1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number 000-22249
INTERNATIONAL AIRCRAFT INVESTORS
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4176107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 TORRANCE BOULEVARD, SUITE 410 TORRANCE, CALIFORNIA 90503
(Address of principal executive offices) (Zip Code)
(310) 316-3080
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes No X
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 16, 1997
----- --------------------------------
COMMON STOCK, $.01 PAR VALUE 4,412,029
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INTERNATIONAL AIRCRAFT INVESTORS
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
As of September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Income
Three months ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Income
Nine months ended September 30, 1997 and 1996 5
Condensed Consolidated Statement of Shareholders' Equity As of
December 31, 1996 and for nine months ended September 30, 1997 6
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 167,201 $ 1,174,369
Flight equipment, at cost less accumulated depreciation of
$23,313,000 at September 30, 1997 and $18,852,000
at December 31, 1996 138,330,257 89,884,974
Deferred fees 540,390 268,776
Cash, restricted 3,049,582 210,827
Other assets 1,032,639 1,080,641
------------- -------------
$ 143,120,069 $ 92,619,587
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other accrued expenses 1,430,040 827,693
Notes payable 126,745,064 82,710,293
Lease deposits 2,874,000 835,000
Maintenance reserves 3,238,740 468,060
Deferred rent 2,545,500 2,295,000
Deferred taxes, net 619,000 400,000
------------- -------------
137,452,344 87,536,046
Commitments and contingencies
Shareholders' equity
Convertible preferred stock, $.01 par value. Authorized
15,000,000 shares; issued and outstanding
4,941,000 shares; liquidation value of $1 per share 49,410 49,410
Common stock, $.01 par value. Authorized
20,000,000 shares; issued and outstanding
81,110 shares at September 30, 1997 and
70,000 shares at December 31, 1996 811 700
Additional paid-in capital 6,222,437 5,172,548
Deferred compensation (825,000)
Retained earnings (deficit) 220,067 (139,117)
------------- -------------
Net shareholders' equity 5,667,725 5,083,541
------------- -------------
$ 143,120,069 $ 92,619,587
============= =============
See accompanying notes to condensed consolidated financial statements
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
---------- ----------
(UNAUDITED)
REVENUES:
Rental of flight equipment $4,048,850 $3,171,749
Consulting fees 52,000
Interest income 102,334 39,101
---------- ----------
Total revenues 4,151,184 3,262,850
EXPENSES:
Interest 2,034,430 1,557,100
Depreciation 1,701,000 1,386,700
General and administrative 174,157 155,335
Stock compensation 75,000
---------- ----------
Total expenses 3,984,587 3,099,135
---------- ----------
Income before income taxes 166,597 163,715
Income tax expense 66,600 13,000
---------- ----------
Net income $ 99,997 $ 150,715
========== ==========
Net income per common and common
equivalent share $ 0.06 $ 0.08
========== ==========
Weighted average common and common
equivalent shares outstanding 1,755,512 1,836,762
========== ==========
See accompanying notes to condensed consolidated financial statements
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
----------- -----------
(UNAUDITED)
REVENUES:
Rental of flight equipment $10,527,731 $ 9,501,857
Consulting fees 12,000 234,750
Interest income 201,209 120,973
----------- -----------
Total revenues 10,740,940 9,857,580
EXPENSES:
Interest 5,055,478 4,787,855
Depreciation 4,461,000 4,160,400
General and administrative 463,678 421,317
Stock compensation 175,000
----------- -----------
Total expenses 10,155,156 9,369,572
----------- -----------
Income before income taxes 585,784 488,008
Income tax expense 226,600 33,000
----------- -----------
Net income $ 359,184 $ 455,008
=========== ===========
Net income per common and common
equivalent share $ 0.20 $ 0.25
=========== ===========
Weighted average common and common
equivalent shares outstanding 1,765,790 1,836,762
=========== ===========
See accompanying notes to condensed consolidated financial statements
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
RETAINED
CONVERTIBLE COMMON STOCK ADDITIONAL DEFERRED EARNINGS
