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, 1999......
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, 1999
----- -----------------------------
Common Stock, no par value 35,818,122
<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, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998 5
Note 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 11
Signatures 12
Index to Exhibits 13
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
March 31, December 31,
1999 1998
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash, including interest bearing accounts
of $25,464(1999) and $33,716(1998) $ 42,124 $ 52,723
Current income taxes receivable 31,033 16,007
Notes receivable and net investment in 298,627 430,248
finance and sales-type leases
Flight equipment under operating leases 17,948,828 16,860,789
Less accumulated depreciation 2,117,901 1,988,359
---------- ----------
15,830,927 14,872,430
Deposits on flight equipment purchases 859,346 906,197
Accrued interest, other receivables
and other assets 93,156 72,525
Deferred debt issue costs-less
accumulated amortization of $64,811
(1999) and $62,115(1998) 28,952 29,502
--------- ---------
$17,184,165 $16,379,632
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables $ 265,648 $ 235,046
Debt financing, net of deferred debt
discount of $25,323(1999) and $14,852
(1998) 11,030,123 10,373,242
Capital lease obligations 794,492 810,768
Security & other deposits on flight
equipment 894,444 863,832
Rentals received in advance 123,821 119,682
Deferred income taxes payable 1,193,668 1,132,687
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 (1999 and 1998) each having 500
shares issued and outstanding 400,000 400,000
Common stock--no par value; 100,000,000
authorized shares, 35,818,122 (1999
and 1998) issued and outstanding 3,582 3,582
Additional paid-in capital 579,955 579,955
Retained earnings 1,898,432 1,860,838
--------- ---------
2,881,969 2,844,375
---------- ----------
$17,184,165 $16,379,632
=========== ===========
</TABLE>
See note to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands)
1999 1998
---------- ---------
(Unaudited)
<S> <C> <C>
REVENUES:
Rentals of flight equipment $ 488,761 $ 431,452
Flight equipment marketing 10,481 37,497
Interest and other 8,945 14,106
------- -------
508,187 483,055
------- -------
EXPENSES:
Interest 157,690 150,633
Depreciation 150,281 130,057
Rent expense 31,767 34,747
Provision for overhaul 20,415 25,356
Selling, general & administrative 12,857 10,342
------- -------
373,010 351,135
------- -------
INCOME BEFORE INCOME TAXES 135,177 131,920
Provision for income taxes 48,529 46,758
------- -------
NET INCOME $ 86,648 $ 85,162
========== ========
</TABLE>
See note to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Dollars in thousands)
1999 1998
---------- ---------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 86,648 $ 85,162
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of flight equipment 150,281 130,057
Amortization of deferred debt
issue costs 2,696 2,866
Gain on sale of flight equipment
included in amount financed (4,632) (1,673)
Increase in notes receivable (1,504)
Equity in net income of affiliates 715 (179)
Change in unamortized debt discount (10,472) (13,564)
Changes in operating assets and liabilities:
Increase in accrued interest,
other receivables and other assets (26,346) (11,751)
Increase in current income taxes receivable (15,026) (46,827)
Increase in deferred income taxes payable 60,981 31,462
Increase in accrued interest and
other payables 30,602 45,344
Increase(decrease) in rentals received in
advance 4,139 (2,486)
------- --------
Net cash provided by operating activities 278,082 218,411
------- --------
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (1,138,967) (1,108,504)
Decrease in deposits and progress payments 46,851 70,633
Proceeds from disposal of flight
equipment-net of gain 20,021 242,666
Collections on notes receivable and finance
and sales-type leases 147,925 12,256
Dividend from unconsolidated subsidiary 5,000
-------- --------
Net cash used in investing activities (919,170) (782,949)
-------- ---------
FINANCING ACTIVITIES:
Proceeds from debt financing 2,260,375 1,897,202
Payments in reduction of debt financing (1,609,298) (1,372,108)
Debt issue costs (2,146) (2,874)
Increase in customer deposits 30,612 59,606
Payment of common and preferred dividends (49,054) (10,834)
--------- ----------
Net cash provided by financing activities 630,489 570,992
--------- ----------
(Decrease)Increase in cash (10,599) 6,454
Cash at beginning of period 52,723 63,754
-------- ---------
Cash at end of period $ 42,124 $ 70,208
========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
1999 1998
---------- ----------
(Dollars in thousands)
(Unaudited)
<S> <C> <C>
Cash paid during the period for:
Interest (net of amount capitalized
$12,381(1999) and $14,579(1998)) $ 105,637 $ 95,857
Income taxes 2,573 62,122
1999:
Notes in the amount of $14,800 were received as partial payment in
exchange for flight equipment sold with a book value of $10,168.
