Investments

9 Months Ended

Sep. 30, 2020

In 2011, the Company entered into an agreement with Mitsui & Co., Ltd. to participate in a joint venture formed as a Dublin-based Irish limited company - Willis Mitsui & Company Engine Support Limited (“WMES”) for the purpose of acquiring and leasing jet engines. Each partner holds a fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. As of September 30, 2020, WMES owned a lease portfolio, inclusive of a note receivable, of 36 engines and five aircraft with a net book value of $296.7 million.

In 2014, the Company entered into an agreement with China Aviation Supplies Import & Export Corporation (“CASC”) to participate in a joint venture named CASC Willis Engine Lease Company Limited (“CASC Willis”), a joint venture based in Shanghai, China. Each partner holds a fifty percent interest in the joint venture and the Company uses the equity method in recording investment activity. CASC Willis acquires and leases jet engines to Chinese airlines and concentrates on the demand for leased commercial aircraft engines and aviation assets in the People’s Republic of China. As of September 30, 2020, CASC Willis owned a lease portfolio of four engines with a net book value of $48.7 million.


Nine Months Ended September 30, 2020	WMES		CASC Willis		Total
	(in thousands)
Investment in joint ventures as of December 31, 2019	$	44,134	$	13,802	$	57,936
Earnings from joint ventures	1,981		631		2,612
Distribution	(7,200)		—		(7,200)
Foreign currency translation adjustment	—		325		325
Investment in joint ventures as of September 30, 2020	$	38,915	$	14,758	$	53,673

“Other revenue” on the Condensed Consolidated Statements of Income includes management fees earned of $0.4 million and $0.7 million during the three months ended September 30, 2020 and 2019, respectively, and $1.2 million and $1.8 million during the nine months ended September 30, 2020 and 2019, respectively, related to the servicing of engines for the WMES lease portfolio.

During the nine months ended September 30, 2020, the Company sold one note receivable, as classified under Accounting Standards Codification (“ASC”) 842, to WMES for $8.4 million. The sale resulted in a loss on sale of $0.1 million recorded to Other Revenue on the Condensed Consolidated Statement of Income and reflected as an operating activity within the Consolidated Statement of Cash Flows. The Company has continuing involvement in the asset under a pre-existing management arrangement and has separately recorded the related management fee income, which is a benefit equal to adequate compensation for servicing the engine, to Other Revenue on the Condensed Consolidated Statement of Income and reflected as an operating activity within the Consolidated Statement of Cash Flows. Additionally, the proceeds received for the sale of the note receivable is reflected as an investing activity within the Consolidated Statement of Cash Flows.

During the nine months ended September 30, 2019, the Company sold five aircraft and other equipment to WMES for $76.4 million. Additionally, during the nine months ended September 30, 2019, WMES sold one engine to Willis Aeronautical Services, Inc., a wholly owned subsidiary of the Company, for $2.6 million.

There were no aircraft or engine sales to CASC Willis during the nine months ended September 30, 2020 or 2019.

Unaudited summarized financial information for 100% of WMES is presented in the following tables:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(in thousands)				(in thousands)
Revenue	$	9,610	$	13,007	$	29,525	$	36,144
Expenses	7,539		10,076		25,718		28,436
WMES net income	$	2,071	$	2,931	$	3,807	$	7,708


	September 30, 2020		December 31, 2019
	(in thousands)
Total assets	$	310,722	$	322,606
Total liabilities	225,761		227,052
Total WMES net equity	$	84,961	$	95,554