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The following is an excerpt from a 8-K SEC Filing, filed by DVI INC on 5/23/2003.
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DVI INC - 8-K - 20030523 - EXHIBIT_INDEX


Exhibit No.

99.1 Transcript of DVI, Inc. Fiscal Third Quarter 2003 Earnings Release Conference Call of May 13, 2003


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Dated:     May 23, 2003                       By:   /s/ Steven R. Garfinkel
                                                    Steven R. Garfinkel
                                                    Executive Vice President and
                                                    Chief Financial Officer

Exhibit 99.1


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 1


MAY 13, 2003
11:00 AM CT

Operator: Thank you for standing by. Welcome to the DVI, Inc. Fiscal Third Quarter Earnings Conference Call.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the one followed by the four on your telephone.

As a reminder, this conference is being recorded Tuesday, May 13, 2003. Any statements contained in this press release which are not historical facts are forward-looking statements.

Such statements are based upon many important factors, which may be outside the companies control causing actual results to differ materially from those adjusted.

Such factors include but are not limited to legislative and regulatory changes in general, including such changes effecting the health care industry, demand for DVI's services, market interest rates, pricing, market condition, and the markets in which we operate, defective economic condition, litigation, competition from institutions offering similar products and services, or access to funding and accessible terms, stability to complete financing transactions and other risks identified in the company's filings with the Securities and Exchange Commission.

Your speakers today are Michael O'Hanlon, Chief Executive Officer; Steve Garfinkel, Chief Financial Officer; Rich Miller, President of DVI Financial Services; and John Boyle, Chief Accounting Officer.

I would now like to turn the conference over to Michael O'Hanlon, please go ahead.

Michael O'Hanlon: Thank you everyone for calling in today. We announced earnings yesterday. We think they're strong earnings. We think they're good earnings, reflecting a continuation of the demand for our product.

We took an opportunity in the quarter to address some lingering issues. We cleaned up some costs that we needed to clean up in order to allow us to move forward in a more profitable manner. We certainly made some tremendous strides in addressing our international business. And, I think, we're all quite pleased and happy where we are there.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 2

But, before we go into that, I think, it would be a wise idea to simply talk about our earnings and our numbers. Now, let me turn the call over to Steve Garfinkel.

Steve Garfinkel: Thank you very much, Michael.

We tried to convey in the press release that there are a number of positive developments being implemented in DVI, all intended to improve earnings going forward.

The impact of some of those developments clearly showed in the quarter for two business units we talked about in the past. And, I'll touch on them briefly. The others provide a good foundation to help move forward with our international operations.

In looking at the earnings release, comparisons to the prior year are both difficult and confusing when compared to last year's quarter, which included the $14 million in charges we took for in setting up reserves for our Argentine operation, as well as, a write down for the Corvis stock impairment. This just makes it very difficult and not productive to talk about comparisons. Instead, I think, it more productive to try and understand this quarter's earnings.

We reported earnings of $3 million, $.20 a share. That number is net of the impact of the $3.8 million pre-tax, or $.15 a share, charge for strategic initiatives that we are undertaking; the relocation of Business Credit and the phase out of our ventured leasing operation, Third Coast Capital.

In the first quarter, we had reported $.33 a share, in the second quarter $.35 a share. We think, that the underlying dynamics of what's going on in our business model should have produced and could have produced results in this quarter, certainly, in range with those results in the first and second quarter. We are certainly confident that those are the trends that we want to get back to beginning as early as next quarter.

Let me talk first about Third Coast Capital that has been in operation for about three years. It was involved in venture leasing. The goal was to let us participate in a new growth medical technology. It never really brought us to where we wanted to be. It was successful for us at one point. But, we made a decision about four months ago to phase out that operation. There were about 12 employees. All 12 employees have exited the company. We've had our credit and lending personnel take over the remaining portfolio of about $37 million. It's well diversified without a lot of exposure in the telecom areas.

When we took over the operations and had our people examine it, we saw that there were a number of restructuring proposals that were on the table that required some decisions. We thought it was reasonable and appropriate to minimize losses going forward and hopefully position us for some type of equity participation on the upside.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 3

So, we took advantage of accepting some of these restructure offers and that resulted in special provision for Third Coast of roughly $2.7 million net for the quarter. I should, also, point out that year to date; we have provided about $8 million for Third Coast Capital. We also continue to incur costs of about $250,000 in the quarter that will begin to ramp down in the first quarter of next year. We got some slight decline from that in this quarter. Most of that decline is severance pay.

The decision to relocate the Business Credit headquarters is something that we have wanted to do for over three years. We've always wanted the synergies with the Equipment Group. We decided to do that about five months ago. We have successfully reduced the staff from 63 to 43. And, hopefully, we'll continue to maintain a lower staff and expand on the synergy within headquarters and the ability to have a lot of our corporate staff units perform the back office operations for Business Credit.

With respect to Business Credit, we are the servicer on a number of outstanding securitizations on medical receivables. After discussing with some of our lenders and the rating agencies, we agreed on a strategy of running parallel staff to ensure that the servicing of those securitizations would not disrupted by this move. So, we took a somewhat more extended, more expensive but safer approach. We actually built in duplicate staff and systems and ran parallel in order to assure the successful conversion and move over the entire operation, since very few people were willing to relocate from California back into the Pennsylvania area. The old staff has exited the company. We've incurred quite a bit of hiring costs and facilities addition costs, which equated to about $850,000 of pre-tax costs in this quarter. We're incurring a slightly lower number next quarter but by the first quarter of fiscal quarter of 2004, we will begin to see practically all that phase out along with the Third Coast Capital charges.

