<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- -----------
Commission file number: 28050
ONYX ACCEPTANCE CORPORATION
State or other jurisdiction of
incorporation or organization (I.R.S. Employer
Identification No.)
Delaware 33-0577635
Onyx Acceptance Corporation
8001 Irvine Center Drive, 5th Floor
Irvine, Ca. 92618
(714) 450-5500
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
----- -----
As of November 11, 1996, there were 5,286,636 shares of registrant's
Common Stock, par value $.01 per share outstanding.
<PAGE> 2
ONYX ACCEPTANCE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
<S> <C> <C>
Consolidated Statements of Financial Condition
at September 30, 1996 (Unaudited) and December 31, 1995 3
Consolidated Statements of Operations for the nine months ended
September 30, 1996 (Unaudited) and September 30, 1995 (Unaudited) 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1996 (Unaudited),
and September 30, 1995(Unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................
Item 5. Other Information...................................................... 19
Item 6. Exhibits and Reports on Form 8-K........................................ 24
.
SIGNATURES....................................................................... 25
</TABLE>
<PAGE> 3
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Finance Revenue $ 7,881,973 $ 4,471,855 $2,994,193 $1,868,823
Interest Expense 4,538,585 3,500,869 1,492,629 1,220,902
----------- ----------- ---------- ----------
Net Finance Revenue 3,343,388 970,986 1,501,564 647,921
Provision for credit losses 142,893 204,692 167,963 21,286
----------- ----------- ---------- ----------
Net Finance Revenue after Provision 3,200,495 766,294 1,333,601 626,635
Gain on Sale of Contracts 13,825,000 2,012,365 4,324,901 0
Service Fee Income 2,262,158 821,615 476,562 322,869
----------- ----------- ---------- ----------
EXPENSES:
Salaries and Benefits 6,153,899 3,613,737 2,292,540 1,342,169
Depreciation 585,479 502,866 216,040 182,975
Occupancy 445,844 288,463 169,097 120,655
General and Administrative expenses 3,603,978 1,420,878 1,583,093 501,708
----------- ----------- ---------- ----------
Total Expenses 10,789,200 5,825,944 4,260,770 2,147,507
----------- ----------- ---------- ----------
NET INCOME/(LOSS) BEFORE INCOME TAXES 8,498,453 (2,225,670) 1,874,294 (1,198,003)
INCOME TAXES 1,678,691 0 370,000 0
----------- ----------- ---------- ----------
NET INCOME (LOSS) $ 6,819,762 ($2,225,670) $1,504,294 ($1,198,003)
=========== =========== ========== ==========
NET INCOME (LOSS) PER SHARE (3) $1.29 ($0.62) $0.23 ($0.33)
Weighted average number of shares of Common Stock
and Common Stock Equivalents outstanding (3) 5,286,636 3,589,790 6,401,283 3,629,614
</TABLE>
(3) On a fully taxed basis the Net Income for the 3rd Quarter 1996 would
be $1,094,588 and Net Income per share would be $0.17.
<PAGE> 4
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH & CASH EQUIVALENTS $ 2,638,355 $ 1,622,713
TRUST RECEIVABLES 8,539,371 6,208,617
CONTRACTS HELD FOR SALE (Net of allowance) (a) 29,986,104 120,215,434
EXCESS SERVICING (Net of amortization) 25,667,744 6,181,518
OTHER ASSETS 2,355,687 1,848,559
----------- ------------
TOTAL ASSETS $69,187,261 $136,076,841
=========== ============
LIABILITIES AND EQUITY
LIABILITIES
ACCOUNTS PAYABLE 696,419 287,519
DEBT 27,795,513 131,949,536
OTHER LIABILITIES 3,776,864 2,356,334
----------- ------------
TOTAL LIABILITIES 32,268,796 134,593,389
REDEEMABLE PREFERRED STOCK SERIES A (b) 0 9,379,177
EQUITY
PREFERRED STOCK SERIES b 0 1,364
COMMON STOCK
Par value $.01 per share; authorized 4,373,178 shares;
issued and outstanding 2,241,500 as of
December 31, 1995 and issued and outstanding
5,879,000 as of September 30, 1996 58,975 22,415
PAID IN CAPITAL 37,610,510 803,109
RETAINED EARNINGS (751,020) (8,722,613)
----------- ------------
TOTAL EQUITY 36,918,465 (7,895,725)
----------- ------------
TOTAL LIABILITIES AND EQUITY 69,187,261 $136,076,841
=========== ============
</TABLE>
(a) Net of unearned discounts.
