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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2003

OR

For the transition period from                      to                     

Commission file number 1-10667

AmeriCredit Corp.

(Exact name of registrant as specified in its charter)

801 Cherry Street, Suite 3900, Fort Worth, Texas 76102

(Address of principal executive offices, including Zip Code)

(817) 302-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

9.875% Senior Notes due 2006/Guarantee of 9.875% Senior Notes due 2006

9 ¹/4% Senior Notes due 2009/Guarantee of 9 ¹/4% Senior Notes due 2009

(Title of each class)

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 12 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    ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes    x    No    ¨

The aggregate market value of 101,666,778 shares of the Registrant’s Common Stock held by non-affiliates based upon the closing price of the Registrant’s Common Stock on the New York Stock Exchange on December 31, 2002, was approximately $786,900,862. For purposes of this computation, all executive officers, directors and 5 percent beneficial owners of the Registrant are deemed to be affiliates. Such determination should not be deemed an admission that such executive officers, directors and beneficial owners are, in fact, affiliates of the Registrant.

There were 156,453,979 shares of Common Stock, $0.01 par value, outstanding as of September 12, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant’s definitive Proxy Statement pertaining to the 2003 Annual Meeting of Shareholders (“Proxy Statement”) filed pursuant to Regulation 14A is incorporated herein by reference into Part III.

Table of Contents

AMERICREDIT CORP.

INDEX TO FORM 10-K

Table of Contents

PART I

ITEM 1.    Business

General

AmeriCredit Corp. was incorporated in Texas on May 18, 1988, and succeeded to the business, assets and liabilities of a predecessor corporation formed under the laws of Texas on August 1, 1986. The Company’s predecessor began operations in March 1987, and the business has been operated continuously since that time. As used herein, the term “Company” refers to the Company, its wholly-owned subsidiaries and its predecessor corporation. The Company’s principal executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, 76102 and its telephone number is (817) 302-7000.

The Company and its subsidiaries have been operating in the automobile finance business since September 1992. The Company purchases auto finance contracts without recourse from franchised and select independent automobile dealerships. As used herein, “loans” includes auto finance contracts originated by dealers and purchased by the Company. The Company targets consumers who are typically unable to obtain financing from traditional sources. Funding for the Company’s auto lending activities is obtained primarily through the transfer of loans in securitization transactions. The Company services its automobile lending portfolio at regional centers using automated loan servicing and collection systems.

The Company reduced its workforce in November 2002 and implemented a revised operating plan in February 2003 in an effort to preserve and strengthen its capital and liquidity position. The revised operating plan included a decrease in the Company’s targeted loan origination volume to approximately $750.0 million per quarter and a reduction of operating expenses through downsizing its workforce, consolidating its branch office network and closing its Canadian lending activities.

On April 23, 2003, the Board of Directors of the Company announced the reorganization of the Company’s executive management team. Michael R. Barrington stepped down as President and Chief Executive Officer and Michael T. Miller stepped down as Chief Operating Officer. Clifton H. Morris, Jr., Chairman of the Board, assumed the Chief Executive Officer position. Daniel E. Berce was promoted from Chief Financial Officer to President. Preston A. Miller was promoted to Chief Financial Officer and Mark Floyd was promoted to Chief Operating Officer.

Automobile Finance Operations

Target Market.    The Company’s automobile lending programs are designed to serve customers who have limited access to traditional automobile financing. The Company’s typical borrowers have experienced prior credit difficulties or have modest income. Because the Company serves customers who are unable to meet the credit standards imposed by most traditional automobile financing sources, the Company generally charges higher interest rates than those charged by traditional financing sources. As the Company provides financing in a relatively high risk market, the Company also expects to sustain a higher level of credit losses than traditional automobile financing sources.

Marketing.    As an indirect lender, the Company focuses its marketing activities on automobile dealerships. The Company is selective in choosing the dealers with whom it conducts business and primarily pursues manufacturer franchised dealerships with used car operations and select independent dealerships. The Company prefers to finance later model, low mileage used vehicles and moderately priced new vehicles. Of the contracts purchased by the Company during the fiscal year ended June 30, 2003, approximately 97% were originated by manufacturer franchised dealers and 3% by select independent dealers. The Company purchased contracts from 18,942 dealers during the fiscal year ended June 30, 2003. No dealer location accounted for more than 1% of the total volume of contracts purchased by the Company for that same period.

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Prior to entering into a relationship with a dealer, the Company considers the dealer’s operating history and reputation in the marketplace. The Company then maintains a non-exclusive relationship with the dealer. This relationship is actively monitored with the objective of maximizing the volume of applications received from the dealer that meet the Company’s underwriting standards and profitability objectives. Due to the non-exclusive nature of the Company’s relationships with dealerships, the dealerships retain discretion to determine whether to obtain financing from the Company or from another source for a loan made by the dealership to a customer seeking to make a vehicle purchase. Company representatives regularly telephone and visit dealers to solicit new business and to answer any questions dealers may have regarding the Company’s financing programs and capabilities. These personnel explain the Company’s underwriting philosophy, including the preference for non-prime quality contracts secured by later model, low mileage vehicles. To increase the effectiveness of these contacts, marketing personnel have access to the Company’s management information systems which detail current information regarding the number of applications submitted by a dealership, the Company’s response and the reasons why a particular application was rejected.

The Company has strategic alliances with several dealer groups and with Chase Automotive Finance (“Chase”). Under the Chase alliance, the Company’s personnel and representatives from Chase jointly market to automobile dealers with the Company providing non-prime auto financing and Chase providing prime auto financing. The alliance allows the Company and Chase to better service automobile dealers by offering auto financing across a broad credit spectrum. The Company also benefits from being able to market its auto financing programs to automobile dealers who have relationships with Chase.

Finance contracts are generally purchased by the Company without recourse to the dealer, and accordingly, the dealer usually has no liability to the Company if the consumer defaults on the contract. To mitigate the risk from credit losses, the Company may charge dealers a non-refundable acquisition fee when purchasing finance contracts. These acquisition fees are assessed on a contract-by-contract basis. Although finance contracts are purchased without recourse to the dealer, the dealer typically makes certain representations as to the validity of the contract and compliance with certain laws, and indemnifies the Company against any claims, defenses and set-offs that may be asserted against the Company because of assignment of the contract. Recourse based upon those representations and indemnities would be limited in circumstances in which the dealer has insufficient financial resources to perform upon such representations and indemnities. The Company does not view recourse against the dealer on these representations and indemnities to be of material significance in its decision to purchase finance contracts from a dealer.

In 2001, the Company joined certain other auto finance companies in providing equity capital to launch a new company, DealerTrack Holdings, Inc. (“DealerTrack”). DealerTrack was established to automate the dealer-lender process, allowing dealers to submit consumer credit applications via the Internet to any participating lender. Real-time contract status information and historical data regarding applications and approvals are also available to dealers. The Company is one of the lenders that offers services through DealerTrack.

Branch Office Network.    The Company primarily uses a branch office network to market its indirect financing programs to selected dealers, develop relationships with these dealers and underwrite contracts submitted by the dealerships. Branch office and marketing personnel are responsible for the solicitation, enrollment and education of dealers regarding the Company’s financing programs. The Company believes a local presence enables it to be more responsive to dealer concerns and local market conditions. The Company selects markets for branch office locations based upon numerous factors, including demographic trends and data, competitive conditions, regulatory environment and availability of qualified personnel. Branch offices are typically situated in suburban office buildings that are accessible to local dealers.

Each branch office solicits dealers for contracts and maintains the Company’s relationship with the dealers in the geographic vicinity of that branch office. Branch office locations are typically staffed by a branch manager, an assistant manager and several dealer and customer service representatives. Larger branch offices may also have additional assistant managers or dealer marketing representatives. The Company believes that the

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personal relationships its branch managers and other branch personnel establish with the dealership staff are an important factor in creating and maintaining productive relationships with the Company’s dealer customer base. Branch managers are compensated with base salaries and annual incentives based on overall branch performance, including factors such as branch loan credit quality, loan pricing adequacy and loan volume objectives. The incentives are typically paid in cash and stock-based awards. The branch managers report to regional vice presidents.

The Company’s regional vice presidents monitor branch office compliance with the Company’s underwriting guidelines and assist in local branch marketing activities. The Company’s management information systems provide the regional vice presidents access to credit application information enabling them to consult with the branch managers on credit decisions and review exceptions to the Company’s underwriting guidelines. The regional vice presidents also make periodic visits to the branch offices to conduct operating reviews.

The following table sets forth information with respect to the number of branches, dollar volume of contracts purchased and number of producing dealerships for the periods set forth below.

Underwriting and Purchasing of Contracts

Proprietary Credit Scoring System and Risk-based Pricing.    The Company utilizes a proprietary credit scoring system to support the credit approval process. The credit scoring system was developed through statistical analysis of the Company’s consumer demographic and portfolio databases. Credit scoring is used to differentiate credit applicants and to rank order credit risk in terms of expected default rates, which enables the Company to evaluate credit applications for approval and tailor loan pricing and structure according to this statistical assessment of credit risk. For example, a consumer with a lower score would indicate a higher probability of default and, therefore, the Company would either decline the application, or, if approved, compensate for this higher default risk through the structuring and pricing of the transaction. While the Company employs a credit scoring system in the credit approval process, credit scoring does not eliminate credit risk. Adverse determinations in evaluating contracts for purchase could negatively affect the credit quality of the Company’s receivables portfolio.

The credit scoring system considers data contained in the customer’s credit application and credit bureau report as well as the structure of the proposed loan and produces a statistical assessment of these attributes. This assessment is used to segregate applicant risk profiles and determine whether the risk is acceptable and the price the Company should charge for that risk. The Company’s credit scorecards are monitored through monthly comparison of actual versus projected performance by score. The Company endeavors to refine its proprietary scorecards based on new information and identified correlations relating to receivables performance.

Loan Approval Process.    The Company purchases individual contracts through its branch offices using a credit approval process tailored to local market conditions. Branch personnel have a specific credit authority based upon their experience and historical loan portfolio results as well as established credit scoring parameters.

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Contracts may also be purchased through the Company’s central loan purchasing office for specific dealers requiring centralized service, in certain markets where a branch office is not present or, in some cases, outside of normal branch office working hours. Although the credit approval process is decentralized, the Company’s application processing system includes controls designed to ensure that credit decisions comply with the Company’s credit scoring strategies and underwriting policies and procedures.

Finance contract application packages completed by prospective obligors are received from dealers via facsimile, electronically or by telephone. Since the Company is a participating lender in DealerTrack, automobile dealers can send application data to the Company electronically via an Internet connection. Such data automatically interfaces with the Company’s application processing systems providing for faster processing. The Company received 64% of credit applications from dealers via DealerTrack for the fiscal year ended June 30, 2003. Application data received by facsimile or telephone is entered into the Company’s application processing system. A credit bureau report is automatically accessed and a credit score is computed. Company personnel with credit authority review the application package and determine whether to approve the application, approve the application subject to conditions that must be met or deny the application. The credit decision is based primarily on the applicant’s credit score. The Company estimates that approximately 66% of applicants are denied credit by the Company typically because of their credit histories. Dealers are contacted regarding credit decisions electronically, by facsimile or by telephone. Declined and conditioned applicants are also provided with appropriate notification of the decision.

The Company’s underwriting and collateral guidelines, including credit scoring parameters, form the basis for the credit decision. Exceptions to credit policies and authorities must be approved by designated individuals with appropriate credit authority. Exceptions are also monitored by the Company’s centralized risk management and corporate governance departments.

Completed contract packages are sent by the automobile dealers to the Company. Once the contract package is received, a customer service representative in the branch verifies certain applicant employment, income and residency information when required by the Company’s credit policies. Loan terms, insurance coverages and other information may be reverified or confirmed with the customer. Key loan documentation is scanned to create electronic images and electronically forwarded to the Company’s centralized loan processing department. The original documents are subsequently sent to the loan processing department and are stored in a fire resistant vault.

