<PAGE>
<PAGE>
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............September 30, 1997......
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 October 30, 1997
----- -------------------------------
COMMON STOCK, NO PAR VALUE 35,818,122
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
September 30, 1997 and December 31, 1996 . . . . . . .3
Condensed Consolidated Statements of Income
Three Months Ended September 30, 1997 and 1996 . . . .4
Condensed Consolidated Statements of Income
Nine Months Ended September 30, 1997 and 1996. . . . .5
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997 and 1996. . . . .6
Note to Condensed Consolidated Financial Statements . . . .8
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations. . . .9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<S> <C> <C>
September 30, December 31,
1997 1996
---------- ------------
(Unaudited)
ASSETS
Cash, including interest bearing accounts
of $61,844(1997) and $31,704 (1996) $ 74,708 $ 36,558
Current income taxes receivable 36,668 16,420
Notes receivable 447,131 429,146
Net investment in finance and sales-
type leases 98,490 103,629
Flight equipment under operating leases 15,414,306 13,674,996
Less accumulated depreciation 1,770,995 1,492,222
---------- ----------
13,643,311 12,182,774
---------- ----------
Deposits on flight equipment purchases 856,157 861,355
Accrued interest, other receivables
and other assets 68,064 50,895
Investments 18,865 18,099
Deferred debt issue costs-less
accumulated amortization of $49,885
(1997) and $43,537 (1996) 25,819 26,720
---------- ----------
$15,269,213 $13,725,596
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables $ 269,891 $ 219,111
Debt financing, net of deferred debt
discount of $30,305 (1997) and $22,749
(1996) 9,850,543 8,798,388
Capital lease obligations 933,320 995,872
Security & other deposits on flight
equipment 722,076 611,272
Rentals received in advance 138,677 77,107
Deferred income taxes 945,906 809,294
SHAREHOLDERS' 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,D,E
F,G and H (1997 and 1996) each having 500
shares issued and outstanding 400,000 400,000
Common stock--no par value; 100,000,000
authorized shares, 35,818,122 (1997
and 1996) issued and outstanding 3,582 3,582
Additional paid-in capital 579,955 579,955
Retained earnings 1,425,263 1,231,015
---------- ----------
2,408,800 2,214,552
---------- ----------
$15,269,213 $13,725,596
========== ==========
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
REVENUES:
Rentals of flight equipment $452,756 $375,474
Flight equipment marketing 41,187 33,003
Interest and other 12,021 14,817
------- -------
505,964 423,294
------- -------
EXPENSES:
Interest 163,123 146,731
Depreciation 141,441 127,812
Rent expense 24,166 10,606
Provision for overhaul 27,569 23,808
Selling, general & administrative 9,936 9,482
------- -------
366,235 318,439
------- -------
INCOME BEFORE INCOME TAXES 139,729 104,855
Provision for income taxes 50,647 39,080
------- -------
NET INCOME $ 89,082 $ 65,775
======= =======
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------- --------
(Unaudited)
REVENUES:
Rentals of flight equipment $1,287,557 $1,069,345
Flight equipment marketing 79,357 102,621
Interest and other 34,704 38,157
--------- ---------
1,401,618 1,210,123
--------- ---------
EXPENSES:
Interest 477,209 427,282
Depreciation 407,592 361,646
Rent expense 67,552 31,434
Provision for overhaul 74,602 63,131
Selling, general & administrative 30,862 28,592
--------- ---------
1,057,817 912,085
--------- ---------
INCOME BEFORE INCOME TAXES 343,801 298,038
Provision for income taxes 123,386 110,764
--------- ---------
NET INCOME $ 220,415 $ 187,274
========= =========
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
OPERATING ACTIVITIES:
Net Income $ 220,415 $ 187,274
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of flight equipment 407,592 361,646
Deferred income taxes 136,612 117,459
Amortization of deferred debt
issue costs 6,967 6,940
Gain on sale of flight equipment
included in amount financed (19,422) (3,772)
Increase in notes receivable (712) (66,721)
Equity in net (income) loss of affiliates (766) (750)
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest,
other receivables and other assets (17,169) 21,295
(Increase) in current income taxes
receivable (20,248) (19,305)
Increase in accrued interest and
other payables 50,780 33,353
Increase in rentals received in advance 61,579 5,555
------------ ------------
Net cash provided by operating activities 825,619 642,974
------------ ------------
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (2,800,024) (2,470,977)
(Increase) decrease in deposits and
progress payments 5,198 (83,390)
Proceeds from disposal of flight
equipment-net of gain 869,858 1,047,339
Collections on notes receivable 63,388 41,186
Collections on finance and sales-type leases 5,937 4,822
------------ ------------
Net cash used in investing activities (1,855,643) (1,461,020)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from debt financing 5,154,335 3,141,327
Payments in reduction of debt financing (4,157,175) (2,433,313)
Debt issue costs (6,066) (4,215)
Change in unamortized debt discount (7,557) (2,982)
Increase in customer deposits 110,804 99,317
Payment of common and preferred dividends (26,167) (30,026)
------------ ------------
Net cash provided by financing activities 1,068,174 770,108
------------ ------------
Increase/(Decrease) in cash 38,150 (47,938)
Cash at beginning of period 36,558 87,097
------------ ------------
Cash at end of period $ 74,708 $ 39,159
============ ============
/TABLE
<PAGE>
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Dollars in thousands)
(Unaudited)
Cash paid (received) during the period for:
Interest (net of amount capitalized
$35,101 (1997) and $37,359 (1996)) $ 400,759 $ 374,158
Income taxes 7,022 12,609
</TABLE>
1997:
Notes and finance and sales-type leases in the amount of
$81,460 were received as partial payment in exchange for flight
equipment sold with a book value of $62,181.