(b) Redeemable preferred stock was converted to common stock
in connection with the IPO on March 29, 1996.
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
--------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 41,113,692 (50,581,108) 77,442,628 (35,888,503)
INVESTING ACTIVITIES:
PURCHASES OF PROPERTY AND EQUIPMENT (152,494) (248,512) (878,302) (400,493)
--------- ---------- ----------- ----------
NET CASH USED IN INVESTING ACTIVITIES (152,494) (248,512) (878,302) (400,493)
FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF COMMON STOCK 30,337,128 2,836
PROCEEDS FROM EXERCISE OF OPTIONS/WARRANTS 8,725 13,795 0
PAYMENTS OF IPO RELATED AND OTHER CAPITALIZED FEES (1,735,669) (13,961)
PROCEEDS FROM DRAWDOWNS ON WAREHOUSE LINE OF CREDIT 3,500,000 1,048,568 6,000,000
PAYMENTS ON CAPITAL LEASE OBLIGATIONS (Net of proceeds) (34,567) (29,364) (9,916) (223,182)
PROCEEDS FROM DRAWDOWNS ON EXCESS SERVICING LINE OF CREDIT 12,800,000 0
PAYOFF OF EXCESS SERVICING LINE OF CREDIT (12,800,000) 0
PAYOFF OF DEALER PARTICIPATION LINE OF CREDIT (10,617,786) 0
PAYDOWN OF COMMERCIAL PAPER RELATED TO SECURITIZATION (115,000,000) (291,000,000) (71,304,507)
PROCEEDS FROM ISSUANCE OF COMMERCIAL PAPER (Net of other
Payments) 75,017,733 47,016,596 205,717,202 93,475,246
PAYOFF OF SUBORDINATED DEBT (10,000,000) 0
INCREASE (DECREASE) IN OTHER LOANS (Net of payments) (55,973) 697,994 0
----------- ---------- ----------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (40,064,082) 50,487,232 (75,548,684) 27,936,432
----------- ---------- ----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 897,116 (342,388) 1,015,642 (8,352,564)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,741,239 2,241,694 1,622,713 10,251,870
----------- ---------- ----------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 2,638,355 1,899,306 $2,638,355 $1,899,306
=========== ========== =========== ==========
INTEREST PAID $ 1,819,399 $ 631,527 $5,756,121 $2,912,499
</TABLE>
<PAGE> 6
ONYX ACCEPTANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1- BASIS OF PRESENTATION
The financial statements included herein are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and Securities and Exchange Commission regulations. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to regulations. In the opinion of management, the
financial statements reflect all adjustments (of a normal and recurring nature)
which are necessary to present fairly the financial position, results of
operations and cash flows for the interim periods. Operating results for the
nine months ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Prospectus which is included in its Registration Statement on Form
S-1 (No. 333-680)
NOTE 2 - EARNINGS PER SHARE
The weighted average number of common and common equivalent shares
outstanding for the purposes of computing net income (loss) per share were
6,401,283 and 3,629,614 for the three months ended September 30, 1996 and 1995
respectively. All share and EPS amounts have been given the effect of a reverse
share split of one share of Common Stock for 3.43 shares of Common Stock.
NOTE 3 - SHAREHOLDERS' EQUITY
On March 29, 1996, the Company completed an offering of 2,500,000
shares of common stock (the "Offering"). The Offering represented approximately
41% ownership of the Company. Net proceeds of the Offering (of approximately
$25.6 million) were used to repay Senior Subordinated Notes and advances under
the Company's revolving credit facility. The balance of the proceeds were used
for general corporate purposes, including working capital. In conjunction with
the Offering, all Series A Preferred Stock was converted to 715,422 shares of
Common Stock. In addition, all Series B Preferred Stock was converted to 39,757
shares of Common Stock. For further information about the Offering, refer to the
Company's Registration Statement on Form S-1 (No. 333-680). On April 25,1996,
the Underwriters elected to exercise their 30 days over-allotment to purchase
375,000 additional shares of common stock. Net proceeds to the Company were 4.0
million.