PREFERRED ---------------------- PAID-IN STOCK (ACCUMULATED
STOCK SHARES AMOUNT CAPITAL COMPENSATION DEFICIT) NET
--------- ---------- --------- ----------- ------------ ----------- -------------
Balance at December 31, 1996 $ 49,410 315,000 $ 3,150 $ 5,170,098 $(139,117) $ 5,083,541
Reverse stock split (245,000) (2,450) 2,450
--------- ---------- --------- ----------- ---------- ---------- -------------
Adjusted balance at
December 31, 1996 49,410 70,000 700 5,172,548 (139,117) 5,083,541
Issuance of common stock
from exercise of stock
options 11,110 111 49,889 50,000
Stock compensation 175,000 175,000
Deferred stock compensation 825,000 (825,000)
Net income 359,184 359,184
--------- ---------- --------- ----------- ----------- ---------- -------------
Balance at September 30, 1997 $ 49,410 81,110 $ 811 $ 6,222,437 $(825,000) $ 220,067 $ 5,667,725
========= ========== ========= =========== ========== ========== =============
See accompanying notes to condensed consolidated financial statements
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------ ------------
(UNAUDITED)
Cash flows from operating activities:
Net income $ 359,184 $ 455,008
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation of flight equipment 4,461,000 4,160,400
Amortization of deferred transaction fees 138,775 113,870
Stock compensation 175,000
(Increase) decrease in assets:
Deferred fees (398,889) (23,139)
Cash, restricted (2,838,755)
Other assets 48,002 (22,977)
Increase (decrease) in liabilities:
Accrued interest and other assets 602,347 436,213
Lease deposits 2,039,000
Maintenance reserves 2,770,680 268,581
Deferred rent 250,500 (184,850)
Deferred taxes, net 219,000 30,741
------------ ------------
Net cash provided by operating activities 7,825,844 5,233,847
Cash flows from investing activities:
Purchase of flight equipment (52,906,283) (198,974)
------------ ------------
Net cash flows used in investing activities (52,906,283) (198,974)
Cash flows form financing activities:
Repayment of notes payable (3,786,017) (3,888,734)
Repayment of notes payable to ILFC (323,712) (459,798)
Proceeds from notes payable 23,500,000 198,974
Proceeds from notes payable to ILFC 24,433,000
Proceeds from notes payable to GLH 200,000 487,500
Issuance of common stock 50,000
Payable to ILFC (696,695)
------------ ------------
Net cash provided by (used in) financing
activities 44,073,271 (4,358,753)
------------ ------------
Net increase (decrease) in cash and cash
equivalents (1,007,168) 676,120
Cash and cash equivalents at beginning of period 1,174,369 33,898
------------ ------------
Cash and cash equivalents at end of period $ 167,201 $ 710,018
============ ============
Supplemental disclosure of cash flow information
Cash paid for interest $ 4,406,756 $ 4,106,423
See accompanying notes to condensed consolidated financial statements
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying unaudited interim condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Registration
Statement on Form S-1 (File No. 333-19875).
Certain reclassifications have been made to prior period amounts to conform to
the current period presentation.
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal and recurring accruals)
necessary for a fair presentation of the financial position of the Company as of
September 30, 1997 and December 31, 1996 and the results of its operations for
the three and nine month periods ended September 30, 1997 and 1996 and its cash
flows for the nine months ended September 30, 1997 and 1996. Operating results
for the three and nine month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997.
2. MANAGEMENT ESTIMATES
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions. These affect the reported amounts of assets,
liabilities, revenues and expenses and the amount of any contingent assets or
liabilities disclosed in the condensed consolidated financial statements. Actual
results could differ from estimates made.
The Company leases flight equipment to various commercial airline fleets, on
short- to medium-term operating leases, generally three to five years. The
related flight equipment is generally financed by borrowings that become due at
or near the end of the lease term through a balloon payment. As a result, the
Company's operating results depend on management's ability to roll over debt
facilities, renegotiate favorable leases and realize estimated residual values.
