-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R8ft+4QTpHGgLiJpAIAnnVFyiiXW4IwHmrp3SqHBaAhcV27wKez2JymC2uCPp93a uwIrx6X5nbE1Vidcr1riEQ== 0000950148-98-000442.txt : 19980310 0000950148-98-000442.hdr.sgml : 19980310 ACCESSION NUMBER: 0000950148-98-000442 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980309 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL LEASE FINANCE CORP CENTRAL INDEX KEY: 0000714311 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 223059110 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-11350 FILM NUMBER: 98560597 BUSINESS ADDRESS: STREET 1: 1999 AVE OF THE STARS 39TH FL CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107881999 MAIL ADDRESS: STREET 1: 1999 AVE OF THE STARS CITY: CENTURY CITY STATE: CA ZIP: 90067 10-K405 1 FORM 10-K405 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT ------------------------ (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 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, LOS ANGELES 90067 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 788-1999 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE (TITLE OF CLASS) 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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K (SEC. 229.405 OF THIS CHAPTER) IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [X] AS OF FEBRUARY 28, 1998, THERE WERE 35,818,122 SHARES OF COMMON STOCK, NO PAR VALUE, OUTSTANDING. REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION J(1)(a) AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. ================================================================================ 2 INTERNATIONAL LEASE FINANCE CORPORATION 1997 FORM 10-K ANNUAL REPORT ------------------------ TABLE OF CONTENTS PART I
PAGE ---- Item 1. Business.................................................... 1 Item 2. Properties.................................................. 6 Item 3. Legal Proceedings........................................... 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters....................................... 8 Item 6. Selected Financial Data..................................... 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 9 Item 8. Financial Statements and Supplementary Data................. 12 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................. 12 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................................... 12
3 PART I ITEM 1. BUSINESS GENERAL International Lease Finance Corporation (the "Company") is primarily engaged in the acquisition of new and used commercial jet aircraft and the leasing and sale of such aircraft to domestic and foreign airlines. The Company, in terms of the number and value of transactions concluded, is a major owner-lessor of commercial jet aircraft. In addition, the Company is engaged in the remarketing of commercial jets for its own account, for airlines and for financial institutions. As well, the Company provides fleet management services for third party operating lessors. As of December 31, 1997, the Company owned 299 aircraft and managed an additional 62 aircraft. See "Item 2. Properties -- Flight Equipment." At December 31, 1997, the Company had committed to purchase 328 aircraft deliverable through 2006 at an estimated aggregate purchase price of $17.7 billion. See "Item 2. Properties -- Commitments." The Company maintains the mix of flight equipment to meet its customers' needs by purchasing those models of new and used aircraft which it believes will have the greatest airline demand and operational longevity and minimize the time that its aircraft are not leased to customers. The Company purchases, and finances the purchase of, aircraft on terms intended to permit the Company to lease or resell such aircraft at a profit. The Company typically finances the purchase of aircraft with borrowed funds and internally generated cash flow. The Company accesses the capital markets for such funds at times and on terms and conditions it considers appropriate. The Company may, but does not necessarily, engage in financing transactions for specific aircraft. The Company relies significantly on short- and medium-term financing, and thereby attempts to manage interest rate exposure. To date, the Company has been able to purchase aircraft on terms which have permitted it to lease the aircraft at a profit and has not experienced any difficulty in obtaining financing. The Company's aircraft are usually leased on terms under which the Company does not fully recover the acquisition cost of such aircraft. Thus, at the termination of a lease, the Company bears the risk of selling or releasing the aircraft on terms which will cover its remaining cost. The airline industry is cyclical, economically sensitive and highly competitive. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." The Company's revenue and income may be affected by political or economic instability abroad, changes in national policy, competitive pressures on certain air carriers, fuel shortages, labor stoppages, recessions, and other political or economic events adversely affecting world or regional trading markets or impacting a particular customer. The Company's continued success is partly dependent on management's ability in the future to develop customer relationships for leasing, sales, remarketing and management services with those airlines and other customers best able to maintain their economic viability and survive in a deregulated environment. The Company is incorporated in the State of California and its principal executive offices are located at 1999 Avenue of the Stars, Los Angeles, California 90067. The Company's telephone, telecopier and telex numbers are (310) 788-1999, (310) 788-1990 and 69-1400, respectively. The Company is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"). AIG is a holding company which through its subsidiaries is primarily engaged in a broad range of insurance and insurance-related activities and financial services in the United States and abroad. The Common Stock of AIG is listed on, among others, the New York Stock Exchange. AIRCRAFT LEASING The initial term of the Company's current leases range in length from one year to 15 years. See "Item 2. Properties -- Flight Equipment" for information regarding scheduled lease terminations. Most of the Company's leases are operating leases under which the Company does not fully recover its aircraft cost and retains the benefit and assumes the risk of the residual value of the aircraft. The Company on occasion also 1 4 enters into finance and sales-type leases where the full cost of the aircraft is substantially recovered over the term of the lease. At December 31, 1997, four of the Company's leases were accounted for as finance leases. The aircraft under operating leases are included as assets on the Company's balance sheet and depreciation is charged to income over the estimated useful lives of the aircraft. In accordance with generally accepted accounting principles, rentals are reported ratably as revenue over the lease term as they become due and are earned. The Company attempts to maintain a mix of short- and medium-term leases to balance the benefits and risks associated with different lease terms. Varying lease terms mitigate the effects of changes in prevailing market conditions at the time aircraft become eligible for re-lease or sale and the uncertainty associated with estimating residual value of the aircraft at the termination of the lease. All leases are on a "net" basis with the lessee responsible for all operating expenses, which customarily include fuel, crews, airport and navigation charges, taxes, licenses, registration and insurance. Normal maintenance and repairs; airframe and engine overhauls; and compliance with return conditions of flight equipment on lease are provided by and paid for by the lessee. Under the provisions of most leases, for certain airframe and engine overhauls, the lessee is reimbursed by the Company for costs incurred up to but not exceeding related contingent rentals paid to the Company by the lessee. Such rentals are included in the caption Rental of flight equipment. The Company provides a charge to operations for such reimbursements based on the estimated reimbursements expected during the life of the lease, which amount is included in overhaul reserves. The lessee is responsible for compliance with all applicable laws and regulations with respect to the aircraft. The Company requires its lessees to comply with the most restrictive standards of either the Federal Aviation Administration (the "FAA") or its foreign equivalent. The Company makes periodic inspections of the condition of its leased aircraft. Generally, the Company requires a deposit which is security for the condition of aircraft upon return to the Company, the rental payment by the lessee and the performance of other obligations by the lessee under the lease. In addition, the leases contain extensive provisions regarding the remedies and rights of the Company in the event of a default thereunder by the lessee and specific provisions regarding the condition of the aircraft upon redelivery to the Company. The lessee is required to continue lease payments under all circumstances, including periods during which the aircraft is not in operation for maintenance, grounding or any other reason whatsoever. The Company obtains and reviews relevant business materials from all prospective lessees and purchasers before entering into a lease or extending credit. Under certain circumstances, the Company may require the lessee to obtain guarantees or other financial support from an acceptable financial institution or other third party. FLIGHT EQUIPMENT MARKETING The Company also regularly disposes of its leased aircraft at or before the expiration of their leases. The buyers include the aircraft's lessee, another airline or a third party lessor. Any gain or loss on disposition of leased aircraft is reflected as revenues from flight equipment marketing. From time to time, the Company also engages in transactions to buy aircraft for resale. In some cases, the Company assists its customers in acquiring or disposing of aircraft through consulting services and procurement of financing from third parties. In addition to its leasing and sales operations, the Company is engaged, from time to time, as an agent for airlines in the disposition of their surplus aircraft. The Company generally acts as an agent under an exclusive remarketing contract whereby it agrees to sell aircraft on a "best efforts" basis within a fixed time period. These activities generally augment the Company's primary activities and also serve to promote relationships with prospective sellers and buyers of aircraft. The Company plans to continue its remarketing services on a selective basis involving specific situations where these activities will not conflict or compete with, but rather will be complementary to, its leasing and selling activities. In connection with the sale of aircraft, the Company has guaranteed certain obligations for entities in which it has an investment, which aggregate approximately $62,256,000. Additionally, the Company 2 5 guaranteed three loans, secured by flight equipment, of customers which aggregated $12,850,000. See Note K of Notes to Consolidated Financial Statements. FLEET MANAGEMENT SERVICES The Company provides fleet management services to third party operating lessors who are unable or unwilling to perform this service as part of their own operation. The Company typically provides the same services that it performs for its own fleet. Specifically, the Company provides leasing, releasing and sales services on behalf of the lessor for which the Company receives a fee. FINANCING/SOURCE OF FUNDS The Company purchases new aircraft directly from manufacturers and used aircraft from airlines for lease or sale to other airlines. The Company finances the purchase price of flight equipment from internally generated funds, secured and unsecured commercial bank financings and the issuance of commercial paper, public and private debt and preferred stock. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." CUSTOMERS At December 31, 1997, lessees of the Company included: (domestic) Alaska Airlines, American Trans Air, Continental Airlines, Frontier Airlines, North American Airlines, Pan American Airways Corp, Southwest Airlines, Tower Air, Trans World Airlines (TWA) and World Airways; (foreign) Aer Lingus, Aerocancun, Aero Lloyd Flugreisen, Aeromexico, Aeroperu, Air 2000, Air Afrique, Air Alfa, Air Canada, Air Espana, Air Europe SpA, Air France, Air Liberte, Air Macau, Air Madagascar, Air Mauritius, Air New Zealand, Air Seychelles, Air Transat, Air UK, Air World, Ansett, Asiana, Avianca, Braathens S.A.F.E., Britannia Airways, British Airways, British Midland Airways, Canada 3000, Cathay Pacific, China Airlines, China Hainan Airlines, China Southern Airlines, China Southwest Airlines, Constellation, Emirates, El Al, Estonian Air, Far Eastern Air Transport, Finnair, Flying Colours, Garuda Indonesia, GB Airways, Hapag-Lloyd Flug, Hong Kong Dragon Airlines (Dragonair), Icelandair, Kenya Airways, KLM Royal Dutch Airlines, Korean Airlines, L'Aeropostale, LACSA, Lineas Aereas Privadas Argentinas, S.A. (LAPA), Lloyd Aero Boliviano (LAB), LAN Chile, LTU Luftransport-Unternehmen, Lufthansa, Malaysian Airline System, Malev Hungarian Airlines, Martinair Holland, Mexicana, Middle East Airlines Airliban, Monarch Airways, ONUR Air, Pegasus, Polynesian Airways, QANTAS Airways, Rio Sul, Sabena, SAETA, Sahara India Airlines, Shenzhen, Sichuan Airlines, Skyservice Airlines Inc., Surinam, Swissair, TACA International Airlines, TACV Cabo Verde, TAP Air Portugal, TEA Basel, THY, TransAer, Transaero Airlines, Transavia, Transbrasil, Varig, Virgin Atlantic Airways, VIVA Airways, Wuhan Airlines, Xiamen and Xinjiang. No single customer accounted for more than 10% of total revenues in any of the last three years. Revenues include rentals of flight equipment to foreign airlines of $1,472,075,000 (1997), $1,202,651,000 (1996) and $1,002,251,000 (1995) comprising 85.0%, 83.3% and 80.0%, respectively, of total rentals of flight equipment. See Note J of Notes to Consolidated Financial Statements. The following table sets forth the dollar amount and percentage of total rental revenues attributable to the indicated geographic areas for the years indicated:
1997 1996 1995 ------------------ ------------------ ------------------ AMOUNT % AMOUNT % AMOUNT % ---------- ----- ---------- ----- ---------- ----- (DOLLARS IN THOUSANDS) Europe............................. $ 705,128 40.7% $ 551,703 38.2% $ 462,252 36.9% Asia/Pacific....................... 358,687 20.7 332,159 23.0 255,163 20.4 United States and Canada........... 345,143 19.9 304,801 21.1 304,784 24.3 Central, South America and Mexico........................... 211,152 12.2 165,819 11.5 166,443 13.2 Africa and the Middle East......... 112,557 6.5 89,957 6.2 65,378 5.2 ---------- ----- ---------- ----- ---------- ----- $1,732,667 100.0% $1,444,439 100.0% $1,254,020 100.0% ========== ===== ========== ===== ========== =====
3 6 Many foreign countries have currency and exchange laws regulating the international transfer of currencies. The Company attempts to minimize its currency and exchange risks by negotiating substantially all of its aircraft lease and sales transactions in U.S. dollars and all guarantees obtained to support various lease agreements are denominated for payment in U.S. dollars. The Company requires, as a condition to any foreign transaction, that the lessee or purchaser in a foreign country first obtain, if required, written approval of the appropriate government agency, finance ministry or central bank for the remittance of all funds contractually owed to the Company in U.S. dollars. As a result, foreign currency risk is immaterial to the Company. The Company has restructured leases with both foreign and domestic lessees. Such restructurings have involved the voluntary termination of leases prior to lease expiration, the replacement of leased aircraft with smaller, less expensive leased aircraft, the arrangement of subleases from the primary lessee to another airline and the rescheduling of lease payments. In 1995, the Company repossessed one Airbus A320 from a lessee and terminated early the lease of another A320. Both aircraft were promptly released to other customers. In 1996, the Company repossessed one aircraft that was promptly released. In addition, the Company terminated early the leases of four aircraft. In this case, two of the aircraft were sold and two were promptly released. No aircraft were repossessed in 1997. In some situations where the Company repossesses an aircraft, it may decide to export the aircraft from the lessee's jurisdiction. To date, the Company has been able to export all repossessed aircraft which it desired to export. In addition, in connection with the repossession of an aircraft, the Company may be required to pay outstanding mechanic's, airport and other operating liens on the repossessed aircraft, which could include charges relating to other aircraft operated by the lessee. The Company's revenues and income may be affected by political or economic instability abroad, changes in national policy, competitive pressures on certain air carriers, fuel shortages, labor stoppages, recessions and other political or economic events adversely affecting world or regional trading markets or impacting a particular customer. COMPETITION The leasing and sale of jet aircraft is highly competitive. Aircraft manufacturers and the airlines sell new and used jet aircraft. Furthermore, the Company faces competition in leasing aircraft from aircraft manufacturers, banks, other financial institutions and leasing companies. There is also competition with respect to its remarketing activities from many sources, including, but not limited to, aircraft brokers. GOVERNMENT REGULATION The FAA and the U.S. Departments of Transportation and State exercise regulatory authority over the air transportation in the United States. The U.S. Departments of Transportation and State, in general, have jurisdiction over the economic regulation of air transportation, including the negotiation with foreign governments of the rights of U.S. carriers to fly to other countries and the rights of foreign carriers to fly to and within the United States. The FAA has regulatory jurisdiction over the maintenance and operation of U.S. air carriers, the operation of aircraft in the United States by foreign carriers and the registration of aircraft in the United States. The FAA can suspend or revoke the authority of U.S. air carriers or their licensed personnel and can similarly revoke the authority of foreign air carriers to operate within the United States for failure to comply with FAA regulations. The FAA can also ground aircraft if their airworthiness is in question. In every foreign country, similar government agencies regulate such country's air carriers, the operations of foreign airlines in such country and the registration of aircraft. Like the FAA, the civil aviation authority in a foreign country can suspend or revoke the operating authority of an airline and ground aircraft for safety reasons. 