GlobeNewswire Inc | May 21, 2021 05:00PM EDT

May 21, 2021

BURLINGAME, Calif., May 21, 2021 (GLOBE NEWSWIRE) -- 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 Companys aircraft that are subject to finance leases and a $1.9 million non-cash charge related to the Companys interest rate swaps, which is included in interest expense.

As previously reported, the Company and its subsidiaries, JetFleet HoldingCorp. and JetFleet Management Corp. (the Debtors) filed a voluntary petitionfor bankruptcy protection under Chapter 11 of the U.S.Bankruptcy Code in theU.S. Bankruptcy Court for the District of Delaware on March 29, 2021. After the bankruptcy filing, the Company has continued to operate itsbusinesses in the ordinary courseas debtors-in-possession under the jurisdiction of the Court and inaccordance with the applicable provisions of the Bankruptcy Code. The Bankruptcy Court has grantedthe Companys motionsdesigned primarily to minimize the effect of bankruptcyon the Companys operations, customers and employees and make it possible for theCompany to continue existing operations withoutinterruption during thependency of the Chapter 11 Case.

The BankruptcyCourt also approved the conduct of a process to market and sell the Companys assets aspart of the Chapter 11 proceeding in order to permit the Company to satisfy theCompanysobligations to its creditors, including its sole secured creditor,Drake Asset Management Jersey Limited (Drake). The Company entered into astalking horse agreement with Drake for thesale of certain of the aircraftassets securing the Drake Indebtedness (the Drake Collateral), which if approvedby the Bankruptcy Court as the best and/or highest offer for the DrakeCollateral,will, upon consummation, lead to fullsatisfaction of the Companys obligations to Drake under the Drake Indebtedness.

No third party qualified bids were received for the Companysassets in the Court-approved marketing and sale process, sothe proposed auction for assets will not be conducted, and the Companyanticipates that the sale of the Drake Collateral will proceed under the termsof the stalking horse agreement.There werenon-qualified third party bidsreceived by the Company for certain subsets of the Companysaircraftassets,and the Companyis currently reviewing and evaluating those offers. With respect to any asset purchases proposed in such non-qualifiedbidsthat 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. 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. 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.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.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 Companys interest rate swaps in the 2021 period.As a result of payment delinquencies during the first quarter of 2020 by two of the Companys 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.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 Companys Drake Indebtedness and legal fees related to the Companys 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.

(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.

Aircraft and Engine Portfolio

AeroCenturys 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 Companys Chapter 11 filing and the Companys 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 Companys 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 Companys 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 Companys 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 (202 ) 124 (24 )assetsOther (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 (5,361 ) (14,640 ) (12,891 )provision/(benefit) 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 1,626 2,547 doubtful accountsAircraft, net of accumulated depreciation 56,085 45,763 Assets held for sale 347 38,147 Property, equipment and furnishings, net of accumulated 12 15 depreciationOffice lease right of use, net of accumulated 126 142 amortizationDeferred 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? EQUITYLiabilities: Accounts payable and accrued expenses $ 215 $ 368 Accrued payroll 222 190 Notes payable and accrued interest, net of unamortized - 88,793 debt issuance costsNotes payable and accrued interest held for sale, net - 13,837 of unamortized debt issuance costsDerivative 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys business. The Companys 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 )

Hal LyonsChief Financial Officer(650) 340-1888