<PAGE> 1
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, 2000......
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)
<TABLE>
<S> <C>
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)
</TABLE>
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.
<TABLE>
<CAPTION>
Class Outstanding at April 30, 2000
----- -----------------------------
<S> <C>
COMMON STOCK, NO PAR VALUE 35,818,122
</TABLE>
<PAGE> 2
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Part I. Financial Information: Page No.
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
March 31, 2000 and December 31, 1999..........................................3
Condensed Consolidated Statements of Income
Three Months Ended March 31, 2000 and 1999....................................4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2000 and 1999....................................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
</TABLE>
<PAGE> 3
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash, including interest bearing accounts
of $49,539 (2000) and $112,372 (1999) $ 74,087 $ 123,109
Current income taxes receivable 14,635
Notes receivable and net investment in
finance and sales-type leases 336,328 326,991
Flight equipment under operating leases 19,210,023 18,246,253
Less accumulated depreciation 2,314,111 2,150,200
----------- -----------
16,895,912 16,096,053
Deposits on flight equipment purchases 838,832 848,730
Accrued interest, other receivables
and other assets 91,943 77,825
Investments 6,075 6,067
Deferred debt issue costs-less
accumulated amortization of $73,123
(2000) and $70,375 (1999) 26,602 28,349
----------- -----------
$18,284,414 $17,507,124
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other payables $ 324,946 $ 280,933
Current income taxes payable 14,370
Debt financing, net of deferred debt
discount of $23,944 (2000) and $28,001
(1999) 11,681,062 11,192,220
Capital lease obligations 654,820 669,576
Security & other deposits on flight
equipment 908,020 801,313
Rentals received in advance 118,797 110,435
Deferred income taxes payable 1,303,857 1,228,085
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 (2000 and 1999) each having 500
shares issued and outstanding 400,000 400,000
Common stock--no par value; 100,000,000
authorized shares, 35,818,122 (2000
and 1999) issued and outstanding 3,582 3,582
Additional paid-in capital 579,955 579,955
Retained earnings 2,309,375 2,226,655
----------- -----------
3,292,912 3,210,192
----------- -----------
$18,284,414 $17,507,124
=========== ===========
</TABLE>
See note to condensed consolidated financial statements.
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<PAGE> 4
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
REVENUES:
Rentals of flight equipment $531,790 $488,761
Flight equipment marketing 7,164 10,633
Interest and other 10,749 8,793
-------- --------
549,703 508,187
-------- --------
EXPENSES:
Interest 174,174 157,690
Depreciation 163,909 150,281
Rent expense 34,327 31,767
Provision for overhaul 20,786 20,415
Selling, general & administrative 12,957 12,857
-------- --------
406,153 373,010
-------- --------
INCOME BEFORE INCOME TAXES 143,550 135,177
Provision for income taxes 50,468 48,529
-------- --------
NET INCOME $ 93,082 $ 86,648
======== ========
</TABLE>
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE> 5
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 93,082 $ 86,648
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation of flight equipment 163,909 150,281
Amortization of deferred debt issue costs 2,748 2,696
Gain on sale of flight equipment included
in amount financed (4,632)
Increase in notes receivable (20,702) (1,504)
Equity in net (income) loss of affiliates (8) 715
Change in unamortized debt discount 4,055 (10,472)
Changes in operating assets and liabilities:
Increase in accrued interest,
other receivables and other assets (7,544) (26,346)
Increase in current income taxes receivable (29,005) (15,026)
Increase in deferred income taxes payable 75,772 60,981
Increase in accrued interest and
other payables 44,013 30,602
Increase in rentals received in advance 8,362 4,139
----------- -----------
Net cash provided by operating activities 334,682 278,082
----------- -----------
INVESTING ACTIVITIES:
Acquisition of flight equipment
for operating leases (963,769) (1,138,967)
Decrease in deposits and progress payments 9,898 46,851
Proceeds from disposal of flight
equipment-net of gain 20,021
Collections on notes receivable and finance
and sales-type leases 11,365 147,925
Dividend from unconsolidated subsidiary 5,000
----------- -----------
Net cash used in investing activities (942,506) (919,170)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from debt financing 1,611,211 2,260,375
Payments in reduction of debt financing (1,141,180) (1,609,298)
Debt issue costs (1,001) (2,146)
Increase in customer deposits 106,707 30,612
Payment of common and preferred dividends (16,935) (49,054)
----------- -----------
Net cash provided by financing activities 558,802 630,489
----------- -----------
Decrease in cash (49,022) (10,599)
Cash at beginning of period 123,109 52,723
----------- -----------
Cash at end of period $ 74,087 $ 42,124
=========== ===========
</TABLE>
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<PAGE> 6
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Dollars in thousands)
(Unaudited)
<S> <C> <C>
Cash paid during the period for:
Interest (net of amount capitalized
$11,399 (2000) and $12,381 (1999)) $ 119,600 $ 105,637
Income taxes 3,701 2,573
</TABLE>
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 during the period
ended March 31, 1999.
