<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............June 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 July 30, 1997
----- ----------------------------
COMMON STOCK, NO PAR VALUE 35,818,122
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<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX
Part I. Financial Information: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
June 30, 1997 and December 31, 1996. . . . . . . . . .3
Condensed Consolidated Statements of Income
Three Months Ended June 30, 1997 and 1996. . . . . . .4
Condensed Consolidated Statements of Income
Six Months Ended June 30, 1997 and 1996. . . . . . . .5
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 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
Index to Exhibits . . . . . . . . . . . . . . . . . . . . 14
<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>
June 30, December 31,
1997 1996
---------- ------------
(Unaudited)
ASSETS
Cash, including interest bearing accounts
of $34,312 (1997) and $31,704 (1996) $ 46,931 $ 36,558
Current income taxes receivable 38,378 16,420
Notes receivable 419,447 429,146
Net investment in finance and sales-
type leases 100,562 103,629
Flight equipment under operating leases 15,880,065 13,674,996
Less accumulated depreciation 1,694,281 1,492,222
---------- ----------
14,185,784 12,182,774
---------- ----------
Deposits on flight equipment purchases 720,994 861,355
Accrued interest, other receivables
and other assets 60,363 50,895
Investments 18,716 18,099
Deferred debt issue costs-less
accumulated amortization of $46,922
(1997) and $43,537 (1996) 27,154 26,720
---------- ----------
$15,618,329 $13,725,596
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables $ 219,186 $ 219,111
Debt financing, net of deferred debt
discount of $24,280 (1997) and $22,749
(1996) 10,411,915 8,798,388
Capital lease obligations 949,596 995,872
Security & other deposits on flight
equipment 665,825 611,272
Rentals received in advance 144,429 77,107
Deferred income taxes 898,190 809,294
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 1,345,651 1,231,015
---------- ----------
2,329,188 2,214,552
---------- ----------
$15,618,329 $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 JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
REVENUES:
Rentals of flight equipment $436,342 $356,697
Flight equipment marketing 32,414 46,455
Interest and other 11,074 12,465
------- -------
479,830 415,617
------- -------
EXPENSES:
Interest 166,650 145,461
Depreciation 138,115 120,930
Rent expense 22,016 10,314
Provision for overhaul 25,177 20,047
Selling, general & administrative 9,771 9,132
------- -------
361,729 305,884
------- -------
INCOME BEFORE INCOME TAXES 118,101 109,733
Provision for income taxes 42,196 41,137
------- -------
NET INCOME $ 75,905 $ 68,596
======= =======
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
REVENUES:
Rentals of flight equipment $834,800 $693,870
Flight equipment marketing 38,170 69,618
Interest and other 22,684 23,340
------- -------
895,654 786,828
------- -------
EXPENSES:
Interest 314,086 280,551
Depreciation 266,151 233,834
Rent expense 43,386 20,828
Provision for overhaul 47,033 39,323
Selling, general & administrative 20,926 19,110
------- -------
691,582 593,646
------- -------
INCOME BEFORE INCOME TAXES 204,072 193,182
Provision for income taxes 72,739 71,683
------- -------
NET INCOME $131,333 $121,499
======= =======
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
OPERATING ACTIVITIES:
Net Income $ 131,333 $ 121,499
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of flight equipment 266,151 233,834
Deferred income taxes 88,896 89,163
Amortization of deferred debt
issue costs 4,354 4,620
Gain on sale of flight equipment
included in amount financed (5,428) (2,262)
Increase in notes receivable (712) (59,836)
Equity in net (income) loss of affiliates (617) (485)
Changes in operating assets and liabilities:
(Increase) decrease in accrued interest,
other receivables and other assets (9,468) 5,275
Increase in current income taxes receivable (21,958) (20,936)
Increase (decrease) in accrued interest and
other payables 75 (23,451)
Increase in rentals received in advance 67,322 4,743
------------ ------------
Net cash provided by operating activities 519,948 352,164
------------ ------------
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (2,534,866) (1,941,942)
Decrease (increase) in deposits and
progress payments 140,361 (177,693)
Proceeds from disposal of flight
equipment-net of gain 242,637 335,646
Collections on notes receivable 38,109 27,392
Collections on finance and sales-type leases 3,865 3,044
------------ ------------
Net cash used in investing activities (2,109,894) (1,753,553)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from debt financing 4,170,657 2,826,327
Payments in reduction of debt financing (2,601,874) (1,540,820)
Debt issue costs (4,789) (2,853)
Change in unamortized debt discount (1,531) (6,207)
Increase in customer deposits 54,553 93,038
Payment of common and preferred dividends (16,697) (21,680)
------------ ------------
Net cash provided by financing activities 1,600,319 1,347,805
------------ ------------
Increase (decrease) in cash 10,373 (53,584)
Cash at beginning of period 36,558 87,097
------------ ------------
Cash at end of period $ 46,931 $ 33,513
=========== ============
</TABLE>
<PAGE>
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Dollars in thousands)
(Unaudited)
Cash paid during the period for:
Interest (net of amount capitalized
$23,455 (1997)and $24,643 (1996)) $ 296,868 $ 274,683
Income taxes 5,801 3,456
</TABLE>
1997:
Notes and finance and sales-type leases in the amount of
$28,495 were received as partial payment in exchange for flight
equipment sold with a book value of $23,069.
