[PLM logo]
T O O U R S H A R E H O L D E R S :
PLM International (the Company) achieved positive results for the ninth
consecutive quarter following completion of the Company's 1994 financial
restructuring. For the quarter ended March 31, 1997, PLM International reported
net income of $1.3 million, or $0.14 per common share. PLM International
reported net income of $0.8 million, or $0.07 per common share, for the
comparable period in 1996. First quarter 1997 consolidated revenues totaled
$12.5 million, compared to $12.4 million for the same quarter in 1996. The
improvement in first quarter earnings is the direct result of our strategic
growth plan to expand and diversify PLM International's revenue sources. This
growth plan, which we implemented in May 1996, has three components: (1)
building the operations of American Finance Group, Inc., the Company's
commercial and industrial equipment leasing and management subsidiary; (2)
expanding PLM Rental, Inc.'s trailer leasing and management activities; and (3)
continuing to manage existing investor equipment leasing programs.
Additionally, in early March 1997, we announced a continuation of our
Company stock repurchase plan, under which we have already repurchased 3.5
million shares (at an average cost of $3.58 per share), which represents more
than 22% of PLM International outstanding common stock since the beginning of
the plan in 1994. With this latest announcement on March 3, 1997, the Board of
Directors has authorized the repurchase of an additional $5 million of common
stock, bringing the total authorized to $17.5 million.
American Finance Group Subsidiary Continues to Post Strong Results
American Finance Group, Inc. (AFG) originates, services, and manages leases for
a wide range of commercial and industrial equipment for investment-grade,
Fortune 2000 companies. In 1996, its first full year of operation, AFG produced
$8 million in direct finance and operating lease revenues. For the first quarter
of 1997, AFG generated $3 million in similar revenues. AFG's income before taxes
for the first quarter, of $836,000, exceeded its income before taxes for
full-year 1996, of $618,000.
We are expanding the AFG lease portfolio, which totaled $97.5 million as of
March 31, 1997, using primarily nonrecourse, securitized debt. We are able to
utilize this less expensive form of debt because of the relatively predictable
cash flows generated by AFG's longer-term leases. Based on the attractive
returns and strong growth potential of this business, we intend to continue
aggressively expanding AFG's lease portfolio and are targeting to double it in
1997. Thus, we expect the revenues generated by AFG to become an increasingly
large portion of total Company revenues in the future.
Our Focus on Cost Controls Adds to Bottom-Line Results
An integral part of PLM International's strategic growth plan is our ongoing
focus on containing and, wherever possible, reducing operating costs. For the
first quarter of 1997, total costs and expenses were 16% lower than in the
comparable period in 1996, primarily as a result of decreased operations support
and general and administrative expenses. Additionally, the Company continues to
realize long-term benefits from sharp reductions in both senior and subordinated
debt achieved in 1996 and prior years.
Revenue Sources Changing -- for the Better
A fundamental goal of our strategic growth plan is to provide long-term earnings
growth that will be more predictable than was generated by the Company's main
revenue sources in the past. With the strong growth in AFG's operations, we are
making steady progress toward this goal. PLM International's revenue sources are
changing in other important ways as well. In prior quarters, the gains reported
from asset sales were primarily due to the sale of older assets from the
Company's owned transportation equipment portfolio. In the first quarter of
1997, over one-half of the $1.4 million gain reported was from the sale of
equipment subject to leases recently originated by AFG and subsequently sold to
third parties, rather than from the sale of older assets. Additionally, a $0.4
million gain was realized on the sale of an aircraft bought and sold during the
first quarter. A second aircraft was sold in a similar transaction early in the
second quarter. Using our core expertise in equipment management, we expect to
complete additional such transactions on an ongoing basis as we identify market
opportunities.
