Note C - Finance Receivables

6 Months Ended

Oct. 31, 2011

C – Finance Receivables

The Company originates installment sale contracts from the sale of used vehicles at its dealerships. These installment sale contracts typically include interest rates ranging from 5.5% to 19% per annum, are collateralized by the vehicle sold and provide for payments over periods ranging from 12 to 36 months. The Company’s finance receivables are defined as one segment and one class of loans, which is sub-prime consumer automobile contracts. The level of risks inherent in our financing receivable are managed as one homogeneous pool. The components of finance receivables are as follows:

(In thousands)	October 31, 2011			April 30, 2011

Gross contract amount	$	348,881		$	317,956
Less unearned finance charges		(39,428	)		(35,478	)
Principal balance		309,453			282,478
Less allowance for credit losses		(65,931	)		(60,173	)

Finance receivables, net	$	243,522		$	222,305

Changes in the finance receivables, net for the six months ended October 31, 2011 and 2010 are as follows:

	Six Months Ended October 31,
(In thousands)	2011			2010

Balance at beginning of period	$	222,305		$	205,423
Finance receivable originations		175,333			151,030
Finance receivable collections		(92,989	)		(87,933	)
Provision for credit losses		(41,157	)		(34,905	)
Losses on claims for payment protection plan		(2,735	)		(2,217	)
Inventory acquired in repossession and payment protection plan claims		(17,235	)		(13,410	)

Balance at end of period	$	243,522		$	217,988

Changes in the finance receivables allowance for credit losses for the six months ended October 31, 2011 and 2010 are as follows:

	Six Months Ended October 31,
(In thousands)	2011			2010

Balance at beginning of period	$	60,173		$	55,628
Provision for credit losses		41,157			34,905
Charge-offs, net of recovered collateral		(35,399	)		(31,499	)

Balance at end of period	$	65,931		$	59,034

The factors which influenced management’s judgment in determining the amount of the additions to the allowance charged to provision for credit losses were:

The level of actual charge-offs, net of recovered collateral is the most important factor in determining the charges to the provision for credit losses. This is due to the fact that once a contract becomes delinquent the account is either made current by the customer, the vehicle is repossessed or the account is written off, if the collateral cannot be recovered. Net charge-offs for the first six months of fiscal 2012 were higher than the prior year period, partially due to higher sales volumes. Net charge-offs as a percentage of average finance receivables increased 0.4% to 12.0% for the first six months ended October 31, 2011 compared to 11.6% for the same period in the prior year. Higher sales volumes also had the effect of higher additions to the allowance charged to the provision for the first six months of fiscal 2012.

Collections and delinquency levels have a significant effect on additions to the allowance and are reviewed frequently in determining the additions to the allowance charged to the provision. For the first six months of fiscal 2012, collections as a percentage of average finance receivables decreased to 31.6% compared to 32.5% for the same period of fiscal 2011.

Macro-economic factors as well as proper execution of operational policies and procedures can have an effect on additions charged to the provision. Higher unemployment levels, higher gasoline prices and higher prices for staple items can potentially have a significant effect. While overall macro-economic factors were still unfavorable during the first six months of 2012, the Company is focused on continuing operational improvements within the collections area. Market share gains and specific stimulus funds directly benefitting many of the Company’s customers were also positive as related to credit results.

Credit quality information for finance receivables is as follows:

(Dollars in thousands)	October 31, 2011						April 30, 2011						October 31, 2010

	Principal			Percent of			Principal			Percent of			Principal			Percent of
	Balance			Portfolio			Balance			Portfolio			Balance			Portfolio
Current		$	258,768		83.62	%		$	243,266		86.12	%		$	232,884		84.07	%
3 - 29 days past due			38,649		12.49	%			30,975		10.97	%			33,369		12.05	%
30 - 60 days past due			8,838		2.86	%			6,003		2.13	%			7,945		2.87	%
61 - 90 days past due			2,458		0.79	%			2,036		0.72	%			2,539		0.92	%
> 90 days past due			740		0.24	%			198		0.07	%			285		0.10	%
Total		$	309,453		100.00	%		$	282,478		100.00	%		$	277,022		100.00	%

Accounts one and two days past due are considered current for this analysis, due to the varying payment dates and variation in the day of the week at each period end. Delinquencies may vary from period to period based on the average age of the portfolio, seasonality within the calendar year, the day of the week and overall economic factors. The above categories are consistent with internal operational measures used by the Company to monitor credit results.

Substantially all of the Company’s automobile contracts involve contracts made to individuals with impaired or limited credit histories, or higher debt-to-income ratios than permitted by traditional lenders. Contracts made with buyers who are restricted in their ability to obtain financing from traditional lenders generally entail a higher risk of delinquency, default and repossession, and higher losses than contracts made with buyers with better credit. The Company monitors contract term length, down payment percentages, and collections for credit quality indicators.

	Six Months Ended October 31,
	2011			2010

Principal collected as a percent of average finance receivables		31.6	%		32.5	%
Average down-payment percentage		7.1	%		7.0	%
Average originating contract term (in months)		26.3			25.7
Portfolio weighted average contract term, including modifications (in months)		27.5			27.4

The decrease in the principal collected as a percent of average finance receivables is primarily attributed to the higher average portfolio interest rate and slightly longer average contract term, together with a slight increase in contract modifications as well as the fact that the overall portfolio is younger when compared to this time last year.