SEE NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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<PAGE> 7
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(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 1999 unaudited condensed
consolidated financial statements to conform to the 2000 presentation.
Operating results for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2000. These statements should be read in conjunction
with, the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended December 31,
1999.
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<PAGE> 8
INTERNATIONAL LEASE FINANCE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
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.
FINANCIAL CONDITION
The Company borrows funds for the purchase of flight equipment, including
funds for progress payments during the construction phase from various sources,
principally on an unsecured basis. The Company's debt financing was comprised of
the following at the following dates:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Dollars in thousands)
<S> <C> <C>
Public term debt with single
maturities $ 3,421,330 $ 3,721,330
Public medium-term notes with
varying maturities 2,829,000 3,225,500
Capital lease obligations 654,820 669,576
Bank and other term debt 1,580,908 1,295,038
------------ ------------
Total term debt and capital lease
obligations 8,486,058 8,911,444
Commercial paper 3,873,768 2,978,353
Deferred debt discount (23,944) (28,001)
------------ ------------
Total debt financing and capital lease
obligations $ 12,335,882 $ 11,861,796
============ ============
Composite interest rate 6.12% 6.14%
Percentage of total debt at fixed rates 62.48% 69.28%
Composite interest rate on fixed rate 6.00% 6.06%
debt
Bank prime rate 9.00% 8.50%
</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 53 banks aggregating $2.9 billion and
an uncommitted line of credit with one bank for $30 million. 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
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<PAGE> 9
billion of debt securities, under which $275 million of notes were sold through
March 31, 2000. Additionally, a $750 million Medium-Term Note Program has been
designated under the shelf registration, under which $105 million of notes have
been sold through March 31, 2000.
The Company has a Euro denominated Medium-Term Note Program for $2.0
billion, under which $771 million in notes were sold through March 31, 2000. The
Company has hedged the notes through operating lease payments or through swaps.
The Company has Export Credit Lease financings which provide ten year,
amortizing loans in the form of capital lease obligations. The interest rate on
62.5% of the original financing available is 6.55%, and the interest rate on
22.5% of the original financing available is fixed at rates varying between
6.18% and 6.89%. These two tranches are guaranteed by various European Export
Credit Agencies. The remaining 15% of the original financing available provides
for LIBOR based pricing.
The Company has an Export Credit Facility, for 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%
depending on the delivery date of the aircraft. Through March 31, 2000, the
Company had borrowed $1.5 billion 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.
VALUE AT RISK
Measuring potential losses in fair values has recently become the focus of
risk management efforts by many companies. Such measurements are performed
through the application of various statistical techniques. One such technique is
Value at Risk (VaR), a summary statistical measure that uses historical interest
rates and estimates the volatility and correlation of these rates to calculate
the maximum loss that could occur over a defined period of time given a certain
probability.
ILFC believes that statistical models alone do not provide a reliable
method of monitoring and controlling market risk. While VaR models are
relatively sophisticated, the quantitative market risk information generated is
limited by the assumptions and parameters established in creating the related
models. Therefore, such models are tools and do not substitute for the
experience or judgement of senior management.
ILFC is exposed to market risk and the risk of loss of fair value resulting
from adverse fluctuations in interest rates. ILFC statistically measured the
loss of fair value through the application of a VaR model at December 31, 1999
and March 31, 2000. In this analysis the net fair value of ILFC was determined
using the financial instrument assets, which included the tax adjusted future
flight equipment lease revenue, and the financial instrument liabilities, which
included the future servicing of the current debt. The estimated impact of the
current derivative positions was also taken into account.
ILFC calculated the VaR with respect to the net fair value using the
variance-covariance (delta-normal) methodology. This calculation also used daily
historical interest rates for the two years ending December 31, 1999 and monthly
historical interest rates for the twenty years ending March 31, 2000. The VaR
model estimated the volatility of each of these interest rates and the
correlation among them. The yield curve was constructed using eleven key points
on the curve to model possible curve movements. Thus, the VaR measured the
sensitivity of the assets and liabilities to the calculated interest rate
exposures. These sensitivities were then applied
-9-
<PAGE> 10
to a database, which contained the historical ranges of movements in interest
rates and the correlation among them. The results were aggregated to provide a
single amount that depicts the maximum potential loss in fair value of a
confidence level of 95 percent for a time period of one month. As of December
31, 1999 and March 1, 2000, the VaR of ILFC with respect to its aforementioned
net fair value was $50 million and $17 million respectively.
