WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

SCHEDULE I — CONDENSED BALANCE SHEETS

Parent Company Information

(In thousands, except share data)


	December 31,		December 31,
	2018		2017
ASSETS
Cash and cash equivalents	$	5,302	$	2,860
Equipment held for operating lease, less accumulated depreciation		618,167		662,162
Maintenance rights		3,296		3,296
Equipment held for sale		701		34,084
Receivables, net of allowances		3,468		7,980
Spare parts inventory		483		11,643
Due from affiliates, net		14,877		18,439
Deferred income taxes		13,896		—
Investments		47,941		50,641
Investment in subsidiaries		141,792		50,047
Property, equipment & furnishings, less accumulated depreciation		15,077		15,238
Intangible assets, net		271		271
Prepaid deposits		1,383		36,455
Other assets, net		10,766		8,385
Total assets	$	877,420	$	901,501

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	27,128	$	15,686
Due to affiliates, net		40,187		2,300
Deferred income taxes		—		7,456
Debt obligations		434,053		508,350
Maintenance reserves		27,329		36,809
Security deposits		10,692		17,795
Unearned revenue		1,690		4,724
Total liabilities		541,079		593,120

Redeemable preferred stock ($0.01 par value, 2,500 shares authorized; 2,500 shares issued and outstanding at December 31, 2018 and 2017, respectively)		49,554		49,471

Shareholders’ equity:
Common stock ($0.01 par value, 20,000 shares authorized; 6,176 and 6,419 shares issued and outstanding at December 31, 2018 and 2017, respectively)		62		64
Paid-in capital in excess of par		—		2,319
Retained earnings		286,623		256,301
Accumulated other comprehensive income, net of income tax benefit		102		226
Total shareholders’ equity		286,787		258,910
Total liabilities, redeemable preferred stock and shareholders' equity	$	877,420	$	901,501

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF INCOME

Parent Company Information

(In thousands)


	Years Ended December 31,
	2018		2017		2016
REVENUE
Lease rent revenue	$	70,269	$	72,580	$	76,283
Maintenance reserve revenue		27,407		46,163		30,742
Spare parts and equipment sales		35,388		35,903		8,404
Gain on sale of leased equipment		6,183		3,696		3,322
Other revenue		13,624		9,881		10,660
Total revenue		152,871		168,223		129,411

EXPENSES
Depreciation and amortization expense		34,795		40,560		43,451
Cost of spare parts and equipment sales		32,331		29,705		6,591
Write-down of equipment		2,567		17,881		5,989
General and administrative		52,896		42,004		39,201
Technical expense		9,858		7,058		4,637
Net finance costs		25,210		25,215		23,358
Total expenses		157,657		162,423		123,227

Earnings from operations		(4,786)		5,800		6,184
Earnings from joint ventures		3,800		7,158		1,813
Income before income taxes		(986)		12,958		7,997
Income tax (benefit) expense		(280)		4,843		4,710
Equity in income of subsidiaries, net of tax of $13,323, $(30,990), and $5,168 at December 31, 2018, 2017 and 2016, respectively		43,937		54,043		10,782
Net income		43,231		62,158		14,069
Preferred stock dividends		3,250		1,813		281
Accretion of preferred stock issuance costs		83		46		8
Net income attributable to common shareholders	$	39,898	$	60,299	$	13,780

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Parent Company Information

(In thousands)



	Years Ended December 31,
	2018		2017		2016
Net income	$	43,231	$	62,158	$	14,069

Other comprehensive income:
Currency translation adjustment		(770)		896		(868)
Unrealized gains on derivative instruments		533		1,061		69
Net (loss) gain recognized in other comprehensive income		(237)		1,957		(799)
Tax benefit (expense) related to items of other comprehensive income		54		(686)		275
Other comprehensive (loss) income		(183)		1,271		(524)
Total comprehensive income	$	43,048	$	63,429	$	13,545

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Information

(In thousands)