1998:
Notes in the amount of $13,730 were received as partial payment in
exchange for flight equipment sold with a book value of $12,056.
</TABLE>
See note to condensed consolidated financial statements.
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(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 1998 condensed consolidated financial statements to
conform to the 1999 presentation. Operating results for the three months
ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. 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, 1998.
<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 funds for 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>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
(Dollars in thousands)
<S> <C> <C>
Public term debt with single
maturities $ 3,425,000 $ 3,825,000
Public medium-term notes with
varying maturities 3,703,750 3,348,350
Capital lease obligations 794,492 810,768
Bank and other term debt 512,138
---------- -----------
Total term debt and capital lease 8,435,380 7,984,118
obligations
Commercial paper 3,414,558 3,214,744
Less: Deferred debt discount (25,323) (14,852)
--------- ---------
Total Debt Financing and capital lease
obligations $ 11,824,615 $ 11,184,010
========== ==========
Composite interest rate 5.90% 6.03%
Percentage of total debt at fixed rates 72.08% 64.20%
Composite interest rate on fixed rate 6.25% 6.41%
debt
Bank prime rate 7.75% 7.75%
</TABLE>
The interest on substantially all of the public debt (exclusive of the
Commercial Paper) is fixed for the terms of the notes. The Company has
committed revolving loans and lines of credit with 54 banks aggregating
$2.90 billion and uncommitted lines of credit with one bank for varying
amounts mutually agreed to by the Company and the bank. These revolving
loans and lines of credit principally provide for interest rates that vary
according to the pricing option in effect at the time of borrowing. Pricing
options include prime, a range from .22% over LIBOR to .32% over LIBOR based
upon utilization, or a rate determined by a competitive bid process with the
banks. The revolving loans and lines of credit are subject to facility fees of
up to .08% of amounts available. Such financing is used primarily as backup
for the Company's Commercial Paper program.
The Company has an effective shelf registration with respect to $2.0
billion of debt securities, under which no notes were sold through March 31,
1999. Additionally, a $750 million Medium-Term Note Program has been
implemented under the shelf registration, under which no notes have been sold
through March 31, 1999.
The Company has an Export Credit Facility, up to a maximum of $4.3 billion,
for approximately 75 aircraft to be delivered from 1999 through 2001. The
Company has the right, but is not required, to use the facility to fund 85%
of each aircraft's purchase price. This facility is guaranteed by various
European Export Credit Agencies. The interest rate varies from 5.753% to
5.898% on the first 75 aircraft depending on the delivery date of the
aircraft. Through March 31, 1999, the Company borrowed $512.1 million under
this facility.
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.
IMPACT OF THE YEAR 2000
The Company continues to monitor the status of the Year 2000 compliance
of third party critical dependencies including lessees, vendors and financial
institutions. This monitoring includes reviewing lessees Y2K exclusions with
regard to insurance coverage. For further information on the impact of the
year 2000, refer to Item 7 of the Company's annual report on Form 10-K for the
year ended December 31, 1998.
Certain of the statements in this discussion, as well as other forward-
looking statements within this document, contain estimates and projections of
cash flows and debt financing to support future capital requirements. While
these forward-looking statements are made in good faith, future operating,
market competitive, economic and other conditions and events could cause
actual results to differ materially from those in the forward-looking
statements.
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations-Three months ended March 31, 1999 versus 1998.
The 13.3% increase in revenues from the rentals of flight equipment,
from $431.5 million in 1998 to $488.8 million in 1999, is due to a 12.2%
increase in the number of aircraft available for operating lease from 327
at March 31, 1998 to 367 at March 31, 1999. Additionally, the cost of the
leased fleet, which includes aircraft subject to sale-lease back transactions
from which rental income is earned, increased 16.2% from $16.7 billion in 1998
to $19.4 billion in 1999.
