WILLIS LEASE FINANCE CORPORATION AND SUBSIDIARIES

SCHEDULE I — CONDENSED BALANCE SHEETS

Parent Company Information

(In thousands, except share data)


	December 31,		December 31,
	2016		2015
ASSETS
Cash and cash equivalents	$	4,574	$	2,894
Equipment held for operating lease, less accumulated depreciation		811,091		753,024
Equipment held for sale		22,446		10,938
Maintenance Rights		16,468		22,680
Operating lease related receivable, net of allowances		7,853		4,170
Spare parts inventory		17,554		16,420
Due from affiliate		24,723		20,286
Investments		45,406		41,295
Investment in subsidiaries		(2,879)		(1,280)
Property, equipment & furnishings, less accumulated depreciation		16,096		19,964
Intangible assets, net		1,021		271
Other assets, net		12,289		8,118
Total assets	$	976,642	$	898,780

LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued expenses	$	13,428	$	17,659
Deferred income taxes		43,265		37,358
Notes payable		626,876		572,759
Maintenance reserves		54,655		38,072
Security deposits		18,555		20,612
Unearned lease revenue		3,843		3,090
Total liabilities		760,622		689,550

Redeemable preferred stock ($0.01 par value, 1,000,000 shares authorized; 1,000,000 and nil shares issued and outstanding at December 31, 2016 and 2015, respectively)		19,760		—

Shareholders’ equity:
Common stock ($0.01 par value, 20,000,000 shares authorized; 6,401,929 and 7,548,395 shares issued and outstanding at December 31, 2016 and 2015, respectively)		64		75
Paid-in capital in excess of par		2,512		28,727
Retained earnings		194,729		180,949
Accumulated other comprehensive loss, net of income tax benefit		(1,045)		(521)
Total shareholders’ equity		196,260		209,230
Total liabilities, redeemable preferred stock and equity	$	976,642	$	898,780

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF INCOME

Parent Company Information

(In thousands)


	Years Ended December 31,
	2016		2015		2014
REVENUE
Lease rent revenue	$	76,283	$	63,443	$	50,492
Maintenance reserve revenue		30,742		29,937		22,229
Spare parts and equipment sales		8,404		20,210		7,588
Gain on sale of leased equipment		3,322		2,420		2,276
Other revenue		10,660		7,017		5,227
Total revenue		129,411		123,027		87,812

EXPENSES
Depreciation expense		43,451		40,623		29,276
Cost of spare parts and equipment sales		6,591		13,559		6,354
Write-down of equipment		5,989		6,764		4,681
General and administrative		39,201		35,898		29,479
Technical expense		4,637		6,805		4,455
Interest expense		23,358		18,448		13,500
Total expenses		123,227		122,097		87,745

Earnings from operations		6,184		930		67

Earnings from joint ventures		1,813		1,175		1,329

Income before income taxes		7,997		2,105		1,396
Income tax expense		4,710		2,277		1,346

Equity in income of subsidiaries, net of tax of $5,168, $4,037, and $3,214 at December 31, 2016, 2015 and 2014, respectively		10,782		6,632		7,130

Net income	$	14,069	$	6,460	$	7,180

Preferred stock dividends		281		—		—
Accretion of preferred stock issuance costs		8		—		—
Net income attributable to common shareholders	$	13,780	$	6,460	$	7,180

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

Parent Company Information

(In thousands)



	Years Ended December 31,
	2016		2015		2014
Net income	$	14,069	$	6,460	$	7,180

Other comprehensive income:
Currency translation adjustment		(868)		(796)		—
Unrealized losses on derivative instruments		69		—		—
Reclassification adjustment for losses (gains) included in net income		—		—		(499)
Net gain (loss) recognized in other comprehensive income		(799)		(796)		(499)
Tax benefit (expense) related to items of other comprehensive income (loss)		275		275		174
Other comprehensive income from parent		(524)		(521)		(325)
Total comprehensive income	$	13,545	$	5,939	$	6,855

WILLIS LEASE FINANCE CORPORATION

AND SUBSIDIARIES

SCHEDULE I — CONDENSED STATEMENTS OF CASH FLOWS

Parent Company Information

(In thousands)


