BURLINGAME, Calif., Feb. 26 /PRNewswire-FirstCall/ -- AeroCentury Corp. (AMEX:ACY), an independent aircraft leasing company, today reported its operating results for the fourth quarter and the year ended December 31, 2007.
In connection with the year-end audit of 2007 consolidated financial results, the Audit Committee and management of the Company determined that two $450,000 non-contingent termination payments due from a lessee at lease-end in October 2007 and February 2008, respectively, should have been recognized as operating lease revenue ratably over the three-year term of the leases. As a result of this timing difference, operating lease revenue has been understated by approximately $627,000 cumulatively through December 31, 2006, and by approximately $229,000 for the nine months ended September 30, 2007.
Accordingly, on February 14, 2008, the Board of Directors, in consultation with management of the Company and the Company's independent registered public accounting firm, determined that its previously issued consolidated financial statements for the years ended December 31, 2004, 2005 and 2006 and the quarters ended March 31, 2005, June 30, 2005, September 30, 2005, March 31, 2006, June 30, 2006, September 30, 2006, March 31, 2007, June 30, 2007 and September 30, 2007 should no longer be relied upon because of the error described above. The Company has restated its consolidated financial statements for the 2007 and 2006 quarters, the effects of which are shown in the tables below. The adjustments do not change the total amount of operating lease revenue recognized from the two lease termination payments, only the timing of the recognition of such revenue.
As discussed and shown in the tables below, comparative information for the third quarter of 2006 and first nine months of 2006 has been restated in connection with the Company's adoption of Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements ("SAB 108") and Financial Accounting Standard Board Staff Position AUG AIR-1, Accounting for Planned Major Maintenance Activities ("FSP AUG AIR-1").
Due to the recent adoption of FSP AUG AIR-1, the Company was required to discontinue the accrue-in-advance method of accounting for planned major maintenance for financial reporting periods beginning on January 1, 2007. The Company has adopted the direct expensing method, under which actual costs incurred are expensed directly when maintenance is performed and the accrual of non-refundable maintenance reserves from the Company's lessees for planned major maintenance is reflected as income. Because the net effect of recognizing income when maintenance reserves are billed and accruing maintenance expense as incurred within any given period will vary, it is likely that the new accounting method will result in uneven effects on the Company's results of operations.
2007 Results For the quarter ended December 31, 2007, the Company reported total revenues of $7.2 million compared with revenues of $4.9 million for the same period a year ago. For the year ended December 31, 2007, the Company reported revenues of $23.8 million compared with revenues of $18.8 million for 2006.
The Company reported net income of $1,124,000 or $0.73 per basic share and $0.69 per diluted share for the fourth quarter of 2007, compared to net income of $709,000 or $0.46 per basic and diluted share for the fourth quarter of 2006. The Company had net income of $3,775,000 or $2.45 per basic share and $2.36 per diluted share for 2007 versus $1,009,000 or $0.65 per basic and diluted share for 2006.
Operating lease revenue was approximately $1,470,000 and $3,601,000 higher in the fourth quarter and full year of 2007, respectively, versus 2006, primarily because of additional lease revenue from aircraft purchased in the fourth quarter of 2006 and during 2007 and re-leases during 2007 at increased rental rates for several of the Company's aircraft. In addition, in 2007 the Company recorded revenue from several aircraft that were off lease for part of 2006. The aggregate effect of these increases was partially offset by a decrease in revenue related to aircraft that were off lease for part of 2007.
Maintenance reserves income represents non-refundable reserves which are earned based on lessee aircraft usage. As a result of an increase in total aircraft usage in 2007, primarily due to aircraft acquisitions during the year, maintenance reserves income was approximately $751,000 and $1,319,000 higher in the fourth quarter and year ended December 31, 2007, respectively, than in 2006.
Total expenses were approximately $1,994,000 higher in the three months ended December 31, 2007, versus the same period in 2006, primarily because of increases in interest, depreciation and management fee expenses as a result of aircraft purchases, as well as maintenance expense. The Company's maintenance expense is dependent on the aggregate maintenance claims amount submitted by lessees for reimbursement and expenses incurred in connection with off-lease aircraft. As a result of higher total lessee claims and the replacement of a damaged engine on one of the Company's leased aircraft, the Company incurred approximately $721,000 more in maintenance expense in the three months ended December 31, 2007, versus the same period in 2006.