We announced that we had closed on a $75 million CP conduit with Nomura Securities for financing the receivables business. We've had a couple of slow quarters in the growth while we reassessed what was going on in that market. Origination in the current quarter was about $47 million in medical receivables that would almost equate cumulatively to originations over the last three quarters.

Clearly, we have relocated the business and are beginning to see the results of that. Also, during the quarter, we looked at some other areas. We are making a very large improvement on our delinquency. We have at least $35 million of loans to a number of borrowers that we see going back to being fully performance loans. We've incurred a lot of legal costs. But, we're at the end of that process.

And, as we speak now, most of those are on accrual or about to go by the end of May. We incurred about $.02 to $.03 of extra legal costs in the quarter. We also incurred a cost of about $1.015, ironically, because of the strong peso in Argentina.

We still have some tax balances down there. But, we are beginning to see the Argentina economy improve. The peso and the real improved by almost 26%, that's a real small cost compared to the overall benefit we're getting on the entire portfolio.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 4

We've also had some lower originations in the international area, as well as, Third Coast and that lowered some of our IDC, the cost of origination to get deferred over the life of the loans that costs us about another $.02. And, we had some higher taxes. We got some tax bills for prior years on the legal entities for Spain, Mexico, and (Oferil), that accounted for about $.02 in charges. We're actually hopeful that we're going to be able to reverse those and are actively planning on tax strategies in the current year to try and turn those legal entities into profit.

But, when you look at the $3 million of earnings this quarter, we are pleased with these earnings, even with all of those charges plus Business Credit and Third Coast. We think we're well on the way back to the trend that we saw in the earlier quarters.

Later this week, we will announce that we closed a CPU/CP conduit for our Equipment Group for $100 million with West LB. As we speak, we are in the market now with another $450 million asset backed securitization.

The one significant change is that in the past we've had Moody's and Fitch as the organization rating securitizations. We've now added S&P. So, that S&P, Moody's, and Fitch, all are rating the securitization. We're hoping for an improvement in the spreads based on having all three major rating firms on that transaction, which again, is in the market as we speak and should be pricing and closing later this week or early next week.

With that, I'd like to turn it back to Michael and Rich Miller.

Michael O'Hanlon: All right, thank you Steve.

I think, what Steve highlighted is the fact that the company is where it should be. And, given the economic cycle, the improvement that we see in the economic cycle is very evident in our performance to date.

We are starting to see very good trends in our delinquency. We're very confident that some of the lingering problems we've had in our delinquency have been addressed. And, by the end of this quarter, June 30, we'll see significant improvement in our delinquency percentage, which we hope will be in the 4% range, which is historically where it's been in the better times.

We've also began to see an improvement in the business climate. There has been a slow down in the medical device business over the past year or so. We've been impacted somewhat by that but, we're starting to see many of our customers finding encouragement in reimbursement improvements.

And, we're starting to see an improvement in our backlog. So, with that, I'd like to turn it over in the call to Rich Miller to talk about our domestic business. Rich.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 5

Richard Miller:   Thanks Michael. I think, the one thing that we're seeing
                  definitely is an up tick in the business that we're seeing
                  today. But, if I compare results from the first three quarters
                  of last fiscal year compared to this fiscal year, we're up
                  slightly when we eliminate Third Coast Capital.

                  We're not at the levels that we wanted to be, as what Michael
                  just said it is, because of the climate. But, we are up from
                  last fiscal year. The one thing we do have is an extremely
                  strong backlog and pipeline in our equipment business.

                  We're continuing to develop new vendor relationships that are
                  bringing up many new opportunities. We've recently added
                  additional staff in both our Credit and Documentation areas to
                  support this increase in the business.

                  Now, we continue to see growth in the diagnostic imaging
                  marketplace. MR is very strong. CT, with some of the new,
                  latest technology of 16 Slice CT, is very fast, almost real
                  time CT with PET with ultrasound. Those modalities still
                  continue to remain very strong and equipment manufacturers are

seeing their sales at record levels. Radiation therapy continues to remain a very strong business for us. There's been some new technology called (IMRT) in the basic linear accelerator business which provides for higher dose, more focused radiation, which provides for much better outcomes for the patients who are undergoing radiation therapy.

We're seeing that the radio surgery market continues to be very strong. We have relationships with a couple different manufacturers there that provide the GammaKnife and the CyberKnife that focus on inoperable tumors and are able to treat their patients very efficiently and very effectively.

We're continuing to see the outpatient surgery center market grow at a very rapid pace.

As you see the costs of healthcare continue to expand, clearly technology is expensive but technology also helps reduce the cost of healthcare by allowing you to make a much quicker, faster diagnosis and be able to treat the patient much more efficiently and effectively than you have in the past.

We still remain very bullish on the healthcare market. It's continuing to grow. The manufacturers of the technology are continuing to improve that technology, which offers more benefits to the medical community. So, we look forward to a great fourth quarter with a very strong backlog going into it and continued growth in our equipment finance business.

Michael O'Hanlon: Richard, thank you. Perhaps the biggest success we've enjoyed in this quarter is in our international market place. We announced the joint venture with DLL that would cover our Asia business and that in conjunction with our current joint venture with Diamond Lease in Japan gives us an opportunity to significantly impact business in Asia. We will shortly announce one, perhaps two, ventures or significant strategic alliances in Europe that will address in a similar fashion our ability to transact business in Europe without incurring the necessity to fund that business. We have found


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 6

                  partners who are willing funders of that business, who will
                  allow us to fund the business on their balance sheet. And, in
                  fashion, they will allow us to grow our business significantly
                  in Europe.

