SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended............March 31, 1994......
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............ to ..............
Commission file number ....... 0-11350
INTERNATIONAL LEASE FINANCE CORPORATION
(Exact name of registrant as specified in its charter)
CALIFORNIA 22-3059110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1999 AVENUE OF THE STARS, LOS ANGELES, CALIFORNIA 90067
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(310) 788-1999
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes_____X______ No____________
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at April 30, 1994
----- -----------------------------
COMMON STOCK, NO PAR VALUE 35,818,122
Registrant meets the conditions set forth in GENERAL INSTRUCTION H
(1) a and b of Form 10-Q and is therefore filing this form with the
reduced disclosure format.
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-March 31,
1994 and December 31, 1993 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1994 and 1993 . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1994 and 1993 . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . 7
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations . . . . . . . . 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 11
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1994 1993
--------- ------------
(Dollars in thousands)
ASSETS (Unaudited)
Cash, including interest bearing accounts
of $82,022 (1994) and $51,657 (1993) $ 88,920 $ 61,566
Notes receivable 318,356 337,855
Net investment in finance and sales-
type leases 285,410 290,269
Flight equipment under operating leases 8,086,264 7,295,241
Less accumulated depreciation 842,830 779,404
--------- ---------
7,243,434 6,515,837
--------- ---------
Deposits on flight equipment purchases 741,436 820,048
Accrued interest, other receivables
and other assets 91,852 81,244
Investments 18,496 17,837
Deferred debt issue costs-less
accumulated amortization of $17,794
(1994) and $16,390 (1993) 17,480 15,165
---------- ----------
$8,805,384 $8,139,821
========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accrued interest and other payables $ 126,975 $ 92,229
Debt financing, net of deferred debt
discount of $16,189 (1994) and $10,194
(1993) 6,408,995 5,819,481
Security & other deposits on flight
equipment 399,413 437,004
Rentals received in advance 59,263 41,951
Deferred income taxes 372,830 339,753
Current income taxes (9,608) 222
SHAREHOLDER'S EQUITY
Preferred stock--no par value; 20,000,000
authorized shares
Market Auction Preferred Stock, $100,000 per
share liquidation value; Series A,B,C, and D
(1994 and 1993) each having 500 shares
issued and outstanding 200,000 200,000
Common stock--no par value; 100,000,000
authorized shares, 35,818,122 (1994
and 1993) issued and outstanding 3,582 3,582
Additional paid-in capital 532,941 532,941
Retained earnings 710,993 672,658
---------- ----------
1,447,516 1,409,181
--------- ---------
$8,805,384 $8,139,821
========== ==========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-3-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
1994 1993
---- ----
(Dollars in thousands)
(Unaudited)
REVENUES:
Rentals of flight equipment $218,887 $171,893
Flight equipment marketing 6,971 2,121
Interest and other 11,599 12,681
------- -------
237,457 186,695
------- -------
EXPENSES:
Interest 78,795 63,397
Depreciation 71,869 55,940
Provision for overhaul 10,760 7,128
Selling, general & administrative 7,350 6,021
------- -------
168,774 132,486
------- -------
INCOME BEFORE INCOME TAXES 68,683 54,209
Provision for income taxes 24,997 19,156
------ ------
NET INCOME $ 43,686 $ 35,053
======= =======
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-4-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
1994 1993
---- ----
(Dollars in thousands)
(Unaudited)
OPERATING ACTIVITIES:
Net Income $ 43,686 $ 35,053
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of flight equipment 71,869 55,940
Deferred income taxes 33,077 18,145
Amortization of deferred debt
issue costs 1,404 1,341
Gain on sale of flight equipment included
in amount financed (1,075) (922)
Increase in notes receivable (2,629) (2,161)
Equity in net income of affiliates (659) (824)
Changes in operating assets and liabilities:
Increase in accrued interest,
other receivables and other assets (10,610) (5,979)
Increase in accrued interest and
other payables 34,748 40,146
Decrease in current income taxes payable (9,830) (19,223)
Increase (decrease) in rentals
received in advance 17,311 (754)
------ -------
Net cash provided by operating activities 177,292 120,762
======= =======
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (868,679) (737,653)
Proceeds from disposal of flight
equipment-net of gain 64,064 4,052
Collections on notes receivable 32,994 37,243