Total expenses were approximately $1,283,000 higher in the year ended December 31, 2007 versus 2006, primarily because of increases in interest, depreciation and management fee expenses, all of which resulted from aircraft purchases during 2006 and 2007, as well as an increase in other taxes. Those increases were partially offset by a decrease in the amount of maintenance expense. As a result of lower total lessee claims and less expense incurred for off-lease aircraft in 2007, the Company incurred approximately $1,584,000 less in maintenance expense in 2007 compared to 2006.
AeroCentury is an aircraft operating lessor and finance company specializing in leasing regional aircraft and engines utilizing triple net leases. The Company's aircraft and engines are on lease to regional airlines and commercial users worldwide.
AeroCentury Corp. Selected Financial Information (Unaudited)
(000's) For the Quarters Ended For the Years Ended
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
(as restated) (as restated) Operating lease
revenue $5,600 $4,130 $19,412 $15,811
Maintenance reserves
income 1,483 732 4,310 2,990
Gain on sale of
aircraft and
aircraft engines 97 - 97 34
Other 11 4 31 8
7,191 4,866 23,850 18,843 Depreciation 1,890 1,204 5,615 4,692
Interest 1,629 1,267 6,260 4,954
Management fees 856 686 3,017 2,743
Maintenance 1,094 373 2,395 3,979
Other taxes 13 8 327 31
Professional fees
and other 242 192 882 814
5,724 3,730 18,496 17,213 Income before taxes 1,467 1,136 5,354 1,630
Tax provision 343 427 1,579 621
Net income $1,124 $709 $3,775 $1,009
Earnings per share:
Basic $0.73 $0.46 $2.45 $0.65
Diluted $0.69 $0.46 $2.36 $0.65
Weighted average
common shares
outstanding 1,543,257 1,543,257 1,543,257 1,543,257
Weighted average
diluted common
shares outstanding 1,628,501 1,543,257 1,598,516 1,543,257 Summary Balance Sheet: December 31, December 31,
2007 2006
(as restated) Total assets $126,653 $97,366
Total liabilities $94,513 $70,558
Shareholders' equity $32,140 $26,808 AeroCentury Corp. Condensed Consolidated Statements of Operations (Unaudited)
(000's) For the Three Months Ended
March 31, 2007 June 30, 2007 September 30, 2007
(as (as (as (as (as (as
pre- restated) pre- restated) pre- restated)
viously viously viously
reported) reported) reported) Operating
lease revenue $4,207 $4,284 $4,152 $4,228 $5,224 $5,300
Maintenance
reserves income 827 827 847 847 1,152 1,152
Gain on sale
of aircraft - - - - - -
Other 7 7 1 1 12 12
5,041 5,118 5,000 5,076 6,388 6,464 Depreciation 1,235 1,235 1,258 1,258 1,493 1,493
Interest 1,222 1,222 1,424 1,424 1,724 1,724
Management fees 683 683 684 684 794 794
Maintenance 225 225 701 701 375 375
Other taxes - 12 14 14 292 292
Professional fees
and other 211 199 219 219 218 218
3,576 3,576 4,300 4,300 4,896 4,896 Income before
taxes 1,465 1,542 700 776 1,492 1,568
Tax provision 492 518 237 263 428 454
Net income $973 $1,024 $463 $513 $1,064 $1,114
Earnings per
share:
Basic $0.63 $0.66 $0.30 $0.33 $0.69 $0.72
Diluted $0.63 $0.66 $0.29 $0.32 $0.66 $0.69 Weighted
average
common shares
outstanding 1,543,257 1,543,257 1,543,257 1,543,257 1,543,257 1,543,257
Weighted
average
diluted
common shares
outstanding 1,543,257 1,543,257 1,601,423 1,601,423 1,618,674 1,618,674 AeroCentury Corp. Condensed Consolidated Statements of Operations (Unaudited)
(000's) For the Three Months Ended
March 31, 2006 June 30, 2006
(as pre- (as pre-
viously viously
reported(1))(as restated)reported(1))(as restated)
Operating lease
revenue $3,701 $3,776 $3,833 $3,908
Maintenance reserves
income 792 792 756 756
Gain on sale of
aircraft - - 34 34
Other (9) (9) 4 4
4,484 4,559 4,627 4,702 Depreciation 1,155 1,155 1,160 1,160
Interest 1,164 1,164 1,251 1,251
Management fees 696 696 683 683
Maintenance 1,092 1,092 1,644 1,644
Professional fees
and other 294 294 174 174
4,401 4,401 4,912 4,912 Income/(loss)
before taxes 83 158 (285) (210)
Tax provision/
(benefit) 31 57 (78) (52)
Net income/(loss) $52 $101 $(207) $(158)
Earnings/(loss)
per share:
Basic $0.03 $0.07 $(0.13) $(0.10)
Diluted $0.03 $0.07 $(0.13) $(0.10)
Weighted average
common shares
outstanding 1,543,257 1,543,257 1,543,257 1,543,257
Weighted average
diluted common
shares outstanding 1,543,257 1,543,257 1,543,257 1,543,257
(1) Results for the quarters ended March 31, 2006, June 30, 2006 and
September 30, 2006, as reported in the Company's quarterly reports on
Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and
September 30, 2007, included the effects of the adoption of SAB 108
and FSP AUG AIR-1.
