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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2002

Commission File Number 1-6798

TRANSAMERICA FINANCE CORPORATION
(Exact name of registrant as specified in its charter)

9399 West Higgins Road
Rosemont, Illinois 60018
(Address of principal executive offices)
(Zip Code)

(847) 685-1100
(Registrant’s telephone number, including area code)

           Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 3 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

           Number of shares of Common Stock, $10 par value, outstanding as of close of business on November 6, 2002: 1,464,285.

           The registrant meets the conditions set forth in General Instruction H(1)(a)(b) and (c) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

PART II – OTHER INFORMATION

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TRANSAMERICA FINANCE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in millions)

See notes to condensed consolidated financial statements

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TRANSAMERICA FINANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in millions)

See notes to condensed consolidated financial statements

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TRANSAMERICA FINANCE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in millions)

See notes to condensed consolidated financial statements

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TRANSAMERICA FINANCE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note A—Basis of Presentation

           The accompanying unaudited condensed consolidated financial statements of Transamerica Finance Corporation and its subsidiaries (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by these accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine and three month periods ended September 30, 2002 are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information, refer to the consolidated financial statements and footnotes set forth in the Company’s Form 10-K for the year ended December 31, 2001. Certain reclassifications have been made to the 2001 condensed consolidated financial statements to conform to the 2002 classifications.

Note B—Impact of Recently Issued Accounting Standards

           In June of 2001, the Financial Accounting Standards Board (“FASB”) issued Statement No. 142, Goodwill and Other Intangible Assets (“FAS No. 142”). This statement significantly changed the accounting for goodwill and intangible assets. Under FAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual fair value impairment tests in accordance with the statement. Other intangible assets will continue to be amortized over their useful lives.

           The Company adopted FAS No. 142 as of January 1, 2002. Pursuant to FAS No. 142, the Company completed its assessment of its previously recognized intangible assets and goodwill in the first quarter of 2002. Based on the results of this assessment, $1.4 million of intangible assets were reclassified as goodwill. The Company also performed the goodwill impairment test required under FAS No. 142 by comparing the unamortized balance of its goodwill to the implied fair value of its goodwill determined through the use of a discounted cash flow model. As a result of this test, the Company recognized after tax impairment losses of $35.4 million and $8.0 million on the goodwill of the intermodal leasing operation and a reporting unit in the commercial lending operation, respectively. These losses were recorded as the cumulative effect of a change in accounting principle in the first quarter of 2002. The Company previously evaluated goodwill for impairment by comparing the unamortized balance of its goodwill to projected undiscounted cash flows. Under this methodology the Company did not have any goodwill impairment.

           The Company’s net income adjusted to exclude goodwill amortization, net of tax, was as follows:

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           In September of 2001, the FASB issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (“FAS No. 144”), that is applicable to financial statements issued for fiscal years beginning after December 15, 2001. This statement superseded FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and significantly changed the criteria that have to be met in order to classify an asset as held for sale. The new rules also superseded the provisions of Accounting Principles Board Opinion 30, Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions (“APB 30”), with regard to reporting the effects of a disposal of a segment or a component of a business, requiring expected future operating losses from discontinued operations to be reported in discontinued operations in the period(s) in which the losses are incurred, rather than as of the measurement date as required by APB 30. The Company adopted FAS No. 144 as of January 1, 2002 without any impact on the Company’s financial position or the results of its operations. With respect to the Company’s assets held for sale in its commercial lending operation, the Company will continue to account for these assets under the provisions of APB 30 as prescribed under FAS No. 144.

Note C—Discontinued Operations

           During the first quarter of 2002, the Company determined that its ninety-five percent ownership interest in TerraPoint, LLC (“TerraPoint”) did not fit its long term strategy. As a result of this determination, the Company reclassified the net assets of TerraPoint, consisting of $11.5 million of accounts receivable and fixed assets, as assets held for sale. In the second quarter of 2002, the Company completed the sale of its interest in TerraPoint, which resulted in a loss of $8.1 million ($5.3 million after tax). The condensed consolidated statements of income have been restated to reflect the results of operations of TerraPoint as a discontinued operation. TerraPoint was part of the Company’s Real Estate Information Services segment. Net revenues for TerraPoint for the nine months and third quarter of 2002 were $3.0 million and $0.0 million, respectively, and $1.8 million and $0.5 million for the comparable periods of 2001.

Note D—Consolidated Statements of Retained Earnings

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Note E — Comprehensive Income

           The components of comprehensive income were as follows:

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Item 2. Management’s Narrative Analysis of Results of Operations.

           The following tables set forth revenues and income (loss) by line of business for the periods indicated:

(1) Unallocated items including intercompany eliminations.

