Aerocentury Corp (ACY) SEC Filing 10-Q Quarterly report for the period ending Sunday, September 30, 2018

Toni Perazzo

Chief Financial Officer

(650) 340-1888

AeroCentury Corp. Reports Second Quarter 2018 Results

BURLINGAME, California, August 9, 2018 -- AeroCentury Corp. (the "Company") (NYSE American: ACY), an independent aircraft leasing company, today reported a second quarter net loss of $81,000, or $(0.06) per share, compared to net income of $371,000, or $0.22 per share, for the first quarter of 2018 and net income of $356,000, or $0.25 per share, for the second quarter of 2017.

In the first six months of 2018, net income decreased 76% to approximately $236,000, or $0.17 per share, from approximately $997,000, or $0.67 per share, in the first six months of 2017.

The second quarter and first six months of 2018 included $0.6 million and $1.6 million, respectively, of other income resulting from payments received from a lessee of three aircraft that were returned to the Company during 2017.  Such payments were received after the aircraft were returned and were applied toward unpaid maintenance reserves as well as amounts owed for unsatisfied return conditions of the applicable leases.  The unpaid amounts were not booked as receivables 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 from this lessee as they are received and they are recorded in other income.

"In the second quarter, we continued on our path of modernizing our portfolio, purchasing two mid-life Dash 8-Q400 turboprop aircraft after having previously sold five older aircraft in late 2017 and early 2018.  An unanticipated delay in closing our second quarter acquisitions resulted in a lag in reinvestment of the previous sales proceeds, and this created a short-term drag on our revenues in the first half of 2018.  The short-term effect of potential lags in reinvestment is a necessary occasional consequence of dynamic and strategic portfolio management, and we believe it is more than outweighed by the potential long-term benefit of modernizing our portfolio in terms of value retention and asset marketability, and we remain committed to continuing on this path.  The average age of aircraft we are holding for lease is now approximately 11 years," said Michael Magnusson, President.

Mr. Magnusson also commented on the progress of the Company's proposed acquisition by merger of JetFleet Holding Corp. ("JHC"), the corporation that has managed the Company's operations and aircraft portfolio since the Company's founding in 1997.  "A special meeting of the Company's stockholders to approve the Merger is scheduled for August 31, 2018, and is the final procedural step to be accomplished before we can consummate the Merger.  Although the consummation of the Merger of the Company and JHC has taken somewhat more time than we originally anticipated, both companies remain fully committed to the transaction," stated Mr. Magnusson.

·	Purchase of two Dash 8-Q400 aircraft on lease to Croatia Airlines, the government-owned flag carrier of the Republic of Croatia

·	Operating lease revenue of $6.8 million

·	EBITDA1of $5.4 million

·	Book value per share of $33.60 as of June 30, 2018

·	91% portfolio utilization during the quarter

·	$32.5 million unused credit facility amount as of June 30, 2018

Second Quarter 2018 Comparative Data:

·	Average portfolio utilization was 91% during the second quarter of 2018, 90% in the first quarter of 2018, and 94% in the second quarter of 2017.  The change between periods was 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 1% to $7.8 million for the second quarter of 2018, compared to $7.9 million in the preceding quarter, and decreased 4% from $8.1 million in the second quarter a year ago.

o	Operating lease revenues increased 6% to $6.8 million in the second quarter of 2018 from $6.5 million in the preceding quarter and decreased 4% from $7.1 million in the year-ago quarter, reflecting assets sales during 2017.

o	Operating lease revenues accounted for 88% of total revenues in the second quarter of 2018, compared to 82% in the first quarter of 2018 and 88% in the year-ago quarter.

o	The Company recorded no maintenance reserve revenue in the first or second quarters of 2018 and $0.7 million in the second quarter of 2017.

o	During the second quarter of 2018, the Company recognized $18,100 in gains from disposal of assets, compared to $8,200 in losses in the preceding quarter and losses of $147,700 in the second quarter of 2017.

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Total expenses increased 6% to $7.9 million from $7.4 million in the preceding quarter, primarily due to higher depreciation and interest and the second quarter provision for impairment, the effects of which were partially offset by a decrease in professional fees.  Total expenses increased 4% from $7.5 million in the year-ago quarter, primarily due to higher depreciation and interest, the effects of which were partially offset by lower maintenance costs and a smaller provision for impairment.

AeroCentury's portfolio currently consists of twenty-three 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 eleven customers operating in nine countries.