4 7 Since the Company does not itself operate its aircraft for public transportation of passengers and property, the Company is not directly subject to the regulatory jurisdiction of the U.S. Departments of Transportation and State or their counterpart organizations in foreign countries. The Company's interface with the FAA consists of the registration with the FAA of those aircraft which are leased by the Company to U.S. carriers and to a number of foreign carriers where, by agreement, the aircraft are to be registered in the United States. In limited circumstances, the Company also obtains from the FAA or its designated representatives a U.S. Certificate of Airworthiness for a particular aircraft or a ferry flight permit. The Company's involvement with the civil aviation authorities of foreign jurisdictions consists largely of requests to register and deregister Company aircraft on lease to carriers in those countries. The Company also works with U.S. Customs with respect to the import and export of Company aircraft into and from the United States for maintenance or lease. EMPLOYEES The Company is in a capital intensive rather than a labor intensive business. As of December 31, 1997, the Company had 74 full-time employees, which it considered adequate for its business operations. The Company will expand its management and administrative personnel, as necessary, to meet future growth. None of the Company's employees is covered by a collective bargaining agreement and the Company believes that it has maintained excellent employee relations. The Company provides certain employee benefits, including retirement plans and health, life, disability and accident insurance. INSURANCE The Company requires its lessees to carry those types of insurance which are customary in the air transportation industry, including comprehensive liability insurance and aircraft hull insurance. In general, the Company is an additional insured on liability policies carried by the lessees. All policies contain a breach of warranty endorsement so that the interests of the Company are not prejudiced by any act or omission of the operator-lessee. Insurance premiums are prepaid by the lessee, with payment acknowledged by the insurance carrier. The territorial coverage is, in each case, suitable for the lessee's area of operations and the policies contain, among other provisions, a "no co-insurance" clause and a provision prohibiting cancellation or material change without at least 30 days advance written notice to the Company. Furthermore, the insurance is primary and not contributory and all insurance carriers are required to waive rights of subrogation against the Company. The stipulated loss value schedule under aircraft hull insurance policies is on an agreed value basis acceptable to the Company, which usually exceeds the book value of the aircraft. In cases where the Company believes that the agreed value stated in the lease is not sufficient, the Company purchases additional Total Loss Only coverage for the deficiency. Additionally, all aircraft in the Company's fleet are covered by Contingent Liability insurance. Aircraft hull policies contain standard clauses covering aircraft engines with deductibles required to be paid by the lessee. Furthermore, the aircraft hull policies contain full war risk endorsements, including, but not limited to, confiscation, seizure, hijacking and similar forms of retention or terrorist acts. All losses under such policies are payable in U.S. dollars. The comprehensive liability insurance policies include provisions for bodily injury, property damage, passenger liability, cargo liability and such other provisions reasonably necessary in commercial passenger and cargo airline operations with minimal deductibles. Such policies generally have combined comprehensive single liability limits of not less than $250 million and all losses are payable in U.S. dollars, U.K. pounds or German marks. The Company also maintains other insurance covering the specific needs of its business operations. Insurance policies are generally placed or reinsured through AIG subsidiaries, with costs allocated back to the Company. The Company believes that its insurance is adequate both as to coverage and amount. 5 8 RECENT EVENTS On February 26, 1998 Pan American Airways, Corp ("Pan Am") filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code ("Code") and suspended operations. The Company leases five Boeing 737 aircraft and manages two other Boeing 737 aircraft leased to Pan Am. Under the Code, Pan Am has 60 days from the date of the bankruptcy filing in which to affirm or reject the leases of such aircraft. The Company has not received any indication from Pan Am as to their intentions with respect to the above aircraft. ITEM 2. PROPERTIES FLIGHT EQUIPMENT The Company's management frequently reviews opportunities to acquire suitable commercial jet aircraft based not only on market demand and customer airline requirements, but also on the Company's fleet portfolio mix criteria and planning strategies for leasing. Before committing to purchase specific aircraft, the Company takes into consideration factors such as estimates of future values, potential for remarketing, trends in supply and demand for the particular type, make and model of aircraft and engines and anticipated obsolescence. As a result, certain types and vintages of aircraft do not necessarily fit the profile for inclusion in the Company's portfolio of aircraft owned and used in its leasing operations. At December 31, 1997, all of the Company's fleet was Stage III compliant, meaning that the aircraft hold or are capable of holding a noise certificate issued under Chapter 3 of Volume 1, Part II of Annex 16 of the Chicago Convention or have been shown to comply with the Stage III noise levels set out in Section 36.5 of Appendix C of Part 36 of the Federal Aviation Regulations of the United States. At December 31, 1997, the average age of the Company's flight equipment was 3.86 years. \The following table shows the scheduled lease terminations (for the minimum noncancelable period) by aircraft type for the Company's lease portfolio at December 31, 1997 as adjusted for aircraft sold through March 9, 1998:
AIRCRAFT TYPE 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 TOTAL ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- 737-300........................... 3 7 7 8 6 4 2 4 41 737-400........................... 4 10 11 5 4 11 5 1 1 52 737-500........................... 3 2 3 3 4 1 1 17 757-200........................... 6 7 5 3 6 2 9 3 7 48 767-200........................... 1 2 3 767-300........................... 1 3 2 7 8 6 3 1 31 747-200........................... 2 1 3 747-300........................... 2 2 747-400........................... 1 1 1 4 1 1 9 MD-83............................. 1 2 3 1 7 MD-87............................. 1 1 MD-11............................. 1 3 2 6 A300-600R......................... 1 3 1 1 1 7 A310-300.......................... 1 7 8 A319.............................. 4 4 A320.............................. 5 7 6 1 5 8 4 1 37 A321.............................. 2 4 4 1 1 1 13 A330.............................. 2 5 1 2 1 11 A340.............................. 2 6 1 9 -- -- -- -- -- -- -- -- -- -- --- Total............................. 21 61 56 37 36 44 18 18 9 9 309
- --------------- This schedule does not include three Boeing 737-300, two 737-400, one 757-200, one A310-200 and one A310-300 aircraft sold through March 9, 1998. In addition, the schedule does not include two A310-200 committed for sale in 1998. This schedule includes 20 aircraft leased by the Company and subleased to others. 6 9 COMMITMENTS At December 31, 1997, the Company had committed to purchase the following aircraft at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $17.7 billion for delivery as shown:
AIRCRAFT TYPE 1998 1999 2000 2001 2002 2003 2004 2005 2006 TOTAL ------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----- 737-300/400/500(a)............. 4 4 737-600/700/800(a)............. 11 8 9 10 10 10 10 9 9 86 757-200........................ 7 6 2 1 1 17 767-300........................ 7 3 2 1 1 1 1 16 767-400........................ 2 2 1 5 777-200/300(a)................. 5 3 4 4 4 4 4 3 3 34 747-400........................ 1 2 1 4 A319........................... 2 5 7 6 6 6 6 6 44 A320-200....................... 9 6 5 4 4 3 3 2 36 A321-100/200(a)................ 8 9 7 4 3 2 2 2 37 A330-200/300(a)................ 4 9 5 4 4 4 4 1 35 A340........................... 2 1 1 2 3 1 10 -- -- -- -- -- -- -- -- -- --- Total................ 60 52 43 38 38 32 30 23 12 328
- --------------- (a) The Company has the right to designate the size of the aircraft within the specific model type at specific dates prior to contractual delivery. Management anticipates that a significant portion of such aggregate purchase price will be funded by incurring additional debt. The exact amount of the indebtedness to be incurred will depend upon the actual purchase price of the aircraft, which can vary due to a number of factors, including inflation, and the percentage of the purchase price of the aircraft which must be financed. All of the purchase commitments set forth above are based upon master arrangements with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the sales subsidiary of Airbus Industrie ("Airbus"). The aircraft listed above are being purchased pursuant to agreements executed by the Company and either Boeing or Airbus. These agreements establish the pricing formulas (which include certain price adjustments based upon inflation and other factors) and various other terms with respect to the purchase of aircraft. Under certain circumstances, the Company has the right to alter the mix of aircraft type ultimately acquired. As of December 31, 1997, the Company had made non-refundable deposits (exclusive of capitalized interest) with respect to the aircraft which the Company has committed to purchase of approximately $553,749,000 and $359,873,000 with Boeing and Airbus, respectively. As of March 9, 1998, the Company had entered into contracts for the lease of all of the 60 aircraft to be delivered in 1998, 46 of the 52 aircraft to be delivered in 1999, 17 of the 43 aircraft to be delivered in 2000, 9 of the 38 aircraft to be delivered in 2001 and 12 of the 135 aircraft to be delivered subsequent to 2001. The Company will need to find customers for aircraft presently on order and any new aircraft ordered and arrange financing for portions of the purchase price of such equipment. Although the Company has been successful to date in placing its new aircraft on lease or sales contracts, and has obtained adequate financing in the past, there can be no assurance as to the future continued availability of lessees or purchasers, or of sufficient amounts of financing on terms acceptable to the Company. FACILITIES The Company's principal offices are located at 1999 Avenue of the Stars, Los Angeles, California. The Company occupies space under leases which expire in 2000. The leases cover approximately 30,000 square feet of office space, provide for annual rentals of approximately $1,627,000, and the rental payments thereunder are subject to certain indexed escalation provisions. 7 10 ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material legal proceedings. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company is indirectly wholly owned by AIG and the Company's Common Stock is not listed on any national exchange or traded in any established market. During the years ended December 31, 1995, 1996 and 1997, the Company paid cash dividends to its parent company of $21,150,000, $20,600,000 and $19,700,000, respectively. It is the intent of the Company to pay its parent company an annual dividend of at least 7% of net income subject to the dividend preference of any preferred stock outstanding. Under the most restrictive provisions of the Company's borrowing arrangements, consolidated retained earnings at December 31, 1997 in the amount of $438,335,000 were unrestricted as to the payment of dividends. ITEM 6. SELECTED FINANCIAL DATA The following table summarizes selected consolidated financial data and certain operating information of the Company. The selected consolidated financial data should be read in conjunction with the Consolidated Financial Statements and notes thereto and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K.
YEARS ENDED DECEMBER 31, ------------------------------------------------------------------ 1993 1994 1995 1996 1997 ---------- ----------- ----------- ----------- ----------- (DOLLAR AMOUNTS IN THOUSANDS) OPERATING DATA: Rentals of flight equipment...... $ 795,437 $ 993,596 $ 1,254,020 $ 1,444,439 $ 1,732,667 Flight equipment marketing....... 53,680 76,193 119,078 136,099 176,005 Interest and other income........ 62,515 40,267 49,390 51,976 49,335 Total revenues................... 911,632 1,110,056 1,422,488 1,632,514 1,958,007 Expenses......................... 633,992 798,049 1,084,142 1,237,575 1,431,848 Income before income taxes....... 277,640 312,007 338,346 394,939 526,159 Net income....................... 168,565 201,943 196,437 251,774 338,684 RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1): 1.68x 1.59x 1.43x 1.47x 1.58x BALANCE SHEET DATA: Flight equipment under operating leases (net of accumulated depreciation).................. $6,515,837 $ 8,851,079 $10,762,870 $12,182,774 $12,792,531 Net investment in finance and sales-type leases.............. 290,269 92,233 86,237 103,629 98,026 Total assets..................... 8,139,821 10,386,256 12,329,182 13,725,596 14,551,954 Total debt....................... 5,819,481 7,583,006 8,892,634 9,794,260 9,954,362 Shareholders' equity............. 1,409,181 1,640,772 2,000,107 2,214,552 2,517,188 OTHER DATA: Aircraft owned at period end(2)......................... 230 270 278 296 299 Aircraft sold or remarketed during the period.............. 9 24 41 37 57
- --------------- (1) See Exhibit 12. (2) See "Item 2. Properties -- Flight Equipment." 8 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL INDUSTRY CONDITION From time to time, certain of the Company's customers have experienced economic difficulties resulting in the Company's participation in customer restructurings. Such restructurings have involved the voluntary early termination of leases and the rescheduling of payments. In addition, in certain circumstances, the Company has been required to repossess aircraft. No aircraft were repossessed in 1997. See "Item 1. Business -- Customers." FINANCIAL CONDITION The Company borrows funds to purchase flight equipment, including funds for progress payments during the construction phase, principally on an unsecured basis from various sources. At December 31, 1997, 1996 and 1995, the Company's debt financing and capital lease obligations were comprised of the following:
1997 1996 1995 ---------- ---------- ---------- (DOLLARS IN THOUSANDS) Public term debt with single maturities........................... $3,950,000 $3,500,000 $3,550,000 Public medium-term notes with varying maturities........................... 2,896,865 2,563,720 2,403,770 Capital lease obligations.............. 903,320 995,872 1,088,424 Bank and other term debt............... -- -- 22,502 ---------- ---------- ---------- Total term debt and capital lease obligations................ 7,750,185 7,059,592 7,064,696 Commercial paper....................... 2,212,601 2,757,417 1,843,630 Less: Deferred debt discount........... (8,424) (22,749) (15,692) ---------- ---------- ---------- Debt financing and capital lease obligations.......... $9,954,362 $9,794,260 $8,892,634 ========== ========== ========== Composite interest rate................ 6.44% 6.23% 6.47% Percentage of total debt at fixed rate................................. 76.49% 68.95% 75.59% Composite interest rate on fixed debt................................. 6.63% 6.58% 6.66% Bank prime rate........................ 8.50% 8.25% 8.50%
The interest on substantially all the public debt (exclusive of the commercial paper) is fixed for the term of the note. As of December 31, 1997, the Company had committed credit agreements with 48 commercial banks aggregating $2.65 billion and uncommitted lines of credit with three banks for varying amounts. Bank debt principally provides for interest rates that vary according to the pricing option in effect at the time of borrowing 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. Bank financing is used primarily as backup for the Company's Commercial Paper program. On January 16, 1998, the Company replaced $1.25 billion of the committed revolving loans and lines of credit with a new, expanded facility for $1.35 billion. The facility is a 364 day tranche with a 5.5 basis point annual facility fee. The pricing options range from prime to .20% over LIBOR. As of December 31, 1997, the Company had an effective registration statement with respect to $2.09 billion of debt securities, under which $700 million of notes were sold through 1997. Additionally, a $990 million Medium-Term Note program was implemented under the shelf registration statement, under which $780 million was sold through 1997. Through February 1998, the Company sold an additional $300 million of notes and $80 million of Medium-Term Notes. In March 1998, a new registration statement of the Company with respect to $2.13 billion of debt securities was declared effective. 9 12 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 varies between 6.18% and 6.89%. The remaining 15% of the original financing available provides for LIBOR based pricing. In 1995, 1996 and 1997, the Company, through unrestricted subsidiaries, entered into sale-leaseback transactions providing proceeds to the Company in the amounts of $413.0 million, $507.6 million and $601.9 million, respectively, each relating to seven aircraft. The transactions resulted in the sale and leaseback of these aircraft for one year operating leases, each with six one year extension options for a total of seven years for each aircraft. The Company has the option to either buy back the aircraft or redeliver the aircraft for a fee to the lessor at the end of any lease period. The lease rates equate to fixed principal amortization and floating interest payments based on LIBOR or commercial paper pricing. As of December 31, 1997, the Company had repurchased one aircraft which was sold to a third party in January, 1998. In each of February and November 1995, the Company sold $100 million of Market Auction Preferred Stock. 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. In the normal course of business, the Company employs a variety of off-balance sheet financial instruments and other derivative products to manage its exposure to interest rates and the resulting impact of changes in interest rates on earnings, with the objective to lower its overall borrowing cost and to maintain its optimal mix of variable and fixed rate interest obligations. The Company only enters into derivative transactions to hedge interest rate risk and not to speculate on interest rates. These derivative products include interest rate swap agreements, interest rate spreadlocks, interest rate swaptions and interest rate floors. The counterparties to the Company's derivative instruments are all recognized U.S. derivative dealers. The counterparties to the majority of the notional amounts of the Company's derivative instruments are "AAA" rated and all have at least an "A" credit rating. The derivatives are subject to a bilateral security agreement which, in certain circumstances, may allow one party to the agreement to require the second party to the agreement to establish a cash collateral account. Any failure of the instruments or counterparties to perform under the derivative contracts would have an immaterial impact on the Company's earnings. RESULTS OF OPERATIONS The increase in revenues from rentals of flight equipment from $1,254.0 million in 1995 to $1,444.4 million in 1996 to $1,732.7 million in 1997 is due to the increase in the volume of flight equipment available for operating lease from 282 in 1995 to 308 in 1996 and 319 in 1997. The increase is also attributable to the increase in the relative cost of the fleet, from $12.0 billion in 1995 to $13.7 billion in 1996 and $14.4 billion in 1997 exclusive of aircraft subject to sale-leaseback transactions from which rental income is earned. In addition to its leasing operations, the Company 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, or during, the lease term. Revenue from such flight equipment marketing increased from $119.1 million in 1995 to $136.1 million in 1996 to $176.0 million in 1997 as a result of the type and the number of the flight equipment marketed in each period which fluctuated from 41 aircraft in 1995 to 36 aircraft in 1996 and 57 aircraft in 1997. In addition, the Company sold 11 engines (1997), seven engines (1996) and 19 engines (1995). Expenses as a percentage of total revenues were 76.2% for 1995, 75.8% for 1996 and 73.1% for 1997. Interest expense increased from $541.4 million in 1995 to $573.6 million in 1996 to $642.3 million in 1997, primarily as a result of an increase in debt outstanding, excluding the effect of debt discount, from $8.908 billion in 1995 to $9.817 billion in 1996 to $9.963 billion in 1997, to finance aircraft acquisitions, as 10 13 affected by changes in interest rates during the periods. These interest rate changes caused the Company's composite borrowing rate to fluctuate as follows: December 31, 1994........................................... 6.41% March 31, 1995.............................................. 6.69 June 30, 1995............................................... 6.59 September 30, 1995.......................................... 6.50 December 31, 1995........................................... 6.47 March 31, 1996.............................................. 6.31 June 30, 1996............................................... 6.22 September 30, 1996.......................................... 6.28 December 31, 1996........................................... 6.23 March 31, 1997.............................................. 6.20 June 30, 1997............................................... 6.32 September 30, 1997.......................................... 6.34 December 31, 1997........................................... 6.44