                  We've even begun discussions with people in regards to
                  potential joint ventures in South America. So, I believe, that
                  in a very short period of time, we will be able to deliver
                  upon our promise to change DVI to a company that is a domestic
                  company with the ability to generate business in the
                  international market place without the requirement of funding
                  that business and reducing our risk significantly. At this
                  same time, reducing our leverage, reducing our cost - and that
                  in combination with the cost reductions we see in Business
                  Credit and in our general organization will lead to a much
                  more profitable and investor friendly DVI.

                  I think, the last remaining issue is the question I'm sure
                  will come up about our bonds that come due in February. We
                  have begun discussions with investment banks, who will
                  represent us in addressing those bonds. We wanted to do
                  several things before we began those discussions. We wanted to
                  improve our performance, as I think we have. And, we wanted to
                  have our joint ventures in the international market place
                  further down the line. We're certainly getting there. We
                  wanted to report these third quarter earnings. And, we wanted
                  to conclude the securitization that's in the market today as
                  we've discussed. And, with those things done, we will move
                  forward to the final step and that is addressing those bonds,
                  which we are very confident will be accomplished.

                  So, with that, I'd like to turn the call over for questions.

Operator:         Thank you, ladies and gentlemen, if you'd like to register a
                  question, please press the one followed by the four on your
                  telephone. You will hear a three tone prompt to acknowledge
                  your request. If you question has been answered and you would
                  like to withdraw your registration, please press the one
                  followed by the three. If you are using a speakerphone, please
                  lift your handset before entering your request.

                  One moment please for the first question. Our first question
                  comes from the line of Lance Vitanza with Concordia Advisors.
                  Please go ahead.

Lance Vitanza:    Thank you. Could you review the level of managed net finance
                  assets and the delinquencies in the three categories that you
                  tend to report them in?

Steve Garfinkel:  The delinquencies are in the domestic portfolio, where without
                  international is roughly 5.5% of managed assets and managed
                  assets are approximately $2.8 billion. And the domestic
                  portfolio of that part is $2.3 billion. The total delinquency
                  for the company, which includes international, is about 7.1%,
                  and the international includes significant delinquency in
                  Argentina, that we think we've more than fully reserved for,
                  and Brazil.

                  I believe those are the primary categories that we talk about
                  delinquency. And, that the domestic portfolio is the one we
                  focus on. That percentage at June 30 is 5.7%. It's a 5.4%
                  through 5.5% now. That is the number that Michael is referring
                  to when he said we would expect that number to get into the 4%

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

Page 7

Lance Vitanza:    In terms of the domestic 5.5%, do you have that broken out by,
                  which is 0 to 30, which is 30 to 60 and so forth, which is
                  30/60, 60/90, and greater than 90 days?

Steve Garfinkel:  That is generally disclosed in our 10K.

Lance Vitanza:    Okay.

Michael O'Hanlon: The significant good news in that regard is that we've
                  addressed or will have addressed by the end of this quarter a
                  pretty significant portion of our over 90 days delinquency
                  that we've been working through and spoke of in the past. We
                  have several accounts where we have systems in place but
                  needed to move through the court system to get that done. They
                  have all reached the stage where they'll be finalized in a
                  short period of time.

                  One other thing that we should point out when we talk about
                  our international delinquency, remember all of our Argentine
                  debt is classified as being past due, even though they
                  continue to make payments. The payments are being made at an
                  amount that doesn't represent full payment. So, under the way
                  we transact business and account for business, we count that
                  as entirely past due. So, we're very happy with the trend in
                  our delinquencies and tremendous improvement in our portfolio.

Lance Vitanza:    Is the increase in the net charges off relative to last year's
                  quarter then as primarily associated with Third Coast?

Michael O'Hanlon: Exactly, the majority of the write offs this quarter was
                  certainly Third Coast related.

Steve Garfinkel:  And, thank you, because you give me a chance to correct a
                  number that I previously said. I previously indicated that I
                  think we provided $8 million so far this fiscal year. In fact,
                  we've charged off in this fiscal year $8 million of Third
                  Coast Capital. We've provided for roughly $6 million. If I go
                  back to last year's fourth quarter, June which is really when
                  we began to make the decisions and saw that there were clearly
                  issues in the Third Coast portfolio, from that June 30 quarter
                  till now, this fourth quarter period, we have had to provide
                  $11 million for possible losses. And, we have charged off $9
                  million. This is mostly all the large telecom transactions, I
                  think, that all of those that were badly impacted by the melt
                  down in that industry are the bulk of what we have had to deal

Lance Vitanza:    Thanks.

Operator:         Our next question comes from the line of Charles Parsons with
                  Parsons Asset Management. Please go ahead.

Charles Parsons:  At one point in your last conference call or the one before
                  that even, you mentioned the fact that you were going to buy
                  in some of the 9 7/8's bonds, since they were so cheap. Were
                  you able to do that or have you been using your funds

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                          Page 8

Michael O'Hanlon: One of the things we said was that we considered buying some
                  of those bonds, because they were that cheap. But, fortunately
                  or unfortunately for us, the bonds have moved back almost to
                  par. And, we decided to use our funds in other parts of the
                  organizations, Charles. But as we move forward in addressing
                  those bonds, we will still look at all of our options there.
                  Some of those options include us buying back some of those
                  bonds. I believe strongly as we move forward with our joint
                  ventures and strategic alliances in our international market
                  places, all which should provide a significant return of
                  capital to the parent company. As that process continues and
                  those funds do flow back, we certainly will hold open an
                  option to buy back some of the bonds.