1996:
Notes in the amount of $80,390 were received as partial
payment in exchange for flight equipment sold with a book value
of $78,128.
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
six month periods ended June 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, as
amended by Form 10-K/A, 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>
June 30, December 31,
1997 1996
---------- -------------
(Dollars in thousands)
Public term debt with single
maturities $ 4,100,000 $ 3,500,000
Public medium-term notes with
varying maturities 2,942,965 2,563,720
Capital lease obligations 949,596 995,872
--------- ---------
Total term debt 7,992,561 7,059,592
Commercial paper 3,393,230 2,757,417
Less: Deferred debt discount (24,280) (22,749)
---------- ----------
Total Debt Financing $11,361,511 $ 9,794,260
========== ==========
Composite interest rate 6.32% 6.23%
Percentage of total debt at fixed rates 67.26% 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 46
banks aggregating $2.65 billion and uncommitted lines of credit
with three banks for varying amounts mutually agreed to 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 $500 million of
notes were sold through June 30, 1997. Additionally, a $750
million Medium Term Note Program has been implemented under the
shelf registration, under which $605 million has been sold
through June 30, 1997. Subsequent to June 30, 1997, the Medium-
Term Note Program was increased by $240 million to $990 million
available, under which $750 million had been sold through July
31, 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 June 30, 1997 versus
1996.
The increase in revenues from the rentals of flight equipment
from $356.7 million in 1996 to $436.3 million in 1997, a 22%
increase, is attributable, in part, to the increase in the volume
of flight equipment subject to operating leases from 302 at June
30, 1996, to 349 at June 30, 1997, a 16% increase. The increase
is also attributable to the increase in the relative cost of the
fleet from $13.4 billion in 1996 to $15.9 billion in 1997, a 19%
increase.
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 $46.5 million
in 1996 to $32.4 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 2 2
Disposition of leased flight equipment 11 15
Expenses as a percentage of total revenues increased to 75.4%
in the second quarter of 1997 compared to 73.6% in the second
quarter of 1996. Interest expense increased from $145.5 million
in 1996 to $166.7 million in 1997 primarily as a result of an
increase in gross debt outstanding at quarter end from $10.2
billion at 1996 to $11.4 billion at 1997 to finance aircraft
acquisitions. In addition, the Company's composite borrowing
rate fluctuated as follows:
Increase/
1997 1996 (Decrease)
Beginning of Quarter 6.20% 6.31% (.11%)
End of Quarter 6.32% 6.22% .10%
---- ---- ------
Average 6.26% 6.27% (.01%)
Depreciation of flight equipment increased from $120.9 million
in 1996 to $138.1 million in 1997 due to the addition of
aircraft.
Rent expense increased from $10.3 million in 1996 to $22.0
million in 1997 as a result of a sale-leaseback transaction for
seven aircraft completed in September 1996. Currently, fourteen
aircraft are subject to sale-leaseback transactions.
Provision for overhauls increased from $20.0 million in 1996
to $25.2 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-Six months ended June 30, 1997 versus 1996.
The increase in revenues from the rentals of flight equipment
from $693.9 million in 1996 to $834.8 million in 1997, a 20%
increase, is attributable, in part, to the increase in the volume
of flight equipment subject to operating leases from 302 at June
30, 1996, to 349 at June 30, 1997, a 16% increase. The increase is
also attributable to the increase in the relative cost of the fleet
from $13.4 billion in 1996 to $15.9 billion in 1997, a 19%
increase.
