-----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, ReW7/TNTks/7g8Fy852CX7/c9Hk9Qtht4ktD80Hxe00KXkohvwY2aQDxO3/z+EGE 9D5gg28Gg69Z+Ezc9fJHqA== 0000950150-98-000812.txt : 19980514 0000950150-98-000812.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950150-98-000812 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL AIRCRAFT INVESTORS CENTRAL INDEX KEY: 0001029688 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EQUIPMENT RENTAL & LEASING, NEC [7359] IRS NUMBER: 954176107 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13451 FILM NUMBER: 98618763 BUSINESS ADDRESS: STREET 1: 3655 TORRANCE BLVD STREET 2: SUITE 410 CITY: TORRANCE STATE: CA ZIP: 90503 BUSINESS PHONE: 3103163080 MAIL ADDRESS: STREET 1: 3655 TORRANCE BLVD STREET 2: SUITE 410 CITY: TORRANCE STATE: CA ZIP: 90503 10-Q 1 FORM 10-Q 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 MARCH 31, 1998 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...X..... No........ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class Outstanding at May 12, 1998 ----- --------------------------- COMMON STOCK, $.01 PAR VALUE 4,497,584
-1- 2 INTERNATIONAL AIRCRAFT INVESTORS INDEX
PART I. FINANCIAL INFORMATION Page No. -------- Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of March 31, 1998 and December 31, 1997............................................ 3 Condensed Consolidated Statements of Income Three months ended March 31, 1998 and 1997............................................ 4 Condensed Consolidated Statements of Cash Flows Three months ended March 31, 1998 and 1997............................................ 5 Notes to Condensed Consolidated Financial Statements.................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations............................................................. 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K...................................................... 12 Signatures............................................................................ 14
-2- 3 INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 1998 1997 ------------ ------------ (UNAUDITED) ASSETS Cash and cash equivalents........................................... $ 23,962,698 $ 23,838,306 Flight equipment, at cost less accumulated depreciation of $27,856,000 at March 31, 1998 and $25,402,000 at December 31, 1997............................................. 170,052,257 172,506,257 Cash, restricted.................................................... 7,543,586 6,976,974 Other assets........................................................ 1,132,026 1,230,589 ------------ ------------ $202,690,567 $204,552,126 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Accrued interest and other accrued expenses......................... $ 4,990,133 $ 4,967,677 Notes payable....................................................... 152,489,910 154,719,546 Maintenance reserves................................................ 7,711,643 7,612,113 Deferred rent....................................................... 2,247,424 3,334,000 Deferred taxes, net................................................. 1,327,800 823,800 ------------ ------------ 168,766,910 171,457,136 Commitments and contingencies Shareholders' equity Preferred stock, $.01 par value. Authorized 15,000,000 shares; none issued and outstanding .............................. -- -- Common stock, $.01 par value. Authorized 20,000,000 shares; issued and outstanding 4,497,584 shares.................................................. 44,976 44,976 Additional paid-in capital.......................................... 33,272,435 33,272,435 Deferred compensation............................................... (687,500) (750,000) Retained earnings................................................... 1,293,746 527,579 ------------ ------------ Net shareholders' equity.................................. 33,923,657 33,094,990 ------------ ------------ $202,690,567 $204,552,126 ============ ============
See accompanying notes to condensed consolidated financial statements -3- 4 INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, ------------------------------ 1998 1997 ------------ ------------ (UNAUDITED) REVENUES: Rental of flight equipment........................................ $ 6,140,426 $ 3,161,149 Consulting fees................................................... -- 12,000 Interest income................................................... 431,542 43,425 ------------ ------------ Total revenues............................................. 6,571,968 3,216,574 EXPENSES: Interest.......................................................... 2,788,177 1,483,036 Depreciation...................................................... 2,454,000 1,380,000 General and administrative........................................ 337,124 130,380 Stock compensation................................................ 62,500 25,000 ------------ ------------ Total expenses.............................................. 5,641,801 3,018,416 ------------ ------------ Income before income taxes and cumulative effect of accounting change............................................................ 930,167 198,158 Income tax expense.................................................. 373,000 72,000 ------------ ------------ Net income before cumulative effect of accounting change............ 557,167 126,158 Cumulative effect of change in accounting for ancillary payments under lease agreements, net of income tax expense of $139,000........................................................ 209,000 -- ------------ ------------ Net income.................................................. $ 766,167 $ 126,158 ============ ============ Basic earnings share: Net income before cumulative effect of accounting change.... $ .12 $ 1.80 Cumulative effect of accounting change...................... .05 -- Net income.................................................. $ .17 $ 1.80 Diluted earnings per share: Net income before cumulative effect of accounting change.... $ .12 $ .07 Cumulative effect of accounting change...................... .05 -- Net income.................................................. $ .17 $ .07 ======= ======= Weighted average common shares outstanding: Basic 4,497,584 70,000 ============ ============ Assuming dilution 4,627,244 1,780,470 ============ ============ Pro forma effect assuming the change in accounting principle is applied retroactively:......................................... Net income.................................................. $ 557,167 $ 136,158 Earnings per share: Basic.................................................... $ .12 $ 1.94 Diluted.................................................. $ .12 $ .08