Depreciation of flight equipment increased from $431.9 million in 1995 to $485.1 million in 1996 to $546.2 million in 1997 due to the addition of aircraft. Provisions for overhauls also increased from $71.1 million in 1995 to $85.1 million in 1996 to $99.5 million in 1997 due to an increase in the number of aircraft on which the Company collects overhaul reserves resulting in an increase in the aggregate number of hours flown for which overhaul reserves are provided. Rent expense increased from $51.8 million in 1996 to $103.9 million in 1997 due to the increase in the number of sale-leaseback transactions from 14 aircraft in 1996 to 20 in 1997. The effective tax rate decreased from 41.9% in 1995 to 36.2% in 1996 and 35.7% in 1997. The higher percentage in 1995 was due principally to the impact of losses of subsidiaries for which the Company did not receive a current or future tax benefit. During the fourth quarter of 1995, two of these corporations were restructured. IMPACT OF THE YEAR 2000 ISSUE The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. This could result in a system failure or miscalculations in the year 2000 causing disruptions of operations of the Company, its lessees, manufacturers or business partners. The Company has already reviewed and identified its computer systems that are subject to Year 2000 risk. Accordingly, the Company has commenced the remediation of all systems not Year 2000 compliant. Remediation and testing of such systems will be completed in advance of Year 2000. The costs of such remediation are expensed as incurred and are not material to the Company's consolidated financial position or consolidated results of operations. The Company has also initiated formal communication with lessees, manufacturers and business partners to determine the extent to which the Company is vulnerable to those third parties' failures to remediate their own Year 2000 issues. The Company has not yet completed its review of responses from its lessees, manufacturers and business partners. As a result, the Company can not determine at this time the extent, if any, to which the Company may be exposed to financial risk from the inability of the Company's lessees, manufacturers and business partners to remediate their own Year 2000 issues. NEW ACCOUNTING PRONOUNCEMENTS, ISSUED BUT NOT YET EFFECTIVE In June 1997, the FASB issued SFAS No. 130 Reporting Comprehensive Income. SFAS No. 130 establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. The Company does not expect this pronouncement to materially impact the Company's results of operations. 11 14 In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for disclosure about operating segments in annual financial statements and selected information in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas and major customers. This statement supersedes SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. The new standard becomes effective for the Company for the year ending December 31, 1998, and requires that comparative information from earlier years be restated to conform to the requirements of this standard. The Company does not expect this pronouncement to materially change the Company's current reporting and disclosures. In February 1997, the Securities and Exchange Commission (SEC) issued Financial Reporting Release No. 48 "Disclosure of Accounting Policies for Derivative Financial Instruments and Derivative Commodity Instruments and Disclosure of Quantitative and Qualitative Information about Market Risk Inherent in Derivative Financial Instruments, Other Financial Instruments, and Derivative Commodity Instruments" (FRR No. 48). These disclosures will be effective with the Company's reporting during 1998. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this Item is submitted as a separate section of this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Registrant changed its independent auditors from Ernst & Young LLP on April 17, 1997 due to the desire to have the accounts of the Registrant and its ultimate parent corporation, American International Group, Inc., and its consolidated subsidiaries audited by the same independent auditors, Coopers & Lybrand L.L.P. On April 17, 1997, the Registrant engaged Coopers & Lybrand L.L.P. as the Registrant's independent auditors. Neither of the reports of Ernst & Young LLP for the years ended December 31, 1996 or 1995 contained an adverse opinion or a disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles. The decision to change independent auditors was approved by the Board of Directors of Registrant. Since January 1, 1995, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, and none of the events set forth in paragraphs (a)(2)(v)(A) through (D) of Item 304 of Regulation S-K occurred. From January 1, 1995 through April 17, 1997, neither the Registrant nor anyone acting on its behalf has consulted Coopers & Lybrand L.L.P. regarding (i) either the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Registrant's financial statements, and either a written report was provided to the Registrant or oral advice was provided that Coopers & Lybrand L.L.P. concluded was an important factor considered by the Registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to that Item) or a reportable event (as described in Item 304(a)(1)(iv) of Regulation S-K). PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (2): Financial Statements and Financial Statement Schedule: The response to this portion of Item 14 is submitted as a separate section of this report beginning on page 14. (a)(3) and (c): Exhibits: The response to this portion of Item 14 is submitted as a separate section on this report beginning on page 13. (b) Reports on Form 8-K: None. 12 15 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES FORM 10-K ITEMS 8, 14(a), AND 14(c) INDEX OF CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE The following consolidated financial statements of the Company and its subsidiaries required to be included in Item 8 are listed below:
PAGE ---- Reports of Independent Auditors............................. 15-16 Consolidated Financial Statements: Balance Sheets at December 31, 1996 and 1997.............. 17 Statements of Income for the years ended December 31, 1995, 1996 and 1997.................................... 18 Statements of Shareholders' Equity for the years ended December 31, 1995, 1996 and 1997....................... 19 Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997.................................... 20-21 Notes to Consolidated Financial Statements................ 22
The following financial statement schedule of the Company and its subsidiaries is included in Item 14(a)(2):
SCHEDULE NUMBER DESCRIPTION PAGE - --------------- ----------- ---- II Valuation and Qualifying Accounts........................... 36
All other financial statements and schedules not listed have been omitted since the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required. The following exhibits of the Company and its subsidiaries are included in Item 14(c):
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 3.1 Restated Articles of Incorporation of the Company, as amended through December 9, 1992, filed November 3, 1993 (filed as an exhibit to Registration Statement No. 33-50913 and incorporated herein by reference). 3.2 Certificate of Determination of Preferences of Series C Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.3 Certificate of Determination of Preferences of Series D Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.4 Certificate of Determination of Preferences of Series E Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.5 Certificate of Determination of Preferences of Series F Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1994 and incorporated herein by reference). 3.6 Certificate of Determination of Preferences of Series G Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 3.7 Certificate of Determination of Preferences of Series H Market Auction Preferred Stock (filed as an exhibit to Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 3.8 By-Laws of the Company, including amendment thereto dated August 31, 1990 (filed as an exhibit to Registration Statement No. 33-37600 and incorporated herein by reference).
13 16
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.1 Indenture dated as of November 1, 1991, between the Company and First Trust National Association (successor to Continental Bank, National Association), as Trustee (filed as an exhibit to Registration Statement No. 33-43698 and incorporated herein by reference). 4.2 The Company agrees to furnish to the Commission upon request a copy of each instrument with respect to issues of long-term debt of the Company and its subsidiaries, the authorized principal amount of which does not exceed 10% of the consolidated assets of the Company and its subsidiaries. 10.1 Purchase Agreement No. 1916, dated as of June 24, 1996, between the Company and The Boeing Company, including Letter Agreements relating thereto (filed as an exhibit to Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated herein by reference). 10.2 Revolving Credit Agreement, dated as of January 17, 1997, among the Company, Union Bank of Switzerland, New York Branch, and the other banks listed therein providing up to $1,250,000,000 (five year facility) (filed as an exhibit to Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.3 Revolving Credit Agreement, dated as of January 17, 1997, among the Company, Union Bank of Switzerland, New York Branch, and the other banks listed therein providing up to $1,250,000,000 (364 day facility) (filed as an exhibit to Form 10-K for the year ended March 31, 1996 and incorporated herein by reference). 10.4 Amendment to Revolving Credit Agreement, dated as of January 16, 1998, among the Company, Union Bank of Switzerland, New York Branch and the other banks listed therein providing up to $1,350,000,000 (364 day facility). 12. Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends. 23.1 Consent of Coopers and Lybrand L.L.P. 23.2 Consent of Ernst and Young LLP. 27. Financial Data Schedule.
14 17 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors International Lease Finance Corporation Los Angeles, California We have audited the accompanying consolidated balance sheet of International Lease Finance Corporation and subsidiaries as of December 31, 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for the year ended December 31, 1997 and the related financial statement schedule. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Lease Finance Corporation and subsidiaries at December 31, 1997, and the consolidated results of their operations and their cash flows for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information required to be included therein. COOPERS & LYBRAND L.L.P. Los Angeles, California February 3, 1998 15 18 REPORT OF INDEPENDENT AUDITORS Shareholders and Board of Directors International Lease Finance Corporation Los Angeles, California We have audited the accompanying consolidated balance sheet of International Lease Finance Corporation and subsidiaries as of December 31, 1996 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of International Lease Finance Corporation and subsidiaries at December 31, 1996, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Century City, Los Angeles, California February 19, 1997 16 19 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS
DECEMBER 31, -------------------------- 1997 1996 ----------- ----------- Cash, including interest bearing accounts of $35,113 (1997) and $31,704 (1996)......................... $ 63,754 $ 36,558 Current income taxes........................................ -- 16,420 Notes receivable............................................ 467,688 429,146 Net investment in finance and sales-type leases............. 98,026 103,629 Flight equipment under operating leases..................... 14,425,091 13,674,996 Less accumulated depreciation............................. 1,632,560 1,492,222 ----------- ----------- 12,792,531 12,182,774 Deposits on flight equipment purchases...................... 1,017,628 861,355 Accrued interest, other receivables and other assets........ 60,416 50,895 Investments................................................. 18,731 18,099 Deferred debt issue costs -- less accumulated amortization of $52,444 (1997) and $43,537 (1996)......................... 33,180 26,720 ----------- ----------- $14,551,954 $13,725,596 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Accrued interest and other payables......................... $ 214,106 $ 219,111 Current income taxes........................................ 64,891 -- Debt financing, net of deferred debt discount of $8,424 (1997) and $22,749 (1996).......................... 9,051,042 8,798,388 Capital lease obligations................................... 903,320 995,872 Security and other deposits on flight equipment............. 744,800 611,272 Rentals received in advance................................. 129,586 77,107 Deferred income taxes....................................... 927,021 809,294 Commitments and contingencies -- Note K 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 shares (1997 and 1996) issued and outstanding............................................ 3,582 3,582 Paid-in capital........................................... 579,955 579,955 Retained earnings......................................... 1,533,651 1,231,015 ----------- ----------- 2,517,188 2,214,552 ----------- ----------- $14,551,954 $13,725,596 =========== ===========
See accompanying notes. 17 20 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- Revenues: Rental of flight equipment............................... $1,732,667 $1,444,439 $1,254,020 Flight equipment marketing............................... 176,005 136,099 119,078 Interest and other....................................... 49,335 51,976 49,390 ---------- ---------- ---------- 1,958,007 1,632,514 1,422,488 Expenses: Interest................................................. 642,321 573,599 541,428 Depreciation of flight equipment......................... 546,226 485,102 431,947 Provision for overhaul................................... 99,458 85,083 71,113 Flight equipment rent expense............................ 103,883 51,809 -- Selling, general and administrative...................... 39,960 41,982 39,654 ---------- ---------- ---------- 1,431,848 1,237,575 1,084,142 ---------- ---------- ---------- INCOME BEFORE INCOME TAXES............................ 526,159 394,939 338,346 Provision for income taxes................................. 187,475 143,165 141,909 ---------- ---------- ---------- NET INCOME............................................ $ 338,684 $ 251,774 $ 196,437 ========== ========== ==========
See accompanying notes. 18 21 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARKET AUCTION PREFERRED STOCK COMMON STOCK --------------------- -------------------- NUMBER OF NUMBER OF PAID-IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS TOTAL --------- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1994........ 2,000 $200,000 35,818,122 $3,582 $582,941 $ 854,249 $1,640,772 Sale of MAPS preferred............ 2,000 200,000 (2,856) 197,144 Dividend to AIG................... (21,150) (21,150) Preferred stock dividends......... (13,096) (13,096) Net income........................ 196,437 196,437 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1995........ 4,000 $400,000 35,818,122 $3,582 $580,085 $1,016,440 $2,000,107 Sale of MAPS preferred............ (130) (130) Dividend to AIG................... (20,600) (20,600) Preferred stock dividends......... (16,599) (16,599) Net income........................ 251,774 251,774 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1996........ 4,000 $400,000 35,818,122 $3,582 $579,955 $1,231,015 $2,214,552 Dividends to AIG.................. (19,700) (19,700) Preferred stock dividends......... (16,348) (16,348) Net income........................ 338,684 338,684 ----- -------- ---------- ------ -------- ---------- ---------- Balance at December 31, 1997...... 4,000 $400,000 35,818,122 $3,582 $579,955 $1,533,651 $2,517,188 ===== ======== ========== ====== ======== ========== ==========
See accompanying notes. 19 22 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------------------------- 1997 1996 1995 ----------- ----------- ----------- OPERATING ACTIVITIES: Net income................................................ $ 338,684 $ 251,774 $ 196,437 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of flight equipment........................ 546,226 485,102 431,947 Deferred income taxes................................... 117,727 148,356 173,528 Amortization of deferred debt issue costs............... 9,505 8,841 11,554 Gain on sale of flight equipment included in amount financed.............................................. (30,369) (16,063) (46,260) Increase in notes receivable............................ (712) (66,721) (9,053) Equity in net (income) loss of affiliates............... (632) (788) 517 Change in unamortized debt discount..................... 14,325 (7,057) 3,336 Changes in operating assets and liabilities: (Increase) decrease in accrued interest, other receivables and other assets.......................... (9,521) 37,096 (16,753) (Decrease) increase in accrued interest and other payables.............................................. (5,005) 22,435 72,651 Increase in current income taxes payable................ 81,311 14,383 2,321 Increase (decrease) in rentals received in advance...... 52,479 (3,704) 8,254 ----------- ----------- ----------- Net cash provided by operating activities................... 1,114,018 873,654 828,479 ----------- ----------- ----------- INVESTING ACTIVITIES: Acquisition of flight equipment for operating leases...... (3,289,744) (3,210,986) (3,364,496) (Increase) decrease in deposits and progress payments..... (156,273) (55,785) 85,141 Proceeds from disposal of flight equipment -- net of gain.................................................... 2,038,390 1,194,946 862,935 Advances on notes receivable.............................. -- -- (5,606) Collections on notes receivable........................... 82,464 163,298 150,093 Collections on finance and sales-type leases.............. 11,049 7,781 5,996 Purchase of investments................................... -- -- (845) Sale of investments -- net of gain........................ -- -- 2,000 ----------- ----------- ----------- Net cash used in investing activities....................... (1,314,114) (1,900,746) (2,264,782) ----------- ----------- ----------- FINANCING ACTIVITIES: Proceeds from debt financing and capital lease obligations............................................. 6,084,081 5,042,064 6,309,304 Payments in reduction of debt financing and capital lease obligations............................................. (5,938,304) (4,133,381) (5,003,012) Proceeds from sale of MAPS preferred stock (net of issue costs).................................................. -- (130) 197,144 Debt issue costs.......................................... (15,966) (8,057) (18,211) Payment of common and preferred dividends................. (36,048) (37,199) (34,246) Increase in customer deposits............................. 133,529 113,256 19,530 ----------- ----------- ----------- Net cash provided by financing activities................... 227,292 976,553 1,470,509 ----------- ----------- ----------- Net increase (decrease) in cash............................. 27,196 (50,539) 34,206 Cash at beginning of year................................... 36,558 87,097 52,891 ----------- ----------- ----------- Cash at end of year..................................... $ 63,754 $ 36,558 $ 87,097 =========== =========== =========== (Table continued on next page)
20 23 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------------------------- 1997 1996 1995 ----------- ----------- ----------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest (net of amount capitalized $48,818 (1997), $50,368 (1996), and $51,091 (1995))................... $ 617,906 $ 559,437 $ 503,023 Income taxes (net of amounts paid)...................... (11,563) (19,574) (33,940) SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: 1997 Notes and finance and sales-type leases in the amount of $125,741 were received as partial payment in exchange for flight equipment sold with a book value of $95,372. 1996 Notes and finance and sale-type leases in the amount of $173,404 were received as partial payment in exchange for flight equipment sold with a book value of $157,340. Flight equipment was received in exchange for notes receivable in the amount of $46,307. 1995 Notes in the amount of $268,660 were received as partial payments in exchange for flight equipment sold with a book value of $222,400. Flight equipment was received in exchange for notes receivable in the amount of $64,576.