AeroCentury Corp. Condensed Consolidated Statements of Operations (Unaudited)
(000's) For the Three Months Ended
September 30, 2006 December 31, 2006
(as restated
(as pre- under
viously (as FSP AUG (as
reported(1)) restated) AIR-1(2)) restated) Operating lease
revenue $3,920 $3,996 $4,053 $4,130
Maintenance reserves
income 710 710 732 732
Gain on sale of
aircraft - - - -
Other 10 10 4 4
4,640 4,716 4,789 4,866 Depreciation 1,173 1,173 1,204 1,204
Interest 1,272 1,272 1,267 1,267
Management fees 677 677 686 686
Maintenance 869 869 373 373
Professional fees
and other 178 178 200 200
4,169 4,169 3,730 3,730 Income/(loss)
before taxes 471 547 1,059 1,136
Tax provision/
(benefit) 163 189 401 428
Net income/(loss) $308 $358 $658 $708
Earnings/(loss)
per share:
Basic $0.20 $0.23 $ 0.43 $0.46
Diluted $0.20 $0.23 $ 0.43 $0.46
Weighted average
common shares
outstanding 1,543,257 1,543,257 1,543,257 1,543,257
Weighted average
diluted common
shares outstanding 1,543,257 1,543,257 1,543,257 1,543,257
(1) Results for the quarters ended March 31, 2006, June 30, 2006 and
September 30, 2006, as reported in the Company's quarterly reports on
Form 10-QSB for the quarters ended March 31, 2007, June 30, 2007 and
September 30, 2007, included the effects of the adoption of SAB 108
and FSP AUG AIR-1.
(2) The effects of the Company's adoption of SAB 108 were included in the
results reported in the Company's Form 8-K filings on February 6, 2007
and March 9, 2007.
AeroCentury Corp. Condensed Consolidated Balance Sheets (Unaudited)
(000's) March 31, 2007 June 30, 2007 September 30, 2007
(as (as (as
previously (as previously (as previously (as
reported) restated)reported) restated) reported) restated) Assets:
Cash and
cash
equivalents $3,131 $3,131 $2,558 $2,558 $2,869 $2,869
Accounts
receivable 758 1,461 937 1,716 1,010 1,865
Aircraft
and aircraft
engine held
for lease,
net 90,788 90,788 103,358 103,358 114,122 114,122
Prepaid
expenses and
other 887 887 1,461 1,461 1,682 1,682
Total assets $95,564 $96,267 $108,314 $109,093 $119,683 $120,538 Liabilities:
Notes payable
and accrued
interest 54,552 54,552 62,944 62,944 70,886 70,886
Maintenance
reserves
and accrued
costs 3,837 3,837 4,692 4,692 4,997 4,997
Deferred
income taxes 4,584 4,826 4,788 5,056 5,243 5,537
All other
liabilities 5,216 5,216 6,496 6,496 8,099 8,099
68,189 68,431 78,920 79,188 89,225 89,519 Stockholders'
equity:
Preferred
stock,
$0.001 par
value,
2,000,000
shares
authorized,
no shares
issued
and
outstanding - - - - - -
Common stock,
$0.001 par
value,
3,000,000
shares
authorized,
1,606,557
shares
issued and
outstanding 2 2 2 2 2 2
Paid in
capital 13,821 13,821 15,377 15,377 15,377 15,377
Retained
earnings 14,056 14,517 14,519 15,030 15,583 16,144
27,879 28,340 29,898 30,409 30,962 31,523
Treasury
stock at
cost,
63,300
shares (504) (504) (504) (504) (504) (504)
Total
stockholders'
equity 27,375 27,836 29,394 29,905 30,458 31,019
$95,564 $96,267 $108,314 $109,093 $119,683 $120,538 AeroCentury Corp. Condensed Consolidated Balance Sheets (Unaudited)
(000's) March 31, 2006 June 30, 2006
(as restated (as restated
under SAB 108 under SAB 108
(as pre- and (as pre- and