Charles Parsons:  Okay, and if I could ask one other question - in regard to the
                  strategic alliances, do you see from - judging from what you
                  said and what was written in your release of last night, in a
                  minority position with these strategic alliances, do these
                  strategic alliances represent enough income to the company to
                  warrant the effort to participate in this? I mean, is it going
                  to be a meaningful addition to net income?

Michael O'Hanlon: The strategic alliances will all be different. The strategic
                  alliance in Asia will certainly be different than what we'll

see in Europe. In regards to Europe, which we consider to be a great market, a market that we see a lot of growth in over the next several years. We plan to stay there as a marketing arm for the potential alliance. I think, we'll be able to see some significant income from that venture as time moves on. In regards to Asia, Asia is a good market place. We think that our participation in that joint venture with DLL will in fact add profitability to the company. But, more importantly, the whole venture was predicated on us agreeing to stay in for a period of time. So, as time moves on, we will continue to look at our position there and we'll see what happens. We do think that all the ventures will have the ability to improve the earnings of the company.

Steve Garfinkel: Charles, this is Steve Garfinkel. There's actually two dimensions to what we're trying to achieve. And, you've asked the question "would it be worth our while?" And, will we make it a profit in international? All along, we've said we're trying to find the right model. But, the most important dimension is that the international operations are not making a profit to the company. And, we can make a significant improvement to the company just by being able to eliminate the loss by moving to a break even or move it towards a much lower loss position and that will have a good impact on the company.

After that, I think, we're very interested in making sure the business gets done right. The other parties would like to see us a part of that transaction because of everything we bring to the table.

Charles Parsons: Yes, it just seemed to me when you first went down into South America, I was really excited about the whole thing. But, the longer you were there, it seemed the worse it got. And, it turns out that, you know, DVI was dealing with a few banana republics basically. And, you really wonder after all is done whether it's really worth while to


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 9

                  make the effort with all the people involved, the time
                  involved, the money involved, to get back such a small amount
                  of profit.

Michael O'Hanlon: I'm not sure I would classify it as a potentially small amount
                  of profit. You do remember that the problem we've had
                  internationally, particularly in Europe, stems from our
                  inability to find a feasible way of funding that business.
                  There is no securitization market in Europe that we could
                  become involved in. And, the fact is that our funding costs
                  and the lack of funding has just retarded our business growth
                  there. With the ability to fund the business on very
                  competitive terms, we can find a way of delivering enough
                  business to that venture to allow us to make a very
                  significant improvement on the performance of the company.

                  The downside of South America is pretty well known given the
                  results of this quarter last year. But, when you look at the
                  benefits that we got from our environment there, the loyalty
                  that we were able to earn from the manufacturers in the market
                  place, there is value. I think South America had a significant
                  improvement upon our U.S. business when you go back and look
                  at when we went into South America, where we were
                  domestically, and compare that to where we are today. There is
                  some argument that can be made that the loyalty and goodwill
                  that we see for our ventures in South America have a
                  significant impact on our domestic business. So was the
                  international business a great decision? Probably not, because
                  I don't think we understood fully the problems we would have
                  in funding that business. If we can simply become a marketing
                  arm to the manufacturers there in representing significant
                  funding sources, there's a very attractive business there and
                  that's where we're going.

Charles Parsons:  Okay, thank you.

Operator:         Your next question comes from the line of Bob Napoli with US
                  Bancorp Piper Jaffray. Please go ahead.

Bob Napoli:       Good morning. A couple of questions - why is the 10Q delayed?
                  I missed the beginning of the call, maybe you can talk about
                  that? Why don't you have a balance sheet with some of the
                  normal metrics tied to that?

Steve Garfinkel:  Yes, Bob, this is Steve. The 10Q is due to be filed on the
                  15th. We're asking for the standard five-day extension. We've
                  had a special project going on to determine whether we're in a
                  position to see the impact of FASB 46, which is a
                  consolidation of variable interest entities that is getting a
                  fair amount of write up on CT conduits. We have a potential
                  10Q disclosure if we're in a position to understand the impact
                  and as yet do not know whether we're in that position. And,
                  until we know whether we're in the position to say of March
                  31, whether we've been able to determine that or not, then
                  we're holding up on the balance sheet filing in the 10Q until
                  this project is completed that our accountants have been
                  running. We have a fiscal June 30 so it's not an early
                  adoption. But, we have to deal with that the beginning on July
                  1 and go through the implications about people that we lend
                  to, who have thin equity and also other reasonable ways and
                  plans, which is really the focus of a lot of the effort of
                  allowing us not to be the primary at risk party so that you
                  don't have to consolidate. I believe, a

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 10

                  number of companies in the country have already disclosed.
                  And, this is an ongoing project and should be consuming a lot
                  of time. But, at the March 31 10Q, we're supposed to be able
                  to make a statement that we can or cannot determine the
                  impact. And, that's essentially what we are holding up the
                  balance sheet for.

Bob Napoli:       And, how material can that impact be?

Steve Garfinkel:  We would hope that in our reading of that, that there are lots
                  of ways and remedies for not being the primary beneficiary. We
                  think that the intent of that was an Enron type of driven
                  affair. It was intended to cover off balance sheet CT
                  conduits. But, its web has swept up basic lending. That has
                  really been the project. We have been going through what could
                  be possible accounts. We have found in most of them, we can
                  show in the early part when the loans were made, there was
                  sufficient equity in there for this not to be a consolidatable
                  entity. It is possible for a number of lenders, commercial
                  banks, and other people will discover a fairly significant
                  impact. That's why we're taking this very seriously. And, we
                  would expect that those companies that have December year-end,
                  this will come onto the radar screen for a lot of companies a
                  little bit later in the year. But, it would be wrong to think
                  that this is limited to CT conduits. So far it's been
                  complicated. And, I don't know that we're going to be in a
                  position to make that determination. We're all required to
                  make a major effort to see if we can articulate that at this
                  point. We will continue to be hopeful that when our loans were
                  made, there was sufficient equity and that it won't be a
                  consolidation issue.