Upon electronic receipt of loan documentation, the loan processing department reviews the loan packages for proper documentation and regulatory compliance and completes the entry of information into the Company’s loan accounting system. Once cleared for funding, the loan processing department electronically transfers funds to the dealer or issues a check. Upon funding of the contract, the Company acquires a perfected security interest in the automobile that was financed. Daily loan reports are generated for review by senior operations management. All of the Company’s contracts are fully amortizing with substantially equal monthly installments.

Servicing and Collections Procedures

General.    The Company’s servicing activities consist of collecting and processing customer payments, responding to customer inquiries, initiating contact with customers who are delinquent in payment of an installment, maintaining the security interest in the financed vehicle, monitoring physical damage insurance coverage of the financed vehicle, arranging for the repossession of, and liquidating collateral when necessary.

The Company uses monthly billing statements to serve as a reminder to customers as well as an early warning mechanism in the event a customer has failed to notify the Company of an address change. Approximately 15 days before a customer’s first payment due date and each month thereafter, the Company mails the customer a billing statement directing the customer to mail payments to a lockbox bank for deposit in a lockbox account. Payment receipt data is electronically transferred from the Company’s lockbox bank to the

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Company for posting to the loan accounting system. Payments may also be received directly by the Company from customers or via electronic transmission of funds. All payment processing and customer account maintenance is performed centrally at the Company’s operations center in Arlington, Texas.

The Company’s collections activities are performed at regional centers located in Arlington, Texas; Chandler, Arizona; Charlotte, North Carolina; Jacksonville, Florida and Peterborough, Ontario. A predictive dialing system is utilized to make phone calls to customers whose payments are past due. The predictive dialer is a computer-controlled telephone dialing system that simultaneously dials phone numbers of multiple customers from a file of records extracted from the Company’s database. Once a live voice responds to the automated dialer’s call, the system automatically transfers the call to a collector and the relevant account information to the collector’s computer screen. The system also tracks and notifies collections management of phone numbers that the system has been unable to reach within a specified number of days, thereby promptly identifying for management all customers who cannot be reached by telephone. By eliminating the time spent on attempting to reach customers, the system gives a single collector the ability to speak with a larger number of borrowers daily.

Once an account reaches a certain level of delinquency, the account moves to one of the Company’s mid-range collection units. The objective of these collectors is to prevent the account from becoming further delinquent. After a scheduled payment on an account becomes more than 90 days past due, the Company typically repossesses the financed vehicle. However, initiation of repossession may occur prior to an account becoming 90 days past due. The Company may repossess a financed vehicle without regard to the length of payment delinquency if an account is deemed uncollectible, the financed vehicle is deemed by collection personnel to be in danger of being damaged, destroyed or hidden, the customer deals in bad faith or the customer voluntarily surrenders the financed vehicle.

At times, the Company offers payment deferrals to customers who have encountered temporary financial difficulty, hindering their ability to pay as contracted. A deferral allows the customer to move delinquent payments to the end of the loan, usually by paying a fee that is calculated in a manner specified by applicable law. The collector reviews the customer’s past payment history and statistically based behavioral score and assesses the customer’s desire and capacity to make future payments. Before agreeing to a deferral, the collector also considers whether the deferment transaction complies with the Company’s policies and guidelines. Certain exceptions to the Company’s policies and guidelines for deferrals must be approved by a collections officer. While payment deferrals are initiated and approved in the collections department, a separate department processes authorized deferment transactions.

Repossessions.    Repossessions are subject to prescribed legal procedures, which include peaceful repossession, one or more customer notifications, a prescribed waiting period prior to disposition of the repossessed automobile and return of personal items to the customer. Some jurisdictions provide the customer with reinstatement or redemption rights. Legal requirements, particularly in the event of bankruptcy, may restrict the Company’s ability to dispose of the repossessed vehicle. Repossessions are handled by independent repossession firms engaged by the Company. All repossessions, other than bankruptcy or previously charged-off accounts, must be approved by a collections officer. Upon repossession and after any prescribed waiting period, the repossessed automobile is sold at auction. The Company does not sell any vehicles on a retail basis. The proceeds from the sale of the automobile at auction, and any other recoveries, are credited against the balance of the contract. Auction proceeds from sale of the repossessed vehicle and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. The Company pursues collection of deficiencies when it deems such action to be appropriate.

Charge-Off Policy.    The Company’s policy is to charge-off an account in the month in which the account becomes 120 days contractually delinquent if the Company has not repossessed the related vehicle. Otherwise, the Company charges-off the account when the vehicle securing the delinquent contract is repossessed and liquidated. The charge-off represents the difference between the actual net sales proceeds and the amount of the delinquent contract, including accrued interest. Accrual of finance charge income is suspended on accounts that are more than 60 days contractually delinquent.

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Risk Management

Overview.    The Company’s risk management department is responsible for monitoring the contract approval process and supporting the supervisory role of senior operations management. This department tracks key variables, such as loan applicant data, credit bureau and credit score information, loan structures and terms and payment histories. The risk management department also regularly reviews the performance of the Company’s credit scoring system and is responsible for the development and enhancement of the Company’s credit scorecards.

The risk management department prepares regular credit indicator packages reviewing portfolio performance at various levels of detail including total Company, branch office and dealer. Various daily reports and analytical data are also generated to monitor credit quality as well as to refine the structure and mix of new loan originations. The Company reviews portfolio returns on a consolidated basis, as well as at the branch office, dealer and contract levels.

Behavioral Scoring.    Statistically-based behavioral assessment models are used to project the relative probability that an individual account will default and to validate the credit scoring system after the receivable has aged for a sufficient period of time, generally six months. Default probabilities are calculated for each account independent of the credit score. Projected default rates from the behavioral assessment models and credit scoring systems are compared and analyzed to monitor the effectiveness of the Company’s credit strategies.

Collateral Value Management.    The value of the collateral underlying the Company’s receivables portfolio is updated monthly with a loan-by-loan link to national wholesale auction values. This data, along with the Company’s own experience relative to mileage and vehicle condition, are used for evaluating collateral disposition activities as well as for reserve analysis models.

Compliance Audits.    The Company’s internal audit and corporate governance departments conduct regular reviews of branch office operations, loan operations, processing and servicing, collections and other functional areas. The primary objective of the reviews is to identify risks and associated controls and measure compliance with the Company’s written policies and procedures as well as regulatory matters. Branch office reviews performed by the Company’s corporate governance department include a review of compliance with underwriting policies, completeness of loan documentation, collateral value assessment and applicant data investigation. Written reports are distributed to departmental managers and officers for response and follow-up. Results and responses are also reviewed by senior management.

Securitization of Loans

Since December 1994, the Company has pursued a strategy of securitizing its receivables to diversify its funding, improve liquidity and obtain a cost-effective source of funds for the purchase of additional automobile finance contracts. The Company applies the net proceeds from securitizations to pay down borrowings under its warehouse credit facilities, thereby increasing availability thereunder for further contract purchases. Through June 30, 2003, the Company had securitized approximately $30.1 billion of automobile receivables since 1994.

In its securitizations, the Company, through wholly-owned subsidiaries, transfers automobile receivables to newly-formed securitization Trusts (“Trusts”), which issue one or more classes of asset-backed securities. The asset-backed securities are in turn sold to investors.

The Company typically arranges for a financial guaranty insurance policy from one of several monoline insurers to achieve a high grade credit rating on the asset-backed securities issued by the securitization Trusts. The financial guaranty insurance policies insure the payment of principal and interest due on the asset-backed securities. The Company has limited reimbursement obligations to the insurers; however, credit enhancement requirements, including the insurers’ encumbrance of certain restricted cash accounts and subordinated interests

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in Trusts, provide a source of funds to cover shortfalls in collections and to reimburse the insurers for any claims which may be made under the policies issued with respect to the Company’s securitizations.

The credit enhancement requirements for the Company’s securitizations include restricted cash accounts that are generally established with an initial deposit and subsequently funded through excess cash flows from securitized receivables. Funds would be withdrawn from the restricted cash accounts to cover any shortfalls in amounts payable on the asset-backed securities. Funds generated from insured securitization transactions are also available to be withdrawn to reimburse the insurers for draws on financial guaranty insurance policies in an event of default. Additionally, agreements with the insurers provide that if portfolio performance ratios (delinquency, default or net loss triggers) in a Trust’s pool of receivables exceed certain targets, the specified enhancement levels would be increased. Cash would be retained in the restricted cash account and not released to the Company until increased minimum levels of credit enhancement requirements have been reached and maintained. The Company is entitled to receive amounts from the restricted cash accounts to the extent the amounts deposited exceed the required minimum levels.

Prior to October 2002, the financial guaranty insurance policies for all of the Company’s insured securitization transactions were provided by Financial Security Assurance, Inc. (“FSA”) and are referred to herein as the “FSA Program.” The restricted cash account for each securitization Trust insured as part of the FSA Program is cross-collateralized to the restricted cash accounts established in connection with the Company’s other securitization Trusts in the FSA Program, such that excess cash flows from a performing securitization Trust may be used to fund increased minimum credit enhancement requirements with respect to securitization Trusts in which specified portfolio performance ratios have been exceeded.

FSA has a security interest in the restricted cash accounts, interest-only receivables from Trusts and investments in Trust receivables related to Trusts that are part of the FSA Program, such that, if the security interest is foreclosed upon in the event of a payment by FSA under one of its insurance policies or the occurrence of other events of default in an FSA Program securitization, FSA would control all of the restricted cash accounts, interest-only receivables from Trusts and investments in Trust receivables with respect to securitization transactions it has insured.

The Company’s securitization transactions insured by financial guaranty insurance providers since October 2002 are cross-collateralized to a more limited extent. In the event of a shortfall in the original minimum credit enhancement requirement for any of these securitization Trusts after a certain period of time, excess cash flows from other transactions insured by the same insurance provider would be used to satisfy the shortfall amount. In addition, excess cash flows from certain securitization transactions would be utilized to satisfy any increased minimum credit enhancement requirements resulting from a breach of portfolio performance ratios in other transactions insured by the same insurance provider if a secured party receives a notice of a rating agency review for downgrade or if there is a downgrade of any class of notes (without taking into consideration the presence of the financial guaranty insurance policy).

Since November 2000, the Company has completed three securitization transactions in the United States and two in Canada involving the sale of subordinate asset-backed securities in order to provide credit enhancement for the senior asset-backed securities and protect investors from potential losses. The Company provided credit enhancement in these transactions in the form of a restricted cash account and overcollateralization, whereby more receivables are transferred to the Trusts than the amount of asset-backed securities issued by the Trusts. Excess cash flows are used to increase the credit enhancement assets to required minimum levels, after which time excess cash flows are distributed to the Company. Since these transactions did not involve the issuance of a financial guaranty insurance policy, the credit enhancement assets related to these Trusts are not cross-collateralized to the credit enhancement assets established in connection with any of the Company’s other securitization Trusts and do not contain limitations on portfolio performance ratios which could increase the minimum required credit enhancement levels.

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Trade Names

The Company has obtained federal trademark protection for the “AmeriCredit” name and the logo that incorporates the “AmeriCredit” name. Certain other names, logos and phrases used by the Company in its business operations have also been trademarked.

Regulation

The Company’s operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations.

In most states in which the Company operates, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as the Company. Such rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation, and restrictions on collection practices and creditors’ rights. In certain states, the Company is subject to periodic examination by state regulatory authorities. Some states in which the Company operates do not require special licensing or provide extensive regulation of the Company’s business.

The Company is also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require the Company to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system used by the Company must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires the Company to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. Additionally, the Company is subject to the Gramm-Leach-Bliley Act, which requires the Company to maintain privacy with respect to certain consumer data in its possession and to periodically communicate with consumers on privacy matters. The Company is also subject to the Soldiers’ and Sailors’ Civil Relief Act, which requires it to reduce the interest rate charged on each loan to customers who have subsequently joined, enlisted, been inducted or called to active military duty.

The dealers who originate automobile finance contracts purchased by the Company also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with these statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on the Company.

The Company believes that it maintains all material licenses and permits required for its current operations and is in substantial compliance with all applicable local, state and federal regulations. There can be no assurance, however, that the Company will be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on its operations. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on the Company’s business.

