AeroCentury Corp. (the “Company”) (NYSE American: ACY), an independent aircraft leasing company, today reported a third quarter net loss of $4.5 million, or $(3.16) per share, compared to a net loss of $81,000, or $(0.06) per share, for the second quarter of 2018 and net income of $0.4 million, or $0.27 per share, for the third quarter of 2017. The results announced are for the period ended September 30, 2018, and therefore, do not reflect the combined operations of the Company and its newly acquired subsidiary, JetFleet Holding Corp., which was acquired on October 1, 2018.
In the first nine months of 2018, the Company reported a net loss of $4.2 million, or $(3.00) per share, compared to net income of $1.4 million, or $0.95 per share, in the first nine months of 2017.
The first nine months of 2018 included $1.6 million of other income resulting from payments received from a lessee of three aircraft that were returned to the Company during 2017. The Company is accounting for the payments from this lessee as they are received, and they are recorded in other income. The third quarter and first nine months of 2018 also included $2.4 million of losses related to the sale of two off-lease turboprop aircraft, as well as impairment provisions totaling $2.7 million on four other off-lease turboprop aircraft that have been identified for sale.
“2018 has been an exciting year of transition for AeroCentury. We completed the acquisition of our management company and its parent, JetFleet Holding Corp., and, management and the portfolio were unified under the AeroCentury umbrella, as of October 1, 2018,” said Michael Magnusson, AeroCentury’s President. “We continue to execute our strategy to modernize the fleet, selling two more of our older turboprop assets. This strategy is designed to make the portfolio a more favorable platform for future growth in 2019 and beyond. These sales, however, came at a time when values of older turboprops had begun a dramatic decline, as both the Dash 8 and Saab aircraft values are beginning to reflect an increased supply, combined with slow demand for those older aircraft types. The Dash 8 market was especially hard hit, as approximately thirty used Dash 8 aircraft entered the market in the last year. As a result of this decline in values, the Company realized a loss on the sale of those older aircraft, and the lower market values also caused the Company to record an impairment provision in the third quarter with respect to the four remaining older aircraft in its portfolio.”
“Despite the difficult quarter, we remain committed to our portfolio modernization program, which we believe has resulted in a significant positive transformation in our fleet.” Mr. Magnusson continued, “Currently, the weighted age of our portfolio is just 11 years old, and the average aircraft unit value is now double what it was ten years ago. We intend to continue to look for sale opportunities for our older turboprop aircraft, as we continue to seek newer aircraft types for acquisition, including Bombardier Q400s and CRJs, ATRs, and Embraer jets.”
Third Quarter Highlights
EBITDA1 was $0.1 million compared to $5.4 million in the preceding quarter and $6.0 million a year ago;
Operating lease revenue was $7.2 million up from $6.8 million in the preceding quarter;
Book value per share of $30.44 as of September 30, 2018, up from $29.19 a year ago;
93% portfolio utilization improved during the quarter compared to 91% in the second quarter of 2018;
$39.2 million was available under the existing credit facility as of September 30, 2018.
Third Quarter 2018 Comparative Data:
- Average portfolio utilization was 93% during the third quarter of 2018, compared with 91% in the preceding quarter. The increase was a result of the acquisition of two aircraft during the second quarter. Average portfolio usage was the same during the third quarters of 2018 and 2017, as a result of the net effect of the second quarter 2018 acquisitions, asset sales during late 2017 and 2018 and the return of several aircraft at lease end in 2017.
- Total revenue and other income decreased 36% to $5.1 million for the third quarter of 2018, compared to $7.8 million in the preceding quarter, and decreased 39% from $8.3 million in the third quarter a year ago. The decreases were primarily a result of losses associated with the sale of two aircraft during the third quarter of 2018, as well as decreased operating lease revenues and decreased maintenance reserves revenues.
- Operating lease revenues increased 5% to $7.2 million in the third quarter of 2018 from $6.8 million in the preceding quarter and decreased 5% from $7.6 million in the year-ago quarter. The period-to-period changes reflect assets sales during late 2017 and the return of several aircraft at lease end in 2017, as well as the positive effect of two assets purchased during the second quarter of 2018.
- The Company recorded no maintenance reserve revenue in the second or third quarters of 2018 and $0.3 million in the third quarter of 2017.
- During the third quarter of 2018, the Company recognized $2.4 million in losses from disposal of assets, compared to $18,100 in gains in the preceding quarter and $3,500 in gains in the third quarter of 2017.
- Total expenses increased 37% to $10.8 million from $7.9 million in the preceding quarter and increased 41% from $7.6 million in the year-ago quarter. The increases were primarily due to impairment provisions recorded during the third quarter of 2018, as well as higher interest and maintenance costs in the third quarter of 2018.
AeroCentury’s portfolio currently consists of seventeen aircraft and one engine that are held for lease and six aircraft that are held under sales-type or direct finance leases. The Company also has six turboprop aircraft that are held for sale, two of which are being sold in parts.
The Company's portfolio consists of ten different aircraft types. The current customer base comprises eleven customers operating in nine countries.
The following table shows the status of the Company's portfolio of aircraft and engines held for lease as of September 30, 2018, December 31, 2017, and September 30, 2017.