Building for a Solid Future
With the successful implementation of our strategic growth plan, we believe PLM
International has entered a new era of long-term growth in earnings and
shareholder value. Going forward, in addition to continuing to build AFG's
operations, we will focus on the other two components of our plan as well: (1)
expanding PLM Rental's trailer leasing and management operations in selected
market niches and (2) managing our existing investor equipment leasing programs.
We hope to report solid progress in all of these areas in the months ahead.
Thank you for your continued support.
Sincerely,
/s/ J. Alec Merriam /s/ Robert N. Tidball
- ------------------------- -------------------------------------
J. Alec Merriam Robert N. Tidball
Chairman of the Board President and Chief Executive Officer
May 8, 1997, San Francisco, California
Consolidated Statements of Income
(in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
1997 1996
<S> <C> <C>
Revenues:
Operating leases $ 4,229 $ 5,046
Finance lease income 1,814 322
Management fees 2,861 2,553
Partnership interests and other fees 486 992
Acquisition and lease negotiation fees 178 1,555
Aircraft brokerage and services 674 687
Gain on the sale or disposition of assets, net 1,368 800
Other 841 446
-------- -------
Total revenues 12,451 12,401
Costs and expenses:
Operations support 4,164 5,113
Depreciation and amortization 2,205 2,709
General and administrative 1,916 2,095
Total costs and expenses 8,285 9,917
Operating income 4,166 2,484
Interest expense 2,642 1,442
Interest income 386 237
Other expense, net 21 26
Income before income taxes 1,889 1,253
Provision for income taxes 608 461
-------- -------
Net income to common shares $ 1,281 $ 792
-------- -------
Earnings per common share outstanding $ 0.14 $ 0.07
</TABLE>
Consolidated Balance Sheets
(in thousands, except share amounts - unaudited)
March 31, Dec 31,
1997 1996
-------- -------
Assets
Cash and cash equivalents $ 13,995 $ 7,638
Receivables 3,966 5,286
Receivables from 4,802 6,019
affiliates
Investment in direct 67,425 69,994
finance leases, net
Loans receivable 6,017 5,718
Equity interest in 29,577 30,407
affiliates
Assets held for sale -- 6,222
Transportation equipment
held for
operating leases 65,175 66,546
Less accumulated depreciation (41,618) (41,750)
------------ ------------
23,557 24,796
Commercial and industrial
equipment held for operating leases 15,786 15,930
Less accumulated depreciation (3,182) (2,302)
------------ ------------
12,604 13,628
Restricted cash and cash 20,130 17,828
equivalents
Other, net 11,887 11,213
----------- ------------
Total assets $ 193,960 $ 198,749
Liabilities, Minority Interest, and
Shareholders' Equity
Liabilities:
Short-term secured debt $ 22,524 $ 30,966
Senior secured loan 25,000 25,000
Senior secured notes 18,000 18,000
Other secured debt 556 618
Nonrecourse securitization facility 47,674 45,392
Payables and other liabilities 16,024 16,757
Deferred income taxes 16,030 15,334
Total liabilities 145,808 152,067
Minority interest 367 362
Shareholders' equity:
Common stock ($.01 par value,
50,000,000 shares authorized,
9,209,431
shares authorized, 9,209,431
outstanding at March 31, 1997 and
9,142,761 at December 31, 1996) 117 117
Treasury stock (3,386,960 and
3,453,630 shares at respective dates) (12,143) (12,382)
------------ ------------
65,752 65,513
Accumulated deficit (17,967) (19,193)
------------ ------------
Total shareholders' equity 47,785 46,320
------------ ------------
Total liabilities, minority interest,
and shareholders' equity $ 193,960 $ 198,749
C E L E B R A T I N G 25 Y E A R S
During our twenty-fifth anniversary, we
salute the many investors, customers,
business partners, and employees who
together have succeeded in building one
of the world's foremost equipment
leasing corporations: PLM International.
[PLM Logo]
PLM INTERNATIONAL, INC.
One Market, Steuart Tower, Suite 800
San Francisco, CA 94105-1301
PLM International's First Quarter 1997 Results
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