3. FLIGHT EQUIPMENT
During 1997, the Company entered into agreements to purchase three aircraft from
ILFC with an aggregate purchase price of $89,200,000. As of September 30, 1997,
the Company took delivery of two of these aircraft. The Company financed these
acquisitions of flight equipment through bank loans, partially guaranteed by
ILFC, as well as loans from ILFC. The Company expects to take delivery of the
third aircraft prior to December 31, 1997.
4. NOTES PAYABLE
During the nine month period ended September 30, 1997, the Company entered into
each of the transactions described below in connection with the purchase of
flight equipment. The Company borrowed $4,433,000 from ILFC for the purchase of
flight equipment. The loan bears interest at 7.25% and matures May 2001,
including a balloon payment of $3,725,840. The Company also borrowed $18,000,000
from ILFC. The loan has an effective interest rate of 6.7% and
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
matures December 31, 1999 with a balloon payment of $15,775,482. In addition,
the Company borrowed $2,000,000 from ILFC. The loan has an effective interest
rate of 6.9% and matures September 30, 2002 with a balloon payment of
$1,394,891. The Company borrowed $22,500,000 from a bank, secured by flight
equipment, guaranteed up to $5,000,000 by ILFC. The loan bears interest at 7.6%
and matures May 2001 with a balloon payment of $19,806,718. Also, the Company
obtained a $1,000,000 bridge loan from a bank bearing interest at 7% due
December 31, 1997. The loan was repaid in November 1997. The Company borrowed
$200,000 at an effective interest rate of 7% from Great Lakes Holdings ("Great
Lakes"), a company owned 100% by the Chief Executive Officer and the President
of the Company. The loan was repaid in November 1997.
5. EARNINGS PER SHARE
Net income per share has been computed using the weighted average number of
common and common stock equivalent shares outstanding for each of the periods
presented. Common stock equivalents represent the number of shares which would
be issued assuming the exercise of common stock options, conversion of preferred
stock and conversion of a note payable reduced by the number of shares which
could be purchased with the proceeds from such conversions using the treasury
stock method. Fully diluted net income per common and common stock equivalent
share is not presented since the amounts do not differ significantly from
primary net income per share presented.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings Per
Share." The statement changes the computation, presentation and disclosure
requirements for earnings per share in the financial statements for periods
ending after December 15, 1997. Early adoption is not permitted. Basic earnings
per share represents income available to common shareholders divided by the
weighted average number of common shares outstanding for the period. Pro forma
basic earnings per share for the three months ended September 30, 1997 and 1996
was $1.23 and $2.15, respectively. Pro forma basic earnings per share for the
nine months ended September 30, 1997 and 1996 was $4.87 and $6.50, respectively.
Diluted earnings per share is similar to the current presentation of fully
diluted earnings per share. Accordingly, pro forma diluted earnings per share
for the three and nine months ended September 30, 1997 and 1996 do not differ
from fully diluted earnings per share.
6. NEW ACCOUNTING STANDARDS
The FASB has issued SFAS No. 128, "Earnings per Share," SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 128 changes the computation,
presentation and disclosure requirements for earnings per share (see Note 5).
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components. SFAS No. 131 supersedes previous reporting
requirements for reporting on segments of a business enterprise. SFAS No. 130
and SFAS No. 131 are effective for periods beginning after December 15, 1997.
Accordingly, the Company plans to implement these two standards during 1998.
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INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. SUBSEQUENT EVENTS
On November 5, 1997, the Company issued 2.6 million shares of common stock in an
initial public offering (IPO). In connection with the IPO, the Company effected
a 1-for-4.5 reverse stock split of its common stock which has been applied
retroactively in the accompanying condensed consolidated financial statements.
Concurrent with the IPO, all outstanding shares of preferred stock were
converted to 1,097,973 shares of common stock and options to acquire 477,391
shares of common stock were exercised at between $4.50 and $5.18 per share after
giving effect for the 1-for-4.5 reverse stock split.
In November 1997, the convertible note was converted to 155,555 shares of common
stock.
