PLMI Trends

1996 Annual Report Excerpts

Trends

The Company continues to seek opportunities for new businesses, markets, and acquisitions. During 1995, the Company established its AFG subsidiary, and in 1996 entered into an agreement with Equis Financial Group (Equis) to obtain its lease origination and servicing operations, and the rights to manage a significant offshore investment program Additionally, the agreement provided for AFG to acquire software, computers, and furniture that support the marketing and operations activities. AFG is engaged in the funding and management of long-term direct finance-type leases, operating leases, and loans. Master lease agreements are entered into with predominately investment-grade lessees and serve as the basis for marketing efforts. The underlying assets represent a broad range of commercial and industrial equipment such as data processing, communications, materials handling, and construction equipment. AFG also is engaged in the management of an institutional leasing investment program for which it originates leases and receives acquisition and management fees. During 1996, AFG originated $150.0 million in leasing and loan transactions, of which $96.9 million was for the Company's account. This is an important new growth area for the Company. In the future, the Company intends to continue to develop the portfolio of its AFG subsidiary.

Going forward, the Company will also concentrate on expanding its current trailer leasing and management operations through its PLM Rental, Inc. subsidiary. PLM Rental is currently the largest short-term, on-demand refrigerated trailer rental operation in North America, and the Company believes there are new opportunities in the refrigerated and other trailer leasing markets.

During 1996, the Company announced the suspension of public syndication of equipment leasing programs with the May 13, 1996 close of Fund I. As a result of this decision, revenues earned from managed programs, which include management fees, partnership interests and other fees, and acquisition and lease negotiation fees, will be reduced in the future as the older programs begin liquidation and the managed equipment portfolio becomes permanently reduced.

The Company has continued to selectively reduce the size of its owned transportation equipment portfolio over the past year. In 1996, the Company sold $39.1 million (of which $0.9 million was included in assets held for sale as of December 31, 1995), based on original cost, of its owned transportation equipment, and the Company expects to continue to sell equipment in 1997 and beyond, as market conditions dictate it is appropriate. As a result of the reduction in owned equipment, the Company's operating lease revenues are expected to continue to decrease, as well as the associated depreciation, operating, and repair and maintenance costs. However, the Company has used the proceeds from equipment sales and cash from operations to reduce senior and subordinated outstanding indebtedness by $25.0 million over the last three years, resulting in reduced interest costs. These reductions will help offset the increased borrowing activity associated with the expansion of the AFG lease portfolio. In addition, the reduction in transportation equipment lease revenue will be offset by increases in commercial and industrial equipment lease revenue generated by AFG.

The Company continues to benefit from cost reduction measures, principally reflecting reductions in total Company staffing implemented during 1995 and 1996, which are resulting in lower operations support and general and administrative expenses.