See accompanying notes. 21 24 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: The Company is primarily engaged in the acquisition of new and used commercial jet aircraft and the leasing and sale of such aircraft to charter and scheduled airlines throughout the world. In addition, the Company is engaged in the remarketing of commercial jets for its own account, for airlines and for financial institutions. Parent Company: International Lease Finance Corporation (the "Company") is an indirect wholly owned subsidiary of American International Group, Inc. ("AIG"). AIG is a holding company which through its subsidiaries is primarily engaged in a broad range of insurance and insurance-related activities and financial services in the United States and abroad. Principles of Consolidation: The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Investments of less than 20% in other entities are carried at cost. Investments of between 20% and 50% in other entities are carried under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. Intercompany Allocations: The Company is party to cost sharing agreements with AIG. Generally, these agreements provide for the allocation of costs upon either a specific identification basis or a proportional cost allocation basis. The charges aggregated $4,526 (1997), $5,595 (1996) and $6,439 (1995). Rentals: The Company, as lessor, leases flight equipment principally under operating leases. Accordingly, income is reported over the life of the lease as rentals become receivable under the provisions of the lease or, in the case of leases with varying payments, under the straight-line method over the noncancelable term of the lease. In certain cases, leases provide for additional rentals based on usage. Flight Equipment Marketing: The Company is a marketer of flight equipment. Marketing revenues include all revenues from such operations consisting of net gains on sales of flight equipment and commissions. Flight Equipment: Flight equipment is stated at cost. Major additions and modifications are capitalized. Normal maintenance and repairs; airframe and engine overhauls; and compliance with return conditions of flight equipment on lease are provided by and paid for by the lessee. Under the provisions of most leases, for certain airframe and engine overhauls, the lessee is reimbursed for costs incurred up to but not exceeding related contingent rentals paid to the Company by the lessee. Such rentals are included in the caption Rental of flight equipment. The Company provides a charge to operations for such reimbursements based on the estimated reimbursements expected during the life of the lease, which amount is included in overhaul reserves. Generally, all aircraft, including aircraft acquired under capital leases, are depreciated using the straight-line method over a 25 year life from the date of manufacture to a 15% residual value. At the time assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss. The Company regularly reviews its flight equipment to determine that its carrying value is not impaired. Capitalized Interest: The Company borrows certain funds to finance progress payments for the construction of flight equipment ordered. The interest incurred on such borrowings is capitalized and included in the cost of the equipment. Deferred Debt Issue Costs: Deferred debt issue costs incurred in connection with debt financing are amortized over the life of the debt using the interest rate method and are charged to interest expense. Financial Instruments: The Company has granted certain parties the right but not the obligation to effectively convert certain of the Company's fixed rate obligations to floating rate obligations based on an established notional amount. The proceeds of such option agreements are initially recorded as a liability. 22 25 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) When swap agreements are effective in modifying the terms of actual debt agreements, such swaps are accounted for by the accrual method. Periodic payments as well as the amortization (by a level yield method) of the initial value are treated as adjustments to interest expense of the related debt. Income Taxes: The Company and its U.S. subsidiaries are included in the consolidated federal income tax return of AIG. The Company and its subsidiaries are included in the combined California unitary tax return of AIG. The provision for income taxes is calculated on a separate return basis. Income tax payments are made pursuant to a tax payment allocation agreement whereby AIG credits or charges the Company for the corresponding increase or decrease (not to exceed the separate return basis calculation) in AIG's current taxes resulting from the inclusion of the Company in AIG's consolidated tax return. Intercompany payments are made when such taxes are due or tax benefits are realized by AIG. The deferred tax liability is determined based on the difference between the financial statement and tax basis of assets and liabilities and is measured at the enacted tax rates that will be in effect when these differences reverse. Deferred tax expense is determined by the change in the liability for deferred taxes ("Liability Method"). Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications: Certain amounts have been reclassified in the 1996 and 1995 financial statements to conform to the Company's 1997 presentation. NOTE B -- NOTES RECEIVABLE Notes receivable are primarily from the sale of flight equipment and are summarized as follows:
1997 1996 -------- -------- Fixed rate notes receivable due in varying installments to 2008: Less than 6%..................................... $ 3,691 $ 3,873 6% to 7.99%...................................... 306,053 240,754 8% to 9.99%...................................... 94,788 140,455 10% to 13%....................................... 6,126 8,302 LIBOR plus 1.1% to LIBOR plus 1.5% notes receivable in varying installments to 2002.................. 57,030 35,762 -------- -------- $467,688 $429,146 ======== ========
Included above, the Company had notes receivable of $4,374 (1997) and $10,694 (1996) representing restructured lease payments. 23 26 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE B -- NOTES RECEIVABLE (CONTINUED) At December 31, 1997, the minimum future notes receivable payments to be received are as follows: 1998................................................... $126,221 1999................................................... 111,276 2000................................................... 34,555 2001................................................... 37,787 2002................................................... 25,831 Thereafter............................................. 132,018 -------- $467,688 ========
The Company sold notes receivable with certain limited recourse provisions to a related party of the Company. The notes were sold at face value including accrued interest and aggregated $116,235 in 1996 and $56,413 in 1995. The Company continues to collect payments from the notes and transfers to the related party the amounts received less a servicing fee. The Company recorded no gain or loss on the sale. The Company recorded servicing fee income of $112 (1997) and $16 (1996) related to the notes sold. The Company's maximum exposure under recourse provisions was $0 at December 31, 1997 and $23,205 at December 31, 1996. During 1997 the Company repurchased one note sold in 1996 and during 1996, the Company repurchased one note sold in 1995. Neither of the notes were repurchased under the recourse provisions. NOTE C -- NET INVESTMENT IN FINANCE AND SALES-TYPE LEASES The following lists the components of the net investment in finance and sales-type leases:
1997 1996 -------- -------- Total minimum lease payments to be received............ $109,615 $122,559 Estimated residual values of leased flight equipment... 19,993 18,483 Less: Unearned income.................................. (31,582) (37,413) -------- -------- Net investment in finance and sales-type leases........ $ 98,026 $103,629 ======== ========
Minimum future lease payments to be received for flight equipment on finance and sales-type leases at December 31, 1997 are as follows: 1998................................................... $ 15,783 1999................................................... 14,682 2000................................................... 16,095 2001................................................... 16,095 2002................................................... 16,035 Thereafter............................................. 30,925 -------- Total minimum lease payments to be received............ $109,615 ========
24 27 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE D -- INVESTMENTS Investments consist of the following:
1997 1996 ------------------ ------------------ PERCENT PERCENT OWNED AMOUNT OWNED AMOUNT ------- ------- ------- ------- Cost method: Air Liberte......................... (A) $ 4,792 10.8% $ 4,792 International Aircraft Investors.... 1.5%(B) 300 6.2% 300 Others.............................. 850 845 Equity method: Pacific Ocean Leasing Ltd........... 50.0% 5,995 50.0% 5,848 Pacific Asia Leasing Ltd............ 25.0% 6,794 25.0% 6,314 ------- ------- $18,731 $18,099 ======= =======
- --------------- (A) During 1997, Air Liberte was acquired by British Airways. As a result of the acquisition, ILFC's percentage ownership will be reduced. Until the acquisition is complete, ILFC's percentage ownership is not determinable. (B) During 1997, International Aircraft Investors ("IAI") consummated an initial public offering which raised $23,380 in equity. As a result, the Company's investment has been diluted to 1.5%. At December 31, 1997, the Company had one aircraft on lease to Air Liberte. This lease is similar in terms to those of unaffiliated customers. The Company has sold used aircraft and engines to IAI on terms similar to those of unaffiliated customers. In exchange for these sales the Company has received notes aggregating $36,675 (1997) and $8,763 (1996), which are included in Notes Receivable in the accompanying consolidated balance sheets (see Note B). In addition, the Company has guaranteed certain obligations of IAI related to such sales (see Note K). The Company has a 50% interest in Pacific Ocean Leasing Ltd. ("POL"), a Bermuda corporation. POL presently owns one Boeing 767-200 aircraft and one spare engine, both of which are on lease to an airline. POL also owns an inventory of spare parts. Additionally, the Company has guaranteed the bank loan to POL (see Note K). The Company has a 25% interest in Pacific Asia Leasing Ltd. ("PAL"), a Bermuda corporation. PAL presently owns one Boeing 767-300ER aircraft on lease to an airline. The Company has a demand note, which bears interest at Libor+1 5/8%, with PAL of $26,751. 25 28 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS Debt financing and capital lease obligations are comprised of the following:
1997 1996 ---------- ---------- Commercial Paper (weighted average interest rate at December 31, 5.89% (1997) and 5.48% (1996))....... $2,212,601 $2,757,417 Term Notes.......................................... 3,950,000 3,500,000 Medium-Term Notes................................... 2,896,865 2,563,720 Capital Lease Obligations........................... 903,320 995,872 Less: Deferred debt discount........................ (8,424) (22,749) ---------- ---------- $9,954,362 $9,794,260 ========== ==========
Bank Financing: As of December 31, 1997, the Company had committed credit agreements with 48 commercial banks aggregating $2,650,000 and uncommitted lines of credit with three banks for varying amounts. Bank debt principally provides for interest rates that vary according to the pricing option in effect at the time of borrowing and range from prime to .20% over LIBOR at the option of the Company. Bank financings are subject to facility fees of up to .08% of amounts available. Bank financing is used primarily as backup for the Company's Commercial Paper program. 26 29 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Term Notes: The Company has issued the following Notes which provide for a single principal payment at maturity and cannot be redeemed prior to maturity:
INITIAL TERM 1997 1996 --------- ---------- ---------- 4 3/4% Notes due January 15, 1997..................... 3 years $ 100,000 5 7/8% Notes due February 1, 1997..................... 4 years 100,000 5 1/2% Notes due April 1, 1997........................ 4 years 100,000 6 1/2% Notes due July 15, 1997........................ 5 years 150,000 6 3/4% Notes due August 1, 1997....................... 3 years 100,000 4 1/2 Floating Rate Notes due October 15, 1997.............. years 100,000 8 1/8% Notes due January 15, 1998..................... 3 years $ 150,000 150,000 5 5/8% Notes due March 1, 1998........................ 4 years 100,000 100,000 5 3/4% Notes due March 15, 1998....................... 5 years 100,000 100,000 7% Notes due June 1, 1998............................. 4 years 100,000 100,000 6 1/4% Notes due June 15, 1998........................ 3 years 100,000 100,000 Floating Rate Notes due June 19, 1998 (swapped to 6.50%).............................................. 2 years 100,000 100,000 5 3/4% Notes due July 1, 1998......................... 5 years 100,000 100,000 8.35% Notes due October 1, 1998....................... 7 years 100,000 100,000 Floating Rate Notes due November 2, 1998 (swapped to 6.0725%)............................................ 2 years 100,000 100,000 5 3/4% Notes due January 15, 1999..................... 5 years 150,000 150,000 5 1/2% Notes due January 15, 1999..................... 3 years 150,000 150,000 7 1/2% Notes due March 1, 1999........................ 4 years 100,000 100,000 6 5/8% Notes due April 1, 1999 (swapped to a floating rate(1))............................................ 5 years 100,000 100,000 6.70% Notes due April 30, 1999........................ 2 years 100,000 Floating Rate Notes due June 2, 1999 (swapped to 6.64%).............................................. 4 years 100,000 100,000 Floating Rate Notes due July 15, 1999 (swapped to 6.235%)............................................. 4 years 100,000 100,000 6 1/2% Notes due August 15, 1999...................... 7 years 100,000 100,000 6 1/8% Notes due November 1, 1999..................... 4 years 100,000 100,000 5 3/4% Notes due December 15, 1999.................... 4 years 150,000 150,000 8 1/4% Notes due January 15, 2000..................... 5 years 100,000 100,000 6 3/8% Notes due January 18, 2000..................... 3 years 200,000 6.65% Notes due April 1, 2000......................... 3 years 100,000 6.20% Notes due May 1, 2000........................... 7 years 100,000 100,000 7% Notes due May 15, 2000............................. 5 years 100,000 100,000 6 5/8% Notes due June 1, 2000......................... 3 years 100,000 6 5/8% Notes due August 15, 2000...................... 4 years 100,000 100,000 6 1/4% Notes due October 15, 2000..................... 5 years 100,000 100,000 Floating Rate Notes due February 1, 2001 (swapped to 6.53%) 4 years 100,000 8 7/8% Notes due April 15, 2001....................... 10 years 150,000 150,000 6 7/8% Notes due May 1, 2001.......................... 4 years 100,000 6 1/2% Notes due July 1, 2001......................... 4 years 100,000 6 3/8% Notes due August 1, 2001....................... 4 years 100,000 6 1/2% Notes due October 15, 2001..................... 5 years 100,000 100,000 6 3/8% Notes due February 15, 2002.................... 5 years 100,000 6 3/8% Notes due August 1, 2002....................... 5 years 100,000 8 3/8% Notes due December 15, 2004.................... 10 years 100,000 100,000 ---------- ---------- $3,950,000 $3,500,000 ========== ==========