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Commercial Lending

           Income from operations for the nine months and third quarter of 2002 was $91.9 million and $26.4 million, respectively, compared with income of $69.1 million and $24.7 million for the corresponding periods of 2001. During the nine months and third quarter of 2002, the commercial lending operation sold $31.4 million and $7.8 million, respectively, of small business administration loan net finance receivables and $242.0 million and $48.5 million of retail finance net finance receivables at their net carrying values. During the first nine months and third quarter of 2001, the commercial lending operation sold approximately $770 million and $320 million, respectively, of retail finance net finance receivables, which resulted in after tax gains of $7.7 million and $0.7 million, respectively. Additionally, during the first nine months of 2001, the operation recorded an after tax gain of $1.2 million from the sale of certain assets of the insurance premium finance business. In connection with the insurance premium finance asset sale, a decision was made to liquidate the remaining insurance premium finance net finance receivables and reclassify the net carrying value of those receivables from assets held for sale to net finance receivables. Operating results for the first nine months of 2001 also included $3.2 million in after tax gains resulting from the sale of a portion of stock received from the exercise of stock warrants. Excluding the above items, income from operations for the nine months and third quarter of 2002 increased $34.9 million (61%) and $2.4 million (10%), respectively, from the comparable prior year periods. Operating results for the nine months and third quarter ended September 30, 2002 benefited from lower operating expenses and lower provisions for losses. These reductions in costs more than offset declining finance margins for the comparable periods. The declines in finance margins were principally attributable to lower average net finance receivables outstanding which was primarily due to continued reductions in the liquidating and assets held for sale portfolios and an overall reduction in customer utilization of available credit lines.

           Revenues for the nine months and third quarter of 2002 decreased $231.4 million (28%) and $54.8 million (23%), respectively, from the corresponding periods of 2001. The decreases were principally a result of the decline in average net finance receivables outstanding and the sale and liquidation of net finance receivables in assets held for sale.

           Interest expense decreased $149.0 million (50%) and $37.9 million (47%), respectively, for the nine months and third quarter of 2002 from the comparable periods of 2001. The decreases were primarily due to lower borrowing rates. Operating expenses for the nine months and third quarter of 2002 decreased $97.1 million (31%) and $19.2 million (20%), respectively, relative to the corresponding periods of 2001. The decreases were primarily due to lower costs associated with the lower levels of liquidating receivables and assets held for sale. The provision for losses on finance receivables for the nine months and third quarter of 2002 decreased $24.1 million (24%) and $0.7 million (3%), respectively, from corresponding periods of 2001, principally as a result of lower credit losses on technology loans and leases. Net annualized credit losses as a percentage of average net finance receivables outstanding were 1.44% for the nine months and 1.92% for the third quarter of 2002 compared with 1.84% and 1.94% for the corresponding periods of 2001.

           Net finance receivables outstanding at September 30, 2002 decreased $961.6 million (14%) from December 31, 2001 principally as a result of a slowdown in the economy, which led to a reduction in customer utilization of available credit lines. Management has established an allowance for losses on net finance receivables of $140.1 million (2.29% of net finance receivables outstanding) at September 30, 2002 compared with $136.8 million (1.94% of net finance receivables outstanding) at December 31, 2001. The increase from December 31, 2001 in the allowance as a percentage of net finance receivables outstanding was primarily due to the retention of reserves on certain non-earning accounts whose ultimate resolution is pending and the maintenance of a stable reserve on the liquidating portfolio. Also, as a result of the slowdown in the economy and the financial difficulties of certain of the Company’s customers, management is closely monitoring its transportation industry finance receivables, particularly those related to the airline industry, for possible impairment.

           Delinquent finance receivables are defined as the installment balance for inventory finance and asset-based lending finance receivables more than 60 days past due and the receivable balance for all other finance receivables more than 60 days past due. At September 30, 2002, delinquent receivables were $100.2 million (1.50% of finance receivables outstanding) compared with $132.1 million (1.70% of finance receivables outstanding) at December 31, 2001.

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           Non-earning finance receivables are defined as balances from borrowers that are more than 90 days delinquent for non-credit card finance receivables or at such time as full collectibility becomes doubtful. Non-earning finance receivables on revolving credit card accounts included in retail finance are defined as balances from borrowers in bankruptcy and accounts for which full collectibility is doubtful. Non-earning finance receivables were $185.7 million (2.77% of finance receivables outstanding) at September 30, 2002 compared with $238.2 million (3.06% of finance receivables outstanding) at December 31, 2001. The decline was primarily the result of resolutions of certain accounts through a combination of collections and charge-offs, particularly related to technology loans and leases.