Competition

Competition in the field of non-prime automobile finance is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities including the captive finance affiliates of major

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automotive manufacturers, banks, thrifts, credit unions and independent finance companies. Many of these competitors have substantially greater financial resources and lower costs of funds than the Company. In addition, the Company’s competitors often provide financing on terms more favorable to automobile purchasers or dealers than the Company offers. Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which are not provided by the Company. Providers of automobile financing have traditionally competed on the basis of interest rates charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish itself as one of the principal financing sources at the dealers it serves, the Company competes predominately on the basis of its high level of dealer service and strong dealer relationships and by offering flexible loan terms. There can be no assurance that the Company will be able to compete successfully in this market or against these competitors.

Risk Factors

Dependence on Warehouse Financing.    The Company depends on warehouse credit facilities with financial institutions to finance its purchase of contracts pending a whole loan sale or securitization. At June 30, 2003, the Company has two warehouse credit facilities with various financial institutions providing for available borrowings of up to a total of approximately $2,200.0 million, subject to defined borrowing bases. The Company’s primary facility is a $1,950.0 million commercial paper facility of which $200.0 million matures in March 2004 and the remaining $1,750.0 million matures in March 2005. Subsequent to June 30, 2003, the Company terminated a $250.0 million commercial paper facility that was scheduled to mature in September 2003.

At June 30, 2003, the Company also has two medium term note facilities with administrative agents on behalf of institutionally managed medium term note conduits that in the aggregate provide $1,250.0 million of receivables financing. The Company has a $750.0 million facility that matures in June 2004 and a $500.0 million facility that matures in February 2005.

The Company cannot guarantee that any of these financing resources will continue to be available beyond the current maturity dates at reasonable terms or at all. The availability of these financing sources depends on factors outside of the Company’s control, including regulatory capital treatment for unfunded bank lines of credit and the availability of bank liquidity in general. If the Company is unable to extend or replace these facilities and arrange new warehouse credit facilities, medium term note facilities or other types of interim financing, it will have to curtail contract purchasing and originating activities, which would have a material adverse effect on the Company’s financial position and results of operations.

The Company’s warehouse credit and medium term note facilities contain restrictions and covenants that require the Company to maintain specified financial ratios and satisfy specified financial tests, including maintenance of asset quality and portfolio performance tests as well as deferment levels. Failure to meet any of these covenants, financial ratios or financial tests could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements or restrict the Company’s ability to obtain additional borrowings under these agreements. The Company’s ability to meet those financial ratios and tests can be affected by events beyond its control, and the Company cannot guarantee that it will meet those financial ratios and tests.

Dependence on Securitization Program.    Since December 1994, the Company has relied upon its ability to aggregate and finance receivables in the asset-backed securities market to generate cash proceeds for repayment of warehouse credit facilities and to purchase additional contracts from automobile dealers. Accordingly, adverse changes in the Company’s asset-backed securities program or in the asset-backed securities market for automobile receivables, in general, could materially adversely affect the Company’s ability to purchase and finance loans on a timely basis and upon terms reasonably favorable to the Company. Any adverse change or

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delay would have a material adverse effect on the Company’s financial position, liquidity and results of operations.

The Company will continue to require the execution of securitization transactions in order to fund the Company’s future liquidity needs. There can be no assurance that funding will be available to the Company through this source or, if available, that it will be on terms acceptable to the Company. If securitizations are not available to the Company on a regular basis, it will be required to seek other possibly more costly forms of financing or to further decrease loan originations and implement additional expense reductions, all of which may have a material adverse effect on the Company’s ability to achieve its business and financial objectives.

Dependence on Credit Enhancement.    To date, all but three of the Company’s securitizations in the United States have utilized credit enhancement in the form of financial guaranty insurance policies provided by various monoline insurance providers in order to achieve AAA/Aaa ratings. These ratings may reduce the costs of securitizations relative to alternative forms of financing available to the Company and enhance the marketability of these transactions to investors in asset-backed securities. All but three of these insured transactions have been insured by FSA. The Company has committed to utilizing specific financial guaranty insurance providers in connection with certain of its future securitizations. However, the financial guaranty insurance providers are not required to insure Company-sponsored securitizations, and there can be no assurance that they will continue to do so or that future Company-sponsored securitizations will be similarly rated. The Company’s insurance providers’ willingness to insure the Company’s future securitizations is subject to many factors beyond the Company’s control, including concentrations of risk with any given insurance provider, the insurance providers’ own rating considerations, their ability to cede this risk to reinsurers and the performance of the portion of the Company’s portfolio for which the insurer has provided insurance. Alternatively, in lieu of relying on a financial guaranty insurance policy, in three of its securitizations, the Company has sold subordinate asset-backed securities in order to provide credit enhancement for the senior asset-backed securities and reduce the initial credit enhancement deposit required for the securitization program.

The Company’s securitization transactions entered into in calendar year 2003 required higher initial and target enhancement levels than previous transactions. The Company anticipates that credit enhancement requirements will be at these higher levels on additional securitization transactions completed during fiscal 2004 and possibly beyond, requiring the use of additional liquidity to support its securitization program. A downgrading of any of the Company’s insurance provider’s credit ratings, an increase in required credit enhancement levels or the lack of availability of alternative credit enhancements, such as reinsurance or senior subordinated structures, for the Company’s securitization program could result in higher interest costs for future Company-sponsored securitizations and larger initial cash deposit requirements. The absence of a financial guaranty insurance policy may also impair the marketability of the Company’s securitizations. These events could have a material adverse effect on the Company’s financial position, liquidity and results of operations.

Liquidity and Capital Needs.    The Company’s ability to make payments on or to refinance its indebtedness and to fund its operations and planned capital expenditures depends on its ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond the Company’s control.

The Company requires substantial amounts of cash to fund its contract purchase activities, whole loan purchase facilities and securitization activities. Although the Company must fund certain credit enhancement requirements upon the closing of a securitization, it typically receives the cash representing excess cash flows and return of credit enhancement deposits over the actual life of the receivables securitized. The Company also incurs significant transaction costs in connection with a whole loan purchase facility or securitization. Accordingly, the Company’s strategy of securitizing or transferring into a whole loan purchase facility substantially all of its newly purchased receivables will require substantial amounts of cash.

The Company expects to continue to require substantial amounts of cash. The Company’s primary cash requirements include the funding of: (i) contract purchases pending their securitization or transfer to a whole loan

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purchase facility; (ii) credit enhancement requirements in connection with the securitization or whole loan transfers of the receivables; (iii) interest and principal payments under the Company’s warehouse credit facilities, its senior notes and other indebtedness; (iv) fees and expenses incurred in connection with the securitization and servicing of receivables; (v) capital expenditures for technology and facilities; (vi) ongoing operating expenses; and (vii) any required income tax payments.

The Company’s primary sources of future liquidity are expected to be: (i) excess cash flows received from securitization Trusts; (ii) interest and principal payments on loans not yet securitized; (iii) servicing fees; (iv) borrowings under its warehouse credit facilities, whole loan purchase facilities or through securitizations; and (v) further issuances of debt or equity securities, depending on capital market conditions.

In addition, because the Company expects to continue to require substantial amounts of cash for the foreseeable future, it anticipates that it will require recurring securitizations or whole loan sales and may choose to enter into debt or equity financings. The type, timing and terms of financing selected by the Company will be dependent upon its cash needs, the availability of other financing sources and the prevailing conditions in the financial markets. There is no assurance that any of these sources will be available to it at any given time or that the terms on which these sources may be available will be favorable.

Leverage.    The Company currently has a substantial amount of outstanding indebtedness. The Company’s ability to make payments of principal or interest on, or to refinance, its indebtedness will depend on its future operating performance, including the performance of receivables transferred to securitization Trusts, and its ability to enter into additional securitizations, whole loan purchase facilities and debt and equity financings, which, to a certain extent, is subject to economic, financial, competitive and other factors beyond its control.

If the Company is unable to generate sufficient cash flows in the future to service its debt, it may be required to refinance all or a portion of its existing debt or to obtain additional financing. There can be no assurance that any refinancings will be possible or that any additional financing could be obtained on acceptable terms. The inability to obtain additional financing could have a material adverse effect on the Company’s financial position, liquidity and results of operations.

The degree to which the Company is leveraged creates risks including: (i) the Company may be unable to satisfy its obligations under its outstanding indebtedness; (ii) the Company may find it more difficult to fund future working capital, capital expenditures, acquisitions, general corporate purposes or other purposes; (iii) the Company may have to dedicate a substantial portion of its cash resources to the payments on its outstanding indebtedness, thereby reducing the funds available for operations and future business opportunities; and (iv) the Company may be more vulnerable to adverse general economic and industry conditions. The Company’s existing outstanding indebtedness restricts its ability to, among other things: (i) sell or transfer assets; (ii) incur additional debt; (iii) repay other debt; (iv) pay dividends; (v) make certain investments or acquisitions; (vi) repurchase or redeem capital stock; (vii) engage in mergers or consolidations; and (viii) engage in certain transactions with subsidiaries and affiliates.

The Company’s warehouse credit facilities, medium term note facilities and senior note indentures require the Company to comply with certain financial ratios and covenants. Additionally, the Company’s warehouse credit facilities and medium term note facilities have minimum asset quality maintenance requirements. These restrictions may interfere with the Company’s ability to obtain financing or to engage in other necessary or desirable business activities. As of June 30, 2003, the Company was in compliance with all financial and portfolio performance covenants on its warehouse credit facilities, medium term note facilities and senior note indentures.

If the Company cannot comply with the requirements in its warehouse credit facilities, medium term note facilities and/or its senior note indentures, then the lenders may increase the Company’s borrowing costs or require it to repay immediately all of the outstanding debt under them. If its debt payments were accelerated, the

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Company’s assets might not be sufficient to fully repay the debt. These lenders may require the Company to use all of its available cash to repay its debt, foreclose upon their collateral or prevent the Company from making payments to other creditors on certain portions of the Company’s outstanding debt.

The Company may not be able to obtain a waiver of these provisions or refinance its debt, if needed. In such a case, the Company’s financial condition, liquidity and results of operations would suffer.

Default and Prepayment Risks.    The Company’s results of operations, financial condition and liquidity depend, to a material extent, on the performance of contracts purchased. Obligors under contracts acquired or originated by the Company may default or prepay during the period prior to their transfer in a securitization transaction. The Company bears the full risk of losses resulting from defaults during such period. In the event of a default, the collateral value of the financed vehicle usually does not cover the outstanding loan balance and costs of recovery. The Company maintains an allowance for loan losses on loans held on the Company’s balance sheet, which reflects management’s estimates of inherent losses for these loans. If the allowance is inadequate, then the Company would recognize as an expense the losses in excess of that allowance, and results of operations could be adversely affected.

The Company also retains a substantial portion of the default and prepayment risk associated with the receivables that it transfers pursuant to Company-sponsored securitizations. A large component of the gains previously recognized on these transactions and the corresponding assets recorded on the Company’s balance sheet are credit enhancement assets which consist of investments in Trust receivables, or overcollateralization, restricted cash and interest-only receivables from Trusts. Interest-only receivables from Trusts are based on the present value of estimated future excess cash flows from the securitized receivables expected to be received by the Company. Credit enhancement assets are calculated on the basis of management’s assumptions concerning, among other things, defaults and recovery rates on repossessed vehicles. Actual defaults and recovery rates may vary from management’s assumptions, possibly to a material degree. As of June 30, 2003, credit enhancement assets totaled $1,360.6 million.

The Company is required to deposit substantial amounts of the cash flows generated by its interests in Company-sponsored securitizations into additional credit enhancement. Credit enhancement assets related to the Company’s securitizations that have involved the issuance of a financial guaranty insurance policy are currently pledged to financial guaranty insurance providers as security for the Company’s obligations to reimburse them for any amounts that may be paid out on financial guaranty insurance policies. Credit enhancement assets related to the Company’s securitizations that have involved the sale of subordinate securities also cannot be accessed by the Company since these assets are available only as security to protect investors in such securitizations against losses.