- --------------- See Note L -- Financial Instruments. (1) Floating rate swap expired April 1, 1997. 27 30 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE E -- DEBT FINANCING AND CAPITAL LEASE OBLIGATIONS (CONTINUED) Medium-Term Notes: The Company's Medium-Term Notes have an average notional amount of $11 million, bear interest at rates varying between 5.05% and 9.88%, inclusive, with maturities from 1998 through 2005. The Medium-Term Notes provide for a single principal payment at the maturity of the respective note. They cannot be redeemed by the Company prior to maturity. Capital Lease Obligations: The Company's Capital Lease Obligations provide 10 year, fully amortizing debt in three interest rate tranches. The first 62.5% of the original debt is at a fixed rate of 6.55%. The second 22.5% of the original debt is at fixed rates varying between 6.18% and 6.89%. The final 15% of the original debt is at a floating LIBOR based rate. The debt matures through 2005. The flight equipment associated with the obligations, and included in flight equipment under operating leases in the balance sheet, had a net book value of $1,147,514 (1997) and $1,174,845 (1996). The following is a schedule by years of future minimum lease payments under capitalized leases together with the present value of the net minimum lease payments as of December 31, 1997: 1998..................................................... $ 151,105 1999..................................................... 144,978 2000..................................................... 138,907 2001..................................................... 132,656 2002..................................................... 126,569 Thereafter............................................... 495,230 ---------- Total minimum lease payments............................. 1,189,445 Less amount representing interest........................ (286,125) ---------- Present value of net minimum lease payments.............. 903,320 ==========
Maturities of debt financing and capital lease obligations (excluding commercial paper and deferred debt discount) at December 31, 1997 are as follows: 1998..................................................... $1,810,667 1999..................................................... 1,915,802 2000..................................................... 1,960,052 2001..................................................... 1,008,552 2002..................................................... 408,552 Thereafter............................................... 646,560 ---------- $7,750,185 ==========
Under the most restrictive provisions of the related borrowings, consolidated retained earnings at December 31, 1997, in the amount of $438,335, are unrestricted as to payment of dividends based on consolidated tangible net worth requirements. NOTE F -- SHAREHOLDERS' EQUITY Preferred Stock: In February and November 1995, 500 shares each of Series E and F and G and H, respectively, of Market Auction Preferred Stock ("MAPS") were issued in connection with public offerings at $100 per 28 31 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE F -- SHAREHOLDERS' EQUITY (CONTINUED) share. Proceeds, net of issuance costs, to the Company were $197,144. In addition, issuance costs of $130 for Series G and H were incurred in 1996. The MAPS have a liquidation value of $100 per share and are not convertible. The dividend rate, other than the initial rate, for each dividend period for each series is reset approximately every 7 weeks (49 days) on the basis of orders placed in an auction. At December 31, 1997, the dividend rates for Series A through H ranged from 4.125% to 4.50%. Stock Appreciation Rights: Stock Appreciation Rights ("SARs") were granted to certain employees of the Company during 1990. The SARs granted generally vest over a nine year period from the effective date and are exercisable immediately upon vesting. SARs initially have no value but can gain a cash value based upon the difference between a Benchmark Price and a Formula Price (based on adjusted pre-tax cash flow of the Company), but not in excess of an aggregate of $150,000, to be accrued and paid over the period of the plan. The SAR plan became effective on January 1, 1991. No value has been earned or accrued under the SAR plan as of December 31, 1997. NOTE G -- RENTAL INCOME Minimum future rentals on noncancelable operating leases and subleases of flight equipment which have been delivered at December 31, 1997 are as follows:
YEAR ENDED ---------- 1998..................................................... $1,460,145 1999..................................................... 1,248,816 2000..................................................... 962,415 2001..................................................... 722,347 2002..................................................... 552,554 Thereafter............................................... 792,066 ---------- $5,738,343 ==========
Additional rentals earned by the Company based on the lessees' usage aggregated $219,380 (1997), $194,741 (1996) and $168,121 (1995). Flight equipment is leased, under operating leases, with remaining terms ranging from one to 10 years. NOTE H -- RENTAL EXPENSE During 1995, 1996 and 1997, the Company entered into sale-leaseback transactions providing proceeds to the Company in the amounts of $412,626, $507,600 and $601,860, respectively, relating to seven aircraft for each transaction. The transactions resulted in the sale and leaseback of these aircraft under one year operating leases, each with six one year extension options, maturing on December 22, 1998, September 20, 1998 and September 11, 1998, respectively. During 1997 one aircraft was repurchased. The lease rates equate to fixed principal amortization and floating interest payments based on LIBOR or commercial paper pricing. Minimum future rental expense for 1998 is $44,227 at December 31, 1997. 29 32 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE I -- INCOME TAXES The provision (benefit) for income taxes is comprised of the following:
1997 1996 1995 -------- -------- -------- Current: Federal(1)........................................... $ 60,003 $(16,700) $(32,962) State................................................ 8,280 1,957 1,427 Foreign.............................................. 1,465 9,381 -- -------- -------- -------- 69,748 (5,362) (31,535) Deferred: Federal.............................................. 111,120 138,750 162,129 State................................................ 6,607 9,777 11,315 -------- -------- -------- 117,727 148,527 173,444 -------- -------- -------- $187,475 $143,165 $141,909 ======== ======== ========
- --------------- (1) Including U.S. tax on foreign income The provision for deferred income taxes is comprised of the following temporary differences:
1997 1996 1995 -------- -------- -------- Accelerated depreciation on flight equipment........... $123,486 $132,101 $182,125 Excess of state income taxes not currently deductible for Federal income tax purposes...................... (2,312) (3,422) (3,960) Tax versus book lease differences...................... 18,568 35,933 779 Provision for overhauls................................ (2,873) (7,726) (4,370) Rentals received in advance............................ (18,270) (5,855) (308) Straight line rents.................................... 778 (3,020) (606) Other.................................................. (1,650) 516 (216) -------- -------- -------- $117,727 $148,527 $173,444 ======== ======== ========
The deferred tax liability consists of the following:
1997 1996 -------- -------- Accelerated depreciation on flight equipment........... $942,861 $819,375 Excess of state income taxes not currently deductible for Federal income tax purposes...................... (19,783) (17,471) Tax versus book lease differences...................... 86,465 67,897 Provision for overhauls................................ (41,646) (38,773) Rentals received in advance............................ (54,747) (36,477) Straight line rents.................................... 15,186 14,408 Other.................................................. (1,315) 335 -------- -------- $927,021 $809,294 ======== ========
30 33 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE I -- INCOME TAXES (CONTINUED) A reconciliation of computed expected total provision for income taxes to the amount recorded is as follows:
1997 1996 1995 -------- -------- -------- Computed expected provision based upon a federal rate of 35%............................................... $184,156 $138,229 $118,421 State income taxes, net of Federal income taxes........ 9,676 7,628 8,282 Foreign sales corporation benefit...................... (6,920) (6,160) (7,305) Subsidiary losses without tax benefit.................. -- -- 17,169 Other.................................................. 563 (1,818) 5,342 Foreign taxes.......................................... -- 5,286 -- -------- -------- -------- $187,475 $143,165 $141,909 ======== ======== ========
NOTE J -- OTHER INFORMATION Concentration of Credit Risk The Company leases and sells aircraft to airlines. All of the lease receivables and the majority of notes receivable are from airlines located throughout the world. The Company generally obtains deposits on leases and obtains collateral in flight equipment on notes receivable. The Company has no single customer which accounts for 10% or more of revenues. Segment Information The Company operates within one industry; the leasing, sales and management of flight equipment. Revenues include rentals of flight equipment to foreign airlines of $1,472,075 (1997), $1,202,651 (1996) and $1,002,251 (1995). The following table sets forth the dollar amount and percentage of total rental revenues attributable to the indicated geographic areas for the years indicated:
1997 1996 1995 ------------------ ------------------ ------------------ AMOUNT % AMOUNT % AMOUNT % ---------- ----- ---------- ----- ---------- ----- (DOLLARS IN THOUSANDS) Europe............................. $ 705,128 40.7% $ 551,703 38.2% $ 462,252 36.9% Asia/Pacific....................... 358,687 20.7 332,159 23.0 255,163 20.4 United States and Canada........... 345,143 19.9 304,801 21.2 304,784 24.3 Central, South America and Mexico........................... 211,152 12.2 165,819 11.5 166,443 13.2 Africa and the Middle East......... 112,557 6.5 89,957 6.2 65,378 5.2 ---------- ----- ---------- ----- ---------- ----- $1,732,667 100.0% $1,444,439 100.0% $1,254,020 100.0% ========== ===== ========== ===== ========== =====
Employee Benefit Plans The Company's employees participate in various benefit plans sponsored by AIG, including a noncontributory qualified defined benefit retirement plan, various stock option and purchase plans and a voluntary savings plan (401(k) plan). 31 34 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE J -- OTHER INFORMATION (CONTINUED) AIG's U.S. plans do not separately identify projected benefit obligations and plan assets attributable to employees of participating affiliates. AIG's projected benefit obligations exceeded the plan assets at December 31, 1997 by $39,569. NOTE K -- COMMITMENTS AND CONTINGENCIES Aircraft orders At December 31, 1997, the Company had committed to purchase 328 aircraft deliverable from 1998 through 2006 at an estimated aggregate purchase price (including adjustment for anticipated inflation) of approximately $17.7 billion. Most of these purchase commitments and options are based upon master arrangements with each of The Boeing Company ("Boeing") and AVSA, S.A.R.L., the sales subsidiary of Airbus Industrie ("Airbus"). The Boeing aircraft (models 737, 747, 757, 767 and 777), and the Airbus aircraft (models A319, A320, A321, A330 and A340) are being purchased pursuant to agreements executed by the Company and Boeing or Airbus. These agreements establish the pricing formulas (which include certain price adjustments based upon inflation and other factors) and various other terms with respect to the purchase of aircraft. Under certain circumstances, the Company has the right to alter the mix of aircraft type ultimately acquired. As of December 31, 1997, the Company had made non-refundable deposits (exclusive of capitalized interest) with respect to the aircraft which the Company has committed to purchase of approximately $553,749 and $359,873 with Boeing and Airbus, respectively. Management anticipates that a significant portion of such aggregate purchase price will be funded by incurring additional debt. The exact amount of the indebtedness to be incurred will depend upon the actual purchase price of the aircraft, which can vary due to a number of factors, including inflation, and the percentage of the purchase price of the aircraft which must be financed. Asset Value Guarantees The Company has guaranteed a portion of the residual value of 28 aircraft to financial institutions expiring at various dates through 2006. The guarantees generally provide for the Company to pay the difference between the fair market value of the aircraft and the guaranteed value up to certain specified amounts, or, at the option of the Company, purchase the aircraft for the guaranteed value. At December 31, 1997, the maximum exposure if the Company were to pay under such guarantees was $145,733. Other Guarantees In connection with the sale of aircraft, the Company has guaranteed certain obligations for entities in which it has an investment. At December 31, 1997, the Company guaranteed nine loans secured by aircraft aggregating $62,256. The Company guaranteed three loans, collateralized by flight equipment, of customers which, at December 31, 1997, aggregated $12,850. Impact of the Year 2000 Issue The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. This could result in a system failure or miscalculations in the year 2000 causing disruptions of operations of the Company, its lessees, manufacturers or business partners. 32 35 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE K -- COMMITMENTS AND CONTINGENCIES (CONTINUED) The Company has already reviewed and identified its computer systems that are subject to Year 2000 risk. Accordingly, the Company has commenced the remediation of all systems not Year 2000 compliant. Remediation and testing of such systems will be completed in advance of Year 2000. The costs of such remediation are expensed as incurred and are not material to the Company's consolidated financial position or consolidated results of operations. The Company has also initiated formal communication with lessees, manufacturers and business partners to determine the extent to which the Company is vulnerable to those third parties' failures to remediate their own Year 2000 issues. The Company has not yet completed its review of responses from its lessees, manufacturers and business partners. As a result, the Company can not determine at this time the extent, if any, to which the Company may be exposed to financial risk from the inability of the Company's lessees, manufacturers and business partners to remediate their own Year 2000 issues. NOTE L -- FINANCIAL INSTRUMENTS In the normal course of business, the Company employs a variety of off-balance sheet derivative transactions with the objective to lower its overall borrowing cost and to maintain its optimal mix of variable and fixed rate interest obligations. These derivative products include interest rate swap agreements, swaptions and interest rate floors (off-balance sheet derivative transactions). The Company accounts for its off-balance sheet derivative transactions on an accrual basis. As such, accrued future payments or receipts are reflected in operating income in the period incurred or earned. Credit risk exposure arises from the potential that the counterparty may not perform under these agreements with respect to the off-balance sheet derivative transactions. The Company minimizes such exposure through transacting with recognized U.S. derivative dealers assigned at least an "A" rating by a recognized statistical rating organization. The counterparties to the majority of the off-balance sheet derivative transactions are assigned an "AAA" rating. One of the counterparties is a related party of the Company. The Company monitors each counterparty's assigned credit rating throughout the life of the off-balance sheet derivative transaction. The Company currently does not require, nor is it required by, its counterparties to provide security for its positions with the Company although it can in certain circumstances. The following table provides the notional amounts of the Company's off-balance sheet derivative transactions at December 31, 1997. The notional amounts used to express the extent of the Company's involvement in swap transactions represent a standard measurement of the volume of the Company's swap transactions. Notional amount is not a quantification of market risk or credit risk and is not recorded on the balance sheet. Notional amounts represent those amounts used to calculate contractual cash flows to be exchanged and are not paid or received. The timing and the amount of cash flows relating to swaption and other interest rate option contracts are determined by each of the respective contractual agreements. It is management's belief that any failure of a counterparty to perform under the agreement with respect to these off-balance sheet transactions would have an immaterial effect on the Company's results of operations, financial condition and liquidity. 33 36 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED) The following table presents the notional amounts of the Company's interest rate swap agreements, swaptions and interest rate floors by maturity at December 31, 1997.