	Years Ended December 31,
	2016		2015		2014
Cash flows from operating activities:
Net income	$	14,069	$	6,460	$	7,180
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in income of subsidiaries		(10,782)		(6,632)		(7,130)
Depreciation expense		43,451		40,623		29,276
Write-down of equipment		5,989		6,764		4,681
Stock-based compensation expenses		3,717		4,150		3,509
Amortization of deferred costs		2,704		2,646		2,391
Amortization of interest rate derivative cost		—		—		(499)
Allowances and provisions		(1)		(17)		34
Gain on sale of leased equipment		(3,322)		(2,420)		(2,276)
Income from joint ventures		(1,813)		(1,175)		(1,329)
Loss on extinguishment of debt		137		—		—
Deferred income taxes		4,710		1,806		1,478
Changes in assets and liabilities:
Receivables		(4,884)		(865)		(1,204)
Spare parts inventory		(1,608)		4,547		(5,533)
Intangibles		(750)		—		—
Other assets		(2,648)		(2,420)		(942)
Accounts payable and accrued expenses		3,723		4,471		2,425
Due to / from subsidiaries		(4,437)		(1,242)		(17,651)
Maintenance reserves		16,583		5,227		17,563
Security deposits		(2,283)		5,354		2,303
Unearned lease revenue		878		817		1,048
Net cash provided by operating activities		63,433		68,094		35,324

Cash flows from investing activities:
Increase in investment in subsidiaries		(2,329)		(23,923)		(9,666)
Distributions received from subsidiaries		15,500		3,791		17,582
Proceeds from sale of equipment held for operating lease (net of selling expenses)		60,893		18,792		21,360
Capital contribution to joint venture		(5,545)		(630)		(17,623)
Distributions received from joint venture		1,167		1,304		847
Maintenance rights payments received		—		5,802		—
Purchase of equipment held for operating lease		(167,874)		(161,888)		(101,710)
Purchase of maintenance rights		(5,530)		(8,844)		(3,296)
Purchase of property, equipment and furnishings		(443)		(3,736)		(13,767)
Net cash used in investing activities		(104,161)		(169,332)		(106,273)

Cash flows from financing activities:
Proceeds from issuance of notes payable		149,000		192,700		154,395
Debt issuance cost		(3,808)		(13)		(5,074)
Proceeds from shares issued under stock compensation plans		155		518		410
Cancellation of restricted stock units in satisfaction of withholding tax		(1,369)		(1,558)		(1,544)
Security deposit		455		(1,606)		4,553
Repurchase of common stock		(28,958)		(16,500)		(5,352)
Excess tax benefit from stock-based compensation		236		26		311
Proceeds from issuance of preferred stock		19,752		—		—
Principal payments on notes payable		(93,055)		(71,846)		(75,859)
Net cash provided by financing activities		42,408		101,721		71,840
Increase/(decrease) in cash and cash equivalents		1,680		483		891
Cash and cash equivalents at beginning of period		2,894		2,411		1,520
Cash and cash equivalents at end of period	$	4,574	$	2,894	$	2,411
Supplemental disclosures of cash flow information:
Net cash paid for:
Interest	$	20,619	$	16,462	$	11,110
Income Taxes	$	20	$	75	$	76

Supplemental disclosures of non-cash investing and financing activities:
During the years ended December 31, 2016, 2015, 2014, engines and equipment totaling $229, $41,410 and $120,880, respectively, were transferred to the parent from its subsidiaries.
During the years ended December 31, 2016, 2015, 2014, engines and equipment totaling $18,194, $21,786 and $3,071, respectively, were transferred from Held for Operating Lease to Held for Sale.
During the years ended December 31, 2016, 2015 and 2014, engines and equipment totaling nil, $6,061 and $9,649, respectively, were transferred from Held for Sale to Spare Parts Inventory.
During the years ended December 31, 2016, an aircraft of $2,925 was transferred from Property, equipment and furnishings to Assets Held for Lease.
As of December 31, 2016, accrued preferred stock dividends were $281.
During the year ended December 31, 2016, the accretion of preferred stock issuance costs was $8.