Bob Napoli:       Okay.  How many loans did you sell this quarter?

Steve Garfinkel:  It was $143 million, and that compares to about $165 a year

Bob Napoli:       So, it's an 11% gain that you had?

Steve Garfinkel:  Yes. We continue to have good execution in the market place.
                  That is actually one of the things that clearly will impact
                  earnings into the next quarter. We really wanted to see how
                  the execution of this securitization goes, especially since
                  we're really gone to the expense and considerable effort to
                  get S&P as an entity to help raise the securitization. But,
                  again, we did have a really good gain. We're continuing to see
                  our business debt originated as long as nine months ahead of
                  the securitization. So, what you're seeing in the last
                  securitization - and, you're going to see this securitization
                  that's under way right now, all of this business has been
                  originated in the very low interest rate environments that
                  everyone's seeing now. There is no tag end of transactions
                  that really dates back into a higher interest rate period.

Bob Napoli:       Now, what was your net interest rate spread on the last
                  transaction? And, what would you expect it to approximately be
                  on this transaction, your effective spread?

Steve Garfinkel:  We look at things like that to be a gain of the percent of
                  loans sold. And, we would still conservatively expect it to be
                  at least equal to the last transaction. I just expect that
                  with the build up in the backlog that I see in Rich Miller's
                  area that we are going to have a much-improved amount of
                  volume in our fiscal fourth quarter. I think that

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 11

                  volume is going to be more the driver of the transaction. It's
                  big to us when you get 5 or 10 basis points better execution.
                  We kill ourselves to get that. But it won't materially alter
                  the total percent on the whole portfolio. I think, volume that
                  we expect to see in this next quarter will really be the
                  driver of that.

Bob Napoli:       Can you tell me what the spread is? I understand how you look
                  at it. But, what is the yield on those assets? And how do you
                  get to that profit? Can you just give me the basic profit
                  model? That would be helpful information to have in your
                  releases, some of that type of information.

Steve Garfinkel:  There are a lot of factors that go into it and this is really
                  an approximation. You're financing a transaction at about a
                  3.5% to 4% cost. And, your yield on the loans is about 8% to
                  9%. So you've got a spread in there of 4% to 5% and you want
                  to give present value of that spread. We will be paid cash for
                  all of that, as the closing of the securitization. You then
                  have quite a bit of costs that we have to offset against that,
                  all the costs that were originating this transaction, the
                  underwriters cost, trustee, we reserve 75 basis points for
                  servicing. There is a hot back up servicer on this
                  transaction. So, if you took those spreads and did a PV, you'd
                  come up with a number much bigger than your reported gain.
                  And, that really goes to all of the costs that I'm talking

Bob Napoli:       So, the securitization costs is about 3.5%, that's the
                  interest expense plus fees?

Steve Garfinkel:  Yes.

Bob Napoli:       You're yielding at 8% to 9%. So, you're coming up with a 4% to
                  5% net interest spread?

Steve Garfinkel:  Yes.

Bob Napoli:       Does the 4% to 5% have some loss assumption? And, you pre PV
                  that and that's a wider spread than you've had historically,
                  isn't it?

Steve Garfinkel:  Yes, it is.  It's about 1.5% higher than in the past.

Bob Napoli:       And, is that because of a favorable competitive environment?

Steve Garfinkel:  Yes, I would attribute it to that. It relates to the fact that
                  we have maintained our pricing, and we are clearly competitive
                  is the dominant position we have in the market.

Bob Napoli:       Can you sell some of those loans for cash, servicing release
                  if you needed to, if you had liquidity reasons? Could you sell
                  those loans, servicing released for cash?

Michael O'Hanlon: Absolutely. And, in fact, we've looked at that. And right now,
                  the answer is we certainly could sell a significant portion of
                  those loans for cash without taking a servicer risk. But, we

prefer to take the servicer risk because we want to control the portfolio and the customer.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

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Bob Napoli:       But, if you needed to, for a liquidity reason, you could see
                  it to somebody like at GE or somebody like that?

Richard Miller:   There are many people that have approached us to develop a
                  relationship to buy transactions from DVI. We've chosen to be
                  a very efficient funder in the securitization market. So,
                  that's how we've chosen to do it. But, the availability is
                  clearly there to sell off transactions if we need to do that.

Bob Napoli:       Okay, last question. On the international business, it sounds
                  like you're going in the right direction. But, it sounds like
                  from a liquidity standpoint, it's kind of slow moving, like
                  it's not going to line up with the $155 million of debt that
                  you have due.

                  Do you have other plans because you're talking about the
                  international about $40 million would liquidate over the next
                  year. In Europe, you're working on some joint ventures. And,
                  that's a $200 million portfolio. But, it just sounds to me
                  like it might take a little longer than what we'd hoped. Or,
                  am I reading that wrong?