REMAINING LIFE ------------------------------------ TWO TO AFTER FIVE TOTAL TOTAL TYPE ONE YEAR FIVE YEARS YEARS 1997 1996 ---- -------- ---------- ---------- ---------- ---------- Interest Rate: Swaps........................... $365,806 $ 659,931 $261,790 $1,287,527 $1,349,234 Swaptions(1).................... 100,000 100,000 100,000 Floors.......................... 33,409 440,221 393,435 867,065 900,434 -------- ---------- -------- ---------- ---------- Total........................... $399,215 $1,200,152 $655,225 $2,254,592 $2,349,668 ======== ========== ======== ========== ==========
- --------------- (1) Swaptions obligate the Company to convert certain fixed rate obligations to floating rate obligations if the option purchaser chooses to exercise. These amounts do not represent credit exposure. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and cash equivalents: The carrying value reported in the balance sheet for cash and cash equivalents approximates its fair value. Notes receivable: The fair values for notes receivable are estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Investments: It was not practicable to estimate the fair value of most of the Company's investments in the common and preferred stocks of other companies because of the lack of a quoted market price and the inability to estimate fair value without incurring excessive costs due to their short maturities. The carrying amount of these investments at December 31, 1997 represents the original cost or original cost plus the Company's share of earnings of the investment. For investments held by the Company that had a quoted market price at December 31, 1997, the Company used such quoted market price in estimating the fair value of such investments. Debt financing: The carrying value of the Company's commercial paper and term debt maturing within one year approximates its fair value. The fair value of the Company's long-term debt is estimated using discounted cash flow analyses, based on the Company's spread to U.S. Treasury bonds for similar debt at year-end. Off-balance-sheet instruments: Fair values for the Company's off-balance-sheet instruments are based on pricing models or formulas using current assumptions (swaps, swaptions and interest rate floors) and the amount of the guarantee which would not be covered by the fair value of the underlying collateral (loan guarantees and asset value guarantees). 34 37 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS) NOTE L -- FINANCIAL INSTRUMENTS (CONTINUED) The carrying amounts and fair values of the Company's financial instruments at December 31, 1997 and 1996 are as follows:
1997 1996 ------------------------------------- ------------------------------------- CARRYING CARRYING AMOUNT OF FAIR VALUE OF AMOUNT OF FAIR VALUE OF ASSET (LIABILITY) ASSET (LIABILITY) ASSET (LIABILITY) ASSET (LIABILITY) ----------------- ----------------- ----------------- ----------------- Cash and cash equivalents............ $ 63,754 $ 63,754 $ 36,558 $ 36,558 Notes receivable..................... 467,688 456,592 429,146 418,520 Investments.......................... 18,731 19,056 18,099 18,099 Debt financing....................... (9,051,042) (9,211,790) (8,798,388) (8,951,593) Off-balance-sheet financial instruments: Swaps........................... (6,030) 4,386 (7,422) (6,386) Swaptions....................... (2,936) (294) (3,371) (1,821) Interest rate floors............ (1,927) (2,122) (4,487) (4,487)
35 38 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E ------ ------------ ----------------------------- ------------ ------------- ADDITIONS BALANCE AT CHARGED TO CHARGED TO BEGINNING OF COSTS AND OTHER ACCOUNTS-- DEDUCTIONS-- BALANCE AT DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE(1) END OF PERIOD ----------- ------------ ---------- ---------------- ------------ ------------- (DOLLARS IN THOUSANDS) Reserve for overhaul: Year ended December 31, 1997...... $102,492 $99,458 $91,128 $110,822 Year ended December 31, 1996...... 83,857 85,083 783(2) 67,231 102,492 Year ended December 31, 1995...... 71,554 71,113 4,191(2) 63,001 83,857
- --------------- (1) Reimbursements to lessees for overhauls performed and amounts transferred to buyers for aircraft sold. (2) Payments received from lessees in lieu of compliance with return conditions. 36 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: March 9, 1998 INTERNATIONAL LEASE FINANCE CORPORATION By /s/ LESLIE L. GONDA ------------------------------------ Leslie L. Gonda Chairman of the Board Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ LESLIE L. GONDA Director March 9, 1998 - ------------------------------------------------ Leslie L. Gonda /s/ STEVEN F. UDVAR-HAZY Chief Executive Officer and March 9, 1998 - ------------------------------------------------ Director Steven F. Udvar-Hazy /s/ LOUIS L. GONDA Director March 9, 1998 - ------------------------------------------------ Louis L. Gonda /s/ M. R. GREENBERG Director March 9, 1998 - ------------------------------------------------ M. R. Greenberg Director - ------------------------------------------------ Edward E. Matthews /s/ WILLIAM N. DOOLEY Director March 9, 1998 - ------------------------------------------------ William N. Dooley /s/ HOWARD I. SMITH Director March 9, 1998 - ------------------------------------------------ Howard I. Smith /s/ ALAN H. LUND Chief Financial Officer and March 9, 1998 - ------------------------------------------------ Chief Accounting Officer Alan H. Lund
37 40 SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT. Since the Registrant is an indirect wholly owned subsidiary of AIG, no annual report to security holders for the year ended December 31, 1997 or proxy statement, form of proxy or other proxy soliciting materials have been sent to securities holders since January 1, 1990. 38 EX-10.4 2 EXHIBIT 10.4 1 EXHIBIT 10.4 AMENDMENT TO 364-Day REVOLVING CREDIT AGREEMENT AMENDMENT AGREEMENT, dated as of January 16, 1998, among INTERNATIONAL LEASE FINANCE CORPORATION, a California corporation (herein called the "Company"), the financial institutions listed on the signature pages hereof (herein, together with their respective successors and assigns, collectively called the "Banks" and individually each called a "Bank") and UNION BANK OF SWITZERLAND, acting through its New York Branch, as agent for the Banks (herein, in such capacity, together with its successors and assigns in such capacity, called the "Agent"). W I T N E S S E T H: WHEREAS, the Company, the Banks listed on Schedule I hereto (the "Original Banks") and the Agent are parties to a 364-Day Revolving Credit Agreement dated as of January 17, 1997 (the "Credit Agreement") pursuant to which the Original Banks agreed to lend up to $1,250,000,000 to the Company on a 364 day revolving basis to enable the Company to support its commercial paper program and for other general corporate purposes; WHEREAS, the Company has requested the Banks to increase the Aggregate Commitment to $1,350,000,000 and to extend the Termination Date under the Credit Agreement for an additional 364 days; WHEREAS, the Banks listed on Schedule II hereto (the "Additional Banks") have agreed to become Banks parties to the Credit Agreement; WHEREAS, the Original Banks listed on Schedule III hereto (the "Terminating Banks") have elected not to participate in the Credit Agreement as so extended; WHEREAS, the Original Banks, other than the Terminating Banks, and the Additional Banks (together, the "Continuing Banks") have agreed so to increase the Aggregate Commitment and to extend the Termination Date; and WHEREAS, capitalized terms used herein which are defined in the Credit Agreement have the meanings herein ascribed to them in the Credit Agreement; -1- 2 NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows: 1. The definitions of the terms "Aggregate Commitment", "Bid Note", "Commitments", "Committed Note" and "Termination Date" in Section 1.2 of the Credit Agreement are hereby amended to read as follows: "Aggregate Commitment" means $1,350,000,000, as reduced by any reduction in the Commitments made from time to time pursuant to Section 5.1 or 13.8." . . . "Bid Note means a promissory note of the Company, substantially in the form of Exhibit A to the Amendment Agreement dated as of January 16, 1998 among the Company, the Banks and the Agent, duly completed, evidencing Bid Loans made to the Company, as such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time." . . . "Commitments means the Banks' commitments to make Committed Loans hereunder; and Commitment as to any Bank means the amount set forth opposite such Bank's name on Schedules I and II to the Amendment Agreement dated as of January 16, 1998 among the Company, the Banks and the Agent (as reduced in accordance with Section 5.1, or as periodically revised in accordance with Section 13.4 or Section 13.8)." . . . "Committed Note means a promissory note of the Company, substantially in the form of Exhibit B to the Amendment Agreement dated as of January 16, 1998 among the Company, the Banks and the Agent, duly completed, evidencing Committed Loans to the Company, as such note may be amended, modified or supplemented or supplanted pursuant to Section 13.4.1 from time to time." . . . -2- 3 "Termination Date means, with respect to any Bank, the earliest to occur of (i) January 15, 1999 or such later date as may be agreed to by such Bank pursuant to Section 13.8(a), (ii) the date on which the Commitments shall terminate pursuant to Section 11.2 or the Commitments shall be reduced to zero pursuant to Section 5.1 and (iii) the date specified as such Bank's Termination Date pursuant to Section 13.8(b), or, if in any case (other than clause (ii) above) such day is not a Business Day, the next succeeding Business Day; in all cases, subject to the provisions of Section 13.8(d)." 2. Each of the Continuing Banks hereby consents to the increase of the Aggregate Commitment and the extension of the Termination Date as herein provided and agrees to continue as a Bank under the Credit Agreement with the Commitment set forth opposite its name on Schedule I hereto. 3. Each of the Additional Banks hereby adopts the Credit Agreement, as amended hereby and assumes the obligations of, and agrees to become, a Bank thereunder with the Commitment set forth opposite its name on Schedule II hereto, as of the date hereof, and with the address to which notices to it may be delivered pursuant to Section 13.2 of the Credit Agreement set forth for it on the signature pages hereof. 4. Each of the Terminating Banks shall automatically cease being a Bank under the Credit Agreement as of the date hereof (which shall be the Termination Date for each of the Terminating Banks), their Commitments shall thereupon be terminated and they shall not thereafter have any further obligations under the Credit Agreement. The Company shall forthwith pay to each Terminating Bank its facility fee pursuant to Section 4.4 of the Credit Agreement accrued to the date hereof. 5. The Company represents and warrants to the Agent and the Banks that the representations and warranties of the Company set forth in Section 8 of the Credit Agreement are true and correct on the date of this Amendment Agreement as though made on such date. 6. The obligations of the Continuing Banks hereunder are subject to the satisfaction of the following conditions precedent: -3- 4 (a) The Agent shall have received this Amendment Agreement duly executed and delivered by each of the Banks and the Company and each of the Continuing Banks shall have received a fully executed Committed Note and a fully executed Bid Note. (b) The Agent shall have received certified copies of all corporate actions taken by the Company to authorize this Amendment Agreement. (c) The Agent shall have received favorable written opinions of O'Melveny & Myers, counsel for the Company, in substantially the form of Exhibit C, and the Corporate Counsel of the Company, in substantially the form of Exhibit D. (d) The Agent shall have received a certificate of the Company's chief financial officer confirming that since the date of the audited financial statements most recently delivered to the Agent pursuant to Section 9.1.1 of the Credit Agreement, there shall not have occurred any material adverse change in the business, credit, operations, financial condition or prospects of the Company and its Subsidiaries taken as a whole. 7. Except as amended hereby, the Credit Agreement shall remain in full force and effect and is hereby ratified and conformed. 8. THIS AMENDMENT AGREEMENT SHALL BE A CONTRACT MADE UNDER, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. 