NOTE 4 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Contracts held for sale $36,086,551 $157,552,745
Less Unearned interest 6,933,373 40,660,123
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C> <C>
----------- -------------
29,153,178 116,892,622
Allowance for credit losses (145,766) (591,765)
----------- -------------
29,007,412 116,300,857
Dealer Participation 978,692 3,914,577
----------- -------------
Total $29,986,104 $120,215,434
=========== ============
</TABLE>
NOTE 5 - EXCESS SERVICING RECEIVABLE
The following table presents the balances and activity for excess
servicing receivable:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
<S> <C> <C>
Beginning Balance $ 6,181,518 $ 2,060,738
Additions 27,700,000 8,718,596
Amortization (8,213,774) (4,597,816)
------------ -----------
Ending Balance $25,667,744 $ 6,181,518
=========== ===========
</TABLE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
OVERVIEW
Onyx Acceptance Corporation (the "Company" or "Registrant") is a specialized
consumer finance company engaged in the purchase, securitization and servicing
of motor vehicle retail installment contracts ("Contracts") originated by
franchised and select independent automobile dealerships within California,
Arizona, Washington, Hawaii, Oregon, and Nevada. The Company focuses its efforts
on acquiring Contracts that are secured by late model used and, to a lesser
extent, new automobiles and entered into with purchasers whom the Company
believes have a favorable credit profile. As of September 30, 1996, the Company
had acquired approximately $522 million in Contracts from 1266 dealerships in
California, Arizona, Washington, Hawaii, Oregon, and Nevada.
The following table illustrates the changes in the Company's Contract
acquisition volume, total revenue, securitization activity and servicing
portfolio during the past nine fiscal quarters:
<TABLE>
<CAPTION>
Selected Quarterly Financial Information
For the Quarters Ended
------------------------------------------------------------------------------------------
Sept 30, Dec. 31, March 31, June 30, Sept. 30, Dec.31, March 31, June 30 September 30
1994 1994 1995 1995 1995 1995 1996 1996 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contracts purchased during period $ 25,858 $ 33,516 $ 38,964 $ 46,883 $ 52,940 $ 60,610 $73,300 $83,555 79,936
Average monthly purchases during
period 8,619 11,172 12,988 15,628 17,646 20,203 24,433 27,852 26,645
Gain on Sale of Contracts -- 515 -- 2,012 -- -- 5,325 4,175 4,325
Total revenue(1) 743 887 1,187 1,647 971 1,813 6,775 6,353 6,303
Contracts Securitized during period -- 38,601 -- 105,000 -- -- 100,500 85,013 120,000
Servicing Portfolio at period end 46,898 74,581 104,895 140,198 177,532 218,207 266,251 317,054 359,104
</TABLE>
(1) Total revenue is comprised of Net Interest Income, Servicing Fee Income and
Gain on Sale of Contract
During the quarter, the Company experienced a reduction in the amount
of Contracts purchased and experienced loan losses in excess of management's
expectations. The Contract origination volume and loan losses were impacted by
the performance of the contracts originated in prior quarters at the North
Hollywood Auto Finance Center. This Auto Finance Center had a significant
concentration of used car dealers and the performance of the Contracts
purchased from these dealers has not been in line with management objectives.
To address the performance issues of this Center, management has
reunderwritten all independent used car dealers that have relationships with
the Company and as a result, has ceased doing business with a number of used
car dealers, especially in the North Hollywood office. Originations in the
North Hollywood office, as a result, have been impacted.
In addition, management further enhanced the credit review process by
promoting a senior credit manager to the position of Chief Credit Officer and
by increasing staffing in the credit review department. This department
continues to audit contracts within a few days after funding. The results of the
audits are communicated back to the originating office on a daily basis.
Management believes these changes will improve the performance of the
contracts purchased in the current and future quarters. Management has created
an additional reserve of $800,000 to provide for increased losses that may
still arise from existing loans.
The Company continues its emphasis on growth of the portfolio and expansion
into new states.
CONTRACTS PURCHASED AND SERVICING PORTFOLIO.
<PAGE> 9
Purchased Contract volume increased to $236.8 million for the first
nine months of 1996 from $138.8 million for the first nine months of 1995,
representing an increase of 71%. Volume for the three months ended September 30,
1996 increased to $79.9 million from $52.9 million for the like period of 1995.