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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
OVERVIEW
The Company is primarily engaged in the acquisition of used, single-aisle jet
aircraft and engines for lease and sale to domestic and foreign airlines and
other customers. The Company leases aircraft under short- to medium-term
operating leases where the lessee is responsible for all operating costs and the
Company retains the potential benefit or risk of the residual value of the
aircraft, as distinct from finance leases where the full cost of the aircraft is
generally recovered over the term of the lease.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
Revenues from rental of flight equipment increased by 28% to $4,049 in the three
months ended September 30, 1997 compared to the same period in 1996 principally
as a result of the re-lease of flight equipment at a higher lease rate and the
acquisition of one aircraft under lease.
The decrease in consulting fees of $52 is primarily the result of the
termination in January 1997 of an arrangement with Great Lakes Holdings ("Great
Lakes"), a company owned 100% by the Chief Executive Officer and the President
of the Company. No further consulting fees are expected to be received from
Great Lakes. The Company earned $36 from Great Lakes and $16 from an unrelated
company in the three month period ended September 30, 1996.
Interest income increased to $102 for the three months ended September 30, 1997
from $39 for the same period in 1996 principally as a result of interest on
increased cash and restricted cash balances.
Expenses as a percent of total revenues were 96% and 95% during the three months
ended September 30, 1997 and 1996, respectively. Interest expense increased to
$2,034 for the three months ended September 30, 1997 from $1,557 for the same
period in 1996 principally as a result of interest on financing related to the
acquisition of one aircraft, offset by the effect of loan paydowns. Depreciation
expense increased to $1,701 in the third quarter of 1997 from $1,387 in the
third quarter of 1996 primarily as a result of the acquisition of one aircraft.
General and administrative expenses increased to $174 in the three months ended
September 30, 1997 from $155 in the same period of 1996. The increase was
primarily the result of additional employees in 1997. During the three months
ended September 30, 1997, the Company incurred $75 of non-cash compensation
expense related to the vesting of options granted to executives officers.
As a result of the completion of the Company's initial public offering in
November 1997, the Company expects increased general and administrative expenses
as a result of additional requirements imposed due to maintaining the Company's
status as a public company and additional compensation as a result of new
employment agreements with the Company's Chief Executive Officer and President
and the addition of one employee in September 1997.
The $54 increase in income tax expense represents a non-cash provision for
deferred income taxes at an effective rate of 40%. The Company paid no federal
income taxes during the three months ended September 30, 1997 due to substantial
net operating loss carryforwards (NOL) resulting from accelerated tax
depreciation. At December 31, 1996, the Company had $23,082 of federal NOLs.
Net income decreased to $100 for the three months ended September 30, 1997 from
$151 for the same period in 1996 due to the factors described above.
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Nine Months Ended September 30, 1997 and 1996
Revenues from rental of flight equipment increased by 10.8% to $10,528 in the
nine months ended September 30, 1997 compared to the same period in 1996
principally as a result of the re-lease of flight equipment at a higher lease
rate and the acquisition of one aircraft under lease.
The decrease in consulting fees of $223 is partly the result of the termination
in January 1997 of an arrangement with Great Lakes. No further consulting fees
are expected to be received from Great Lakes. The Company earned $12 from Great
Lakes in the nine month period ended September 30, 1997. The Company earned $108
from Great Lakes, $76 from International Lease Finance Corporation ("ILFC"), an
affiliate of the Company, and $51 from unrelated companies in the nine month
period ended September 30, 1996.
Interest income increased to $201 for the nine months ended September 30, 1997
from $121 for the same period in 1996 principally as a result of interest on
increased cash and restricted cash balances.
Expenses as a percent of total revenues were 94.5% and 95% during the nine
months ended September 30, 1997 and 1996, respectively. Interest expense
increased to $5,055 for the nine months ended September 30, 1997 from $4,788 for
the same period in 1996 principally as a result of interest on financing related
to the acquisition of one aircraft, offset by the effect of loan paydowns.