Advances on notes receivable (4,641) (3,150)
Collections on finance and sales-type
leases 4,860 3,427
-------- --------
Net cash used in investing activities (771,402) (696,081)
======== ========
FINANCING ACTIVITIES:
Proceeds from debt financing 1,404,125 1,365,649
Payments in reduction of debt financing (808,616) (650,051)
Debt issue costs (3,720) (3,163)
Increase in MAPS issue costs (37)
Change in unamortized debt discount (5,995) (3,774)
(Increase) decrease in deposits and progress
payments 78,612 (171,983)
Decrease in customer deposits (37,592) (3,430)
Payment of common and preferred dividends (5,350) (3,812)
------- --------
Net cash provided by financing activities 621,464 529,399
-------- ---------
Increase (decrease) in cash 27,354 (45,920)
Cash at beginning of period 61,566 55,181
-------- ---------
Cash at end of period $ 88,920 $ 9,261
======== =========
-5-
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1994 1993
---- ----
(Dollars in thousands)
(Unaudited)
Cash paid during the period for:
Interest (net of amount capitalized $10,680
(1994) and $10,684 (1993)) $ 38,853 $ 17,933
Income taxes - 20,153
1994:
Notes in the amount of $6,225 were received as partial payment in
exchange for flight equipment sold with a book value of $5,150.
1993:
Flight equipment with a net book value of $60,478 was transferred from
operating leases to finance leases.
Flight equipment was received in exchange for notes receivable in the
amount of $41,475.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-6-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
A. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in
accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Certain reclassifications have been made to the 1993
condensed consolidated financial statements to conform to the 1994
presentation. Operating results for the three month period ended
March 31, 1994 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1994. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1993.
-7-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company borrows funds for the purchase of flight equipment,
including the making of progress payments during the construction phase,
principally on an unsecured basis from various sources. The Company's
debt financing was comprised of the following at the following dates:
Dec. 31, March 31,
1993 1994
---- ----
(Dollars in thousands)
Public term debt with single
maturities $2,550,000 $3,000,000
Public medium-term notes with
varying maturities 1,765,920 1,752,420
Bank term debt and revolvers 20,000 20,000
Other term debt 48,778 23,503
--------- ---------
Total term debt 4,384,698 4,795,923
Commercial paper 1,444,977 1,629,261
Bank lines of credit - -
Less: Deferred debt discount (10,194) (16,189)
--------- ---------
Total Debt Financing $5,819,481 $6,408,995
========== ==========
Composite interest rate 5.89% 5.79%
Percentage of total debt at fixed rates 74.77% 71.93%
Composite interest rate on fixed rate
debt 6.70% 6.57%
Bank prime rate 6.00% 6.25%
The interest on substantially all the public debt (exclusive of
the commercial paper) is fixed for the term of the note. The Company has
committed revolving loans and lines of credit with 29 banks aggregating
$965 million and an uncommitted line of credit with one bank in the
amount of $200 million; no amounts were outstanding thereunder at March
31, 1994. Bank debt principally provides for interest rates that vary
according to the pricing option then in effect and range from prime, .30%
to 3/8% over LIBOR or .425% to .50% over CD rates, at the Company's
option. Bank financings may be subject to either compensating balances or
commitment fees of up to .25% of amounts available.
The Company has an effective shelf registration with respect to
$2.1 billion of debt securities, under which $950 million of notes were
sold through March 31, 1994. Additionally, an $800 million Medium Term
Note Program has been implemented under the shelf registration, under
which $673.4 million has been sold through March 31, 1994.
In 1994, the Company entered into an Export Credit Lease Facility
in the amount of $555 million which is available for the acquisition of
up to 10 aircraft manufactured by Airbus to be delivered in 1994. As of
March 31, 1994 the Company had canceled the options to finance three of
the aircraft aggregating $97 million. In addition, as of March 31, 1994
the Company had exercised the options to finance three aircraft scheduled
-8-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
for delivery in the second quarter of 1994 aggregating $240 million. As
a result, $218 million remains available to finance the remaining four
aircraft as of March 31, 1994.
The Company believes that it has sufficient financing sources
available to meet its capital requirements through 1994.
RESULTS OF OPERATIONS - Three months ended March 31, 1994 versus March 31,
1993.