Michael O'Hanlon: No, I think, you're reading it wrong. We're pretty far down
                  the line with these ventures or strategic alliances. I'm not
                  sure if the transaction in Europe would be termed a joint
                  venture. I think, it's more a strategic alliance. But, in all
                  the cases, we're talking about due diligence for a sale of a
                  significant portion of our portfolio, which would in fact
                  bring back cash well before the bonds. The bonds are due in
                  February. We certainly expect this to be done well before

Steve Garfinkel:  Bob, the $44 million that we've talked about is only related
                  to the Latin American portfolio that's $133 million. We
                  actually are separately continuing to have dialogues - there's
                  about a $36 million remaining out of a securitization we did
                  with an $80 million securitization at stake down to $33
                  million. Has a very low delinquency rate. Against that, we
                  continue to maintain about $15 million in cash reserves that
                  were part of the enhancement. And, we'll continue to try and
                  find a way to sell just those remaining loans that are really
                  probably the best performing in the whole portfolio and free
                  up the cash. So, aside from the normal maturity schedule, we
                  do have this blocked in the securitization that we'll continue
                  to talk to people to see if there's a way to sell that block
                  of Brazilian loans to de-leverage but also pick up $15 million
                  of tax reserves.

Bob Napoli:       Business Credit had to be ramped up this quarter, new
                  commitments. Do you expect to see a resumption of significant
                  growth in the assets on the balance sheet in that business?

Michael O'Hanlon: We still have lingering concerns about the funding portion of
                  that business given the National Century problems. We still

see some reluctance on some of lenders to increase their participation in that business. As we get comfortable with our ability to fund that business in a profitable fashion, the more bullish we get about the business. But long-term Business Credit will remain a significant portion of our business.


Moderator: Michael O'Hanlon

05-13-03/11:00 am CT

Confirmation #101434

Page 13

                  We're looking at alternative methods of funding the business.
                  We're looking at strategic partnerships in the Business Credit
                  area with domestic partners that may, in fact, allow us to
                  become less dependent upon the securitization markets than we
                  have in the past in that area. As a business, we hope to
                  continue to grow. But, we're going to do it in a manner that
                  doesn't expose us to any short-term problems on the funding
                  side of the business.

Bob Napoli:       And, I promise last question. You talk about financial
                  leverage, what is your target financial leverage? I would look
                  at it as tangible shareholders equity to managed assets. Is
                  that how the rating agencies are looking at it?

Steve Garfinkel:  Tangible defined as adjusted for good will.

Bob Napoli:       Good will, what about the retained interest?

Steve Garfinkel:  No. That continues to be an evolving concept and discussion.
                  That's a very harsh hit that I don't know that the industry
                  could operate at that. I don't think it's accurate. I don't
                  think it's the dominant theme. They're certainly looking and
                  bringing the traditional, tangible equity to your managed
                  assets and looking at that level. Part of this really goes
                  back to what was the loss assumptions and what are the loss
                  reserves that are off balance sheet, that are in addition to
                  the retained interest piece. I don't think that there's a firm
                  view on how to deal with that but that would be the harshest

Michael O'Hanlon: I think, the important thing to remember, Bob, is that these
                  international initiatives will have a very positive effect on
                  our leverage. We are moving forward to de-leverage the
                  company. And, really to put us in a position at this stage of
                  the economic cycle, where we see significant growth arising as
                  the economic cycle improves. Now, we're going to be in a
                  position where we can do a significant amount of new business
                  in the domestic environment based on our leverage. We're
                  getting to be exactly where we want to be.

Bob Napoli:       Do you have a goal in mind for the traditional, tangible
                  equity to managed assets? And, have the rating agencies kind
                  of suggested where they would like you to be? And, where would
                  you like to be yourself on that tangible equity and managed?

Steve Garfinkel:  There are not hard guidelines out there. And, that tends to be
                  a three or four-dimensional question. What they consider to be
                  excessive leverage is the other leg of that stool or the
                  history of earnings and how good the earnings are, sources of
                  liquidity and loss history. If you've got excellent loss
                  history, excellent liquidity, you're clearly going to be
                  allowed to have much higher leverage. If those factors aren't
                  working in your favor, then the leverage numbers would be
                  lower. I think we're near the high end of the leverage that we
                  would like right now. And, that's why we're going to begin to
                  de-leverage, that's why we've talked about at some point to
                  issue capital. But, I think we ought to be able to accomplish
                  all of this just from what everything we're trying to do in
                  international and the high yield bonds.

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 14

Bob Napoli:       Thank you.

Operator:         Your next question comes from the line of Ken Grossman with SG
                  Capital Management. Please go ahead.

Ken Grossman:     Morning gentlemen. Getting back to the joint ventures in Asia
                  and in Europe or the relationships in Asia and Europe. Can you
                  give a little bit more clarity on the kinds of equity you
                  think you can bring back with those joint ventures? It seems
                  as though we were talking just before about Latin America and
                  $44 million in capital. But, what is the impact of Asia and

Michael O'Hanlon: Well, the way we look at things, we tend to put a 10% capital
                  against our portfolios. Our portfolio in Europe is several
                  hundred million dollars, $200 million. Our portfolio in Asia
                  is $70 million. Just take 10% of that and you have some
                  significant capital that comes back to the company. But, in
                  parts of Europe, particularly in Turkey, we have some
                  significant amount of loans that we fund with cash. We have
                  some loans funded in Asia in cash. When you add all that up,
                  those numbers start to look relatively exciting. I am
                  reluctant to say what those numbers are going to be because
                  the simple fact is dependent upon the appetite of our
                  strategic partners and their willingness to buy those
                  portfolios on a non-recourse basis is going to have a
                  significant effect on how much we do get back.

                  Our European and Asian portfolios historically have performed
                  much better than our domestic portfolios. So, we believe that
                  our partners would find those portfolios very much to their
                  liking. We expect that to happen. But, I just don't want to
                  put a number on it just now, Ken. I just don't want it to come
                  back to haunt me later on.