See accompanying notes to condensed consolidated financial statements -4- 5 INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ------------ ----------- (UNAUDITED) Cash flows from operating activities: Net income......................................................... $ 766,167 $ 126,158 Adjustments to reconcile net income to cash provided by operating activities: Depreciation of flight equipment................................ 2,454,000 1,380,000 Cumulative effect of accounting change.......................... (209,000) -- Amortization of deferred transaction fees....................... 62,064 36,164 Deferred taxes, net............................................. 504,000 66,400 Stock compensation.............................................. 62,500 25,000 (Increase) decrease in assets: Cash, restricted................................................ (566,612) (446,115) Other assets.................................................... 47,999 102,220 Increase (decrease) in liabilities: Accrued interest and other accrued liabilities.................. 22,456 (113,686) Maintenance reserves............................................ 308,530 38,882 Deferred rent................................................... (1,086,576) (69,500) ------------ ----------- Net cash provided by operating activities 2,365,528 1,145,523 Cash flows from financing activities: Repayment of notes payable...................................... (1,704,652) (1,369,004) Repayment of notes payable to ILFC.............................. (494,984) (127,804) Repayment of notes payable to GLH............................... (41,500) -- ------------ ----------- Net cash used in financing activities........................... (2,241,136) (1,496,808) ------------ ----------- Net increase (decrease) in cash and cash equivalents............ 124,392 (351,285) Cash and cash equivalents at beginning of period................... 23,838,306 1,174,369 ------------ ----------- Cash and cash equivalents at end of period......................... $ 23,962,698 $ 823,084 ============ =========== Supplemental disclosure of cash flow information Cash paid for interest.......................................... $ 2,714,206 $ 1,528,409
See accompanying notes to condensed consolidated financial statements -5- 6 INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998 (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 Annual Report on Form 10-K. 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 March 31, 1998 and December 31, 1997 and the results of its operations for the three month periods ended March 31, 1998 and 1997 and its cash flows for the three months ended March 31, 1998 and 1997. Operating results for the three month period ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. 2. ACCOUNTING CHANGE Effective January 1, 1998, the Company changed its method of accounting for income recognition of ancillary payments under lease agreements to a full accrual method from recognition upon lease termination. This new method, which was accounted for as a change in accounting method, was made to better reflect the earnings process under lease agreements. The effect of this change on net earnings and earnings per share, before cumulative effect of accounting change, for the three month period ended March 31, 1998 was an increase of $157,000 ($.03 per basic and diluted share). The cumulative effect on retained earnings at January 1, 1998 of the accounting change was an increase of approximately $209,000 ($.05 per basic and diluted share), net of related income taxes of $139,000. The pro forma amounts shown on the condensed consolidated statements of income have been adjusted for the effect of retroactive application. 3. 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-term 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. -6- 7 INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 4. EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings per Share." SFAS No. 128 replaced the calculation of primary and diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to SFAS No. 128 requirements. The following table sets forth the computation of basic and diluted earnings per share:
THREE MONTHS ENDED MARCH 31, ---------------------------- 1998 1997 ---- ---- Numerator: Net income before cumulative effect of accounting change..... $ 557,167 $ 126,158 Cumulative effect of change in accounting for ancillary payments under lease agreements............................ 209,000 -- ------------- ------------- Net income................................................... $ 766,167 $ 126,158 Denominator: Denominator for basic earnings per share-weighted average shares outstanding......................................... 4,497,584 70,000 Effect of dilutive securities: Employee stock options....................................... 129,660 216,873 Non-employee stock options................................... -- 240,069 Convertible preferred stock.................................. -- 1,097,973 Convertible note payable..................................... -- 155,555 ------------- ------------- Dilutive potential common shares 129,660 1,710,470 ------------- ------------- Denominator for diluted earnings per share-adjusted weighted average shares and assumed conversions 4,627,244 1,780,470 Basic earnings per share: Net income before cumulative effect of accounting change $ .12 $ 1.80 Cumulative effect of accounting change .05 -- -------- -------- Net income $ .17 $ 1.80 ======== ======== Diluted earnings per share: Net income before cumulative effect of accounting change $ .12 $ .07 Cumulative effect of accounting change .05 -- -------- -------- Net income $ .17 $ .07 ======== ========