The Company regularly measures its default, recovery and other assumptions against the actual performance of securitized receivables. If the Company were to determine, as a result of such regular review or otherwise, that it underestimated defaults, overestimated recoveries or that any other material assumptions changed adversely, the Company would be required to reduce the carrying value of its credit enhancement assets. If the change in assumptions and the impact of the change on the value of the credit enhancement assets were deemed other-than-temporary, the Company would record a charge to income. Additionally, for securitization transactions accounted for as financing transactions, an allowance for loan losses is maintained to reflect inherent losses in these loans. If losses were higher than estimated, the Company would be required to adjust its allowance for loan losses through a charge to income. Future cash flows from securitization Trusts may also be less than expected, and the Company’s results of operations and liquidity would be adversely affected, possibly to a material degree. Furthermore, an increase in defaults would reduce the size of the Company’s servicing portfolio, which would reduce the Company’s servicing income, further adversely affecting results of operations and cash flows. A material write-down of credit enhancement assets and the corresponding decreases in earnings and cash flows could limit the Company’s ability to service debt and to enter into future securitizations and other financings. Although the Company believes that it has made reasonable assumptions as to the future cash flows of the

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various pools of receivables that have been sold in securitization transactions, actual rates of default and recovery rates on repossessed vehicles may differ from those assumed, or other assumptions may be required to be revised upon future events.

Portfolio Performance; Negative Impact on Cash Flows; Right to Terminate Normal Servicing.    Generally, the form of credit enhancement agreements the Company enters into with its financial guaranty insurance providers in connection with securitization transactions contain specified limits on portfolio performance ratios (delinquency, default and net loss triggers) on the receivables included in each securitization Trust. If, at any measurement date, a portfolio performance ratio with respect to any Trust were to exceed the specified limits, provisions of the credit enhancement agreement would automatically increase the level of credit enhancement requirements for that Trust, if a waiver was not obtained. During the period in which the specified portfolio performance ratio was exceeded, excess cash flows, if any, from the Trust would be used to fund the increased credit enhancement levels instead of being distributed to the Company, which would have an adverse effect on the Company’s cash flows. Further, the credit enhancement requirements for each securitization Trust in the FSA Program are cross-collateralized to the credit enhancement requirements established in connection with each of the Company’s FSA Program securitization Trusts, such that excess cash flows from a performing securitization Trust in the FSA Program may be used to fund increased minimum credit enhancement requirements with respect to securitization Trusts in the FSA Program in which specified portfolio performance ratios have been exceeded, which would have an adverse effect on the Company’s cash flows.

The Company’s securitization transactions insured by financial guaranty insurance providers since October 2002 are cross-collateralized to a more limited extent. In the event of a shortfall in the original minimum credit enhancement requirement for any of these securitization Trusts after a certain period of time, excess cash flows from other transactions insured by the same insurance provider would be used to satisfy the shortfall amount. In addition, excess cash flows from certain securitization transactions would be utilized to satisfy any increased minimum credit enhancement requirements resulting from a breach of portfolio performance ratios in other transactions insured by the same insurance provider if a secured party receives a notice of a rating agency review for downgrade or if there is a downgrade of any class of notes (without taking into consideration the presence of the financial guaranty insurance policy).

Since March 2003, the Company has exceeded its targeted net loss triggers in five FSA Program securitization transactions. A waiver was not granted by FSA. Accordingly, as of June 30, 2003, $82.0 million in cash generated by FSA Program securitization transactions otherwise distributable to the Company has been used to fund increased credit enhancement levels for the FSA Program securitizations that breached their net loss triggers. The Company believes that it is probable that net loss triggers on additional FSA Program securitization Trusts will exceed targeted levels during fiscal 2004. The Company does not expect waivers to be granted by FSA in the future with respect to FSA Program securitizations that have breached net loss triggers and therefore cash otherwise distributable to the Company by Trusts in the FSA Program will continue to be used to increase credit enhancement for FSA Program transactions rather than released to the Company.

The agreements that the Company enters into with its financial guaranty insurance providers in connection with securitization transactions contain additional specified targeted portfolio performance ratios on the receivables included in each Trust that are higher than the limits referred to in the preceding paragraphs. If, at any measurement date, the targeted portfolio performance ratios with respect to any insured Trust were to exceed these additional levels, provisions of the agreements permit the financial guaranty insurance providers to terminate the Company’s servicing rights to the receivables sold to that Trust. In addition, the servicing agreements on certain insured securitization Trusts are cross-defaulted such that a default under one servicing agreement would allow the financial guaranty insurance providers to terminate the Company’s servicing rights under all servicing agreements for securitization Trusts in which they issued a financial guaranty insurance policy. The Company amended the cumulative net loss event of default triggers for all of the Company’s FSA Program transactions completed in 2000, 2001 and 2002 in exchange for increased insurance premiums due to FSA. The amendment was effective July 1, 2003. Although the Company has never exceeded these additional

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targeted portfolio performance ratios, and with the amendment does not anticipate violating any event of default triggers for its FSA Program securitizations, there can be no assurance that the Company’s servicing rights with respect to the automobile receivables in such Trusts or any other Trusts will not be terminated if (i) such targeted portfolio performance ratios are breached, (ii) the Company breaches its obligations under the servicing agreements, (iii) the financial guaranty insurance providers are required to make payments under a policy, or (iv) certain bankruptcy or insolvency events were to occur. As of June 30, 2003, no such termination events have occurred with respect to any of the Trusts formed by the Company. The termination of any or all of the Company’s servicing rights would have a material adverse effect on the Company’s financial position, liquidity and results of operations.

Implementation of Business Strategy.    The Company’s financial position, liquidity and results of operations depend on management’s ability to execute its business strategy. Key factors involved in the execution of the business strategy include achieving the desired contract purchase volume, continued and successful use of proprietary scoring models for risk assessment and risk-based pricing, the use of effective risk management techniques and collection methods, continued investment in technology to support operating efficiency, and continued access to significant funding and liquidity sources. The failure or inability of the Company to execute any element of its business strategy could materially adversely affect its financial position, liquidity and results of operations.

Target Consumer Base.    The Company specializes in purchasing and servicing non-prime automobile receivables. Non-prime borrowers are associated with higher-than-average delinquency and default rates. While the Company believes that it effectively manages these risks with its proprietary credit scoring system, risk-based loan pricing and other underwriting policies and collection methods, no assurance can be given that these criteria or methods will be effective in the future. In the event that the Company underestimates the default risk or under-prices contracts that it purchases, the Company’s financial position, liquidity and results of operations would be adversely affected, possibly to a material degree.

Economic Conditions.    During periods of economic slowdown or recession, delinquencies, defaults, repossessions and losses generally increase. These periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding loans, which weakens collateral coverage on the Company’s loans and increases the amount of a loss the Company would experience in the event of default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. Because the Company focuses on non-prime borrowers, the actual rates of delinquencies, defaults, repossessions and losses on these loans are higher than those experienced in the general automobile finance industry and could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, the Company’s servicing costs may increase without a corresponding increase in its servicing income. While the Company seeks to manage the higher risk inherent in loans made to non-prime borrowers through the underwriting criteria and collection methods it employs, no assurance can be given that these criteria or methods will afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions or losses or increased servicing costs could also adversely affect the Company’s financial position, liquidity and results of operations and its ability to enter into future securitizations.

Wholesale Auction Values.    The Company sells repossessed automobiles at wholesale auction markets located throughout the United States and Canada. Auction proceeds from the sale of repossessed vehicles and other recoveries are usually not sufficient to cover the outstanding balance of the contract, and the resulting deficiency is charged-off. Decreased auction proceeds resulting from the depressed prices at which used automobiles may be sold during periods of economic slowdown or recession will result in higher credit losses for the Company. Furthermore, depressed wholesale prices for used automobiles may result from significant liquidations of rental or fleet inventories, and from increased volume of trade-ins due to promotional financing programs offered by new vehicle manufacturers. The Company’s recoveries as a percentage of repossession charge-offs declined to 42% in fiscal 2003 from 48% in fiscal 2002 and 51% in fiscal 2001, and there can be no assurance that the Company’s recovery rates will be maintained or improve in the future.

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Interest Rates.    The Company’s profitability may be directly affected by the level of and fluctuations in interest rates, which affects the gross interest rate spread the Company earns on its receivables. As the level of interest rates increase, the Company’s gross interest rate spread on new originations will generally decline since the rates charged on the contracts originated or purchased from dealers are limited by statutory maximums, restricting the Company’s opportunity to pass on increased interest costs. The Company believes that its profitability and liquidity could be adversely affected during a period of higher interest rates, possibly to a material degree. The Company monitors the interest rate environment and employs pre-funding and other hedging strategies designed to mitigate the impact of changes in interest rates. The Company can provide no assurance, however, that pre-funding or other hedging strategies will mitigate the impact of changes in interest rates.

Labor Market Conditions.    Competition to hire personnel possessing the skills and experience required by the Company could contribute to an increase in the Company’s employee turnover rate. High turnover or an inability to attract and retain qualified replacement personnel could have an adverse effect on the Company’s delinquency, default and net loss rates and, ultimately, the Company’s financial condition, results of operations and liquidity.

Competition.    Reference should be made to Item 1. “Business—Competition” for a discussion of competitive risk factors.

Regulation.    Reference should be made to Item 1. “Business—Regulation” for a discussion of regulatory risk factors.

Litigation.    As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against the Company could take the form of class action complaints by consumers. As the assignee of finance contracts originated by dealers, the Company may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages.

Several complaints have been filed by shareholders against the Company and certain of the Company’s officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The lawsuits, all of which seek class action status, have been consolidated into one action pending in the United States District Court for the Northern District of Texas Fort Worth Division. The consolidated lawsuit claims, among other allegations, that deferments were improperly granted by the Company to avoid delinquency triggers in securitization transactions and enhance cash flows, thereby causing the Company to misrepresent its financial performance throughout the alleged class period. The Company believes that its granting of deferments, which is a common practice within the auto finance industry, complied with the covenants contained in its securitization and warehouse financing documents, and that its deferment activities were properly disclosed to all constituents, including shareholders, asset-backed investors, creditors and credit enhancement providers. In the opinion of management, the consolidated lawsuit is without merit and the Company intends to vigorously defend against it.

Additionally, a complaint has been filed against the Company and certain of its officers and directors in the 48^th Judicial District Court of Tarrant County, Texas alleging violations of Sections 11 and 15 of the Securities Act of 1933 in connection with the Company’s secondary public offering of common stock on October 1, 2002. This lawsuit, which seeks class action status on behalf of all persons who purchased in such secondary offering, alleges that the Company’s registration statement and prospectus for the offering contained untrue statements of material facts and omitted to state material facts necessary to make other statements in the registration statement not misleading. The shares issued by the Company in the secondary offering were priced at $7.50 per share; at

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the time this lawsuit was filed, the Company’s stock price was $7.88. This lawsuit has been removed by the Company to the United States District Court for the Northern District of Texas, Fort Worth Division, where a motion filed by the plaintiff seeking remand to the state district court is presently pending. In the opinion of management, this lawsuit is without merit and the Company intends to vigorously defend against it.

Two shareholder derivative actions have also been served on the Company. On February 27, 2003, the Company was served with a shareholder’s derivative action filed in the United States District Court for the Northern District of Texas, Fort Worth Division, entitled Mildred Rosenthal, derivatively and on behalf of nominal defendant AmeriCredit Corp. v. Clifton H. Morris, Jr., et al. A second shareholder derivative action was filed in the District Court of Tarrant County, Texas 48^th Judicial District, on August 19, 2003, entitled David Harris, derivatively and on behalf of nominal defendant AmeriCredit Corp. v. Clifton H. Morris, Jr., et al. Both of these shareholder derivative actions allege, among other complaints, that certain officers and directors of the Company breached their respective fiduciary duties by causing the Company to make improper deferments, violated federal and state securities laws and issued misleading financial statements. The substantive allegations in both of the derivative actions are essentially the same as those in the above-referenced class actions.

The Company believes that it has taken prudent steps to address the litigation risks associated with its business activities. However, an adverse resolution of the litigation pending or threatened against the Company, including the proceedings specifically described in this section, could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

Employees

At June 30, 2003, the Company employed 3,639 persons in 31 states and one Canadian province. None of the Company’s employees are a part of a collective bargaining agreement, and the Company’s relationships with employees are satisfactory.