           Assets held for sale at September 30, 2002 totaled $54.0 million, net of a $29.3 million valuation allowance, and consisted of consumer mortgage and small business administration net finance receivables and other repossessed assets. The balance of the Company’s retail net finance receivables were disposed of during the third quarter of 2002. Assets held for sale at December 31, 2001 totaled $278.6 million, net of a $113.1 million valuation allowance. At September 30, 2002, delinquent and non-earning net finance receivables of these businesses were $25.4 million and $36.5 million, respectively, compared with $51.5 million and $54.5 million, respectively, at December 31, 2001.

Intermodal Leasing

           Losses from operations for the nine months and third quarter of 2002 were $3.1 million and $2.2 million, respectively, compared with losses of $16.0 million and $4.7 million for the corresponding periods of 2001. Operating results for the nine months of 2002 included a $6.6 million net tax benefit associated with a structured financing of certain European trailer equipment. Operating results for the first nine months of 2001 were favorably impacted by a $2.4 million after tax gain resulting from the termination of certain forward exchange contracts. Excluding these items, operating results for the nine months and third quarter of 2002 improved by $8.7 million and $2.5 million, respectively, primarily due to the factors discussed below.

           Revenues for the nine months and third quarter of 2002 decreased $27.3 million (8%) and $2.6 million (2%), respectively, from the corresponding periods of 2001. The decreases were primarily due to declines in per diem rates for maritime containers and fewer European trailers on-hire, partially offset by more maritime containers on-hire.

           Expenses for the nine months and third quarter of 2002 decreased $31.8 million (9%) and $4.3 million (4%), respectively, from the corresponding periods of 2001. The decreases were primarily attributable to lower ownership costs resulting principally from lower borrowing rates and a smaller fleet size. Contributing to the decline for the nine months of 2002 were decreases in fleet operating costs primarily related to increased utilization of maritime containers, partially offset by valuation provisions recorded on certain European trailers and maritime containers reclassified to assets held for sale.

           Marine container utilization averaged 78% and 81% for the nine months and third quarter of 2002, respectively, and 74% and 73% for the corresponding periods of 2001. European trailer utilization was 88% for the nine months and third quarter of 2002 and 2001.

Real Estate Information Services

           Real estate information services income from operations for the nine months and third quarter of 2002 was $27.1 million and $10.7 million, respectively, compared with $32.0 million and $7.7 million for the same periods of 2001. Income from operations for the first nine months of 2001 included a $13.0 million after tax gain, recorded in the second quarter, from the reversal of a current state tax liability accrued, but never incurred, while operating as a division of Transamerica Corporation. Excluding this item, income from operations for the nine months and third quarter of 2002 increased $8.1 million (43%) and $3.0 million (42%) from the comparable periods of 2001, primarily due to the factors discussed below.

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           Revenues for the nine months and third quarter of 2002 increased $8.7 million (5%) and $3.7 million (6%), respectively, compared with the same periods of 2001. The increases were primarily due to higher levels of mortgage refinancing activity, which led to higher flood certification and property tax monitoring service fees.

           Operating expenses for the nine months and third quarter of 2002 decreased $4.9 million (4%) and $1.6 million (4%), respectively, compared with the same periods of 2001, primarily due to cost control and quality improvement initiatives.

           In the first quarter of 2002, as discussed in Note C of Notes to Condensed Consolidated Financial Statements, the Company determined that its ninety-five percent ownership interest in TerraPoint no longer fit its long term strategy and reclassified the net assets of TerraPoint as assets held for sale. In accordance with FAS No. 144, the results of operations of TerraPoint were reclassified as discontinued operations. In the second quarter of 2002, the Company completed the sale of its interest in TerraPoint, which resulted in a loss of $8.1 million ($5.3 million after tax).

Other

           Losses for the nine months and third quarter of 2002 were $14.5 million and $11.6 million, respectively, compared with income of $0.6 million and losses of $4.2 million, for the corresponding periods of 2001. Results for the nine months and third quarter of 2002 included a $3.3 million after tax charge relating to a tentative settlement of litigation in connection with a former business of the Company that was disposed of during 1999. Results for the nine months and third quarter of 2002 also included after tax charges of $4.9 million and $5.4 million, respectively, relating to the fair value of debt derivatives that did not qualify as hedges under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS No. 133”). This compares with after tax charges of $1.7 million and $1.5 million, respectively, for the corresponding periods of 2001. Results for the first nine months of 2001 also included a gain of $9.8 million after tax, resulting from a tax reversal in the second quarter of 2001 of a deferred state income tax liability that was no longer required. The tax reversal in 2001 was the result of a revaluation of the current consolidated state income tax position of the Company as a result of AEGON’s acquisition of Transamerica Corporation and the relocation and reorganization of the Company. Excluding the above items, results for the nine months and third quarter 2002 improved by $1.2 million (16%) and decreased by $0.2 million (7%), respectively, from the comparable prior year periods.