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 $69.6 million in 1996 to
$38.2 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 - 1
Commissions 6 8
Disposition of leased flight equipment 14 21
Expenses as a percentage of total revenues increased to 77.2%
in the first six months of 1997 compared to 75.4% in the first
six months of 1996. Interest expense increased from $280.6
million in 1996, to $314.1 million in 1997 primarily as a result
of an increase in gross debt outstanding at the six months ended
from $10.2 billion at 1996 to $11.4 billion in 1997 to finance
aircraft acquisitions. In addition, the Company's composite
borrowing rate fluctuated as follows:
Increase/
1997 1996 (Decrease)
---- ---- --------
Beginning of six months 6.23% 6.47% (.24%)
End of six months 6.32% 6.22% .10%
----- ----- -------
Average 6.28% 6.35% (.07%)
Depreciation of flight equipment increased from $233.8 million
in 1996 to $266.2 million in 1997 due to the addition of aircraft.
Rent expense increased from $20.8 million in 1996 to $43.4
million in 1997 as a result of a sale-leaseback transaction for
seven aircraft completed in September 1996. Currently, fourteen
aircraft are subject to sale-leaseback transactions.
Provision for overhauls increased from $39.3 million in 1996 to
$47.0 million in 1997 due to an increase in the number of aircraft
on which the Company collects overhaul reserves and therefore an
increase in the number of hours flown for which an overhaul reserve
is provided.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
12. Computation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends
27. Financial Data Schedule
b) Reports on Form 8-K:
1. Form 8-K, event date April 15, 1997 (Item 7)
2. Form 8-K, event date April 17, 1997 (Item 4)
3. Form 8-K, event date April 29, 1997 (Item 7)
4. Form 8-K, event date May 14, 1997 (Item 7)
5. Form 8-K, event date May 21, 1997 (Item 7)
6. Form 8-K, event date June 17, 1997 (Item 7)
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INTERNATIONAL LEASE FINANCE CORPORATION
August 12, 1997 /S/ Leslie L. Gonda
LESLIE L. GONDA
Chairman of the Board
August 12, 1997 /S/ Pamela S. Hendry
PAMELA S. HENDRY
Vice President
and Treasurer
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
12 Computation of Ratios of Earnings to Fixed Charges
and Preferred Stock Dividends
27 Financial Data Schedule
<PAGE>
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
1997 1996
------ ------
(Unaudited)
Earnings:
Net Income . . . . . . . . . . . . . .$ 131,333 $ 121,499
Add:
Provision for income taxes . . . . 72,739 71,683
Fixed charges. . . . . . . . . . . 364,296 317,589
Less:
Capitalized interest . . . . . . . 23,455 24,643
------- -------
Earnings as adjusted (A) . . . . . .$ 544,913 $ 486,128
======= =======
Preferred dividend requirements. . . .$ 8,197 $ 8,480
Ratio of income before provision
for income taxes to net income . . 155% 159%
------- -------
Preferred dividend factor on pretax
basis. . . . . . . . . . . . . . . 12,705 13,483
------- -------
Fixed Charges:
Interest expense . . . . . . . . . . 314,086 280,551
Capitalized interest . . . . . . . . 23,455 24,643
Interest factor of rents . . . . . . 26,755 12,395
------- -------
Fixed charges as adjusted (B). . . . 364,296 317,589
------- -------
Fixed charges and preferred stock
dividends (C). . . . . . . . . . $ 377,001 $ 331,072
======= =======
Ratio of earnings to fixed charges
(A) divided by (B) . . . . . . . . 1.50x 1.53x
===== =====
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (C) . . . . . . . . 1.45x 1.47x
===== =====
/TABLE
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<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 JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 46,931
<SECURITIES> 0
<RECEIVABLES> 419,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 15,880,065
<DEPRECIATION> 1,694,281
<TOTAL-ASSETS> 15,618,329
<CURRENT-LIABILITIES> 0
<BONDS> 10,411,915
<COMMON> 3,582
0
400,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,618,329
<SALES> 834,800
<TOTAL-REVENUES> 895,654
<CGS> 0
<TOTAL-COSTS> 377,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 314,086
<INCOME-PRETAX> 204,072
<INCOME-TAX> 72,739
<INCOME-CONTINUING> 131,333
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,333
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
