Mail Stop 7010
September 9, 2005
Via U.S. mail and facsimile
Steven F. Udvar-Hazy, Chief Executive Officer
International Lease Finance Corporation
10250 Constellation Boulevard, Suite #3400
Los Angeles, CA 90067
RE: Form 10-K for the fiscal year ended December 31, 2004
Form 10-Q for the fiscal quarter ended June 30, 2005
Form 10-Q for the fiscal quarter ended March 31, 2005
File No. 1-31616
Dear Mr. Udvar-Hazy:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K/A for the Fiscal Year Ended December 31, 2004, filed on
August 15, 2005
Comment applicable to your overall filing
1. Where a comment below requests additional disclosures or other
revisions to be made, please show us in your supplemental response
what the revisions will look like. These revisions should be
included in your future filings.
Item 6. Selected Financial Data, page 15
2. Your selected consolidated financial data presents lease
margin,
which is a non-GAAP financial measure. Please expand your
disclosure
to include the following:
* a discussion which details why the presentation of lease margin
provides useful information to investors regarding your financial
condition and results of operations,
* a reconciliation of the most comparable GAAP measure, and
* a footnote stating lease margin may not be comparable to those
of
other entities, as not all companies and analysts calculate this
non-
GAAP measure in the same manner.
Alternatively, you may disclose in a footnote to this line item
that
this is a non-GAAP measure and state the location where this
information is included. Refer to SEC Release No. 33-8176.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 17
Critical Accounting Policies and Estimates, page 26
Flight Equipment, page 26
3. Your disclosure states that certain manufacturers establish
notional accounts for your benefit and that these amounts are used
at
your direction to protect you from certain events. Please expand
your disclosure to include the following related to the notional
accounts:
* the contractual terms of these accounts, including terms which
may
limit your use of these accounts and
* the treatment of amounts, which are not used.
You disclosed that the amounts credited to the notional accounts
are
recorded as a reduction to the basis of the aircraft purchased.
Please include in your disclosure how the above affect when you
record the reductions to the basis of the aircraft purchased.
Legal Proceedings, page 28
4. You disclosed that the ATO is currently investigating the GST
aspects of the restructured transactions relating to the ownership
of
aircraft in certain lease transactions in Australia. In addition,
you disclosed that in December 2004 the ATO issued a draft
compliance
audit report, which was contrary to your position. You further
disclose that you have not accrued any amounts related to this
matter
and that you have taken approximately $55 million GST credits
through
December 31, 2004. Please expand your disclosure to include your
conclusion and the related assumptions used to determine your
conclusion based on the guidance in paragraphs 3 and 8-10 of SFAS
5
relating to this matter. Please similarly revise Note L to your
financial statements.
Financial Condition, page 28
Existing Commitments (Exclusive of Interest), page 33
5. Please revise your table of contractual cash obligations to
include planned funding of pension obligations and estimated
interest
payments on your debt. You disclosed on page 37 that and in Note
J
that you are required to pay $245 million relating to tax benefits
to
AIG in 2007 and 2009. Please include these payments in your table
of
contractual cash obligations as well. Because the table is aimed
at
increasing transparency of cash flow, we believe these payments
should be included in the table. Please also disclose any
assumptions you made to derive these amounts.
Results of Operations (restated), page 34
6. Please expand your disclosure to discuss the factors that
contributed to the increase in revenues during the period,
including
any offsetting results these factors may have had with one
another.
Please include in your discussion factors such as:
* changes in the number of aircraft that were under
reconfiguration,
* significant changes in geographic regions,
* lower lease rates, and
* restructured rents.
Please also quantify the impact each of these factors had on your
net
sales.
7. You disclosed in October 2004 you recorded impairment losses of
$28.9 million related to your investment in ATA and $25.0 million
for
assumed liabilities relating to ATA due to their filing for
bankruptcy. Please expand your disclosure to discuss the terms of
the derivative contract, including those terms that triggered the
recording of this liability during this period, rather than in an
earlier period. In addition, please tell us the facts and
circumstances you considered that supported your conclusion that
no
impairment charge was warranted related to your investment in ATA
prior to October 2004.
Notes to Financial Statements
8. Please expand your disclosures to include a note to the
financial
statements which discloses the percentage of your receivables and
sales related to companies in bankruptcy, if material. Please
also
expand your liquidity disclosure to include a discussion regarding
the potential impact, if any, this may have on your current and
future results of operations.