1996:
Notes in the amount of $87,658 were received as partial
payment in exchange for flight equipment sold with a book value
of $83,886.
Flight Equipment was received in exchange for notes receivable
in the amount of $46,307.
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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 only of normal recurring accruals)
considered necessary for a fair presentation have been
included. Certain reclassifications have been made to the
1996 condensed consolidated financial statements to conform to
the 1997 presentation. Operating results for the three and
nine month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 1997. 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, 1996.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
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:
<TABLE>
<S> <C> <C>
September 30, December 31,
1997 1996
----------- -----------
(Dollars in thousands)
Public term debt with single
maturities $ 4,050,000 $ 3,500,000
Public medium-term notes with
varying maturities 3,015,465 2,563,720
Capital lease obligations 933,320 995,872
--------- ---------
Total term debt 7,998,785 7,059,592
Commercial paper 2,815,383 2,757,417
Less: Deferred debt discount (30,305) (22,749)
--------- ----------
Total Debt Financing $ 10,783,863 $ 9,794,260
=========== ==========
Composite interest rate 6.34% 6.23%
Percentage of total debt at fixed rates 71.82% 68.95%
Composite interest rate on fixed rate
debt 6.63% 6.58%
Bank prime rate 8.50% 8.25%
</TABLE>
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 47
banks aggregating $2.65 billion and uncommitted lines of credit
with three banks for varying amounts mutually agreed upon by the
Company and the banks. Bank debt principally provides for
interest rates that vary according to the pricing option then in
effect and range from prime to .20% over LIBOR at the Company's
option. Bank financings are subject to facility fees of up to
.08% of amounts available.
The Company has an effective shelf registration with respect
to $2.09 billion of debt securities, under which $700 million of
notes were sold through September 30, 1997. Additionally, a $990
million Medium Term Note Program has been implemented under the
shelf registration, under which $780 million has been sold
through September 30, 1997.
The Company believes that the combination of internally
generated funds and debt financing currently available to the
Company will allow the Company to meet its capital requirements
for at least the next 12 months.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-Three months ended September 30, 1997
versus 1996.
The increase in revenues from the rentals of flight equipment
from $375.5 million in 1996 to $452.8 million in 1997, a 20.6%
increase, is attributable to several factors. Firstly, the
increase is due to the increase in the volume of flight equipment
subject to operating leases from 301 at September 30, 1996 to 347
at September 30, 1997, a 15% increase. Secondly, the increase is
attributable to the increase in the relative cost of the fleet
from $13.2 billion in 1996 to $15.4 billion in 1997, a 17%
increase. Finally, the increase is due to the number of aircraft
subject to sale-leaseback transactions, increasing from 14
aircraft at September 30, 1996, to 20 aircraft at September 30,
1997, from which rental income is earned, although the aircraft
are not counted as being in the fleet.
In addition to its leasing operations, the Company actively
engages in the marketing of flight equipment from its own
portfolio as well as on a principal and commission basis. Revenue
from such flight equipment marketing increased from $33.0 million
in 1996 to $41.2 million in 1997 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:
1997 1996
---- ----
Sales of flight equipment - -
Commissions 1 4
Disposition of leased flight equipment 9 10
Expenses as a percentage of total revenues decreased to 72.4%
in the third quarter of 1997 compared to 75.2% in the third
quarter of 1996. Interest expense increased from $146.7 million
in 1996 to $163.1 million in 1997 primarily as a result of an
increase in gross debt outstanding at quarter end from $9.6
billion at 1996 to $10.8 billion at 1997 to finance aircraft
acquisitions. In addition, the Company's composite borrowing
rate fluctuated as follows:
1997 1996 Increase
---- ---- --------
Beginning of Quarter 6.32% 6.22% .10%
End of Quarter 6.34% 6.28% .06%
---- ---- ------
Average 6.33% 6.25% .08%
Depreciation of flight equipment increased from $127.8 million
in 1996 to $141.4 million in 1997 due to the addition of
aircraft.
Rent expense increased from $10.6 million in 1996 to $24.2
million in 1997 as a result of a sale-leaseback transaction for
seven aircraft completed in September 1996. Currently, 20
aircraft are subject to sale-leaseback transactions.
