o
Depreciation
expense decreased by 54% to $0.7 million in the first quarter of
2021 from $1.5 million in the preceding quarter and decreased by
68% from $2.2 million in the first quarter a year ago, primarily as
a result of the reclassification of three aircraft from held for
lease to held for sale during the fourth quarter of 2020, as well
as a decrease in depreciation for two aircraft that were written
down to their estimated sale values during the second quarter of
2020 and were sold during the fourth quarter.
o
Interest expense
decreased by 42% to $1.9 million in the first quarter of 2021 from
$3.3 million in the fourth quarter of 2020 and decreased 68% from
$6.0 million in the first quarter of 2020, primarily as a result of
a lower average interest rate and lower interest expense related to
the Company’s interest rate swaps in the 2021
period.
o
As a result of
payment delinquencies during the first quarter of 2020 by two of
the Company’s customers under its two sales-type leases and
decreases in the appraised values of the underlying assets, the
Company recorded a bad debt expense of $1.2 million. During the
first quarter of 2021, the Company recorded a bad debt allowance of
$0.8 million related to one of its sales-type finance leases as a
result of its May 2021 agreement to sell the aircraft to the
customer, which requires the approval of the Bankruptcy Court and
which the Company expects to occur in the second quarter of
2021.
o
Professional fees
and other expenses increased by 298% to $1.9 million in the first
quarter of 2021 from $0.5 million in the fourth quarter of 2020 and
increased 76% from $1.1 million in the first quarter of 2020,
primarily due to
increased amortization of legal fees related to the Company’s
Drake Indebtedness and legal fees related to the Company’s
Chapter 11 filing.
●
Book value per
share was ($14.89) as of March 31, 2021, compared to ($11.40) at
December 31, 2020 and $8.84 a year ago.
Aircraft
and Engine Portfolio
AeroCentury’s
portfolio currently consists of twelve aircraft, spread over four
different aircraft types: (i) four regional jets and two turboprops
that are on lease to three customers operating in three countries;
(ii) two turboprops that are financed under sales-type leases (iii)
one turboprop and three regional jets that are off lease and (iv)
two turboprop aircraft that are being sold in parts and are held
for sale. The off-lease aircraft were reclassified from held for
sale to held for lease during the first quarter of 2021 as a result
of the Company’s Chapter 11 filing and the Company’s
consequent lack of authority to sell certain assets without the
approval of the Bankruptcy Court.
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.
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
Company’s continuation of operations during the pendency of
its bankruptcy proceeding, the sale of the Drake Collateral
pursuant to the terms of a stalking horse agreement; and
anticipated sale of one of is turboprops. 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,
|
|
2021
|
2020
|
2020
|
|
|
|
|
Operating lease
revenue
|
$2,737
|
$3,072
|
$4,768
|
Finance lease
revenue
|
-
|
-
|
56
|
Net (loss)/gain on
disposal of assets
|
(202)
|
124
|
(24)
|
Other
(loss)/income
|
(1)
|
302
|
(23)
|
|
2,534
|
3,498
|
4,777
|
|
|
|
|
Impairment
|
1,940
|
11,931
|
6,655
|
Interest
|
1,915
|
3,326
|
6,013
|
Professional fees
and other
|
1,869
|
470
|
1,063
|
Bad debt
expense
|
821
|
333
|
1,170
|
Depreciation
|
699
|
1,512
|
2,170
|
Salaries and
employee benefits
|
506
|
510
|
517
|
Maintenance
costs
|
145
|
56
|
80
|
|
7,895
|
18,138
|
17,668
|
|
|
|
|
Loss before income
tax provision/(benefit)
|
(5,361)
|
(14,640)
|
(12,891)
|
|
|
|
|
Income tax
provision/(benefit)
|
49
|
(174)
|
(2,713)
|
|
|
|
|
Net
loss
|
$(5,410)
|
$(14,466)
|
$(10,178)
|
|
|
|
|
Loss per
share:
|
|
|
|
Basic
|
$(3.50)
|
$(9.36)
|
$(0.85)
|
Diluted
|
$(3.50)
|
$(9.36)
|
$(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,
|
|
2021
|
2020
|
|
|
|
Cash and cash
equivalents
|
$4,225
|
$2,409
|
Cash and cash
equivalents held for sale
|
-
|
346
|
Restricted cash
held for sale
|
-
|
2,346
|
Accounts
receivable
|
310
|
257
|
Finance leases
receivable, net of allowance for doubtful accounts
|
1,626
|
2,547
|
Aircraft, net of
accumulated depreciation
|
56,085
|
45,763
|
Assets held for
sale
|
347
|
38,147
|
Property, equipment
and furnishings, net of accumulated depreciation
|
12
|
15
|
Office lease right
of use, net of accumulated amortization
|
126
|
142
|
Deferred tax
asset
|
4
|
1,151
|
Taxes
receivable
|
1,161
|
-
|
Prepaid expenses
and other assets
|
539
|
255
|
Total
assets
|
$64,435
|
$93,378
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
||
Liabilities:
|
|
|
Accounts payable
and accrued expenses
|
$215
|
$368
|
Accrued
payroll
|
222
|
190
|
Notes payable and
accrued interest, net of unamortized debt issuance
costs
|
-
|
88,793
|
Notes payable and
accrued interest held for sale, net of unamortized debt issuance
costs
|
-
|
13,837
|
Derivative
liability held for sale
|
-
|
768
|
Derivative
termination liability
|
-
|
3.075
|
Lease
liability
|
151
|
172
|
Maintenance
reserves
|
2,100
|
2,001
|
Accrued maintenance
costs
|
-
|
46
|
Security
deposits
|
466
|
716
|
Unearned
revenues
|
549
|
1,027
|
Income taxes
payable
|
1
|
1
|
Total liabilities
not subject to compromise
|
3,704
|
110,994
|
Liabilities subject
to compromise
|
83,755
|
-
|
Total
liabilities
|
87,459
|
110.994
|
|
|
|
Stockholders’
equity:
|
|
|
Preferred stock,
$0.001 par value
|
-
|
-
|
Common stock,
$0.001 par value
|
2
|
2
|
Paid-in
capital
|
16,783
|
16,783
|
Accumulated
deficit
|
(36,772)
|
(31,362)
|
Accumulated other
comprehensive loss
|
-
|
(2)
|
|
19,987
|
14,579
|
Treasury
stock
|
(3,037)
|
(3,037)
|
Total
stockholders’ deficit
|
(23,024)
|
(17,616)
|
Total liabilities
and stockholders’ deficit
|
$64,435
|
$93,378
|
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,
|
|
2021
|
2020
|
2020
|
Reconciliation of
Net loss to EBITDA:
|
|
|
|
Net
loss
|
$(5,410)
|
$(14,466)
|
$(10,178)
|
Depreciation
|
699
|
1,512
|
2,170
|
Interest
|
1,915
|
3,326
|
6,013
|
Income tax
provision/(benefit)
|
49
|
(174)
|
(2,713)
|
EBITDA
|
(2,747)
|
(9,802)
|
(4,708)
|