	Years Ended December 31,
	2018		2017		2016
Cash flows from operating activities:
Net income	$	43,231	$	62,158	$	14,069
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries		(43,937)		(54,043)		(10,782)
Depreciation expense		34,795		40,560		43,451
Write-down of equipment		2,567		17,881		5,989
Stock-based compensation expenses		5,410		4,270		3,717
Excess tax benefit from stock-based compensation		—		—		236
Amortization of deferred costs		3,324		3,085		2,704
Allowances and provisions		439		76		(1)
Gain on sale of leased equipment		(6,183)		(3,696)		(3,322)
Gain on insurance settlement		—		(1,288)		—
Income from joint ventures		(3,800)		(7,158)		(1,813)
Loss on extinguishment of debt		—		—		137
Loss on disposal of property, equipment and furnishings		41		—		—
Deferred income taxes		(434)		4,843		4,710
Changes in assets and liabilities:
Receivables		4,073		5,366		(4,884)
Distributions received from joint ventures		5,730		1,880		1,167
Spare parts inventory		7,320		5,612		(1,608)
Intangibles		—		—		(750)
Other assets		(3,983)		(4,259)		(2,648)
Accounts payable and accrued expenses		19,459		2,370		3,723
Due to / from subsidiaries		41,449		8,584		(4,437)
Maintenance reserves		(9,500)		7,906		16,583
Security deposits		(6,773)		6,876		(2,283)
Unearned lease revenue		(3,034)		906		878
Net cash provided by operating activities		90,194		101,929		64,836

Cash flows from investing activities:
Increase in investment in subsidiaries		(9,104)		(45,609)		(2,329)
Distributions received from subsidiaries		388,910		347,626		15,500
Proceeds from sale of equipment held for operating lease (net of selling expenses)		48,049		33,118		60,893
Capital contribution to joint venture		—		—		(5,545)
Proceeds from insurance settlement		—		14,886		—
Purchase of equipment held for operating lease		(417,857)		(354,918)		(167,874)
Purchase of maintenance rights		—		—		(5,530)
Purchase of property, equipment and furnishings		(1,104)		(268)		(443)
Net cash provided by (used in) investing activities		8,894		(5,165)		(105,328)

Cash flows from financing activities:
Proceeds from issuance of notes payable		386,000		350,500		149,000
Debt issuance cost		—		—		(3,808)
Principal payments on notes payable		(462,119)		(470,606)		(93,055)
Interest bearing security deposits		—		(2,261)		455
Proceeds from shares issued under stock compensation plans		245		177		155
Repurchase of common stock		(16,136)		(3,546)		(28,958)
Proceeds from issuance of preferred stock		—		29,663		19,752
Preferred stock dividends		(3,348)		(1,311)		—
Cancellation of restricted stock units in satisfaction of withholding tax		(1,288)		(1,094)		(1,369)
Net cash (used in) provided by financing activities		(96,646)		(98,478)		42,172

Increase/(decrease) in cash and cash equivalents		2,442		(1,714)		1,680
Cash and cash equivalents at beginning of period		2,860		4,574		2,894
Cash and cash equivalents at end of period	$	5,302	$	2,860	$	4,574

Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	23,525	$	21,761	$	20,619
Income Taxes	$	795	$	180	$	20

Supplemental disclosures of non-cash investing and financing activities:
Engines and equipment transferred to the parent from its subsidiaries	$	—	$	17,910	$	229
Engines and equipment transferred to the subsidiaries from the parent	$	42,456	$	—	$	—
Transfers from Equipment held for operating lease to Equipment held for sale	$	—	$	31,571	$	18,194
Transfers from Equipment held for sale to Spare parts inventory	$	26,387	$	—	$	—
Transfers from Property, equipment and furnishings to Equipment held for lease	$	—	$	—	$	2,925
Accrued preferred stock dividends	$	686	$	783	$	281
Accretion of preferred stock issuance costs	$	83	$	46	$	8

The accompanying note is an integral part of the Consolidated financial statements.

WILLIS LEASE FINANCE CORPORATION

SCHEDULE I — CONDENSED FINANCIAL INFORMATION OF PARENT

Note to Condensed Financial Information of Parent

1. Organization and Summary of Presentation

The accompanying condensed financial statements include the activity of the Parent Company. These condensed financial statements have been presented for the parent company only and should be read in conjunction with the Consolidated Financial Statements and notes thereto of the Company set forth in Part II, Item 8 “Financial Statements and Supplementary Data” in this Annual Report on Form 10-K.