The Company issued its underwriters warrants to purchase 260,000 shares of its common stock at $12 per share in connection with its initial public offering. These warrants were excluded from the computation of diluted net income per common share because they were anti-dilutive. The warrants are exercisable through November 5, 2000. -7- 8 5. NOTES PAYABLE The Company extended the maturity of a note payable with a bank with a balloon payment of $3,680,125 to May 27, 1998. The Company intends to refinance the loan with a bank related to the re-lease of an aircraft. 6. NEW ACCOUNTING STANDARDS The FASB has issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." 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. SFAS No. 130 had no impact on the accompanying condensed consolidated financial statements. The Company plans to implement SAFS No. 131 in connection with its 1998 reporting on Form 10-K. As SFAS No. 131 only requires additional disclosures, the Company expects there will be no material impact on its financial condition or results of operations from its implementation. 7. SUBSEQUENT EVENTS During April 1998, the Company entered into an agreement to re-lease its Boeing Model 727-200adv. The noncancellable lease term runs through April 2003. As a result of the lease, the aircraft will be modified with a Stage III noise compliance Hushkit. During April 1998, the Company repaid a note due August 1998 with a balance of $824,781. -8- 9 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 for lease and sale to domestic and foreign airlines and other customers. The Company leases aircraft under short-term to medium-term operating leases where the lessee is responsible for all operating costs, including major overhauls 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. Rental amounts are accrued evenly over the lease term and are recognized as revenue from the rental of flight equipment. The Company's flight equipment is recorded on the balance sheet at cost and is depreciated on a straight-line basis over the estimated useful life to the Company's estimated salvage value. Revenue, depreciation expense and resultant profit for operating leases are recorded evenly over the life of the lease. Initial direct costs related to the origination of leases are capitalized and amortized over the lease terms. This Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. Reference is made to the cautionary statements made in the Company's Report on Form 10-K for the year ended December 31, 1997 ("Form 10-K") which should be read as being applicable to all related forward-looking statements wherever they appear in this Report on Form 10-Q. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below, as well as those discussed elsewhere in the Form 10-K. ACCOUNTING CHANGE Effective January 1, 1998, the Company changed its method of accounting for income recognition of ancillary payments under lease agreements to a full accrual method from recognition upon lease termination. This new method, which was accounted for as a change in accounting method, was made to better reflect the earnings process under lease agreements. The effect of this change on net earnings, before cumulative effect of accounting change, for the three month period ended March 31, 1998 was an increase of $157. The cumulative effect on retained earnings at January 1, 1998 of the accounting change was an increase of approximately $209, net of related income taxes of $139. RESULTS OF OPERATIONS Three Months Ended March 31, 1998 and 1997 Revenues from rental of flight equipment increased by 94%, or $2,979, to $6,140 in the three months ended March 31, 1998 compared to the same period in 1997 as a result of the Company having ten aircraft under lease in the three months ended March 31, 1998 compared to seven aircraft under lease in the same period of 1997, as well as the impact of the change in accounting method discussed above. The Company extended the lease of its Boeing Model 737-200adv through March 1999. The decrease in consulting fees of $12 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. Interest income increased to $432 for the three months ended March 31, 1998 from $43 for the same period in 1997 principally as a result of interest on increased cash, primarily from the Company's initial public offering in November 1997 and restricted cash balances. Expenses as a percent of total revenues were 86% and 94% during the three months ended March 31, 1998 and 1997, respectively. This decrease in percentage is due to the effect of the 104% increase in total revenue while expenses -9- 10 increased 87%. Interest expense increased to $2,788 for the three months ended March 31, 1998 from $1,483 for the same period in 1997 principally as a result of interest on financing related to the acquisition of three additional aircraft, offset by the effect of loan paydowns. Depreciation expense increased to $2,454 in the first quarter of 1998 from $1,380 in the first quarter of 1997 primarily as a result of the acquisition of three additional aircraft. General and administrative expenses increased to $337 in the three months ended March 31, 1998 from $130 in the same period of 1997. The increase in general and administrative expense was primarily the result of additional compensation resulting from the addition of two employees and new employment agreements with the Company's Chief Executive Officer and President, as well as the additional costs incurred due to maintaining the Company's status as a public company. During the three months ended March 31, 1998, the Company incurred $63 of non-cash stock compensation expense compared to $25 of non-cash stock compensation expense in the same period of 1997 related to the vesting of options granted to executives officers. The increase stock compensation expense resulted from three months of non-cash expense in the first quarter of 1998 compared to one month of non-cash expense in the first quarter of 1997. The $301 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 March 31, 1998 due to substantial net operating loss carryforwards (NOL) resulting from accelerated tax depreciation. At December 31, 1997, the Company had $23,577 of federal NOLs. Net income increased to $766 for the three months ended March 31, 1998 from $126 for the same period in 1997 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 and the net proceeds from the Company's initial public offering. 