Depreciation expense increased to $4,461 in the nine months ended September 1997
from $4,160 in the same period of 1996 primarily as a result of the acquisition
of one aircraft. General and administrative expenses increased to $464 in the
nine months ended September 30, 1997 from $421 in the same period of 1996. The
increase was primarily the result of additional employees in 1997. During the
nine months ended September 30, 1997, the Company incurred $175 of non-cash
compensation expense related to the vesting of options granted to executives
officers.
As a result of the completion of the Company's initial public offering in
November 1997, the Company expects increased general and administrative expenses
as a result of additional requirements imposed due to maintaining the Company's
status as a public company and additional compensation as a result of new
employment agreements with the Company's Chief Executive Officer and President
and the addition of one employee in September 1997.
The $194 increase in income tax expense represents a non-cash provision for
deferred income taxes at an effective rate of 40%. The Company paid no federal
income taxes during the nine months ended September 30, 1997 due to substantial
net operating loss carryforwards resulting from accelerated tax depreciation. At
December 31, 1996, the Company had $23,082 of federal NOLs.
Net income decreased to $359 for the nine months ended September 30, 1997 from
$455 for the same period in 1996 due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal external sources of funds have been term loans from
banks and seller financing secured by flight equipment. As a result, a
substantial amount of the Company's cash flows from rental of flight equipment
is applied to principal and interest payments on secured debt. The terms of the
Company's loans generally require a substantial balloon payment at the end of
the noncancellable portion of the lease of the related flight equipment, at
which time the Company will be required to re-lease the flight equipment and
renegotiate the balloon amount of the loan or obtain other financing.
Refinancing of the balloon amount is dependent upon the Company re-leasing the
related flight equipment. Accordingly, the Company begins lease remarketing
efforts well in advance of the lease termination. The principal use of cash is
for financing the acquisition of the Company's flight equipment portfolio, which
is financed by loans secured by the applicable flight equipment. As a result,
the Company does not currently maintain a line of credit.
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For the nine months ended September 30, 1997, net cash provided from operating
activities increased by $2,592 principally as a result of increased lease
deposits and increased rentals from the re-lease of one aircraft and the
acquisition of one aircraft under lease.
Net cash used in investing activities increased to $52,906 in the nine months
ended September 30, 1997 from $199 in the same period of 1996. In 1997, the
Company acquired two additional aircraft under lease for $52,875 from ILFC.
For the nine months ended September 30, 1997, net cash provided by financing
activities was $44,073 compared to net cash used in financing activities of
$4,359 during the nine months ended September 30, 1996. In 1997, the Company
borrowed $48,133 to finance the acquisition of flight equipment under lease and
received $50 from the exercise of management stock options. In 1997, the Company
also made payments on its outstanding borrowings of $4,110.
During the nine month period ended September 30, 1997, the Company entered into
each of the following transactions described below in connection with the
purchase of flight equipment. The Company borrowed $4,433 from ILFC. The loan
bears interest at 7.25% and matures May 2001, including a balloon payment of
$3,726. The Company also borrowed $18,000 from ILFC. The loan has an effective
interest rate of 6.7% and matures December 31, 1999 with a balloon payment of
$15,775. In addition, the Company borrowed $2,000 from ILFC. The loan has an
effective interest rate of 6.9% and matures September 30, 2002 with a balloon
payment of $1,395. The Company borrowed $22,500 from a bank, secured by flight
equipment, guaranteed up to $5,000 by ILFC. The loan bears interest at 7.6% and
matures May 2001 with a balloon payment of $19,807. Also, the Company obtained a
$1,000 bridge loan from a bank bearing interest at 7% due December 31, 1997. The
loan was repaid in November 1997. The Company borrowed $200 at an effective
interest rate of 7% from Great Lakes Holdings ("Great Lakes"), a company owned
100% by the Chief Executive Officer and the President of the Company. The loan
was repaid in November 1997.