9. This Amendment Agreement may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. When counterparts of this Amendment Agreement executed by each party shall have been lodged with the Agent (or, in the case of any Bank as to which an executed counterpart shall not have been so lodged, the Agent shall have received telegraphic, telex or other written confirmation of execution of a counterpart hereof by such Bank), this Amendment Agreement shall become effective as of the date -4- 5 hereof and the Agent shall so inform all of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment Agreement as of the day and year first above written. INTERNATIONAL LEASE FINANCE CORPORATION By: /s/ ALAN H. LUND ------------------------------------- Name: ALAN H. LUND Title: EXECUTIVE VICE PRESIDENT By: /s/ PAMELA S. HENDRY ---------------------------------- Name: PAMELA S. HENDRY Title: VICE PRESIDENT AND TREASURER 1999 Avenue of the Stars 39th Floor Los Angeles, California 90067 Attention: Pamela S. Hendry Telephone: (310) 788-1999 Facsimile: (310) 788-1990 Telex: 69-1400 INTERLEAS BVHL -5- 6 The Continuing Banks: UNION BANK OF SWITZERLAND, acting through its New York Branch, in its individual corporate capacity and as Agent By: /s/ ROBERT MENDELES ---------------------------------- Name: ROBERT MENDELES Title: DIRECTOR By: /s/ GREGORY H. RAUE ---------------------------------- Name: GREGORY H. RAUE Title: FDBK 299 Park Avenue New York, New York 10171-0026 Attention: Robert Mendeles Telephone: (212) 821-3020 Facsimile: (212) 821-4541 Telex: 426239 Answerback UI THE CHASE MANHATTAN BANK By: ---------------------------------- Name: Title: 270 Park Avenue New York, New York 10017 Attention: Sherwood E. Exum, Jr./ Richard Smith Telephone: (212) 270-5435 Facsimile: (212) 270-5144 Telex: 62910 -6- 7 The Continuing Banks: UNION BANK OF SWITZERLAND, acting through its New York Branch, in its individual corporate capacity and as Agent By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 299 Park Avenue New York, New York 10171-0026 Attention: Robert Mendeles Telephone: (212) 821-3020 Facsimile: (212) 821-4541 Telex: 426239 Answerback UI THE CHASE MANHATTAN BANK By: /s/ MATTHEW H. MASSIE ---------------------------------- Name: MATTHEW H. MASSIE Title: VICE PRESIDENT 270 Park Avenue New York, New York 10017 Attention: Sherwood E. Exum, Jr./ Richard Smith Telephone: (212) 270-5435 Facsimile: (212) 270-5144 Telex: 62910 -6- 8 COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH By: /s/ CHRISTIAN JAGENBERG ---------------------------------- Name: Christian Jagenberg Title: SVP and Manager By: /s/ KARLA WIRTH ---------------------------------- Name: Karla Wirth Title: Assistant Treasurer 633 West Fifth Street, Suite 6600 Los Angeles, California 90071 Attention: Werner Schmidbauer Telephone: (213) 623-8223 Facsimile: (213) 623-0039 Telex: 678338 THE FUJI BANK, LIMITED By: ---------------------------------- Name: Title: 333 South Hope Street Suite 3900 Los Angeles, California 90071 Attention: Yoshizumi Takata Telephone: (213) 253-4176 Facsimile: (213) 253-4198 -7- 9 COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 633 West Fifth Street, Suite 6600 Los Angeles, California 90071 Attention: Werner Schmidbauer Telephone: (213) 623-8223 Facsimile: (213) 623-0039 Telex: 678338 THE FUJI BANK, LIMITED By: /s/ MASAHITO FUKUDA ---------------------------------- Name: MASAHITO FUKUDA Title: JOINT GENERAL MANAGER 333 South Hope Street Suite 3900 Los Angeles, California 90071 Attention: Yoshizumi Takata Telephone: (213) 253-4176 Facsimile: (213) 253-4198 -7- 10 ROYAL BANK OF CANADA By: /s/ BRIAN BOLOTIN ---------------------------------- Name: BRIAN BOLOTIN Title: MANAGER New York Branch Financial Square, 23rd Floor 32 Old Slip New York, New York 10005-3531 Attention: Manager, Credit Administration Telephone: (212) 428-6204 Facsimile: (212) 428-2372 with a copy to: Royal Bank of Canada Financial Square, 24th Floor 32 Old Slip New York, New York 10005-3531 Attention: D.G. Calancie Telephone: (212) 428-6445 Facsimile: (212) 428-6459 THE SAKURA BANK, LTD., LOS ANGELES AGENCY By: ---------------------------------- Name: Title: 515 South Figueroa Street Suite 400 Los Angeles, California 90071 Attention: Michael Ross Telephone: (213) 489-6456 Facsimile: (213) 623-8692 Telex: 67-7185 -8- 11 ROYAL BANK OF CANADA By: ---------------------------------- Name: Title: New York Branch Financial Square, 23rd Floor 32 Old Slip New York, New York 10005-3531 Attention: Manager, Credit Administration Telephone: (212) 428-6204 Facsimile: (212) 428-2372 THE SAKURA BANK, LTD., LOS ANGELES AGENCY By: /s/ OFUSA SATO ---------------------------------- Name: Ofusa Sato Title: Senior Vice President & Assistant General Manager 515 South Figueroa Street Suite 400 Los Angeles, California 90071 Attention: Michael Ross Telephone: (213) 489-6456 Facsimile: (213) 623-8692 Telex: 67-7185 -8- 12 SOCIETE GENERALE By: /s/ MAUREEN KELLY ---------------------------------- Name: Maureen Kelly Title: Vice President 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attention: Maureen Kelly, Su Fei Koo Telephone: (310) 788-7110, 788-7107 Facsimile: (310) 551-1537 Telex: 188273 THE BANK OF NOVA SCOTIA By: ---------------------------------- Name: Title: 580 California Street 21st Floor San Francisco, California 94104 Attention: Alan Pendergast Telephone: (415) 986-1100 Facsimile: (415) 397-0791 Telex: 00340602 -9- 13 SOCIETE GENERALE By: ---------------------------------- Name: Title: 2029 Century Park East Suite 2900 Los Angeles, California 90067 Attention: Maureen Kelly, Su Fei Koo Telephone: (310) 788-7110, 788-7107 Facsimile: (310) 551-1537 Telex: 188273 THE BANK OF NOVA SCOTIA By: /s/ A. PENDERGAST ---------------------------------- Name: A. Pendergast Title: RM 580 California Street 21st Floor San Francisco, California 94104 Attention: Alan Pendergast Telephone: (415) 986-1100 Facsimile: (415) 397-0791 Telex: 00340602 -9- 14 BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: /s/ MICHAEL C. IRWIN ---------------------------------- Name: MICHAEL C. IRWIN Title: Vice President 1251 Avenue of the Americas New York, New York 10116-3138 Attention: Michael Irwin Telephone: (212) 782-4316 Facsimile: (212) 782-6445 DRESDNER BANK AG, NEW YORK & GRAND CAYMAN BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 75 Wall Street 29th Floor New York, New York 10005 Attention: Lloyd Stevens Telephone: (212) 429-2229 Facsimile: (212) 429-2524 -10- 15 BANK OF TOKYO - MITSUBISHI TRUST COMPANY By: ---------------------------------- Name: Title: 1251 Avenue of the Americas New York, New York 10116-3138 Attention: Michael Irwin Telephone: (212) 782-4316 Facsimile: (212) 782-6445 DRESDNER BANK AG, NEW YORK & GRAND CAYMAN BRANCH By: /s/ ROBERT P. DONOHUE ---------------------------------- Name: ROBERT P. DONOHUE Title: VICE PRESIDENT By: /s/ LLOYD C. STEVENS ---------------------------------- Name: Lloyd C. Stevens Title: Vice President 75 Wall Street 29th Floor New York, New York 10005 Attention: Lloyd Stevens Telephone: (212) 429-2229 Facsimile: (212) 429-2524 -10- 16 THE BANK OF NEW YORK By: /s/ REBECCA K. LEVINE ---------------------------------- Name: REBECCA K. LEVINE Title: VICE PRESIDENT 10990 Wilshire Boulevard Suite 1125 Los Angeles, California 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 609 Fifth Avenue New York, New York 10017-1021 Attention: Stefanie Gaensslen Telephone: (212) 745-1583 Facsimile: (212) 745-1556 Telex: 234476/666755 MCI -11- 17 THE BANK OF NEW YORK By: ---------------------------------- Name: Title: 10990 Wilshire Boulevard Suite 1125 Los Angeles, California 90024 Attention: Jonathan Rollins Telephone: (310) 996-8658 Facsimile: (310) 996-8667 DG BANK DEUTSCHE GENOSSENSCHAFTSBANK By: /s/ STEFANIE GAENSSLEN ---------------------------------- Name: STEFANIE GAENSSLEN Title: Asst. Vice President By: /s/ KAREN A. BRINKMAN ---------------------------------- Name: KAREN A. BRINKMAN Title: Vice President 609 Fifth Avenue New York, New York 10017-1021 Attention: Stefanie Gaensslen Telephone: (212) 745-1583 Facsimile: (212) 745-1556 Telex: 234476/666755 MCI -11- 18 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT, CAYMAN ISLANDS BRANCH By: /s/ STEVEN ATWELL ---------------------------------- Name: Steven Atwell Title: Vice President By: /s/ YORAM DANKNER ---------------------------------- Name: Yoram Dankner Title: Senior Vice President Financial Square 32 Old Slip, 32nd Floor New York, New York 10005 Attention: Steven Atwell Telephone: (212) 440-0768 Facsimile: (212) 440-0741 Telex: 175850 THE SANWA BANK, LIMITED By: ---------------------------------- Name: Title: Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Stephen C. Small Telephone: (212) 339-6201 Facsimile: (212) 754-1304 Telex: 232423 RCA -12- 19 BAYERISCHE HYPOTHEKEN-UND WECHSEL-BANK AKTIENGESELLSCHAFT, CAYMAN ISLANDS BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: Financial Square 32 Old Slip, 32nd Floor New York, New York 10005 Attention: Steven Atwell Telephone: (212) 440-0768 Facsimile: (212) 440-0741 Telex: 175850 THE SANWA BANK, LIMITED By: /s/ STEPHEN C. SMALL ---------------------------------- Name: Stephen C. Small Title: Vice President & Area Mgr. Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attention: Stephen C. Small Telephone: (212) 339-6201 Facsimile: (212) 754-1304 Telex: 232423 RCA -12- 20 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES By: /s/ RAYMOND K. MILLER ---------------------------------- Name: Raymond K. Miller Title: Vice President By: /s/ LAURA SPICHIGER ---------------------------------- Name: Laura Spichiger Title: Associate 1211 Avenue of the Americas 24th Floor New York, New York 10036 Attention: Laura Spichiger Telephone: (212) 852-6012 Facsimile: (212) 852-6148 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 31 W. 52nd Street New York, New York 10019 Attention: Robert Landis Telephone: (212) 469-8214 Facsimile: (212) 469-8212 -13- 21 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK AND CAYMAN ISLANDS BRANCHES By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 1211 Avenue of the Americas 24th Floor New York, New York 10036 Attention: Laura Spichiger Telephone: (212) 852-6012 Facsimile: (212) 852-6148 DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES By: /s/ GAYMA Z. SHIVNARAIN ---------------------------------- Name: Gayma Z. Shivnarain Title: Vice President By: /s/ ECKHARD OSENBERG ---------------------------------- Name: Eckhard Osenberg Title: Vice President 31 W. 52nd Street New York, New York 10019 Attention: Robert Landis Telephone: (212) 469-8214 Facsimile: (212) 469-8212 -13- 22 THE ASAHI BANK, LTD., LOS ANGELES AGENCY By: /s/ MUNEO NISHIMURA ---------------------------------- Name: MUNEO NISHIMURA Title: Senior Deputy General Manager 350 So. Grand Avenue, Suite 3800 Los Angeles, California 90071 Attention: Jeffrey K. Bordley Telephone: (213) 473-3334 Facsimile: (213) 624-0172 BANCA COMMERCIALE ITALIANA, LOS ANGELES FOREIGN BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 555 So. Flower Street, 43rd Flr. Los Angeles, California 90071 Attention: Rick Iwanicki Telephone: (213) 624-0440 Facsimile: (213) 624-0457 -14- 23 THE ASAHI BANK, LTD., LOS ANGELES AGENCY By: ---------------------------------- Name: Title: 350 So. Grand Avenue, Suite 3800 Los Angeles, California 90071 Attention: Jeffrey K. Bordley Telephone: (213) 473-3334 Facsimile: (213) 624-0172 BANCA COMMERCIALE ITALIANA, LOS ANGELES FOREIGN BRANCH By: /s/ RICHARD E. IWANICKI ---------------------------------- Name: Richard E. Iwanicki Title: Vice President By: /s/ EDUARD BOMBERI ---------------------------------- Name: Eduard Bomberi Title: Vice President & Manager 555 So. Flower Street, 43rd Flr. Los Angeles, California 90071 Attention: Rick Iwanicki Telephone: (213) 624-0440 Facsimile: (213) 624-0457 -14- 24 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: /s/ PETER OBERMANN ---------------------------------- Name: Peter Obermann Title: Senior Vice President Manager Lending Division By: /s/ ALEXANDER KOHNERT ---------------------------------- Name: Alexander Kohnert Title: Vice President 560 Lexington Avenue 17th Floor New York, New York 10022 Attention: James Boyle Telephone: (212) 310-9817 Facsimile: (212) 310-9868 Telex: TRT 177130 THE DAI-ICHI KANGYO BANK, LTD., LOS ANGELES AGENCY By: ---------------------------------- Name: Title: 555 West 5th Street Fifth Floor Los Angeles, California 90013 Attention: Israel Carmeli Telephone: (213) 243-4760 Facsimile: (213) 624-5258 Telex: 67-4 516/DKB-LSA -15- 25 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 560 Lexington Avenue 17th Floor New York, New York 10022 Attention: James Boyle Telephone: (212) 310-9817 Facsimile: (212) 310-9868 Telex: TRT 177130 THE DAI-ICHI KANGYO BANK, LTD., LOS ANGELES AGENCY By: /s/ MASATSUGU MORISHITA ---------------------------------- Name: Masatsugu Morishita Title: Sr. Vice President & Joint General Manager 555 West 5th Street Fifth Floor Los Angeles, California 90013 Attention: Israel Carmeli Telephone: (213) 243-4760 Facsimile: (213) 624-5258 Telex: 67-4 516/DKB-LSA -15- 26 WELLS FARGO BANK, N.A. By: /s/ DAVID B. HOLLINGSWORTH ---------------------------------- Name: David B. Hollingsworth Title: Vice President 707 Wilshire Blvd. U.S. Bank - 16th Flr. Los Angeles, California 90017 Attention: David Hollingsworth Telephone: (213) 614-7602 Facsimile: (213) 614-2305 BANCA NAZIONALE DEL LAVORO, S.p.A. - NEW YORK BRANCH By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 25 West 51st Street New York, New York 10019 Attention: Miguel J. Medida/ Giulo Giovine Telephone: (212) 314-0239 Facsimile: (212) 789-9088 Telex: 62840 -16- 27 WELLS FARGO BANK, N.A. By: ---------------------------------- Name: Title: 707 Wilshire Blvd. U.S. Bank - 16th Flr. Los Angeles, California 90017 Attention: David Hollingsworth Telephone: (213) 614-7602 Facsimile: (213) 614-2305 BANCA NAZIONALE DEL LAVORO, S.p.A. - NEW YORK BRANCH By: /s/ LEONARDO VALENTINI ---------------------------------- Name: Leonardo Valentini Title: First Vice President By: /s/ GIULIO GIOVINE ---------------------------------- Name: Giulio Giovine Title: Vice President 25 West 51st Street New York, New York 10019 Attention: Miguel J. Medida/ Giulo Giovine Telephone: (212) 314-0239 Facsimile: (212) 789-9088 Telex: 62840 -16- 28 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A. By: /s/ ROBERT WURSTER ---------------------------------- Name: Robert Wurster Title: First Vice President By: /s/ ETTORE VIAZZO ---------------------------------- Name: Ettore Viazzo Title: Vice President 444 South Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Donald W. Brown Telephone: (213) 489-3105 Facsimile: (213) 622-2514 Telex: 220045 BANQUE NATIONALE DE PARIS By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attention: Tjalling Terpstra Telephone: (213) 488-9120 Facsimile: (213) 488-9602 Telex: 6734168 BNPLA -17- 29 ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A. By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 444 South Flower Street, Suite 4550 Los Angeles, California 90071 Attention: Donald W. Brown Telephone: (213) 489-3105 Facsimile: (213) 622-2514 Telex: 220045 BANQUE NATIONALE DE PARIS By: /s/ C. BETTLES ---------------------------------- Name: C. Bettles Title: Sr. Vice President & Manager By: /s/ TJALLING TERPSTRA ---------------------------------- Name: Tjalling Terpstra Title: Vice President 725 South Figueroa Street Suite 2090 Los Angeles, California 90017 Attention: Tjalling Terpstra Telephone: (213) 488-9120 Facsimile: (213) 488-9602 Telex: 6734168 BNPLA -17- 30 BANK OF HAWAII By: /s/ ROBERT M. WHEELER III ---------------------------------- Name: Robert M. Wheeler III Title: Vice President 130 Merchant Street 20th Floor Honolulu, Hawaii 96813 Attention: David Ward Telephone: (808) 537-8016 Facsimile: (808) 537-8301 Telex: 7238434 BANCO CENTRAL HISPANOAMERICANO, SAN FRANCISCO AGENCY By: ---------------------------------- Name: Title: 100 Pine Street, Suite 2950 San Francisco, California 94111 Attention: Fernando Laseca Telephone: (415) 398-6333 Facsimile: (415) 398-3173 Telex: 470598 CENT SF -18- 31 BANK OF HAWAII By: ---------------------------------- Name: Title: 130 Merchant Street 20th Floor Honolulu, Hawaii 96813 Attention: David Ward Telephone: (808) 537-8016 Facsimile: (808) 537-8301 Telex: 7238434 BANCO CENTRAL HISPANOAMERICANO, SAN FRANCISCO AGENCY By: /s/ FERNANDO LASECA ---------------------------------- Name: Fernando Laseca Title: SVP and General Manager 100 Pine Street, Suite 2950 San Francisco, California 94111 Attention: Fernando Laseca Telephone: (415) 398-6333 Facsimile: (415) 398-3173 Telex: 470598 CENT SF -18- 32 FIRST HAWAIIAN BANK By: /s/ TRAVIS RUETENIK ---------------------------------- Name: Travis Ruetenik Title: Corporate Banking Officer 