This growth in acquisition is attributable to the opening of three additional
Auto Finance Centers since the end of the first nine months of 1995 and the
continued market penetration within the Company's existing centers. The
Company's servicing portfolio at September 30, 1996 was $359.1 million compared
to $177.5 at September 30, 1995, an increase of 102.3%. Total revenues during
the first nine months of 1996 were $19.4 million compared to $3.8 million for
the same period ended September 30, 1995.
<PAGE> 10
RESULTS OF OPERATIONS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995 AND NINE MONTHS ENDED 1996 AND 1995
NET FINANCE REVENUE. Net finance revenue increased to $1.5 million for the
quarter ended September 30, 1996 from $647,921 for the same period in 1995. Net
finance revenue for the nine month period ending September 30, 1996 increased by
240% to $3.3 million from $970,986 for the like period in 1995. The increase is
primarily attributable to an increase in Contracts held for sale during the
quarter and the nine month period ending September 30, 1996 compared to the
quarter and nine month period ending September 30, 1995.
PROVISIONS FOR CREDIT LOSSES. During the quarter ended September 30, 1996, the
provision for credit losses totaled $167,963 compared to $21,286 for the same
period ended in 1995. This increase is attributable to a larger balance of loans
held for sale during the period as origination volume has increased and the
effect of contracts purchased in the North Hollywood office and has resulted in
higher loss. Provision for credit losses for the nine month period ending
September 30, 1996 were $142,893 compared to $204,692 for the first nine months
of 1995. At September 30, 1996 Contracts held for sale were $29.1 million
compared to $64.6 million at September 30, 1995.
GAIN ON SALE OF CONTRACTS. The Company completed a $120.0 million securitization
during the quarter ended September 30, 1996, resulting in a gain on sale of
Contracts of $4.3 million. The Company did not complete a securitization in the
third quarter of 1995. Gain on the Sale of Contracts for the nine months period
ending September 30, 1996 was $13.8 million as compared to $2.0 million for the
same period in 1995.
SERVICING FEE INCOME. Servicing fee income increased to $476,562 for the quarter
ended September 30, 1996 from $322,869 for the quarter ended September 30, 1995.
The increase was attributable to a significant increase in the size of the
servicing portfolio. Servicing fee income for the nine months ending September
30, 1996 was $2.3 million compared $821,615 for the like period in 1995. The
size of the servicing portfolio at September 30, 1996 increased to $359.1
million from $177.5 million at September 30, 1995.
SALARIES AND BENEFITS EXPENSE. The Company incurred salary and benefit expenses
of $2.3 million during the third quarter of 1996 compared with $1.3 million for
the third quarter of 1995, an increase of 76.9%. Salary and benefits increased
in the first nine months to $6.2 million from $3.6 million for the first nine
months of 1995. This is attributable in great part to the growth of operations
and the servicing portfolio and the fact that the number of employees at the
Company increased from 68 at September 30, 1995 to 165 at September 30, 1996.
OTHER OPERATING EXPENSES. Other operating expenses increased by 148% to $2.0
million for the quarter ended September 30,1996 from $805,338 for the same
period ended September 30, 1995. For the first nine months of 1996 other
operating expenses were $4.6 million compared to $2.2 million for the first nine
months of 1995. The majority of the increases are due to growth of the servicing
portfolio and the opening of three new auto finance centers.
<PAGE> 11
NET INCOME. The Company posted net income of $1.5 million for the quarter ended
September 30, 1996 or $.23 per share compared to a net loss of $1.2 million or
($.33 ) per share for the same period of 1995. Net income for the nine months
ending September 30, 1996 was $6.8 million compared to a loss of $2.2 million
for the first nine months of 1995. The higher earnings are the result of the
Company's continuing focus on its growth strategy within the western United
States, which enabled sales of $305.5 million in Contracts and the recording of
a $13.8 million gain on the transactions for the nine months ended September,
1996.
ASSET QUALITY.