During November 1997, the Company successfully completed an initial public
offering of 2,600,000 shares of its common stock and received net proceeds of
approximately $24,180. The Company used $1,200 of the net proceeds to repay
certain loans. The Company intends to use the remaining net proceeds, together
with debt financing to acquire additional aircraft for lease, as well as for
working capital and other general purposes.
Cash and cash equivalents vary from year to year principally as a result of the
timing of the purchase and sale of aircraft.
The Company uses interest swap arrangements to reduce the potential impact of
increases in interest rates on floating rate long-term debt and does not use
them for trading purposes. Premiums paid for purchased interest rate swap
agreements are amortized to interest expense over the terms of the swap
agreements.
The Company's ability to execute successfully its business strategy and to
sustain its operations is dependent, in part, on its ability to obtain financing
and to raise equity capital. There can be no assurance that the necessary amount
of such capital will continue to be available to the Company on favorable terms
or at all. If the Company were unable to continue to obtain any portion of
required financing on favorable terms, the Company's ability to add new aircraft
to its lease portfolio, renew leases, re-lease an aircraft, repair or
recondition an aircraft if required, or retain ownership of an aircraft on which
financing has expired would be impaired, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's financing arrangements to date have been dependent in
part upon ILFC.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
NUMBER DESCRIPTION
------ -----------
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
4.1 Specimen of Common Stock certificate. Filed as Exhibit 4.1 to
Registration Statement No. 333-19875, and incorporated herein
by reference
4.2 Amended and Restated Aircraft Loan Agreement dated November 4,
1996 between SWA I Corporation and Wells Fargo Bank, N.A..
Filed as Exhibit 4.2 to Registration Statement No. 333-19875,
and incorporated herein by reference
4.3 Secured Promissory Note in the original principal amount of
$13,700,000 made November 4, 1996 by SWA I Corporation in
favor of Wells Fargo Bank, N.A.. Filed as Exhibit 4.3 to
Registration Statement No. 333-19875, and incorporated herein
by reference
4.4 Amended and Restated Guaranty Agreement dated as of November
4, 1996 made by International Aircraft Investors in favor of
Wells Fargo Bank, N.A.. Filed as Exhibit 4.4 to Registration
Statement No. 333-19875, and incorporated herein by reference
4.5 Senior Term Loan Agreement dated as of May 17, 1996 between
IAI Alaska I Corporation and City National Bank. Filed as
Exhibit 4.5 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.6 Aircraft Secured Promissory Note in the original principal
amount of $14,650,000 made May 17, 1996 by IAI Alaska I
Corporation in favor of City National Bank. Filed as Exhibit
4.6 to Registration Statement No. 333-19875, and incorporated
herein by reference
4.7 Secured Credit Agreement dated as of December 21, 1993 between
IAI II, Inc. and Continental Bank, N.A.. Filed as Exhibit 4.7
to Registration Statement No. 333-19875, and incorporated
herein by reference
4.8 Note in the original principal amount of $21,976,677 made by
IAI II, Inc. in favor of Continental Bank, N.A.. Filed as
Exhibit 4.8 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.9 Loan Agreement, dated as of September 26, 1997, between IAI
IV, Inc. and International Lease Finance Corporation. Filed as
Exhibit 4.9 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.10 Senior Term Loan Agreement, dated June 23, 1997, between IAI
III, Inc. and City National Bank. Filed as Exhibit 4.10 to
Registration Statement No. 333-19875, and incorporated herein
by reference
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NUMBER DESCRIPTION
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4.11 The Company hereby agrees to furnish to the Commission upon
request a copy of any instrument with respect to long-term
debt where the total amount of securities authorized
thereunder does not exceed 10% of the consolidated assets of
the Company
10.1 Employment Agreement with William E. Lindsey
10.2 Employment Agreement with Michael P. Grella
11 Computation re earnings per share
27 Financial Data Schedule
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERNATIONAL AIRCRAFT INVESTORS
December 19, 1997 by: /S/ Michael P. Grella
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Michael P. Grella
President
December 19, 1997 by: /S/ Rick O. Hammond
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Rick O. Hammond
Vice President-Finance
And Treasurer
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