999 Bishop Street Honolulu, Hawaii 96813 Attention: Travis Ruetenik Telephone: (808) 525-7074 Facsimile: (808) 525-6372 Telex: 7238329 BARCLAYS BANK PLC By: ---------------------------------- Name: Title: 222 Broadway New York, New York 10038 Attention: Karen Wagner Telephone: (212) 412-7682 Facsimile: (212) 412-5610 -19- 33 FIRST HAWAIIAN BANK By: ---------------------------------- Name: Title: 999 Bishop Street Honolulu, Hawaii 96813 Attention: Travis Ruetenik Telephone: (808) 525-7074 Facsimile: (808) 525-6372 Telex: 7238329 BARCLAYS BANK PLC By: /s/ KAREN M. WAGNER ---------------------------------- Name: Karen M. Wagner Title: Associate Director 222 Broadway New York, New York 10038 Attention: Karen Wagner Telephone: (212) 412-7682 Facsimile: (212) 412-5610 -19- 34 CITICORP USA, INC. By: /s/ STEPHEN P. ZWICK ---------------------------------- Name: Stephen P. Zwick Title: Vice President 399 Park Avenue, 12th Floor New York, New York 10043 Attention: Peter Bickford Telephone: (212) 559-8146 Facsimile: (212) 935-4285 COMERICA BANK By: ---------------------------------- Name: Title: 1920 Main Street, Suite 1150 Irvine, California 92714 Attention: Emmanuel Skevofilax Telephone: (714) 476-1933 Facsimile: (714) 476-1222 -20- 35 CITICORP USA, INC. By: ---------------------------------- Name: Title: 399 Park Avenue, 12th Floor New York, New York 10043 Attention: Peter Bickford Telephone: (212) 559-8146 Facsimile: (212) 935-4285 COMERICA BANK By: /s/ EMMANUEL SKEVOFILAX ---------------------------------- Name: Emmanuel Skevofilax Title: Assistant Vice President 1920 Main Street, Suite 1150 Irvine, California 92714 Attention: Emmanuel Skevofilax Telephone: (714) 476-1933 Facsimile: (714) 476-1222 -20- 36 KREDIETBANK NV By: /s/ ROBERT SNAUFFER ---------------------------------- Name: Robert Snauffer Title: Vice President By: /s/ RAYMOND F. MURRAY ---------------------------------- Name: Raymond F. Murray Title: Vice President 125 West 55th Street 10th Floor New York, New York 10019 Attention: Robert Snauffer Telephone: (212) 541-0700 Facsimile: (212) 956-5580 PNC BANK, NATIONAL ASSOCIATION By: ---------------------------------- Name: Title: 1600 Market Street, 21st Floor Philadelphia, PA 19103 Attention: Robert E. Bjonhus, Jr. Telephone: (215) 585-6872 Facsimile: (215) 585-7615 -21- 37 KREDIETBANK NV By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 125 West 55th Street 10th Floor New York, New York 10019 Attention: Robert Snauffer Telephone: (212) 541-0700 Facsimile: (212) 956-5580 PNC BANK, NATIONAL ASSOCIATION By: /s/ ROBERT E. BJONHUS, JR. ---------------------------------- Name: Robert E. Bjonhus, Jr. Title: Vice President 1600 Market Street, 21st Floor Philadelphia, PA 19103 Attention: Robert E. Bjonhus, Jr. Telephone: (215) 585-6872 Facsimile: (215) 585-7615 -21- 38 STANDARD CHARTERED BANK By: /s/ PAUL S. KNOX ---------------------------------- Name: Paul S. Knox Title: Sr. Vice President By: /s/ KATRINA MCDAVID ---------------------------------- Name: Katrina McDavid Title: Vice President 7 World Trade Center New York, New York 10048 Attention: Robert Gilbert Telephone: (212) 667-0493 Facsimile: (212) 667-0251 Telex: 420117 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: ---------------------------------- Name: Title: 350 South Grand Avenue Suite 1500 Los Angeles, California 90071 Attention: Craig Papayanis Telephone: (213) 893-6441 Facsimile: (213) 488-9840 Telex: 6831123 -22- 39 STANDARD CHARTERED BANK By: ---------------------------------- Name: Title: 7 World Trade Center New York, New York 10048 Attention: Robert Gilbert Telephone: (212) 667-0493 Facsimile: (212) 667-0251 Telex: 420117 THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS ANGELES AGENCY By: /s/ CRAIG PAPAYANIS ---------------------------------- Name: Craig Papayanis Title: Vice President 350 South Grand Avenue Suite 1500 Los Angeles, California 90071 Attention: Craig Papayanis Telephone: (213) 893-6441 Facsimile: (213) 488-9840 Telex: 6831123 -22- 40 THE TOYO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY By: /s/ TATSUYA MIYAMOTO ---------------------------------- Name: Tatsuya Miyamoto Title: Deputy General Manager 444 South Flower Street, Suite 1550 Los Angeles, California 90071 Attention: Steven K. Rubinstein Telephone: (213) 624-2424 Facsimile: (213) 624-5874 Telex: 215288 UNIBANK A/S By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 13-15 West 54th Street New York, New York 10019 Attention: Tom Hickey Telephone: (212) 603-6924 Facsimile: (212) 603-1685 Telex: 668776 -23- 41 THE TOYO TRUST & BANKING CO., LTD., LOS ANGELES AGENCY By: ---------------------------------- Name: Title: 444 South Flower Street, Suite 1550 Los Angeles, California 90071 Attention: Steven K. Rubinstein Telephone: (213) 624-2424 Facsimile: (213) 624-5874 Telex: 215288 UNIBANK A/S By: /s/ THOMAS P. HICKEY ---------------------------------- Name: Thomas P. Hickey Title: Vice President By: /s/ HENRIK M. STEFFENSEN ---------------------------------- Name: Henrik M. Steffensen Title: First Vice President 13-15 West 54th Street New York, New York 10019 Attention: Tom Hickey Telephone: (212) 603-6924 Facsimile: (212) 603-1685 Telex: 668776 -23- 42 BANCO DI NAPOLI S.p.A. By: /s/ VITO SPADA ---------------------------------- Name: Vito Spada Title: Executive Vice President By: /s/ CLAUDE P. MAPES ---------------------------------- Name: Claude P. Mapes Title: First Vice President 4 East 54th Street New York, New York 10022 Attention: Clemente Imperiale Telephone: (212) 872-2417 Facsimile: (212) 872-2426 Telex: 420634 PT. BANK NEGARA INDONESIA (PERSERO), Tbk., NEW YORK AGENCY By: ---------------------------------- Name: Title: 55 Broadway, 5th Floor New York, New York 10006 Attention: Monica Baccari Telephone: (212) 943-4750 Facsimile: (212) 344-5723 -24- 43 BANCO DI NAPOLI S.p.A. By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 4 East 54th Street New York, New York 10022 Attention: Clemente Imperiale Telephone: (212) 872-2417 Facsimile: (212) 872-2426 Telex: 420634 PT. BANK NEGARA INDONESIA (PERSERO), Tbk., NEW YORK AGENCY By: /s/ MARULI POHAN ---------------------------------- Name: Maruli Pohan Title: General Manager 55 Broadway, 5th Floor New York, New York 10006 Attention: Monica Baccari Telephone: (212) 943-4750 Facsimile: (212) 344-5723 -24- 44 THE INTERNATIONAL COMMERCIAL BANK OF CHINA, NEW YORK AGENCY By: /s/ ROBIN C. C. LIN ---------------------------------- Name: Robin C. C. Lin Title: Vice President & Deputy General Manager 65 Liberty Street New York, New York 10005 Attention: Mong-Shyr Wu/Tony Wu Telephone: (212) 815-9113 Facsimile: (212) 766-5006 Telex: 420062 IGBC UI ARAB BANK PLC - GRAND CAYMAN By: ---------------------------------- Name: Title: 520 Madison Avenue New York, New York 10022 Attention: Kahn Vuong Telephone: (212) 715-9717 Facsimile: (212) 593-4632 -25- 45 THE INTERNATIONAL COMMERCIAL BANK OF CHINA, NEW YORK AGENCY By: ---------------------------------- Name: Title: 65 Liberty Street New York, New York 10005 Attention: Mong-Shyr Wu/Tony Wu Telephone: (212) 815-9113 Facsimile: (212) 766-5006 Telex: 420062 IGBC UI ARAB BANK PLC - GRAND CAYMAN By: [SIG] ------------------------------------- Name: Title: 520 Madison Avenue New York, New York 10022 Attention: Kahn Vuong Telephone: (212) 715-9717 Facsimile: (212) 593-4632 -25- 46 The Additional Banks: ABN AMRO BANK N.V. By: /s/ CLAUDIA C. HELDRING ---------------------------------- Name: Claudia C. Heldring Title: Vice President By: /s/ LUKAS VAN DER HOEF ---------------------------------- Name: Lukas van der Hoef Title: Vice President 135 S. LaSalle Street Suite 625 Chicago, Illinois 60603 Attention: Claudia Hildring Telephone: (312) 904-8835 Facsimile: (312) 904-8840 Telex: 6732700 BANK OF MONTREAL By: ---------------------------------- Name: Title: 115 S. LaSalle Street, 12th Floor Chicago, Illinois 60603 Attention: Charles Reed Telephone: (312) 750-5912 Facsimile: (312) 845-2199 -26- 47 The Additional Banks: ABN AMRO BANK N.V. By: ---------------------------------- Name: Title: By: ---------------------------------- Name: Title: 135 S. LaSalle Street Suite 625 Chicago, Illinois 60603 Attention: Claudia Hildring Telephone: (312) 904-8835 Facsimile: (312) 904-8840 Telex: 6732700 BANK OF MONTREAL By: /s/ CHARLES W. REED ---------------------------------- Name: CHARLES W. REED Title: DIRECTOR 115 S. LaSalle Street, 12th Floor Chicago, Illinois 60603 Attention: Charles Reed Telephone: (312) 750-5912 Facsimile: (312) 845-2199 -26- 48 MELLON BANK, N.A. By: /s/ DEAN G. PACE ---------------------------------------- Name: Dean G. Pace Title: Vice President One Mellon Bank Center, Room 4525 Pittsburgh, Pennsylvania 15258-0001 Attention: Dean G. Pace Telephone: (412) 236-1643 Facsimile: (412) 2364-9047 CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE S.p.A., GRAND CAYMAN BRANCH By: ---------------------------------------- Name: Title: 10 East 53rd Street New York, New York 10022 Attention: Anthony Giobbi Telephone: Telecopy: -27- 49 MELLON BANK, N.A. By: ---------------------------------------- Name: Title: One Mellon Bank Center, Room 4525 Pittsburgh, Pennsylvania 15258-0001 Attention: Dean G. Pace Telephone: (412) 236-1643 Facsimile: (412) 2364-9047 CARIPLO-CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE S.p.A., GRAND CAYMAN BRANCH By: /s/ ANTHONY F. GIOBBI ---------------------------------------- Name: Anthony F. Giobbi Title: FVP By: /s/ LUIGI COMINATTI ---------------------------------------- Name: Luigi Cominatti Title: SVP 10 East 53rd Street New York, New York 10022 Attention: Anthony Giobbi Telephone: Telecopy: -27- 50 The Terminating Banks: THE MITSUI TRUST & BANKING COMPANY, LIMITED, NY BRANCH By: /s/ EIICHI AKAMA ---------------------------------------- Name: Eiichi Akama Title: Vice President THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: ---------------------------------------- Name: Title: CIBC, INC. By: ---------------------------------------- Name: Title: THE YASUDA TRUST & BANKING CO., LTD. By: ---------------------------------------- Name: Title: -28- 51 The Terminating Banks: THE MITSUI TRUST & BANKING COMPANY, LIMITED, NY BRANCH By: ---------------------------------------- Name: Title: THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: /s/ MASAHITO SAITO ---------------------------------------- Name: Masahito Saito Title: Senior Vice President and Assistant General Manager CIBC, INC. By: ---------------------------------------- Name: Title: THE YASUDA TRUST & BANKING CO., LTD. By: ---------------------------------------- Name: Title: -28- 52 The Terminating Banks: THE MITSUI TRUST & BANKING COMPANY, LIMITED, NY BRANCH By: ---------------------------------------- Name: Title: THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: ---------------------------------------- Name: Title: CIBC, INC. By: /S/ WILLIAM KOSLO ---------------------------------------- Name: WILLIAM KOSLO Title: EXECUTIVE DIRECTOR C??C Oppenheimer Corp., AS AGENT THE YASUDA TRUST & BANKING CO., LTD. By: ---------------------------------------- Name: Title: -28- 53 The Terminating Banks: THE MITSUI TRUST & BANKING COMPANY, LIMITED, NY BRANCH By: ---------------------------------------- Name: Title: THE TOKAI BANK, LTD. LOS ANGELES AGENCY By: ---------------------------------------- Name: Title: CIBC, INC. By: ---------------------------------------- Name: Title: THE YASUDA TRUST & BANKING CO., LTD. By: /s/ ROHN M. LAUDENSCHLAGER ---------------------------------------- Name: Rohn Laudenschlager Title: Senior Vice President -28- EX-12 3 EXHIBIT 12 1 EXHIBIT 12 INTERNATIONAL LEASE FINANCE CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1993 1994 1995 1996 1997 -------- -------- -------- ---------- ---------- (DOLLARS IN THOUSANDS) Earnings Net income......................... $168,565 $201,943 $196,437 $ 251,774 $ 338,684 Add: Provision for income taxes...... 109,075 110,064 141,909 143,165 187,475 Fixed charges................... 340,568 421,170 592,519 655,958 754,246 Less: Capitalized interest............ 39,363 44,610 51,091 50,368 48,818 -------- -------- -------- ---------- ---------- Earnings as adjusted (A)........... $578,845 $688,567 $879,774 $1,000,529 $1,231,587 ======== ======== ======== ========== ========== Preferred dividend requirements.... $ 2,692 $ 6,890 $ 13,096 $ 16,599 $ 16,348 Ratio of income before provision for income taxes to net income........................ 165% 155% 172% 157% 155% -------- -------- -------- ---------- ---------- Preferred dividend factor on pretax basis.................. 4,442 10,680 22,525 26,060 25,339 -------- -------- -------- ---------- ---------- Fixed charges Interest expense................ 301,205 376,560 541,428 573,599 642,321 Capitalized interest............ 39,363 44,610 51,091 50,368 48,818 Interest factor of rents........ -- -- -- 31,991 63,107 -------- -------- -------- ---------- ---------- Fixed charges as adjusted (B)...... 340,568 421,170 592,519 655,958 754,246 -------- -------- -------- ---------- ---------- Fixed charges and preferred stock dividends (C)................... $345,010 $431,850 $615,044 $ 682,018 $ 779,585 ======== ======== ======== ========== ========== Ratio of earnings to fixed charges ((A) divided by (B))............... 1.70x 1.63x 1.48x 1.53x 1.63x ======== ======== ======== ========== ========== Ratio of earnings to fixed charges and preferred stock dividends ((A) divided by (C)).................... 1.68x 1.59x 1.43x 1.47x 1.58x ======== ======== ======== ========== ==========
EX-23.1 4 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-45101) of International Lease Finance Corporation and in the related Prospectus of our report dated February 3, 1998, with respect to the consolidated financial statements and schedule of International Lease Finance Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1997. COOPERS & LYBRAND L.L.P. Los Angeles, California March 9, 1998 EX-23.2 5 EXHIBIT 23.2 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-3 No. 333-45101) of International Lease Finance Corporation and in the related Prospectus of our report dated February 19, 1997, with respect to the consolidated financial statements and schedule of International Lease Finance Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1997. ERNST & YOUNG LLP Century City, Los Angeles, California March 9, 1998 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS INCLUDED IN THE REGISTRANT'S ANNUAL REPORT ON FORM 10-K 405 FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 63,754 0 467,688 0 0 0 14,425,091 1,632,560 14,551,954 0 9,051,042 0 400,000 3,582 0 14,551,954 1,732,667 1,958,007 0 789,527 0 0 642,321 526,159 187,475 338,684 0 0 0 338,684 0 0
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