Ken Grossman:     Have you quantified the profitability impact of going into
                  these relationships? You've articulated that there's been a
                  loss in Europe. What is that loss? How would that translate
                  into increased profitability domestically? Have you quantified
                  that? Is that something you can provide?

Michael O'Hanlon: We have lost money in Europe. We certainly have lost some
                  money in South America. We've had periods when we lost money
                  in Asia. Our strong belief, is that the opportunities that we
                  have with these strategic alliances will reverse those losses
                  to profit. But, even if we just reverse the losses and got
                  back to break even, I think, you would see a very measurable
                  improvement on our profitability. As we run our projections
                  internally, we see an opportunity to improve our profitability
                  by 20% to 30% and that's a very conservative number.

Ken Grossman:     Just at a break even level?

Michael O'Hanlon: Just at a break even level.

Ken Grossman:     Could you share anything with respect to the quality trends
                  you're now seeing in the Latin American business? You said
                  that things are looking up there. Are they back to a paying
                  mode? Can you share any of that?

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 15

Michael O'Hanlon: Our Latin American business and our Latin American customers
                  historically have paid. The problems they've had, particularly
                  in Brazil, when the currency went from parity to a point where
                  the real was almost $4, the dollar was so much stronger that
                  it the real was only $.25 cents compared to what it was a year
                  before. I don't think any customer that we're doing business
                  with could afford to have their payments increased by 400% and
                  continue to make full payments. What we've seen is that the
                  customer struggling to make payments. When they are not able
                  to make the full payment we count it as a delinquency.

                  Since the government in Brazil has changed, we've seen a
                  significant improvement in the environment down there. I think
                  we said in a press release, Brazil just did a really large
                  government bond that was well received in the market place,
                  and the real has improved by more than 20% against the dollar.
                  And, then more importantly and significant for us, the
                  government for the first time in April, approved a 10% across
                  the board increase in reimbursement for procedures. And,
                  that's going to have a significant impact on our portfolio.
                  So, we've seen the portfolio getting better. In Argentina,
                  we're starting to see some improvement there. In Mexico and
                  Venezuela and Columbia, where we have some portfolio but not a
                  very significant amount, we've continued to see some
                  improvement there.

                  So, we're pretty bullish in South America. And, by bullish, I
                  believe strongly that we're going to be able to access a
                  partner down there that will allow us to do something similar
                  to what we're doing in Europe. We want a partner able to fund
                  the business in local currency and depend upon us to help
                  market that product with them. And, we would be paid a fee for
                  that. If in fact we can do that, then I think, South America
                  will become an area in which we will be comfortable with on a
                  collaborative basis.

Ken Grossman:     Your 45 days into your quarter already. Can you share any
                  color with respect to originations going on in the June

Michael O'Hanlon: As you say it's 45 days in the quarter, so I just asked our
                  Chief Credit Officer how busy he was? And, he's telling me
                  he's got 45 deals sitting on his desk.

Richard Miller:   Yes, just an example. The month of March was, without talking
                  exact numbers, the largest dollar volume of credit approvals
                  in the history of the company. We have expanded our
                  relationships to manufacturers. We're in the process of
                  documenting certain things that will bring DVI a lot of
                  additional opportunities. The backlog coming into this quarter
                  was the largest backlog DVI has had coming into any quarter.
                  So, as I said earlier, we're not happy with where we are
                  through three quarters, even though, we're up from where we
                  were last year. And, we're all expecting a very strong quarter
                  in this fiscal quarter. But, it still remains to be seen
                  because we have 45 days remaining. But, the backlog, the
                  amount of transactions in credit, and the documentation that
                  needs to be done, is why we had to beef up our staff there. We
                  are seeing a big resurgence again in the market place.

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 16

Ken Grossman:     Thank you.

Operator:         Your next question comes from the line of Steve Blose with
                  Brencourt Advisors. Please go ahead.

Steve Blose:      Yes, hello. Could you give the total dollar amount of loans on
                  non-accrual status at the end of the quarter? And, also, the
                  total dollar amount of loans greater than 90 days with income
                  still accruing at end of the quarter?

Steve Garfinkel:  I can give you what we've disclosed and what we've disclosed
                  in the past and in the 10Q, which is impaired loans. And, the
                  value of impaired loans would be $189 million that compares to
                  $153 million in March 31 a year ago. And, part of that
                  increase relates to what I said earlier, that we have a good
                  number of delinquencies that we're cleaning up. So, we would
                  expect to be back to the impaired level of a year ago shortly.

                  Your impaired loans generally would mirror where you are in
                  the greater than 90 day as potential non-accrual; it's a
                  decent proxy for that. But, we basically disclosed impaired

Steve Blose:      Okay, thank you.

Operator:         Ladies and gentlemen, if there are any additional questions,
                  please press the one followed by the four at this time. Lance
                  Vitanza with Concordia Advisors, please go ahead with your
                  follow up question.

Lance Vitanza:    Yes, actually, I have two questions if I may. The first
                  relates to the balance sheet. Can you tell us the cash
                  position of the company at the end of the quarter?

Steve Garfinkel:  Yes, give me one second. The cash and equivalents was
                  approximately $16 million. The restricted cash, which is about
                  $131 million where about $45 million of that is normally in a
                  collection account. And, it's loans that are in all of our
                  lock boxes waiting to apply to our loans. The difference
                  between the $45 and the $131 is cash reserves that we set up
                  for the securitization. But, cash and cash equivalents should
                  be approximately $16 million.