Note A - Summary of Significant Accounting Policies, page 51
9. Please expand your disclosure to include your accounting policy
regarding the types of costs you capitalize and the types of costs
you expense as incurred relating to your initial direct costs
associated with your leased assets. In addition, please disclose
whether the costs you capitalize relating to your initial direct
costs are based on actual costs incurred for each lease or group
of
leases, or whether you use an allocation method to determine these
capitalized costs. If you apply an allocation to determine these
capitalized costs, please also disclose the methodology you use.
Please also disclose the amortization period and amortization
method
you use to amortize your initial direct costs. Please tell us
what
consideration you gave to the above in concluding this should not
be
included in your critical accounting policies.
10. Please expand your disclosure to discuss your policy regarding
the accounting treatment related to refunds paid to your customers
relating to the original terms of retroactively amended leases.
Cash, page 52
11. You state on page 7 that you require certain deposits as
security
relating to the lessee`s performance of obligations under the
lease
and the condition of the aircraft upon return. Please expand your
disclosure to disclose whether your financing agreements contain
any
restrictions as to the timing and use of these monies included in
your financial statements for each of the periods presented.
Please
also discuss restrictions, if any, your credit facilities impose
on
the use of monies collected relating to the overhaul rentals. If
your financing agreements do contain restrictions regarding the
timing and use of these monies, please tell us what consideration
you
gave to Article 5-02.1 of Regulation S-X and Chapter 3A, paragraph
6
of ARB 43 in concluding that these monies should not be presented
separately on the balance sheet as restricted cash and in your
statements of cash flows.
Note E - Investments, page 59
Other Equity Investments, page 59
Equity Method, page 59
12. Your disclosure states that you do not consolidate your 99%
investment in 21937, LLC due to lack of effective control. Please
expand your disclosure to discuss how you determined you lack
effective control in the joint venture, precluding you from
consolidating this investment. Please also include in your
disclosure how you determined this investment did not meet the
criteria for consolidation under FIN 46(R). In your discussion,
please specifically address the analysis you used in concluding
that
you lacked any of the three characteristics of a controlling
financial interest relating to this investment as discussed in
paragraphs 5(a) through 5(c) of FIN 46(R).
Form 10-Q for the Fiscal Quarter Ended June 30, 2005
Comment applicable to your overall filing
13. Please address the comments above in your interim Forms 10-Q
as
well.
Notes to Financial Statements
14. You disclosed in your Form 10-Q for the fiscal quarter ended
March 31, 2005 that you recorded approximately $5.2 million as a
reduction of retained earnings and a corresponding increase to
additional paid-in capital relating for compensation expense
relating
to the SICO Deferred Compensation Plan. Please tell us how you
determined that it was appropriate to record this adjustment
directly
to retained earnings, rather than in your statements of income.
Please also include the accounting guidance you used to support
your
conclusion.
Item 2. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 13
Restatement of Previously Issued Financial Statements and Recent
Developments, page 14
15. You disclosed that in June 2005 Varig S.A, one of your
customers,
filed for bankruptcy. Please expand your disclosure to include
the
impact, if any, this had on your operations during the fiscal
quarter
ended June 30, 2005. If any amounts were recorded in your
statements
of operations as a result of the bankruptcy, please expand your
disclosure to discuss these impacts, including the amounts and
line
items that were affected in your statements of operations.
Results of Operations - Three months ended June 30, 2005 versus
2004,
page 21
16. Your disclosure states that your selling, general and
administrative expenses remained relatively constant. Please
expand
your disclosure to discuss the factors that contributed to this,
including any offsetting results these factors may have had with
one
another. Please also quantify the impact each of these factors
had
on your selling, general and administrative expenses. Similarly,
please revise your comparative discussion regarding your results
of
operations for the six months ended June 30, 2005 and June 30,
2004.
* * * *
Please respond to these comments within 10 business days, or
tell us when you will provide us with a response. Please provide
us
with a supplemental response letter that keys your responses to
our
comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Meagan Caldwell, Staff Accountant, at (202) 551-
3754
or, in her absence, to the undersigned at (202) 551-3769.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Steven F. Udvar-Hazy
International Lease Finance Corporation
September 9, 2005
Page 1 of 7
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE