WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

SCHEDULE I — CONDENSED BALANCE SHEETS

Parent Company Information

(In thousands, except share data)


	December 31,		December 31,
	2017		2016
ASSETS
Cash and cash equivalents	$	2,860	$	4,574
Equipment held for operating lease, less accumulated depreciation		662,162		811,091
Maintenance rights		3,296		16,468
Equipment held for sale		34,084		22,446
Operating lease related receivables, net of allowances		7,980		7,853
Spare parts inventory		11,643		17,554
Due from affiliates, net		18,439		24,723
Investments		50,641		45,406
Investment in subsidiaries		50,047		(2,879)
Property, equipment & furnishings, less accumulated depreciation		15,238		16,096
Intangible assets, net		271		1,021
Prepaid deposits		36,455		4,399
Other assets, net		8,385		7,890
Total assets	$	901,501	$	976,642

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	15,686	$	13,428
Due to affiliates, net		2,300		—
Deferred income taxes		7,456		43,265
Debt obligations		508,350		626,876
Maintenance reserves		36,809		54,655
Security deposits		17,795		18,555
Unearned revenue		4,724		3,843
Total liabilities		593,120		760,622

Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 and 1,000 shares issued and outstanding at December 31, 2017 and 2016, respectively)		49,471		19,760

Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,419 and 6,402 shares issued and outstanding at December 31, 2017 and 2016, respectively)		64		64
Paid-in capital in excess of par		2,319		2,512
Retained earnings		256,301		194,729
Accumulated other comprehensive income (loss), net of income tax (expense) benefit		226		(1,045)
Total shareholders’ equity		258,910		196,260
Total liabilities, redeemable preferred stock and shareholders' equity	$	901,501	$	976,642

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF INCOME

Parent Company Information

(In thousands)


	Years Ended December 31,
	2017		2016		2015
REVENUE
Lease rent revenue	$	72,580	$	76,283	$	63,443
Maintenance reserve revenue		46,163		30,742		29,937
Spare parts and equipment sales		35,903		8,404		20,210
Gain on sale of leased equipment		3,696		3,322		2,420
Other revenue		9,881		10,660		7,017
Total revenue		168,223		129,411		123,027

EXPENSES
Depreciation and amortization expense		40,560		43,451		40,623
Cost of spare parts and equipment sales		29,705		6,591		13,559
Write-down of equipment		17,881		5,989		6,764
General and administrative		42,004		39,201		35,898
Technical expense		7,058		4,637		6,805
Net finance costs		25,215		23,358		18,448
Total expenses		162,423		123,227		122,097

Earnings from operations		5,800		6,184		930
Earnings from joint ventures		7,158		1,813		1,175
Income before income taxes		12,958		7,997		2,105
Income tax expense		4,843		4,710		2,277
Equity in income of subsidiaries, net of tax of $(30,990), $5,168, and $4,037 at December 31, 2017, 2016 and 2015, respectively		54,043		10,782		6,632
Net income		62,158		14,069		6,460
Preferred stock dividends		1,813		281		—
Accretion of preferred stock issuance costs		46		8		—
Net income attributable to common shareholders	$	60,299	$	13,780	$	6,460

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Parent Company Information

(In thousands)



	Years Ended December 31,
	2017		2016		2015
Net income	$	62,158	$	14,069	$	6,460

Other comprehensive income:
Currency translation adjustment		1,061		(868)		(796)
Unrealized gains on derivative instruments		896		69		—
Net gain (loss) recognized in other comprehensive income		1,957		(799)		(796)
Tax (expense) benefit related to items of other comprehensive income		(686)		275		275
Other comprehensive income (loss)		1,271		(524)		(521)
Total comprehensive income	$	63,429	$	13,545	$	5,939

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Information

(In thousands)


	Years Ended December 31,
	2017		2016		2015
Cash flows from operating activities:
Net income	$	62,158	$	14,069	$	6,460
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries		(54,043)		(10,782)		(6,632)
Depreciation expense		40,560		43,451		40,623
Write-down of equipment		17,881		5,989		6,764
Stock-based compensation expenses		4,270		3,717		4,150
Excess tax benefit from stock-based compensation		—		236		26
Amortization of deferred costs		3,085		2,704		2,646
Allowances and provisions		76		(1)		(17)
Gain on sale of leased equipment		(3,696)		(3,322)		(2,420)
Gain on insurance settlement		(1,288)		—		—
Income from joint ventures		(7,158)		(1,813)		(1,175)
Loss on extinguishment of debt		—		137		—
Deferred income taxes		4,843		4,710		1,806
Changes in assets and liabilities:
Receivables		5,366		(4,884)		(865)
Spare parts inventory		5,612		(1,608)		4,547
Intangibles		—		(750)		—
Other assets		(4,259)		(2,648)		(2,420)
Accounts payable and accrued expenses		2,370		3,723		4,471
Due to / from subsidiaries		8,584		(4,437)		(1,242)
Maintenance reserves		7,906		16,583		5,227
Security deposits		6,876		(2,283)		5,354
Unearned lease revenue		906		878		817
Net cash provided by operating activities		100,049		63,669		68,120

Cash flows from investing activities:
Increase in investment in subsidiaries		(45,609)		(2,329)		(23,923)
Distributions received from subsidiaries		347,626		15,500		3,791
Proceeds from sale of equipment held for operating lease (net of selling expenses)		33,118		60,893		18,792
Capital contribution to joint venture		—		(5,545)		(630)
Proceeds from insurance settlement		14,886		—		—
Distributions received from joint venture		1,880		1,167		1,304
Maintenance rights payments received		—		—		5,802
Purchase of equipment held for operating lease		(354,918)		(167,874)		(161,888)
Purchase of maintenance rights		—		(5,530)		(8,844)
Purchase of property, equipment and furnishings		(268)		(443)		(3,736)
Net cash used in investing activities		(3,285)		(104,161)		(169,332)

Cash flows from financing activities:
Proceeds from issuance of notes payable		350,500		149,000		192,700
Debt issuance cost		—		(3,808)		(13)
Principal payments on notes payable		(470,606)		(93,055)		(71,846)
Interest bearing security deposits		(2,261)		455		(1,606)
Proceeds from shares issued under stock compensation plans		177		155		518
Repurchase of common stock		(3,546)		(28,958)		(16,500)
Proceeds from issuance of preferred stock		29,663		19,752		—
Preferred stock dividends		(1,311)		—		—
Cancellation of restricted stock units in satisfaction of withholding tax		(1,094)		(1,369)		(1,558)
Net cash (used in) provided by financing activities		(98,478)		42,172		101,695

(Decrease)/Increase in cash and cash equivalents		(1,714)		1,680		483
Cash and cash equivalents at beginning of period		4,574		2,894		2,411
Cash and cash equivalents at end of period	$	2,860	$	4,574	$	2,894

Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	21,761	$	20,619	$	16,462
Income Taxes	$	180	$	20	$	75

Supplemental disclosures of non-cash investing and financing activities:
Engines and equipment transferred to the parent from its subsidiaries	$	17,910	$	229	$	41,410
Transfers from Equipment held for operating lease to Equipment held for sale	$	31,571	$	18,194	$	21,786
Transfers from Equipment held for sale to Spare parts inventory	$	—	$	—	$	6,061
Transfers from Property, equipment and furnishings to Equipment held for lease	$	—	$	2,925	$	—
Accrued preferred stock dividends	$	783	$	281	$	—
Accretion of preferred stock issuance costs	$	46	$	8	$	—