In addition to its leasing operations, the Company engages in the marketing
of flight equipment at the end of, or during, the lease term, as well as the
sales of flight equipment on a principal and commission basis. Revenue from
flight equipment marketing decreased from $37.5 million in 1998 to $10.5
million in 1999 as a result of the type and the number of the flight equipment
marketed in each period. Twelve aircraft were sold in the first quarter of
1998 compared to two aircraft in the first quarter of 1999. In addition, the
Company sold two engines in the first quarter of 1998 compared to no engines
in the first quarter of 1999.
Interest expense increased from $150.6 million in 1998 to $157.7 million in
1999 as a result of an increase in debt outstanding, excluding the effect of
debt discount, from $10.5 billion in 1998 to $11.8 billion in 1999, offset in
part by lower composite borrowing rates in 1999. The Company's composite
borrowing rate fluctuated as follows:
<TABLE>
<CAPTION>
1999 1998 Decrease
---- ---- --------
<S> <C> <C> <C>
Beginning of Quarter 6.03% 6.44% (.41%)
End of Quarter 5.90% 6.29% (.39%)
----- ----- -----
Average 5.97% 6.37% (.40%)
</TABLE>
Depreciation of flight equipment increased from $130.1 million in 1998 to
$150.3 million in 1999 due to the increased cost of the fleet.
Rent expense decreased from $34.7 million in 1998 to $31.8 million in 1999
due to a decrease in the lease rates for 20 aircraft subject to sale-lease
back transactions. Lease rates decreased as a result of principal
amortization and decreased interest rate affecting the floating interest
component of the lease rates.
Provision for overhauls decreased from $25.4 million in 1998 to $20.4
million in 1999 due to a decrease in the number of aircraft on which the
Company collects overhaul reserves. The reduction in the number of aircraft
resulted in a decrease in the aggregate number of hours flown for which
overhaul reserves are provided.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
12. Computation of Ratios of Earnings
27. Financial Data Schedule
b) Reports on Form 8-K:
1. Form 8-K, event date February 11, 1999 (Item 7)
2. Form 8-K, event date March 19, 1999 (Item 7)
<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, 1999 /S/ Leslie L. Gonda
LESLIE L. GONDA
Chairman of the Board
May 12, 1999 /S/ Alan H. Lund
ALAN H. LUND
Executive Vice President
Co-Chief Operating Officer
and Chief Financial Officer
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
Exhibit No.
12. Computation of Ratios of Earnings
27. Financial Data Schedule
<PAGE>
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
---------- -----------
(Unaudited)
<S> <C> <C>
Earnings:
Net Income $ 86,648 $ 85,162
Add:
Provision for income taxes 48,529 46,758
Fixed charges 188,452 186,444
Less:
Capitalized interest 12,381 14,579
---------- ----------
Earnings as adjusted (A) $ 311,248 $ 303,785
---------- ----------
Preferred dividend requirements $ 4,054 $ 4,334
Ratio of income before provision
for income taxes to net income 156% 155%
---------- ----------
Preferred dividend factor on pretax
basis 6,324 6,718
---------- ----------
Fixed Charges:
Interest expense 157,690 150,633
Capitalized interest 12,381 14,579
Interest factor of rents 18,381 21,232
------- -------
Fixed charges as adjusted (B) 188,452 186,444
------- -------
Fixed charges and preferred stock
dividends (C) $ 194,776 $ 193,162
---------- ----------
Ratio of earnings to fixed charges
(A) divided by (B) 1.65x 1.63x
------- -------
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (C) 1.60x 1.57x
------- -----
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL STATEMENTS INCLUDED
IN THE REGISTRANT'S QUARTERLY REPORT ON FORM 10Q FOR THE
QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 42,124
<SECURITIES> 0
<RECEIVABLES> 237,101
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 17,948,828
<DEPRECIATION> 2,117,901
<TOTAL-ASSETS> 15,830,927
<CURRENT-LIABILITIES> 0
<BONDS> 11,030,123
<COMMON> 3,582
0
400,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,184,165
<SALES> 488,761
<TOTAL-REVENUES> 508,187
<CGS> 0
<TOTAL-COSTS> 215,320
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,690
<INCOME-PRETAX> 135,177
<INCOME-TAX> 48,529
<INCOME-CONTINUING> 86,648
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,648
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
