AeroCentury Corp. (NYSE American:ACY), an independent aircraft leasing company, today reported first quarter earnings of $0.3 million, or $0.22 per share, compared to $6.02 million, or $4.25 per share for the fourth quarter of 2017 and $0.6 million, or $0.41 per share, for the first quarter of 2017.
First quarter 2018 included $1.1 million of other income resulting from cash received from the previous lessee of three aircraft that were returned to the Company during 2017. Such payments were for unpaid maintenance reserves as well as amounts due pursuant to the unsatisfied return conditions of the applicable leases and were not accrued by the Company at the time of lease termination based on management’s evaluation of the creditworthiness of the lessee. Therefore, the Company is accounting for payments as they are received and recorded in other income. Fourth quarter 2017 results included a $5.4 million tax benefit arising from the revaluation of the Company’s deferred tax liability prompted by the passage of the Tax Cuts and Jobs Act of 2017.
“In the first quarter, we continued on our path of modernizing our portfolio. As a result of the sale of two older turboprop aircraft, the average age of aircraft we are holding for lease is currently approximately 11 years,” said Michael Magnusson, President.
Mr. Magnusson also commented on the progress on the proposed acquisition by the Company of JetFleet Holding Corp. (JHC), the corporation that has managed the Company’s operations and aircraft portfolio since the Company’s founding in 1997. “We have already received the permit for the issuance of shares of the Company’s stock in the transaction from the California Department of Business Oversight, and the shareholders of JHC have approved the transaction. Our next step will be obtaining the consent of the AeroCentury stockholders at a special meeting to be held in the coming weeks. The Company’s stockholder approval is not required under Delaware or California corporate law and will be obtained solely to comply with the NYSE American stock exchange listing regulations for the shares of the Company’s stock issued in the Merger. Although the consummation of the Merger of the Company and JHC has taken somewhat more time than we originally anticipated, both parties are fully committed to the transaction, and are both proceeding expeditiously to complete the necessary steps to consummate the acquisition,” stated Mr. Magnusson.
First Quarter Highlights
Sale of two older turboprop aircraft at or near book value
Operating lease revenue of $6.5 million
Operating margin1 of 6%
EBITDA2 of $5.7 million
Book value per share of $33.66 as of March 31, 2018
90% portfolio utilization during the quarter
$47 million unused credit facility amount as of March 31, 2018
First Quarter 2018 Comparative Data (at or for the periods ended March 31, 2018, December 31, 2017, and March 31, 2017):
Average portfolio utilization was 90% during the first quarter of 2018, 91% in the fourth quarter of 2017 and 96% in the first quarter of 2017 primarily due to asset sales during late 2017 and 2018, as well as the return of several aircraft at lease end in 2017.
Total revenue and other income decreased 29% to $7.9 million for the first quarter of 2018, compared to $11.2 million in the preceding quarter, and decreased 1% from $8.0 million in the first quarter a year ago.
Operating lease revenues decreased 8% to $6.5 million in the first quarter of 2018 from $7.0 million in the preceding quarter and decreased 12% from $7.3 million in the year-ago quarter, reflecting assets sales during 2017.
Operating lease revenues accounted for 82% of total revenues in the first quarter of 2018, compared to 63% in the fourth quarter of 2017 and 92% in the year-ago quarter.
The Company recorded no maintenance reserve revenue in the first quarters of 2018 and 2017. Such revenue contributed $2.9 million to fourth quarter 2017 revenues.
During the first quarter of 2018, the Company recognized $8,200 in losses from disposal of assets, compared to gains of $922,000 in the fourth quarter of 2017 and gains of $311,000 in the first quarter of 2017.
Total expenses decreased 26% to $7.4 million from $10.0 million in the preceding quarter, primarily due to lower maintenance costs and the fourth quarter provision for impairment. Total expenses increased 7% from $6.9 million in the year-ago quarter, primarily due to higher interest expense.
AeroCentury's portfolio currently consists of twenty-one aircraft and one engine that are held for lease and nine aircraft that are held under sales-type or direct finance leases. The Company also has two turboprop aircraft that are held for sale, which are being sold in parts.
The Company's portfolio consists of eleven different aircraft types. The current customer base comprises ten customers operating in eight countries.
The following table shows the status of the Company's portfolio of aircraft and engines held for lease as of March 31, 2018, December 31, 2017, and March 31, 2017.