Executive Officers

The following sets forth certain data concerning the executive officers of the Company as of June 30, 2003.

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CLIFTON H. MORRIS, JR. has been Chairman of the Board since May 1988 and has served as Chief Executive Officer from April 2003 to the present and from May 1988 to July 2000. He also served as President from May 1988 until April 1991 and from April 1992 to November 1996.

DANIEL E. BERCE has been President since April 2003. Mr. Berce was Vice Chairman and Chief Financial Officer from November 1996 until April 2003. He served as Executive Vice President, Chief Financial Officer and Treasurer from November 1994 until November 1996.

STEVEN P. BOWMAN has been Executive Vice President, Chief Credit Officer since March 2000. He served as Senior Vice President, Risk Management from May 1998 until March 2000 and was Vice President, Risk Management from June 1997 until May 1998. From February 1996 until June 1997, Mr. Bowman was Assistant Vice President, Risk Management.

CHRIS A. CHOATE has been Executive Vice President, Chief Legal Officer and Secretary since November 1999. He served as Senior Vice President, General Counsel and Secretary from November 1996 to November 1999. Mr. Choate was Vice President, General Counsel and Secretary from November 1994 until November 1996.

RICHARD E. DALY has been Executive Vice President, Chief Learning Officer since January 2002. He served as Senior Vice President, Learning & Performance from July 2000 until January 2002. Prior to July 2000, Dr. Daly was President of Humanex, Inc., a management consulting firm, serving in that position for over five years.

EDWARD H. ESSTMAN has been an Executive Vice President since April 2003 and was Vice Chairman from August 2001 until April 2003. Mr. Esstman served as Executive Vice President, Dealer Services and Co-Chief Operating Officer from October 2000 to August 2001, Executive Vice President, Dealer Services from October 1999 to October 2000, Executive Vice President, Auto Finance Division from November 1996 to October 1999 and Senior Vice President and Chief Credit Officer from November 1994 to November 1996.

S. MARK FLOYD has been Executive Vice President, Chief Operating Officer since April 2003. He served as President, Dealer Services from August 2001 until April 2003. Mr. Floyd served as Executive Vice President, Dealer Services from November 1999 to August 2001 and was Senior Vice President, Director Strategic Alliance from January 1998 to November 1999. He was Senior Vice President, Strategic Alliance from September 1997 to January 1998.

JOSEPH E. McCLURE was Executive Vice President, Chief Information Officer from April 1999 to June 2003. He served as Senior Vice President, Chief Information Officer from October 1998 until April 1999. Prior to October 1998, Mr. McClure was Executive Vice President and Division Information Officer of Associates First Capital Corp. and was in that position for more than five years. In July 2003, Mr. McClure was reassigned to a non-executive officer position.

CHERYL L. MILLER was Executive Vice President, Consumer Services from April 2003 to June 2003 and was President, Consumer Services from May 2001 until April 2003. She served as Executive Vice President, Director of Collections and Customer Service from June 1998 to May 2001 and was Senior Vice President, Collections and Customer Service from October 1994 to June 1998. In July 2003, Ms. Miller was reassigned to a non-executive officer position.

PRESTON A. MILLER has been Executive Vice President, Chief Financial Officer and Treasurer since April 2003. Mr. Miller was Executive Vice President, Treasurer from July 1998 until April 2003. He served as Senior Vice President, Treasurer from November 1996 until July 1998 and Vice President, Controller from November 1994 until November 1996.

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KARL J. REEB has been Executive Vice President, Chief Administration Officer since November 1999. Prior to November 1999, Mr. Reeb held various human resource executive positions with Verizon and its predecessor company for approximately 10 years.

Available Information

The Company makes available free of charge through its website, www.americredit.com, securitization portfolio performance measures and all materials that it files electronically with the Securities and Exchange Commission (“SEC”), including the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practical after filing or furnishing such material with the SEC.

The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

ITEM 2.    Properties

The Company’s executive offices are located at 801 Cherry Street, Suite 3900, Fort Worth, Texas, in a 227,000 square foot office space under a 12-year lease that commenced in July 1999. The Company also leases 150,000 square feet of office space in Chandler, Arizona, under a ten-year agreement with renewal options; 76,000 square feet of office space in Charlotte, North Carolina, under a ten-year agreement with renewal options; 85,000 square feet of office space in Peterborough, Ontario, under a ten-year agreement with renewal options; and 85,000 square feet of office space in Jacksonville, Florida, under a ten-year agreement with renewal options. The Company also owns two 250,000 square foot servicing facilities in Arlington, Texas.

The Company’s branch office facilities are generally leased under agreements with original terms of three to five years. Such facilities are typically located in a suburban office building and consist of between 1,000 and 2,000 square feet of space.

ITEM 3.    Legal Proceedings

As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against the Company could take the form of class action complaints by consumers. As the assignee of finance contracts originated by dealers, the Company may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but includes requests for compensatory, statutory and punitive damages.

Several complaints have been filed by shareholders against the Company and certain of the Company’s officers and directors alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The lawsuits, all of which seek class action status, have been consolidated into one action pending in the United States District Court for the Northern District of Texas Fort Worth Division. The consolidated lawsuit claims, among other allegations, that deferments were improperly granted by the Company to avoid delinquency triggers in securitization transactions and enhance cash flows, thereby causing the Company to misrepresent its financial performance throughout the alleged class period. The Company believes that its granting of deferments, which is a common practice within the auto finance industry, complied with the

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covenants contained in its securitization and warehouse financing documents, and that its deferment activities were properly disclosed to all constituents, including shareholders, asset-backed investors, creditors and credit enhancement providers. In the opinion of management, the consolidated lawsuit is without merit and the Company intends to vigorously defend against it.

Additionally, a complaint has been filed against the Company and certain of its officers and directors in the 48^th Judicial District Court of Tarrant County, Texas alleging violations of Sections 11 and 15 of the Securities Act of 1933 in connection with the Company’s secondary public offering of common stock on October 1, 2002. This lawsuit, which seeks class action status on behalf of all persons who purchased in such secondary offering, alleges that the Company’s registration statement and prospectus for the offering contained untrue statements of material facts and omitted to state material facts necessary to make other statements in the registration statement not misleading. The shares issued by the Company in the secondary offering were priced at $7.50 per share; at the time this lawsuit was filed, the Company’s stock price was $7.88. This lawsuit has been removed by the Company to the United States District Court for the Northern District of Texas, Fort Worth Division, where a motion filed by the plaintiff seeking remand to the state district court is presently pending. In the opinion of management, this lawsuit is without merit and the Company intends to vigorously defend against it.

Two shareholder derivative actions have also been served on the Company. On February 27, 2003, the Company was served with a shareholder’s derivative action filed in the United States District Court for the Northern District of Texas, Fort Worth Division, entitled Mildred Rosenthal, derivatively and on behalf of nominal defendant AmeriCredit Corp. v. Clifton H. Morris, Jr., et al. A second shareholder derivative action was filed in the District Court of Tarrant County, Texas 48^th Judicial District, on August 19, 2003, entitled David Harris, derivatively and on behalf of nominal defendant AmeriCredit Corp. v. Clifton H. Morris, Jr., et al. Both of these shareholder derivative actions allege, among other complaints, that certain officers and directors of the Company breached their respective fiduciary duties by causing the Company to make improper deferments, violated federal and state securities laws and issued misleading financial statements. The substantive allegations in both of the derivative actions are essentially the same as those in the above-referenced class actions.

The Company believes that it has taken prudent steps to address the litigation risks associated with its business activities. In the opinion of management, the resolution of the litigation pending or threatened against the Company, including the proceedings specifically described in this section, will not have a material effect on the Company’s financial condition, results of operations or cash flows.

ITEM 4.    Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of the Company’s security holders during the fourth quarter ended June 30, 2003.

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PART II

ITEM 5.    Market for Registrant’s Common Equity and Related Stockholder Matters

The Company’s common stock trades on the New York Stock Exchange under the symbol ACF. As of September 12, 2003, there were 156,453,979 shares of common stock outstanding and approximately 300 shareholders of record.

The following table sets forth the range of the high, low and closing sale prices for the Company’s common stock as reported on the Composite Tape of the New York Stock Exchange Listed Issues.

The Company has never paid cash dividends on its common stock. The indentures pursuant to which the Company’s senior notes were issued contain certain restrictions on the payment of dividends. The Company presently intends to retain future earnings, if any, for use in the operation and expansion of the business and does not anticipate paying any cash dividends in the foreseeable future.

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ITEM 6.    Selected Financial Data

The table below summarizes selected financial information. For additional information, refer to the audited consolidated financial statements and notes thereto in Item 8. Financial Statements and Supplementary Data.

ITEM 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The Company is a consumer finance company specializing in purchasing retail automobile installment sales contracts originated by franchised and select independent dealers in connection with the sale of used and new automobiles. The Company generates revenue and cash flows primarily through the purchase, retention, subsequent securitization and servicing of finance receivables. As used herein, “loans” include auto finance receivables originated by dealers and purchased by the Company. To fund the acquisition of receivables prior to securitization, the Company uses borrowings under its warehouse credit facilities. The Company earns finance charge income on the finance receivables and pays interest expense on borrowings under its warehouse credit facilities.

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The Company periodically transfers receivables to securitization Trusts (“Trusts”) that, in turn, sell asset-backed securities to investors. The Company retains an interest in the securitization transactions in the form of credit enhancement assets, including the estimated future excess cash flows expected to be received by the Company over the life of the securitization. Excess cash flows result from the difference between the finance charges received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses.

Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to the Company. Credit enhancement requirements will increase if targeted portfolio performance ratios are exceeded (see Liquidity and Capital Resources section). In addition to excess cash flows, the Company earns monthly base servicing income of 2.25% per annum on the outstanding principal balance of domestic receivables securitized and collects other fees, such as late charges, as servicer for those Trusts.

The Company has changed the structure of its securitization transactions beginning with transactions closed subsequent to September 30, 2002, to no longer meet the criteria for sales of finance receivables. Accordingly, following a securitization, the finance receivables and the related securitization notes payable remain on the consolidated balance sheets. The Company recognizes finance charge and fee income on the receivables and interest expense on the securities issued in the securitization transaction, and records a provision for loan losses to cover probable loan losses on the receivables. This change has significantly impacted the Company’s reported results of operations compared to its historical results because there is no gain on sale of receivables subsequent to September 30, 2002. Accordingly, historical results may not be indicative of the Company’s future results.

The Company reduced its workforce in November 2002 and implemented a revised operating plan in February 2003 in an effort to preserve and strengthen its capital and liquidity position. The revised operating plan included a decrease in the Company’s targeted loan origination volume to approximately $750.0 million per quarter and a reduction of operating expenses through downsizing its workforce, consolidating its branch office network and closing its Canadian lending activities.

On April 23, 2003, the Board of Directors of the Company announced the reorganization of the Company’s executive management team. Michael R. Barrington stepped down as President and Chief Executive Officer and Michael T. Miller stepped down as Chief Operating Officer. Clifton H. Morris, Jr., Chairman of the Board, assumed the Chief Executive Officer position. Daniel E. Berce was promoted from Chief Financial Officer to President. Preston A. Miller was promoted to Chief Financial Officer and Mark Floyd was promoted to Chief Operating Officer.

On August 25, 2003, the Company issued a press release reporting a restatement of its financial statements for the year ended June 30, 2002, and for the first three quarters of the year ended June 30, 2003, as a result of a review of the accounting treatment under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) for certain interest rate swap agreements that were entered into prior to 2001 and used to hedge interest rate risk on a portion of its cash flows from credit enhancement assets.

