AeroCentury Corp. (“AeroCentury” or the “Company”) (NYSE American: ACY), an independent aircraft leasing company, today reported a first quarter net loss of $1.3 million, or $(0.85) per share, compared to net income $0.3 million, or $0.22 per share, for the first quarter of 2018. First quarter 2019 results reflect the combined operations of AeroCentury and its subsidiary, JetFleet Holding Corp. (“JetFleet”), which was acquired on October 1, 2018.
The results for the first quarter ended March 31, 2019 included $1.4 million of impairment provisions related to two older off-lease turboprop aircraft and a spare engine, all of which were written down to their estimated sales values. The Company expects the sales of these aircraft and engine to occur in the second quarter of 2019. First quarter 2019 results also included a one-time, non-cash charge of $0.4 million related to the Company’s interest rate swaps, which is included in interest expense. The first quarter of 2018 included $1.1 million of maintenance reserves revenue resulting from payments received during the first quarter of 2018 from a lessee that returned three leased aircraft to the Company in 2017.
“Despite the reported loss for the first quarter, there were significant positive developments for the Company that create stepping stones for the Company’s future success,” stated Michael Magnusson, AeroCentury’s President.
“First, we are indeed beginning to see the benefits of our acquisition of JetFleet in terms of cost reductions reflected in our first quarter results, and continue to expect this transaction will prove accretive to the Company’s earnings in the long term. As a unified portfolio and management company, our results going forward now present an integrated view of the Company’s business, cost management, and financial performance, which we believe gives our shareholder base and potential new investors better insight into the Company’s business.
"Second, the renewal, in February, of our revolving credit facility to February 2023, together with the refinancing of six of our aircraft with non-recourse term loans with a new lender that same month, has freed up availability of acquisition financing under our credit facility.
"Third, the Company took a major step in the first quarter in furtherance of its fleet modernization program. We currently have three remaining older turboprop aircraft being held for sale, but we expect to sell two of them in the second quarter of 2019, and as a result of that anticipated sale, we were required to write down the book value on those two aircraft to their sales price.”
First Quarter 2019 Highlights and Comparative Data
Net loss was $1.3 million compared to the $3.8 million loss in the preceding quarter and net income of $0.3 million a year ago.
EBITDA1 was $4.4 million compared to $1.9 million in the preceding quarter and $5.7 million a year ago.
Average portfolio utilization was 98% during the first quarter of 2019, compared with 95% in the preceding quarter. The increase was a result of the sale of off-lease aircraft during 2018. Average portfolio usage was 90% during the first quarter of 2018. The year-over-year increase was a result of the net effect of the acquisition of two aircraft during the second quarter of 2018 and sales of off-lease assets during 2018.
Total revenue and other income increased 18% to $7.6 million for the first quarter of 2019, compared to $6.4 million in the preceding quarter. The increase from the preceding quarter was a result of gains on sale of aircraft during the first quarter, compared to losses on sales of aircraft in the fourth quarter of 2018. Total revenue and other income decreased 4% from $7.9 million in the first quarter a year ago, as a result of lower maintenance reserves revenue, the effect of which was partially offset by increases in operating lease revenue and gains on sale of aircraft.
° Operating lease revenue remained steady at $7.1 million in the first quarter of 2019, approximately the same as the fourth quarter of 2018, and increased 11% from $6.5 million in the first quarter of 2018. The year-to-year change reflects assets purchased during 2018.
° The Company recorded no maintenance reserves revenue in the first quarter of 2019 or fourth quarter of 2018 and $1.1 million in the first quarter of 2018.
° 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. The Company expects to sell all three assets during the second quarter of 2019. During the fourth quarter of 2018, the Company recognized $1.0 million loss on sale of an aircraft. During the first quarter of 2018, the Company recognized $8,200 in losses from disposal of assets.
Total expenses decreased 9% to $9.2 million from $10.1 million in the preceding quarter. Although the first quarter of 2019 included higher asset impairments and interest expense, including a one-time, non-cash charge related to the Company’s interest rate swaps, the increases in such expenses were less than the settlement loss recorded in the fourth quarter of 2018 in connection with the acquisition of JetFleet on October 1, 2018. Total expenses increased 25% from $7.4 million in the year-ago quarter, primarily due to asset impairments and higher interest expense, the effects of which were partially offset by a $0.5 million decrease in salaries, employee benefits and professional fees and other compared to the pre-Merger management fees and professional fees and other incurred in the year-ago quarter.
Book value per share was $25.59 as of March 31, 2019, compared to $26.71 at December 31, 2018 and $33.66 a year ago.
Aircraft and Engine Portfolio
AeroCentury’s portfolio currently consists of twenty-two aircraft, spread over nine different aircraft types. Sixteen of the aircraft, comprised of thirteen regional jets and three turboprops, are held for lease. Three additional regional jets and three turboprops are held under sales-type or direct finance leases. The Company also has one engine and five turboprop aircraft that are held for sale, two of which are being sold in parts. The current customer base comprises nine customers operating in eight countries.