RESULTS OF OPERATIONS - Three months ended March 31, 2000 versus 1999.
The 8.8% increase in revenues from the rentals of flight equipment, from
$488.8 million in 1999 to $531.8 million in 2000, is due to a 3.5% increase in
the number of aircraft available for operating lease from 367 at March 31, 1999
to 380 at March 31, 2000. Additionally, the cost of the leased fleet, which
includes aircraft subject to sale-lease back transactions from which rental
income is earned, increased 6.2% from $19.4 billion in 1999 to $20.6 billion in
2000.
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 $10.6 million in 1999 to $7.2 million
in 2000 as a result of the type and the number of the flight equipment marketed
in each period. Two aircraft were sold in the first quarter of 1999 compared to
no aircraft in the first quarter of 2000, while the Company sold no engines in
the first quarter of 1999 compared to three engines in the first quarter of
2000.
Interest expense increased from $157.7 million in 1999 to $174.2 million in
2000 as a result of an increase in interest rates and an increase in total debt
outstanding, excluding the effect of debt discount, from $11.8 billion in 1999
to $12.4 billion in 2000. The Company's composite borrowing rate fluctuated as
follows:
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Beginning of Quarter 6.14% 6.03%
End of Quarter 6.12% 5.90%
Average 6.13% 5.97%
</TABLE>
Depreciation of flight equipment increased from $150.3 million in 1999 to
$163.9 million in 2000 due to the increased cost of the fleet.
Rent expense increased from $31.8 million in 1999 to $34.3 million in 2000
due to an increase in the lease rates for 19 aircraft subject to sale-lease
back transactions. Lease rates increased mainly as a result of the increased
interest rates affecting the floating interest component of the lease rates.
Provision for overhauls increased from $20.4 million in 1999 to $20.8
million in 2000 due to an increase in the number of aircraft on which the
Company collects overhaul payments. An increase or decrease in the number of
aircraft on which the Company collects overhaul payments will result in a
corresponding increase or decrease in the aggregate number of hours flown for
which overhaul reserves are provided.
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<PAGE> 11
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:
None
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<PAGE> 12
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 4, 2000 /S/ Leslie L. Gonda
LESLIE L. GONDA
Chairman of the Board
May 4, 2000 /S/ Alan H. Lund
ALAN H. LUND
Executive Vice President
Co-Chief Operating Officer
and Chief Financial Officer
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<PAGE> 13
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No.
<S> <C>
12. Computation of Ratios of Earnings to Fixed Charges and
Preferred Stock Dividends
27. Financial Data Schedule
</TABLE>
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<PAGE> 1
Exhibit 12
INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
-------- --------
(Unaudited)
<S> <C> <C>
Earnings:
Net Income $ 93,082 $ 86,648
Add:
Provision for income taxes 50,468 48,529
Fixed charges 207,078 188,452
Less:
Capitalized interest 11,399 12,381
-------- --------
Earnings as adjusted (A) $339,229 $311,248
-------- --------
Preferred dividend requirements $ 3,362 $ 4,054
Ratio of income before provision
for income taxes to net income 154% 156%
-------- --------
Preferred dividend factor on pretax
basis 5,177 6,324
-------- --------
Fixed Charges:
Interest expense 174,174 157,690
Capitalized interest 11,399 12,381
Interest factor of rents 21,505 18,381
-------- --------
Fixed charges as adjusted (B) 207,078 188,452
-------- --------
Fixed charges and preferred stock
dividends (C) $212,255 $194,776
-------- --------
Ratio of earnings to fixed charges
(A) divided by (B) 1.64x 1.65x
-------- --------
Ratio of earnings to fixed charges
and preferred stock dividends
(A) divided by (C) 1.60x 1.60x
-------- --------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 74,087
<SECURITIES> 0
<RECEIVABLES> 281,222
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,210,23
<DEPRECIATION> 2,314,111
<TOTAL-ASSETS> 18,284,414
<CURRENT-LIABILITIES> 0
<BONDS> 11,681,062
0
400,000
<COMMON> 3,582
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,284,414
<SALES> 531,790
<TOTAL-REVENUES> 549,703
<CGS> 0
<TOTAL-COSTS> 231,979
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174,174
<INCOME-PRETAX> 143,550
<INCOME-TAX> 50,468
<INCOME-CONTINUING> 93,082
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 93,082
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