viously FSP AUG (as viously FSP AUG (as
filed) AIR-1) restated) filed) AIR-1) restated) Assets:
Cash and
cash
equivalents $2,220 $2,220 $2,220 $3,420 $3,420 $3,420
Accounts
receivable 736 750 1,150 609 624 1,099
Aircraft and
aircraft
engine held
for lease,
net 91,940 89,701 89,698 91,294 89,127 89,127
Aircraft and
aircraft
engine held
for sale,
net 1,026 1,023 1,026 - - -
Prepaid
expenses
and other 1,088 1,088 1,088 759 759 759
Total assets $97,010 $94,782 $95,182 $96,082 $93,930 $94,405 Liabilities:
Notes
payable and
accrued
interest 58,191 58,191 58,191 57,108 57,108 57,108
Maintenance
reserves
and accrued
costs 13,481 2,031 2,031 13,282 2,319 2,319
Deferred
income taxes 1,100 3,780 3,917 1,140 3,692 3,855
All other
liabilities 5,143 5,143 5,143 5,371 5,381 5,381
77,915 69,145 69,282 76,901 68,500 68,663 Stockholders'
equity:
Preferred
stock,
$0.001 par
value,
2,000,000
shares
authorized,
no shares
issued and
outstanding - - - - - -
Common stock,
$0.001 par
value,
3,000,000
shares
authorized,
1,606,557
shares
issued and
outstanding 2 2 2 2 2 2
Paid in
capital 13,821 13,821 13,821 13,821 13,821 13,821
Retained
earnings 5,776 12,318 12,581 5,862 12,111 12,423
19,599 26,141 26,404 19,685 25,934 26,246
Treasury
stock at
cost,
63,300
shares (504) (504) (504) (504) (504) (504)
Total
stockholders'
equity 19,095 25,637 25,900 $19,181 25,430 $25,742
$97,010 $94,782 $95,182 $96,082 $93,930 $94,405 AeroCentury Corp. Condensed Consolidated Balance Sheets (Unaudited)
(000's) September 30, 2006 December 31, 2006
(as restated
under SAB 108 (as restated
(as pre- and (as pre- under
viously FSP AUG (as viously FSP AUG (as
filed) AIR-1) restated) filed) AIR-1) restated) Assets:
Cash and
cash
equivalents $3,245 $3,245 $3,245 $3,384 $3,384 $3,384
Accounts
receivable 947 965 1,515 864 871 1,498
Aircraft and
aircraft
engine held
for lease,
net 90,045 87,951 87,951 93,675 91,902 91,902
Prepaid
expenses
and other 731 731 731 582 582 582
Total assets $94,968 $92,892 $93,442 $98,505 $96,739 $97,366 Liabilities:
Notes payable
and accrued
interest 54,813 54,813 54,813 57,907 57,907 57,907
Maintenance
reserves
and accrued
costs 13,996 2,970 2,970 14,111 3,168 3,168
Deferred
income taxes 1,243 3,855 4,043 1,127 4,256 4,471
All other
liabilities 5,516 5,516 5,516 5,012 5,012 5,012
75,568 67,154 67,342 78,157 70,343 70,558 Stockholders' equity:
Preferred stock,
$0.001 par
value,
2,000,000
shares
authorized,
no shares
issued and
outstanding - - - - - -
Common stock,
$0.001 par
value,
3,000,000
shares
authorized,
1,606,557
shares
issued and
outstanding 2 2 2 2 2 2
Paid in
capital 13,821 13,821 13,821 13,821 13,821 13,821
Retained
earnings 6,081 12,419 12,781 7,029 13,077 13,489
19,904 26,242 26,604 20,852 26,900 27,312
Treasury stock
at cost,
63,300
shares (504) (504) (504) (504) (504) (504)
Total
stockholders'
equity 19,400 25,738 26,100 20,348 26,396 26,808
$94,968 $92,892 $93,442 $98,505 $96,739 $97,366
DATASOURCE: AeroCentury Corp.
CONTACT: Toni Perazzo, Chief Financial Officer of AeroCentury Corp., +1-650-340-1888 Web site: http://www.aerocentury.com/
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