Lance Vitanza:    Is it possible to go through any of the other asset line items
                  like contract receivables, retained interest, and
                  securitizations and so forth?

Steve Garfinkel:  It's safe to say, none of those have materially changed from
                  the prior quarter in growth. I'm going to say that total
                  assets are approximately $1.7 billion. Managed assets are
                  approximately $2.7 billion.

Lance Vitanza:    Okay, and then the next question is - you had mentioned
                  earlier that you've begun discussions with an investment bank
                  regarding the bonds that are due in February and that you
                  expected a satisfactory resolution. Can you elaborate on
                  exactly what in your mind constitutes a satisfactory
                  resolution? I'm just looking at the high yield market

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 17

                  right now. It seems to be red hot. And, I'm just wondering if
                  there's a reason that you haven't made an attempt to tap the
                  market at this point. Or, if there are certain, you know,
                  criteria that you want to further satisfy?

Michael O'Hanlon: What we did is we sat down and decided among ourselves what we
                  wanted to accomplish first. Because obviously when we go to
                  the market to address the bonds, we want to be in the best
                  possible position. So, we wanted to get the joint ventures in
                  place or where the strategic alliance issue is pretty far down
                  the line, so that we could address the concerns expressed
                  about our international operations. We wanted to improve the
                  quality of our portfolio, which I think we have done
                  significantly. We wanted to get the securitization in the
                  market place first - we didn't want to be in the market place
                  with a securitization and the bonds at the same time. So, we
                  needed to get that done. And, we wanted to get through this
                  earnings report. So, I think, all that is behind us. And,
                  we're real happy. We're truly happy where we are. I think,
                  that some of the things that Steve talked about in regards to
                  liquidity in the Nomura facility and the West LB facility are
                  important programs for us. They add significant liquidity to
                  the company. So, that makes us happy. And, we want to get a
                  better grip on how much money do we really believe we're going
                  to get back in these international operations. It's gong to
                  have an impact on what we do with the bonds. So, we're getting
                  there. We still have a strong desire to have the bond issue
                  behind us before year-end, year-end being June 30.

                  We think we're doing all the right things. We are pretty happy
                  with what we've done in the past quarters to get ourselves in
                  the position to do this. I think, we're ready to move forward.
                  And, I agree with you, if the markets hot, we expect the bonds
                  to be addressed pretty easily.

Lance Vitanza:    Have you hired a bank?

Michael O'Hanlon: Yes.

Lance Vitanza:    Can you identify the bank?

Michael O'Hanlon: No, I can't right now. Because, I don't have their permission
                  to do that. But, we will make an announcement shortly.

Lance Vitanza:    Thanks.

Operator:         Your next question comes from the line of Steve Ferris with
                  Ferris Capital. Please go ahead, sir.

Steve Ferris:     Can you address the amount of capital that will be brought in
                  from the partnerships that you have in Europe and with the
                  other bank in the Asian deal?

Michael O'Hanlon: I can't give you an exact number, Steve. Because, it is really
                  dependent upon the partners, if you will, buying a significant
                  portion of those portfolios. As I said earlier, I believe very
                  strongly just given the quality of that portfolio that that
                  won't be an issue.

                                                                       DVI, INC.

                                                     Moderator: Michael O'Hanlon

                                                            05-13-03/11:00 am CT

                                                            Confirmation #101434

                                                                         Page 18

                  But, until they go through their due diligence and make their
                  determination, it's difficult for me to really give an exact
                  number on that. The number will be significant. It'll be a
                  number that will improve the liquidity of the company
                  dramatically and will give a pretty strong indication to
                  potential bondholders that there is significant cash

Steve Ferris:     Well, Mike, in the European portfolio, is that going to be a
                  sale of that portfolio? And, will there be cash? Will it be a
                  significant amount of cash going down to pay down the bond?

Michael O'Hanlon: Well, that's an interesting question. We believe based on our
                  prior experience with the people that we're talking to in
                  Europe - and, we've had extensive experience with them in
                  buying transactions from us, that they will find the portfolio
                  acceptable. And, that by far, the great majority of the
                  portfolio will, in fact, be purchased on a non-recourse basis.

Steve Ferris:     Okay, thanks Mike.

Michael O'Hanlon: I don't want to mislead anybody. Whether or not we use any or
                  all of that money to buy back the bonds is really dependent
                  upon the market for the bonds. This is a company that has
                  significant opportunities to grow its business. And, it would
                  be part of the decision process on what we do with any cash we
                  raise from these portfolios, as to whether to buy back those
                  bonds or to use it as capital to grow our business and take
                  advantage of the opportunities out there. So, it depends on
                  where the bonds are, what would we do with them, at what price
                  we can either obtain them, or at what price we can extend
                  them, roll them over, compared to what we believe is the
                  opportunity for that capital. The opportunities in the future
                  are significant. And, let's keep that in mind.

Operator:         Gentlemen, I am showing no further questions at this time. I'd
                  like to turn the conference back to you.

Michael O'Hanlon: Okay, well again thanks everybody for calling in. We are
                  pleased with where we are. We still have some things that we
                  have to accomplish over the next 90 to 120 days. We will
                  accomplish them. We will be successful in doing all we set out
                  to do. I'm very confident of that. And, I think, that you'll
                  be very happy with the results.

                  I think, you'll see significant improvement in DVI's prospects
                  and some long-term viability and profitability. So, thank you
                  and we look forward to talking to you all in the future.

Operator:         Ladies and gentlemen, that does conclude your conference call
                  for today. We thank you for your participation and ask that
                  you please disconnect your line.