At September 30, 1996, delinquencies for the Company's Servicing Portfolio
represented 1.67% of the amount of Contracts in the Company's Servicing
Portfolio or $6.0 million as compared to 1.4% at September 30, 1995 or $2.5
million. Loan losses for the Servicing Portfolio as a percentage of average
serviced loans outstanding increased to 2.28% during the quarter compared to
.31% for the third quarter of 1995 and increased to 1.48% for the first nine
months of 1996 compared with .20% for the first nine months of 1995. Increases
in delinquencies and losses were due to several factors including seasoning of
the Company's Servicing Portfolio and continued higher than usual loan losses
and delinquencies arising from Contracts originated by independent used car
dealers through the company's North Hollywood office.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
September 30,
1996 1995
AMOUNT NO. AMOUNT NO.
------ --- ------ ---
(Dollars in thousands)
<S> <C> <C> <C> <C>
Servicing portfolio .................................. $359,104 33,879 $177,532 16,433
Delinquencies(1)(2)
0-59 days .......................... $ 2,979 270 $ 1,421 113
60-89 days ......................... $ 1,554 136 $ 633 51
90+ days ........................... $ 1,461 128 $ 439 35
Total ................................................ $ 5,994 534 $ 2,493 199
Total delinquencies as a percent of
Servicing Portfolio .................................. 1.67% 1.58% 1.40% 1.21%
</TABLE>
--------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
<PAGE> 12
LOAN LOSS EXPERIENCE OF SERVICING PORTFOLIO
FOR THE QUARTERS ENDED
<TABLE>
<CAPTION>
September 30,
---------------------
1996 1995
----- ----
(Dollars in thousands)
<S> <C> <C>
Period end contracts outstanding ........... $359,104 $177,532
Average servicing portfolio(1) ............. $337,513 $156,122
Number of gross charge-offs ................ 298 60
Gross charge-offs .......................... $2,264.2 $133.6
Net charge-offs ................... $1,927.0 $120.6
Annualized net charge-offs as a percent of
average servicing portfolio ................ 2.28% .31%
</TABLE>
- ------
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires substantial cash and capital resources to operate its
business. Its primary uses of cash include: (i) acquisition of Contracts; (ii)
payments of dealer participation; (iii) securitization costs, including cash
held in spread accounts; (iv) settlements of hedging transactions; (v) operating
expenses; and (vi) interest expense. The capital resources available to the
Company include: (i) net interest income during the warehousing period; (ii)
contractual servicing fees; (iii) future servicing cash flows; (iv) settlements
of hedging transactions; (v) sales of contracts in Securitizations; (vi) equity
investments; and (vii) borrowings under its credit facilities.
Cash provided by operating activities was $41.1 million for the quarter ended
September 30, 1996, compared to $50.6 million used in the quarter ended
September 30, 1995. Onyx did not complete a securitization in the third quarter
of 1995.
Cash used in investing activities was $152,494 for the quarter ended September
30, 1996 compared to $248,512 for the quarter ended September 30, 1995.
Cash used by financing activities was $40.0 million for the quarter ended
September 30, 1996, compared to $50.5 million provided by financing activities
for the quarter ended September 30, 1995. Cash used during the quarter ended
September 30, 1996 was used to pay down $115 million of the CP Facility due to
the securitization and sale of Contracts.
The Company's wholly owned special purpose subsidiary, Onyx Acceptance Financial
Corporation ("OAFC"), is party to a $200 million auto loan warehouse program
(the"CP Facility") with Triple-A One Funding Corporation ("Triple-A"). Triple-A
is a commercial paper asset-backed conduit lender sponsored by Capital Markets
Assurance Corporation ("CapMAC") and is currently rated A-1/P-1 by Standard &
Poor's Ratings Group and Moody's Investor Services, Inc., respectively. This
facility provides funds to purchase Contracts. CapMAC provides credit
enhancement to Triple-A by issuing surety bonds covering all principal and
interest obligations owed by OAFC under a loan agreement with Triple-A. In
February of 1996, the Company refinanced its $13.5 million revolving credit
facility with the Revolving
<PAGE> 13
Facility under which the Company may (subject to borrowing base availability)
borrow up to $20 million for working capital and expenditures for which the
Company's $200 million CP Facility is not otherwise available. By refinancing
the revolving credit facility, the Company reduced the interest it pays under
the Revolving Facility from a 30-day LIBOR based rate to a prime rate base.