The increase in revenues from the rentals of flight equipment from
$171,893,000 in 1993 to $218,887,000 in 1994, a 27.3% increase, is
attributable to the acquisition of additional new aircraft as the fleet
of flight equipment on operating lease increased from 195 at March 31,
1993 to 245 at March 31, 1994, a 25.6% increase.
In addition to its leasing operations, the Company actively engages
in the marketing of flight equipment on a principal and commission basis
as well as the disposition of flight equipment at the end of the lease
term. Revenue from such flight equipment marketing increased from
$2,121,000 in 1993 to $6,971,000 in 1994 as a result of the nature of the
related flight equipment marketed. Flight equipment marketing revenue
consisted of the following number of transactions in each period:
1994 1993
---- ----
Sales of flight equipment - -
Commissions 2 4
Disposition of leased flight equipment 2 1
Expenses as a percentage of total revenues increased to 71.1% in the
first quarter of 1994 compared to 71.0% in the first quarter of 1993.
Interest expense increased from $63,397,000 in 1993 to $78,795,000 in
1994 primarily as a result of an increase in gross debt outstanding at
quarter end from $4,965 million at 1993 to $6,425 million at 1994 to
finance aircraft acquisitions. However, the Company's composite borrowing
rate decreased as follows:
1994 1993 Decrease
---- ---- --------
Beginning of Quarter 5.89% 6.55% .66%
End of Quarter 5.79% 6.29% .50%
----- ----- ----
Average 5.84% 6.42% .58%
Depreciation of flight equipment increased from $55,940,000 in 1993
to $71,869,000 in 1994 due to the addition of aircraft.
Provision for overhauls increased from $7,128,000 in 1993 to
$10,760,000 in 1994 due to an increase in the number of aircraft on which
the Company collects overhaul reserves and therefore an increase in the
number of hours flown for which an overhaul reserve is provided. In
addition, the rate at which overhaul reserves are provided increased in
1994, causing part of the increase.
Provision for income taxes increased from $19,156,000 in 1993 to
$24,997,000 in 1994 as a direct result of an increase in pretax income.
The Company's effective income tax rate increased from 35.3% in 1993 to
36.4% in 1994.
-9-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
12 Computation of Ratio of Earnings to Fixed
Charges and Preferred Stock Dividends.
b) Reports on Form 8-K:
1. Form 8-K, event date January 4, 1994 (Item 7).
2. Form 8-K, event date January 11, 1994 (Item 7).
3. Form 8-K, event date February 23, 1994 (Item 7).
4. Form 8-K, event date March 24, 1994 (Item 7).
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INTERNATIONAL LEASE FINANCE CORPORATION
May 12, 1994 /s/ Leslie L. Gonda
Date ---------------------
LESLIE L. GONDA
Chairman of the Board
May 12, 1994 /s/ Alan H. Lund
Date ---------------------
ALAN H. LUND
Senior Vice President,
Chief Financial
Officer and Treasurer
-11-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
12. Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividends
-12-
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND
MARCH 31, 1993
1994 1993
---- ----
(Dollars in thousands)
Earnings:
Net Income . . . . . . . . . . . . . . . . . $43,686 35,053
Add:
Provision for income taxes . . . . . . . . .24,997 19,156
Fixed charges. . . . . . . . . . . . . . . .89,475 74,081
Less:
Capitalized interest . . . . . . . . . . . 10,680 10,684
------- -------
Earnings as adjusted (A) . . . . . . . . . $147,478 $117,606
======= =======
Preferred dividend requirements. . . . . . . .$ 1,690 $ 884
Ratio of income before provision
for income taxes to net income . . . . . 157% 155%
----- -----
Preferred dividend factor on pretax
basis. . . . . . . . . . . . . . . . . . 2,653 1,370
----- -----
Fixed Charges:
Interest expense . . . . . . . . . . . . . 78,795 63,397
Capitalized interest . . . . . . . . . . . 10,680 10,684
------ ------
Fixed charges as adjusted. . . . . . . . 89,475 74,081
------ ------
Fixed charges and preferred stock
dividends (B) . . . . . . . . . . . . . . .$ 92,128 $ 75,451
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (B). . . . . . . . . . . . . . 1.60x 1.56x
===== =====
-13-