The Company enters into interest rate swap agreements to hedge the variability in future excess cash flows attributable to fluctuations in interest rates on floating rate securities issued in connection with its securitizations accounted for as sales. The cash flows are expected to be received over the life of the securitizations. Prior to calendar 2001, the Company entered into interest rate swap agreements outside of the securitization Trusts, at the corporate level. Upon implementation of SFAS 133 on July 1, 2000, the swap agreements were valued and recorded separately from the credit enhancement assets on the consolidated balance sheets, with changes in the

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fair value of the interest rate swap agreements recorded in other comprehensive income. Unrealized losses or gains related to the interest rate swap agreements were reclassified from accumulated other comprehensive income into earnings as accretion was recorded on the hedged cash flows of the credit enhancement assets. However, as unrealized gains related to the credit enhancement assets declined due to worse than expected credit losses and unrealized losses related to the interest rate swap agreements increased due to a declining interest rate environment, a combined net unrealized loss position developed in accumulated other comprehensive income. Previously, the Company reclassified amounts from accumulated other comprehensive income into earnings based upon the cash flows of the credit enhancement assets utilizing a discount rate which resulted in all of the remaining unrealized loss in accumulated other comprehensive income being reclassified into earnings in the same period when the remaining accretion on the credit enhancement assets was projected to be realized. A review of this accounting treatment indicated that the Company should have reclassified additional accumulated other comprehensive losses into earnings since the combination of the derivative instrument and the hedged item resulted in net unrealized losses that were not expected to be recovered in future periods. Accordingly, the Company restated its financial statements for the year ended June 30, 2002, and for the first three quarters of the year ended June 30, 2003, to reclassify additional unrealized losses to net income from accumulated other comprehensive income. Additionally, in conjunction with the reclassification of unrealized losses to net income, the Company also recorded an other-than-temporary impairment during the June 2002 quarter that resulted in a write down of credit enhancement assets and a $4.9 million, net of tax, decrease in shareholders’ equity at June 30, 2002. The restatement had no effect on the cash flows of such transactions. The Company has been contacted by the staff of the Securities and Exchange Commission (“SEC”) and informally requested to provide the staff with certain documents and other information related to the restatement. The Company intends to voluntarily cooperate with this request and to assist the SEC in its review of the restatement. See additional discussion in Note 2 to the Consolidated Financial Statements.

The restatement resulted in the following changes to the financial statements for the year ended June 30, 2002 (in thousands, except per share data):

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Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the amount of revenue and costs and expenses during the reporting periods. Actual results could differ from those estimates and those differences may be material. The accounting estimates that the Company believes are the most critical to understanding and evaluating the Company’s reported financial results include the following:

Gain on sale of receivables

The Company periodically transfers receivables to Trusts that, in turn, sell asset-backed securities to investors. Prior to October 1, 2002, the Company recognized a gain on the sale of receivables to the Trusts, which represents the difference between the sale proceeds to the Company, net of transaction costs, and the Company’s net carrying value of the receivables, plus the present value of the estimated future excess cash flows to be received by the Company over the life of the securitization. The Company has made assumptions in order to determine the present value of the estimated future excess cash flows to be generated by the pool of receivables sold. The most significant assumptions made are the cumulative credit losses to be incurred on the pool of receivables sold, the timing of those losses and the rate at which the estimated future excess cash flows are discounted.

Significant assumptions used in determining the gain on sale of auto receivables were as follows:

The cumulative credit loss assumptions utilized at the time of sale of receivables were determined using a range of possible outcomes based on historical experience, credit attributes for the specific pool of receivables and general economic factors. The unrealized gains at time of sale represent the excess of the fair value of credit enhancement assets over the Company’s carrying value related to such interests when receivables are sold. The cumulative credit loss assumption, including unrealized gains at time of sale, reflects the approximate level that cumulative credit losses could reach (notwithstanding other assumptions) in a securitization pool before the credit enhancement assets would suffer an other-than-temporary impairment.

The discount rates used to estimate the present value of credit enhancement assets are based on the relative risks of each asset type. Interest-only receivables from Trusts represent estimated future excess cash flows in the Trusts and have a first loss position to absorb any shortfall in Trust cash flows due to adverse credit loss development or adverse changes in Trust performance relative to other assumptions. While the Company earns a higher yield on its securitized receivables, the Company utilizes a 14% discount rate for interest-only receivables from Trusts since net undiscounted estimated future excess cash flows already incorporate a default assumption and the receivables underlying the securitization represent a diverse pool of assets. Restricted cash and investments in Trust receivables are backed by cash and receivables and are senior to interest-only receivables from Trusts for credit enhancement purposes. Accordingly, restricted cash and investments in Trust receivables are assigned a lower discount rate than the interest-only receivables from Trusts. The assumptions used represent the Company’s best estimates. The use of different assumptions would produce different financial results. See additional discussion regarding sensitivity analysis surrounding assumptions used in Note 5 to the Consolidated Financial Statements.

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Fair value measurements

Certain of the Company’s assets, including the Company’s derivative financial instruments and credit enhancement assets related to gain on sale Trusts, are recorded at fair value. Fair values for derivative financial instruments are based on third-party quoted market prices, where possible. However, market prices are not readily available for the Company’s credit enhancement assets and, accordingly, fair value is determined using discounted cash flow models. The most significant assumptions made are the cumulative net credit losses to be incurred on the pool of receivables sold, the timing of those losses and the rate at which estimated future excess cash flows are discounted. The assumptions used represent the Company’s best estimates. The use of different assumptions would result in different carrying values for the Company’s credit enhancement assets and changes in the accretion of present value discount and impairment of credit enhancement assets recognized through the consolidated statements of income. Additionally, if actual cumulative net credit losses exceed the Company’s estimate, additional impairment of credit enhancement assets could result.

Allowance for loan losses

The Company reviews charge-off experience factors, delinquency reports, historical collection rates, estimates of the value of the underlying collateral, economic trends, such as unemployment rates, and other information in order to make the necessary judgments as to probable credit losses on finance receivables. Receivables, including accrued interest, are charged-off to the allowance for loan losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectable. As of June 30, 2003, the Company believes that the allowance for loan losses is adequate to cover probable losses inherent in its receivables; however, because the allowance for loan losses is based on estimates, there can be no assurance that the ultimate charge-off amount will not exceed such estimates, which would result in an additional charge to operations. See additional discussion in Note 3 to the Consolidated Financial Statements.

Derivative financial instruments

The Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by Statement of Financial Accounting Standards No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133, an amendment of FASB Statement No. 133,” Statement of Financial Accounting Standards No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133” and Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS 133”), on July 1, 2000. Unrealized gains and losses on derivatives that arose prior to the initial application of SFAS 133 and that were previously deferred as adjustments of the carrying amount of hedged items were not adjusted. Accordingly, the Company did not record a transition adjustment from the adoption of SFAS 133.

The Company sells fixed rate auto receivables to Trusts that, in turn, sell either fixed rate or floating rate securities to investors. The interest rates on the floating rate securities issued by the Trusts are indexed to various London Interbank Offered Rates (“LIBOR”). The Company utilizes interest rate swap agreements to convert floating rate exposures on securities issued by the Trusts to fixed rates, hedging the variability in future excess cash flows to be received by the Company over the life of the securitization attributable to interest rate risk. These interest rate swap agreements are designated as cash flow hedges and are highly effective in hedging the Company’s exposure to interest rate risk from both an accounting and economic perspective.

The fair value of the interest rate swap agreements is included in the Company’s consolidated balance sheets, and the related unrealized gains or losses on these agreements are deferred and included in shareholders’ equity as a component of accumulated other comprehensive income. These unrealized gains or losses are recognized as an adjustment to income over the same period in which cash flows from the related credit enhancement assets affect earnings. However, if the Company expects the continued reporting of a loss in

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accumulated other comprehensive income would lead to recognizing a net loss on the combination of the interest rate swap agreements and the hedged asset, the loss is reclassified to earnings for the amount that is not expected to be recovered. Additionally, to the extent that any of these contracts are not considered to be perfectly effective in offsetting the change in the value of the cash flows being hedged, any changes in fair value relating to the ineffective portion of these contracts are recognized in income.

During fiscal 2002, the Company also utilized an interest rate swap agreement to hedge the change in fair value of certain of its fixed rate senior notes. The change in fair value of the interest rate swap agreement and the senior notes were recognized in income. The interest rate swap agreement has been terminated and the previous adjustments to the carrying value of the senior notes are being amortized into interest expense over the expected life of the senior notes on an effective yield basis.

The Company formally documents all relationships between interest rate swap agreements and the underlying asset, liability or cash flows being hedged, as well as its risk management objective and strategy for undertaking the hedge transactions. At hedge inception and at least quarterly, the Company also formally assesses whether the interest rate swap agreements that are used in hedging transactions have been highly effective in offsetting changes in the cash flows or fair value of the hedged items and whether those interest rate swap agreements may be expected to remain highly effective in future periods. The Company will discontinue hedge accounting prospectively when it is determined that an interest rate swap agreement has ceased to be highly effective as a hedge.

The Company also utilizes interest rate cap agreements as part of its interest rate risk management strategy for securitization transactions as well as for warehouse credit facilities. The Trusts and the Company’s wholly- owned special purpose finance subsidiaries typically purchase interest rate cap agreements to limit variability in excess cash flows from receivables sold to the Trusts or financed under warehouse credit facilities due to potential increases in interest rates. The purchaser of the interest rate cap agreement pays a premium in return for the right to receive the difference in the interest cost at any time a specified index of market interest rates rises above the stipulated “cap” rate. The interest rate cap agreement purchaser bears no obligation or liability if interest rates fall below the “cap” rate. The Company’s special purpose finance subsidiaries are contractually required to purchase interest rate cap agreements as credit enhancement in connection with securitization transactions and warehouse credit facilities. As part of the Company’s interest rate risk management strategy and when economically feasible, the Company may simultaneously sell a corresponding interest rate cap agreement in order to offset the premium paid to purchase the interest rate cap agreement and thus retain the interest rate risk. The fair value of the interest rate cap agreements purchased and sold by the Company is included in other assets and derivative financial instruments, respectively, on the Company’s consolidated balance sheets. The intrinsic value of the interest rate cap agreements purchased by the Trusts is reflected in the valuation of the credit enhancement assets.

The Company does not hold any interest rate cap or swap agreements for trading purposes.

RESULTS OF OPERATIONS

Year Ended June 30, 2003 as compared to Year Ended June 30, 2002

Revenue

The Company’s average managed receivables outstanding consisted of the following (in thousands):

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Average managed receivables outstanding increased by 26% as a result of the purchase of loans in excess of collections and charge-offs. The Company purchased $6,310.6 million of auto loans during fiscal 2003, compared to purchases of $8,929.4 million during fiscal 2002. This decrease resulted from a reduction in the number of the Company’s branch offices in connection with the Company’s revised operating plan implemented in February 2003. The Company operated 90 auto lending branch offices as of June 30, 2003, compared to 251 as of June 30, 2002.

The average new loan size was $16,833 for fiscal 2003, compared to $16,428 for fiscal 2002. The increase in average new loan size was due to a change in the mix of business towards financing later model vehicles. The average annual percentage rate for finance receivables purchased during fiscal 2003 was 16.7%, compared to 17.7% during fiscal 2002. Decreasing short-term market interest rates have lowered the Company’s cost of funds, allowing the Company to pass along some of this benefit to consumers in the form of lower loan pricing.

Finance charge income increased by 81% to $613.2 million for fiscal 2003 from $339.4 million for fiscal 2002. Finance charge income was higher due to an increase in average on-book receivables that resulted primarily from the Company’s decision to structure securitization transactions as secured financings. The Company’s effective yield on its on-book finance receivables decreased to 16.5% for fiscal 2003 from 19.4% for fiscal 2002. The effective yield is higher than the contractual rates of the Company’s auto finance contracts as a result of finance charge income earned between the date the auto finance contract is originated by the automobile dealership and the date the auto finance contract is funded by the Company. The effective yield decreased for fiscal 2003 due to lower levels of finance charges earned between the origination date and funding date as well as lower loan pricing.

The gain on sale of receivables decreased by 71% to $132.1 million for fiscal 2003 from $448.5 million for fiscal 2002. The decrease in gain on sale of receivables resulted from the Company’s decision to structure securitization transactions subsequent to September 30, 2002, to no longer meet the criteria for sales of finance receivables. During fiscal 2003, $2,507.9 million of finance receivables securitized were accounted for as sales of receivables as compared to $8,608.9 million during fiscal 2002. The gain as a percentage of the receivables securitized in gain on sale Trusts remained relatively stable at 5.3% for fiscal 2003 as compared to 5.2% for fiscal 2002.