Provision for overhauls increased from $23.8 million in 1996
to $27.6 million in 1997 due to an increase in the number of
aircraft from which the Company collects overhaul reserves and,
therefore, an increase in the total number of hours flown for
which an overhaul reserve is provided.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS-Nine months ended September 30, 1997 versus
1996.
The increase in revenues from the rentals of flight equipment
from $1,069.3 million in 1996 to $1,287.6 million in 1997, a 20%
increase, is attributable to several factors. Firstly, the
increase is due to the increase in the volume of flight equipment
subject to operating leases from 301 at September 30, 1996 to 347
at September 30, 1997, a 15% increase. Secondly, the increase is
attributable to the increase in the relative cost of the fleet
from $13.2 billion in 1996 to $15.4 billion in 1997, a 17%
increase. Finally, the increase is due to the number of aircraft
subject to sale-leaseback transactions, increasing from 14
aircraft at September 30, 1996 to 20 aircraft at September 30,
1997, from which rental income is earned, although the aircraft
are not counted as being in the fleet.
In addition to its leasing operations, the Company actively
engages in the marketing of flight equipment from its own
portfolio as well as on a principal and commission basis.
Revenue from such flight equipment marketing decreased from
$102.6 million in 1996 to $79.3 million in 1997 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:
1997 1996
---- ----
Sales of flight equipment - 1
Commissions 6 12
Disposition of leased flight equipment 23 31
Expenses as a percentage of total revenues increased to 75.5%
in the first nine months of 1997 compared to 75.4% in the first
nine months of 1996. Interest expense increased from $427.3
million in 1996 to $477.2 million in 1997, primarily as a result
of an increase in gross debt outstanding at the nine months ended
from $9.6 billion at 1996 to $10.8 billion at 1997 to finance
aircraft acquisitions. In addition, the Company's composite
borrowing rate fluctuated as follows:
Increase/
1997 1996 (Decrease)
---- ---- --------
Beginning of Nine months 6.23% 6.47% (.24%)
End of Nine months 6.34% 6.28% .06%
---- ---- -----
Average 6.29% 6.38% (.09%)
Depreciation of flight equipment increased from $361.6 million
in 1996 to $407.6 million in 1997 due to the addition of
aircraft.
Rent expense increased from $31.4 million in 1996 to $67.6
million in 1997 as a result of a sale-leaseback transaction for
seven aircraft completed in September 1996. Currently, 20
aircraft are subject to sale-leaseback transactions.
Provision for overhauls increased from $63.1 million in 1996
to $74.6 million in 1997 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.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
12. Computation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends
27. Financial Data Schedule
b) Reports on Form 8-K:
1. Form 8-K, event date July 7, 1997 (Item 7)
2. Form 8-K, event date July 29, 1997 (Item 7)
3. Form 8-K, event date July 29, 1997 (Item 7)
<PAGE>
<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
November 11, 1997 /s/ Leslie L. Gonda
LESLIE L. GONDA
Chairman of the Board
November 11, 1997 /s/ Alan H. Lund
ALAN H. LUND
Executive Vice President
Co-Chief Operating Officer
and Chief Financial Officer
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
12 Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends
27 Financial Data Schedule
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
Earnings:
Net Income . . . . . . . . . . . . . . $ 220,415 $ 187,274
Add:
Provision for income taxes . . . . 123,386 110,764
Fixed charges. . . . . . . . . . . . 552,473 482,803
Less:
Capitalized interest . . . . . . . 35,101 37,359
------- -------
Earnings as adjusted (A) . . . . . . $ 861,173 $ 743,482
======= =======
Preferred dividend requirements. . . . $ 12,466 $ 12,576
Ratio of income before provision
for income taxes to net income . . 156% 159%
------- -------
Preferred dividend factor on pretax
basis. . . . . . . . . . . . . . . 19,447 19,996
------- -------
Fixed Charges:
Interest expense . . . . . . . . . . 477,209 427,282
Capitalized interest . . . . . . . . 35,101 37,359
Interest factor of rents . . . . . . 40,163 18,162
------- -------
Fixed charges as adjusted (B). . . . 552,473 482,803
------- -------
Fixed charges and preferred stock
dividends (C). . . . . . . . . . . $ 571,920 $ 502,799
======= =======
Ratio of earnings to fixed charges
(A) divided by (B) . . . . . . . . 1.56x 1.54x
===== =====
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (C) . . . . . . . . 1.51x 1.48x
===== =====
</TABLE>
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN
THE REGISTRANT'S QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 74,708
<SECURITIES> 0
<RECEIVABLES> 447,131
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,269,213
<DEPRECIATION> 1,770,995
<TOTAL-ASSETS> 15,269,213
<CURRENT-LIABILITIES> 0
<BONDS> 9,850,543
<COMMON> 3,582
0
400,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,269,213
<SALES> 1,287,557
<TOTAL-REVENUES> 1,401,618
<CGS> 0
<TOTAL-COSTS> 580,608
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 477,209
<INCOME-PRETAX> 343,801
<INCOME-TAX> 123,386
<INCOME-CONTINUING> 220,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,415
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