Derivatives

           The Company uses derivative financial instruments to hedge some of its interest rate and foreign currency exchange rate risk. The Company uses interest rate exchange agreements to hedge the interest rate risk of its outstanding indebtedness. The interest rate exchange agreements are intended to help the Company more closely match the cash flow received from its assets to the payments on its liabilities, and generally provide that one party pays interest at a floating rate in relation to movements in an underlying index while the other party pays interest at a fixed rate. The Company uses foreign currency forward exchange agreements primarily to hedge the risks associated with the funding of certain of its foreign operations. Under these agreements, the Company agrees to sell to other contracting parties a specified amount of foreign currency for a specified amount of dollars at a future date. Derivatives are used only for the purpose of hedging such risks, not for speculation.

           The notional amounts of the Company’s debt derivative financial instruments were $0.5 billion at September 30, 2002 and $1.7 billion at December 31, 2001. Of these derivatives, $0.3 billion at September 30, 2002 and $1.3 billion at December 31, 2001 qualified under FAS No. 133 for hedge accounting treatment. The hedging relationships of the Company’s fair value and cash flow hedges qualified under FAS No. 133 for the “short cut method” and therefore no ineffective cash flow gains or losses were recognized.

           The fair values of the Company’s debt derivatives at September 30, 2002 and December 31, 2001 were net obligations of $6.4 million and net benefits of $5.4 million, respectively. At September 30, 2002 and December 31, 2001, these debt derivatives contained aggregate gross obligations of $17.4 million and $11.9 million, respectively, and aggregate gross benefits of $11.0 million and $17.3 million.

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Impact of Adopting New Accounting Standard

           In June of 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets (“FAS No. 142”). This statement significantly changed the accounting for goodwill and intangible assets. Under FAS No. 142, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to an annual fair value impairment test. Other intangible assets continue to be amortized over their useful lives. The Company adopted FAS No. 142 as of January 1, 2002. Application of the amortization provisions of the statement relating to existing goodwill will result in a reduction in expenses of approximately $15 million for 2002.

           In the first quarter of 2002, pursuant to FAS No. 142, the Company completed its assessment of its previously recognized intangible assets and goodwill. Based on the results of this assessment, the Company reclassified $1.4 million of intangible assets as goodwill. In accordance with the transition provisions of FAS No. 142, the Company assigned all of its goodwill and intangible assets to its applicable reporting units, and completed the required transitional goodwill impairment test. The Company completed step one of the impairment test by using a discounted cash flow model to estimate the current fair values of its reporting units. These estimated fair values were then compared with their carrying values, revealing potential goodwill impairments in the Company’s intermodal leasing operation and in a reporting unit in the commercial lending operation. As a result of the identification of these potential impairments the Company was required to perform step two of the impairment test. Step two required the Company to compare the carrying value of the goodwill in these reporting units with the value of the goodwill implied by the fair value estimations. In both instances the implied fair values of the goodwill of these reporting units were found to be less than their carrying values and impairment losses were recognized for the differences. The Company recognized after tax impairment losses of $35.4 million and $8.0 million on the goodwill of the intermodal leasing operation and a reporting unit in the commercial lending operation, respectively. These losses were recorded as the cumulative effect of a change in accounting principle in the first quarter of 2002. The Company previously evaluated goodwill for impairment by comparing the unamortized balance of its goodwill to projected undiscounted cash flows. Under this methodology the Company did not have any goodwill impairment.

           In June of 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities, (“FAS No. 146”). This statement addresses the financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issue Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” FAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002, with earlier application encouraged. The Company expects to adopt this statement as of January 1, 2003.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

           The statements contained in this report, which are not historical facts, are forward-looking statements. When included in this report, the words “expects”, “intends”, “anticipates”, “estimates”, and analogous expressions are intended to identify forward-looking statements. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, competition, changes in financial markets (credit, currency, commodities and stocks), changes in foreign, political, social and economic conditions, regulatory initiatives and compliance with governmental regulations, judicial decisions and rulings, and various other matters, many of which are beyond the Company’s control. These forward-looking statements speak only as of the date of this report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

           Omitted in accordance with General Instruction H.

Item 4. Controls and Procedures.

           As of a date (the “Evaluation Date”) within 90 days prior to this report, the Company carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that as of the Evaluation Date the Company’s disclosure controls and procedures were effective to timely alert them to material information required to be included in the Company’s Exchange Act filings. Subsequent to the Evaluation Date, there were no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls.

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PART II – OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

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SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

           Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on November 7, 2002 by the following persons on behalf of the Registrant and in the capacities indicated.

Date:    November 7, 2002

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CERTIFICATIONS

Date:    November 7, 2002

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Date:    November 7, 2002

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