Servicing income was $211.3 million, or 1.8% of average gain on sale auto receivables, for fiscal 2003, compared to $335.9 million, or 3.1% of average gain on sale auto receivables, for fiscal 2002. Servicing income represents accretion of the present value discount, base servicing fees, and other fees earned by the Company as servicer of the receivables sold to the Trusts. Servicing income also includes other-than-temporary impairment charges of $189.5 million and $53.9 million for fiscal 2003 and 2002, respectively. Other-than-temporary impairment resulted from increased default rates caused by continued weakness in the economy, lower than expected recovery proceeds caused by depressed used car values and the expectation that current economic conditions will continue for the foreseeable future. In addition, the Company’s credit enhancement assets are carried on its financial statements based on the present value of future excess cash flows to be received by the Company from securitization Trusts. In fiscal 2003, the expected delay in cash distributions from the FSA Program securitizations due to breaches of certain portfolio performance ratios and, to a lesser extent, additional insurance fees payable to FSA in connection with the amendment to the event of default net loss ratios reduced the present value of such cash distributions and resulted in other-than-temporary impairment.

Other income was $24.6 million for fiscal 2003, compared to $12.9 million for fiscal 2002. The increase in other income is primarily due to investment income earned on higher average cash and restricted cash balances, an increase in late fees collected on finance receivables held by the Company and additional other fees received.

Costs and Expenses

Operating expenses decreased to $373.7 million for fiscal 2003 from $424.1 million for fiscal 2002. As a percentage of average managed receivables outstanding, operating expenses decreased to 2.4% for fiscal 2003,

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compared to 3.4% for fiscal 2002. Operating expenses declined primarily as a result of a reduction in workforce in November 2002 and implementation of a revised operating plan in February 2003.

The Company recognized $63.3 million in restructuring charges including $6.9 million for its November 2002 reduction in workforce and $56.4 million related to the implementation of a revised operating plan in February 2003. The revised operating plan included a decrease in the Company’s targeted loan origination volume to approximately $750.0 million per quarter and a reduction of operating expenses. The restructuring charges consisted primarily of severance costs of identified workforce reductions of approximately 1,200 positions related to the consolidation/closing of 161 branch offices including the closing of the Company’s Canadian lending activities, costs incurred to terminate facility and equipment leases prior to their expiration date as well as estimated costs that will continue to be incurred under the contracts for their remaining terms without economic benefit to the Company. The restructuring charges also include $20.8 million of previously capitalized costs for discontinuation of the development of the Company’s customer relationship management system, which was designed to provide operational scalability and marketing benefits in a high-growth environment.

The provision for loan losses increased to $307.6 million for fiscal 2003 from $65.2 million for fiscal 2002. As an annualized percentage of average on-book receivables, the provision for loan losses was 8.3% and 3.7% for fiscal 2003 and 2002, respectively. Subsequent to September 30, 2002, the Company changed the structure of its securitization transactions to no longer meet the criteria for sales of finance receivables. Under this new structure, finance receivables remain on the Company’s balance sheet throughout their term, and credit losses related to those securitized receivables are provided for as a charge to operations. The remaining increase reflects the general expectation that current economic conditions, including elevated unemployment rates, will result in a higher number of charge-offs, and that depressed wholesale auction prices on the sale of repossessed vehicles will result in a higher amount charged-off per loan.

Interest expense increased to $202.2 million for fiscal 2003 from $135.9 million for fiscal 2002 due to higher debt levels. Average debt outstanding was $4,167.8 million and $2,366.3 million for fiscal 2003 and 2002, respectively. The increase in average debt outstanding results from the Company’s decision to structure securitization transactions subsequent to September 30, 2002, as secured financings. The Company’s effective rate of interest paid on its debt decreased to 4.9% from 5.7% as a result of lower short-term market interest rates.

The Company’s effective income tax rate was 38.5% for fiscal 2003 and 2002.

Other Comprehensive Loss

Other comprehensive loss consisted of the following (in thousands):

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Credit Enhancement Assets

The decrease in unrealized gains on credit enhancement assets consisted of the following (in thousands):

The unrealized gains at time of sale represent the excess of the fair value of credit enhancement assets over the Company’s allocated carrying value related to such interests when receivables are sold. Unrealized gains at time of sale were lower for fiscal 2003 as compared to fiscal 2002 due to the change in the structure of securitization transactions entered into subsequent to September 30, 2002, to no longer meet the criteria for sales of finance receivables.

Changes in the fair value of credit enhancement assets as a result of modifications to the credit loss assumptions are reported as unrealized gains in other comprehensive loss until realized, or, in the case of unrealized losses considered to be other-than-temporary, as a charge to operations. The cumulative credit loss assumptions used to estimate the fair value of credit enhancement assets are periodically reviewed by the Company and modified to reflect the actual credit performance for each securitization pool through the reporting date as well as estimates of future losses considering several factors including changes in the general economy. Differences between cumulative credit loss assumptions used in individual securitization pools can be attributed to the original credit attributes of a pool, actual credit performance through the reporting date and pool seasoning to the extent that changes in economic trends will have more of an impact on the expected future performance of less seasoned pools.

The Company increased the cumulative credit loss assumptions (including remaining unrealized gains at time of sale) used in measuring the fair value of credit enhancement assets to a range of 11.3% to 14.7% as of June 30, 2003, from a range of 10.4% to 12.7% as of June 30, 2002, which, together with the expected delay in cash distributions from the FSA Program, caused an other-than-temporary impairment charge of $189.5 million and a decrease in unrealized gains of $96.9 million for fiscal 2003. The range of cumulative credit loss assumptions was increased to reflect adverse actual credit performance compared to previous assumptions as well as expectations for higher future losses due to continued weakness in the general economy. The increase in unrealized gains of $59.5 million for fiscal 2002 was due to the decline in the carrying value of credit enhancement assets resulting from the reclassification of unrealized gains and losses between credit enhancement assets and cash flow hedges. This was partially offset by an increase in the range of cumulative credit loss assumptions for securitization Trusts to reflect adverse actual credit performance compared to previous assumptions as well as expectations for higher future losses due to economic weakness. Cumulative credit loss assumptions (including remaining unrealized gains at time of sale) used in measuring the fair value of credit enhancement assets ranged from 10.4% to 12.7% as of June 30, 2002, as compared to 8.7% to 11.7% as of June 30, 2001.

Decreases in unrealized gains related to changes in interest rates of $19.5 million and $22.3 million for fiscal 2003 and 2002, respectively, resulted primarily from a decline in estimated future cash flows to be generated from investment income earned on the restricted cash and Trust collections accounts due to lower interest rates. The lower earnings were partially offset by an increase in value associated with a decrease in interest rates payable to investors on the floating rate tranches of securitization transactions.

Net unrealized gains of $35.6 million and $115.7 million were reclassified into earnings through accretion during fiscal 2003 and 2002, respectively, and relate primarily to recognition of actual excess cash collected over

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the Company’s initial estimate and recognition of unrealized gains at time of sale. Included in the net unrealized gains reclassified into earnings during fiscal 2003 and 2002, are net unrealized gains of $13.5 million and $53.7 million, respectively, related to fluctuations in interest rates during the respective periods which are offset by cash flow hedges described below.

Cash Flow Hedges

Unrealized losses on cash flow hedges decreased by $14.0 million and $22.9 million for fiscal 2003 and 2002, respectively. Unrealized gains or losses on cash flow hedges are reclassified into earnings as unrealized gains or losses related to interest rate fluctuations on the Company’s credit enhancement assets are reclassified. However, if the Company expects the continued reporting of a loss in accumulated other comprehensive income would lead to recognizing a net loss on the combination of the interest rate swap agreements and the credit enhancement assets, the loss is reclassified to earnings for the amount that is not expected to be recovered. Net unrealized losses reclassified into earnings were $66.6 million and $92.2 million for fiscal 2003 and 2002, respectively.

Canadian Currency Translation Adjustment

Canadian currency translation adjustment gains of $12.4 million and $2.0 million for fiscal 2003 and 2002, respectively, were included in other comprehensive loss. This unrealized gain is due to the increase in the value of the Company’s Canadian dollar denominated assets related to the decline in the U.S. dollar to Canadian dollar conversion rates during the years. The Company does not anticipate the settlement of intercompany transactions with its Canadian subsidiaries in the foreseeable future.

Net Margin

Net margin is the difference between finance charge and other income earned on the Company’s receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

The Company’s net margin as reflected on the consolidated statements of income is as follows (in thousands):

The Company evaluates the profitability of its lending activities based partly upon the net margin related to its managed auto loan portfolio, including on-book and gain on sale receivables. The Company uses this information to analyze trends in the components of the profitability of its managed auto portfolio. Analysis of net margin on a managed basis allows the Company to determine which origination channels and loan products are most profitable, guides the Company in making pricing decisions for loan products and indicates if sufficient spread exists between the Company’s revenues and cost of funds to cover operating expenses and achieve corporate profitability objectives. Additionally, net margin on a managed basis facilitates comparisons of results between the Company and other finance companies (i) that do not securitize their receivables or (ii) due to the structure of their securitization transactions, are not required to account for the securitization of their receivables as a sale.

The Company routinely securitizes its receivables and prior to October 1, 2002, recorded a gain on the sale of such receivables. The net margin on a managed basis presented below assumes that all securitized receivables have not been sold and are still on the Company’s consolidated balance sheet. Accordingly, no gain on sale or

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servicing income would have been recognized. Instead, finance charges would be recognized over the life of the securitized receivables as earned, and interest and other costs related to the asset-backed securities would be recognized as incurred.

Net margin for the Company’s managed finance receivables portfolio is as follows (in thousands):

Net margin as a percentage of average managed finance receivables outstanding is as follows (dollars in thousands):

The following is a reconciliation of finance charge and other income as reflected on the Company’s consolidated statements of income to the Company’s managed basis finance charge and other income (in thousands):

The following is a reconciliation of interest expense as reflected on the Company’s consolidated statements of income to the Company’s managed basis interest expense (in thousands):

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Year Ended June 30, 2002 as compared to Year Ended June 30, 2001

Revenue

The Company’s average managed receivables outstanding consisted of the following (in thousands):

Average managed receivables outstanding increased by 50% as a result of the purchase of loans in excess of collections and charge-offs. The Company purchased $8,929.4 million of auto loans during fiscal 2002, compared to purchases of $6,378.7 million during fiscal 2001. This growth resulted from increased loan production at branches open during both periods as well as expansion of the Company’s branch network. Loan purchases at branch offices opened prior to June 30, 2000, were 10% higher in fiscal 2002 versus fiscal 2001. The Company operated 251 auto lending branch offices as of June 30, 2002, compared to 232 as of June 30, 2001.

The average new loan size was $16,428 for fiscal 2002, compared to $15,430 for fiscal 2001. The average annual percentage rate for finance receivables purchased during fiscal 2002 was 17.7%, compared to 19.0% during fiscal 2001. Decreasing short-term market interest rates have lowered the Company’s cost of funds, allowing the Company to pass along some of this benefit to consumers in the form of lower loan pricing.

Finance charge income increased by 51% to $339.4 million for fiscal 2002 from $225.2 million for fiscal 2001. Finance charge income was higher due primarily to an increase of 68% in average on-book receivables in fiscal 2002 versus fiscal 2001. The Company’s effective yield on its on-book finance receivables decreased to 19.4% for fiscal 2002 from 21.5% for fiscal 2001. The effective yield is higher than the contractual rates of the Company’s auto finance contracts as a result of finance charge income earned between the date the auto finance contract is originated by the automobile dealership and the date the auto finance contract is funded by the Company. The effective yield decreased for fiscal 2002 due to lower loan pricing.

The gain on sale of receivables increased by 49% to $448.5 million for fiscal 2002 from $301.8 million for fiscal 2001. The increase in gain on sale of receivables resulted from the sale of $8,608.9 million of receivables in fiscal 2002 as compared to $5,300.0 million of receivables sold in fiscal 2001. The gain as a percentage of the receivables securitized in gain on sale Trusts decreased to 5.2% for fiscal 2002 from 5.7% for fiscal 2001 primarily due to the use of higher cumulative credit loss assumptions. The Company increased the assumption for cumulative credit losses used in determining the gain on sale of receivables from 11.3% for fiscal 2001 to 12.5% for fiscal 2002 to incorporate an expected increase in credit losses resulting from the general decline in the economy, including higher unemployment rates.