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. At March 31, 1998 and December 31, 1997, the Company had cash and cash equivalents of $23,963 and $23,838, respectively. The Company plans to use cash and cash equivalents, together with debt financing, to acquire addition aircraft for lease. For the three months ended March 31, 1998, net cash provided from operating activities increased by $1,220 principally as a result of profits of $640 and increases in noncash charges for depreciation and deferred taxes of $1,074 and $438, respectively, partially offset by a decrease in deferred rent of $1,018. For the three months ended March 31, 1998, net cash used in financing activities was $2,241 compared to net cash used in financing activities of $1,497 during the three months ended March 31, 1997. In both periods net cash used was principally due to loan paydowns. Cash and cash equivalents vary from period to period 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 -10- 11 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 International Lease Finance Corporation. IMPACT OF YEAR 2000 No change has occurred in the Company's Year 2000 status as previously disclosed in its December 31, 1997 report on Form 10-K. -11- 12 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. Filed as Exhibit 3.1 to Form 10-Q for the quarterly period ended September 30, 1997, and incorporated herein by reference 3.2 Amended and Restated Bylaws of the Company. Filed as Exhibit 3.2 to Form 10-Q for the quarterly period ended September 30, 1997, and incorporated herein by reference 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 4.11 Senior Term Loan Agreement, dated December 10, 1997, between IAI V, Inc. and City National Bank. Filed as Exhibit 4.11 to Form 10-Q for the quarterly period ended September 30, 1997, and incorporated herein by reference 4.12 Senior Term Loan Agreement, dated December 10, 1997, between IAI V, Inc. and International Lease Finance Corporation. Filed as Exhibit 4.12 to Form 10-Q for the quarterly period ended September 30, 1997, and incorporated herein by reference
-12- 13
NUMBER DESCRIPTION ------ ----------- 4.13 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 18 Preferability letter regarding change in accounting principle 27.1 Financial Data Schedule for the three months ended March 31, 1998 27.2 Financial Data Schedule for the three months ended March 31, 1997
REPORTS ON FORM 8-K: During the quarter ended March 31, 1998, the Company did not file any reports on Form 8-K. -13- 14 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 May 13, 1998 by: /s/ Michael P. Grella --------------------------------- Michael P. Grella President May 13, 1998 by: /s/ Rick O. Hammond --------------------------------- Rick O. Hammond Vice President-Finance And Treasurer -14- EX-18 2 PREFERABILITY LETTER 1 Exhibit 18 April 21, 1998 International Aircraft Investors Torrance, CA Ladies and Gentlemen: We have been furnished with a copy of Form 10-Q of International Aircraft Investors for the three months ended March 31, 1998, and have read the Company's statements contained in Note 2 to the condensed consolidated financial statements included therein. As stated in Note 2, the Company changed its method of accounting for income recognition of ancillary payments under lease agreements to the full accrual method from recognition upon lease termination. The change is being made due to the increase in frequency of leases with ancillary payment provisions. Note 2 states that the newly adopted accounting principle is preferable in the circumstances because it better reflects the earning process. In accordance with your request, we have reviewed and discussed with Company officials the circumstances and business judgment and planning upon which the decision to make this change in the method of accounting was based. We have not audited any financial statements of International Aircraft Investors as of any date or for any period subsequent to December 31, 1997, nor have we audited the information set forth in the aforementioned Note 2 to the condensed consolidated financial statements; accordingly, we do not express an opinion concerning the factual information contained therein. With regard to the aforementioned accounting change, authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method. However, for purposes of International Aircraft Investors' compliance with the requirements of the Securities and Exchange Commission, we are furnishing this letter. Based on our review and discussion, with reliance on management's business judgment and planning, we concur that the newly adopted method of accounting is preferable in the Company's circumstances. /s/ KPMG Peat Marwick LLP EX-27.1 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 23,962,698 0 0 0 0 0 197,908,257 27,856,000 202,690,567 0 152,489,910 0 0 44,976 33,878,681 202,690,567 0 6,571,968 0 2,853,624 0 0 2,788,177 930,167 373,000 557,167 0 0 209,000 766,167 0.17 0.17
EX-27.2 4 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 823,084 0 0 0 0 0 108,736,974 20,232,000 91,196,033 0 81,213,485 49,410 0 700 5,234,699 91,196,033 0 3,216,574 0 1,535,380 0 0 1,483,036 198,158 72,000 126,158 0 0 0 126,158 1.80 0.07
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