Servicing income increased to $335.9 million, or 3.1% of average gain on sale auto receivables, for fiscal 2002, compared to $281.2 million, or 3.9% of average gain on sale auto receivables, for fiscal 2001. Servicing income represents accretion of the present value discount on estimated future excess cash flows from the Trusts, base servicing fees and other fees earned by the Company as servicer of the receivables sold to the Trusts. Servicing income also includes other-than-temporary impairment charges of $53.9 million for fiscal 2002. Other-than-temporary impairment resulted from increased default rates caused by continued weakness in the economy and lower than expected recovery proceeds caused by depressed used car values. The growth in servicing income is primarily attributable to the increase in average gain on sale auto receivables outstanding for fiscal 2002 compared to fiscal 2001.

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Costs and Expenses

Operating expenses as a percentage of average managed receivables outstanding decreased to 3.4% for fiscal 2002, compared to 3.7% for fiscal 2001. The ratio improved as a result of economies of scale realized from a growing receivables portfolio and automation of loan origination, processing and servicing functions. The dollar amount of operating expenses increased by $115.7 million, or 38%, primarily due to the addition of branch offices and loan processing and servicing staff.

The provision for loan losses increased to $65.2 million for fiscal 2002 from $31.4 million for fiscal 2001 primarily due to higher average amounts of on-book receivables and the use of a higher provision for loan loss rate. As a percentage of average on-book receivables, the provision for loan losses was 3.7% and 3.0% for fiscal 2002 and 2001, respectively. The increase in the rate of provision for loan losses reflects the general expectation that continuing weakness in the economy, including an increase in unemployment rates, will cause a higher number of delinquent accounts. Since accounts delinquent for greater than 30 days are ineligible for securitization, receivables held indefinitely by the Company may increase, resulting in higher losses on receivables prior to securitization.

Interest expense increased to $135.9 million for fiscal 2002 from $116.0 million for fiscal 2001 due to higher debt levels. Average debt outstanding was $2,366.3 million and $1,255.0 million for fiscal 2002 and 2001, respectively. The Company’s effective rate of interest paid on its debt decreased to 5.7% from 9.2% as a result of lower short-term market interest rates.

The Company’s effective income tax rate was 38.5% for fiscal 2002 and 2001.

Other Comprehensive (Loss) Income

Other comprehensive (loss) income consisted of the following (in thousands):

Credit Enhancement Assets

The (decrease) increase in unrealized gains on credit enhancement assets consisted of the following (in thousands):

The unrealized gains at time of sale represent the excess of the fair value of credit enhancement assets over the Company’s allocated carrying value related to such interests when receivables are sold. Unrealized gains at time of sale were higher for fiscal 2002 as compared to fiscal 2001 due to a greater amount of receivables sold in fiscal 2002.

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Changes in the fair value of credit enhancement assets as a result of modifications to the credit loss assumptions are reported as unrealized gains in other comprehensive income until realized, or, in the case of unrealized losses considered to be other-than-temporary, as a charge to operations. The cumulative credit loss assumptions used to estimate the fair value of credit enhancement assets are periodically reviewed by the Company and modified to reflect the actual credit performance for each securitization pool through the reporting date as well as estimates of future losses considering several factors including changes in the general economy. Differences between cumulative credit loss assumptions used in individual securitization pools can be attributed to the original credit attributes of a pool, actual credit performance through the reporting date and pool seasoning to the extent that changes in economic trends will have more of an impact on the expected future performance of less seasoned pools.

Unrealized gains increased by $59.5 million for fiscal 2002 due to the decline in the carrying value of credit enhancement assets resulting from the reclassification of unrealized gains and losses between credit enhancement assets and cash flow hedges. This was partially offset by an increase in the range of cumulative credit loss assumptions for securitization Trusts to reflect adverse actual credit performance compared to previous assumptions as well as expectations for higher future losses due to economic weakness. Cumulative credit loss assumptions (including remaining unrealized gains at time of sale) used in measuring the fair value of credit enhancement assets ranged from 10.4% to 12.7% as of June 30, 2002, as compared to 8.7% to 11.7% as of June 30, 2001.

The Company decreased the cumulative credit loss assumptions (including remaining unrealized gain at time of sale) used in measuring the fair value of credit enhancement assets to a range of 8.7% to 11.7% as of June 30, 2001, from a range of 9.4% to 12.6% as of June 30, 2000, resulting in an increase in unrealized holding gains of $36.1 million for fiscal 2001. The range of cumulative credit loss assumptions was decreased to reflect favorable actual credit performance compared to previous assumptions.

The decrease in unrealized gains related to changes in interest rates of $22.3 million for fiscal 2002 resulted primarily from a decline in estimated future cash flows to be generated from investment income earned on restricted cash and Trust cash collection accounts due to lower short-term market interest rates. Unrealized holding gains related to changes in interest rates of $55.2 million for fiscal 2001 resulted primarily from an increase in estimated future cash flows from the Trusts due to lower interest rates payable to investors on the floating rate tranches of securitization transactions.

Net unrealized gains of $115.7 million and $7.5 million were reclassified into earnings through accretion during fiscal 2002 and 2001, respectively, and relate primarily to the recognition of actual excess cash collected over the Company’s initial estimate and recognition of unrealized gains at time of sale. The increase in amounts reclassified into earnings was due to the reclassification of unrealized gains and losses between credit enhancement assets and cash flow hedges resulting from the restatement.

Cash Flow Hedges

Unrealized losses on cash flow hedges decreased by $22.9 million in fiscal 2002 and increased by $64.2 million in fiscal 2001. Short-term market interest rates decreased during fiscal 2002 and 2001, resulting in an increase in the liability related to the Company’s interest rate swap agreements. The increase in liability was reduced by the decline in the amount of interest rate swap agreements held by the Company. The unrealized losses decreased in fiscal 2002, since, commencing in January 2001, interest rate swap agreements have been executed within the Trusts, thus neutralizing the impact of changes in interest rates (except relative to investment income) on the fair value of credit enhancement assets for Trusts established thereafter. Unrealized gains or losses on cash flow hedges are reclassified into earnings as unrealized gains or losses related to interest rate fluctuations on the Company’s credit enhancement assets are reclassified. However, if the Company expects the continued reporting of a loss in accumulated other comprehensive income would lead to recognizing a net loss on the combination of the interest rate swap agreements and the hedged asset, the loss is reclassified to earnings for the amount that is not expected to be recovered. Net unrealized losses reclassified into earnings were $92.2 million for fiscal 2002.

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Net Margin

Net margin is the difference between finance charge and other income earned on the Company’s receivables and the cost to fund the receivables as well as the cost of debt incurred for general corporate purposes.

The Company’s net margin as reflected on the consolidated statements of income is as follows (in thousands):

The Company evaluates the profitability of its lending activities based partly upon the net margin related to its managed auto loan portfolio, including on-book and gain on sale receivables. The Company uses this information to analyze trends in the components of the profitability of its managed auto portfolio. Analysis of net margin on a managed basis allows the Company to determine which origination channels and loan products are most profitable, guides the Company in making pricing decisions for loan products and indicates if sufficient spread exists between the Company’s revenues and cost of funds to cover operating expenses and achieve corporate profitability objectives. Additionally, net margin on a managed basis facilitates comparisons of results between the Company and other finance companies (i) that do not securitize their receivables or (ii) due to the structure of their securitization transactions, are not required to account for the securitization of their receivables as a sale.

The Company routinely securitizes its receivables and prior to October 1, 2002, recorded a gain on the sale of such receivables. The net margin on a managed basis presented below assumes that all securitized receivables have not been sold and are still on the Company’s consolidated balance sheet. Accordingly, no gain on sale or servicing income would have been recognized. Instead, finance charges would be recognized over the life of the securitized receivables as earned, and interest and other costs related to the asset-backed securities would be recognized as incurred.

Net margin for the Company’s managed finance receivables portfolio is as follows (in thousands):

Net margin as a percentage of average managed finance receivables outstanding is as follows (dollars in thousands):

Net margin as a percentage of average managed auto receivables increased for fiscal 2002 compared to fiscal 2001 as the Company was able to retain some of the benefit of declining interest rates in its loan pricing strategies.

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The following is a reconciliation of finance charge and other income as reflected on the Company’s consolidated statements of income to the Company’s managed basis finance charge and other income (in thousands):

The following is a reconciliation of interest expense as reflected on the Company’s consolidated statements of income to the Company’s managed basis interest expense (in thousands):

Credit Quality

The Company provides financing in relatively high-risk markets, and, therefore, anticipates a corresponding high level of delinquencies and charge-offs.

Finance receivables on the Company’s balance sheets include receivables purchased but not yet securitized and receivables securitized by the Company after September 30, 2002. Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses on the balance sheet at a level considered adequate to cover probable credit losses on finance receivables at June 30, 2003. Finance receivables are charged-off to the allowance for loan losses when the Company repossesses and disposes of the collateral or the account is otherwise deemed uncollectable.

Prior to October 1, 2002, the Company periodically sold receivables to Trusts in securitization transactions accounted for as a sale of receivables and retained an interest in the receivables sold in the form of credit enhancement assets. Credit enhancement assets are reflected on the Company’s balance sheet at fair value, calculated based upon the present value of estimated excess future cash flows from the Trusts using, among other assumptions, estimates of future credit losses on the receivables sold. Charge-offs of receivables that have been sold to Trusts decrease the amount of excess future cash flows from the Trusts. If such charge-offs are expected to exceed the Company’s original estimates of cumulative credit losses or if the actual timing of these losses differs from expected timing, the fair value of credit enhancement assets is written down through an other-than-temporary impairment charge to earnings to the extent the write-down exceeds any unrealized gain.

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The following tables present certain data related to the receivables portfolio (dollars in thousands):

The following is a summary of managed finance receivables which are (i) more than 30 days delinquent, but not yet in repossession, and (ii) in repossession (dollars in thousands):

Delinquencies in the Company’s managed receivables portfolio may vary from period to period based upon the average age or seasoning of the portfolio, seasonality within the calendar year and economic factors. Due to

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the Company’s target customer base, a relatively high percentage of accounts become delinquent at some point in the life of a loan and there is a high rate of account movement between current and delinquent status in the portfolio.

Delinquencies were higher as of June 30, 2003, compared to June 30, 2002, due to continued weakness in the economy, including higher unemployment rates, and an increase in the average age of the Company’s managed receivables portfolio.

In accordance with its policies and guidelines, the Company, at times, offers payment deferrals to consumers, whereby the consumer is allowed to move a delinquent payment to the end of the loan generally by paying a fee (approximately the interest portion of the payment deferred). The Company’s policies and guidelines, as well as certain contractual restrictions in the Company’s warehouse credit facilities and securitization transactions, limit the number and frequency of deferments that may be granted. An account for which all delinquent payments are deferred is classified as current at the time the deferment is granted. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account. Contracts receiving a payment deferral as an average quarterly percentage of average managed auto receivables outstanding were 6.6%, 4.9% and 4.7% for fiscal 2003, 2002 and 2001, respectively. Of the total amount deferred, on-book finance receivables receiving a payment deferral were 6.6%, 2.0% and 0.9% for fiscal 2003, 2002 and 2001, respectively. The percentage of contracts receiving a payment deferral increased during fiscal 2003, compared to fiscal 2002 and 2001 due to the Company providing deferments to an increased number of consumers who were temporarily unable to make monthly payments as originally contracted due to weak economic conditions.

The following is a summary of total deferrals as a percentage of managed receivables outstanding:

The Company evaluates the results of its deferment strategies based upon the amount of cash installments that are collected on accounts that have been deferred versus the extent to which the collateral underlying deferred accounts has depreciated over the same period of time. The Company believes that payment deferrals granted according to its policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

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The following table presents charge-off data with respect to the Company’s managed finance receivables portfolio (dollars in thousands):