Under the two year term of the Revolving Credit Facility, the available
borrowings are based on the following collateral based formula. The Company may
borrow up to the lesser of 65% of the net book value of the Company's excess
servicing and trust receivables deemed eligible by the lenders or 80% of the
value of such excess servicing and trust receivables determined by such lenders
in accordance with their collateral valuation model. The Revolving Credit
Facility converts from revolving loans to fully-amortizing two-year term loans
on January 31, 1998 or earlier upon the occurrence of certain "credit triggers"
Securitizations. In September of 1996, the Company consummated, with a
pass-through rate of 6.40%, and a net interest rate spread inclusive of all
costs of 3.14%, a securitization in the amount of $120.0 million. As a result of
this securitization, the Company realized a gain on sale of approximately $4.3
million.
The Contracts originated and held by the Company during the warehousing period
are all fixed rate and accordingly, the Company has exposure to changes in
interest rates. The Company is able through the use of varying maturities on
advances from the CP Facility to lock in rates during the warehousing period,
when in management's judgment it is appropriate, to limit interest rate
exposure. Further the Company employs a hedging strategy which primarily
includes the use of two-year Treasury securities forward agreements. These
hedges are entered into by the Company in numbers and amounts which generally
correspond to the anticipated principal amount of the related securitization. As
of November 13, 1996, the Company had in effect an interest rate hedge for $80
million which matures December 16, 1996 which the Company believes is adequate
to cover its next securitization.
<PAGE> 14
RISK FACTORS
Except for the historical information contained herein, the matters discussed in
this Quarterly Report are forward-looking statements which involve risk and
uncertainties, including but not limited to economic, competitive and
governmental factors affecting the Company's operations and other factors
discussed in the Company's filing with the Securities and Exchange Commission.
LIQUIDITY. The Company requires substantial cash to implement its business
strategy, including cash to: (i) acquire Contracts; (ii) pay dealer
participation; (iii) pay securitization costs including cash held in spread
accounts; (iv) settle hedge transactions; (v) satisfy working capital
requirements; (vi) pay operating expenses; and (vii) pay interest expense. These
cash requirements increase as the Company's volume of purchases of Contracts
increases. A substantial portion of the Company's revenues in any period is
represented by gain on sale of Contracts in such period but the cash underlying
such revenues is received over the life of the Contracts. In addition, cash paid
by the Company for dealer participation is not recovered at the time of
securitizations, but over the life of the Contract. The Company has operated and
expects to continue to operate on a negative cash flow basis as long as the
volume of Contract purchases continues to grow. The Company has historically
funded these negative operating cash flows principally through borrowings from
financial institutions, sales of equity securities and sales of subordinated
notes. No assurance can be given, however, that the Company will have access to
the capital markets in the future for equity or debt issuances or for
Securitizations, or that financing through borrowings or other means will be
available on acceptable terms to satisfy the Company's cash requirements to
implement its business strategy. The Company's inability to access the capital
markets or obtain acceptable financing could have a material adverse effect on
the Company's results of operations and financial condition.
DEPENDENCE ON WAREHOUSE FINANCING. The Company depends on warehousing facilities
with financial institutions to finance the purchase of Contracts pending
securitization. The Company participates in a $200 million asset-backed
commercial paper conduit program (the "CP Facility"), of which CapMAC is the
program manager, to finance 95% of the purchase price of Contracts. The CP
Facility expires in September 1999, subject to the requirement that the related
liquidity facility provided by certain banks be extended annually. The Company
currently has (subject to borrowing base availability) a $20 million secured
revolving credit facility (the "Revolving Facility") with an institutional
lender for working capital and expenditures for which the Company's $200 million
CP Facility is not otherwise available. The Revolving Facility converts on
January 31, 1998 into fully-amortizing two-year term loans maturing in February
2000. The Company's business strategy will require continued availability of
financing during the warehousing period. There can be no assurance that such
financing will be available to the Company on favorable terms. The inability of
the Company to arrange new warehousing credit facilities or to extend its
existing credit facilities when they expire would have a material adverse effect
on the Company's results of operations and financial condition. The continued
availability of the CP Facility is subject to, among other things, maintenance
of a target net yield, and compliance by the Company with certain financial
covenants contained in the sale and servicing agreement between the Company, as
seller, and OAFC, as purchaser.
<PAGE> 15
These covenants include a minimum ratio of tangible net worth to total
liabilities plus tangible net worth, minimum operating cash flow, minimum amount
of Contracts serviced by the Company and minimum cash on hand. There can be no
assurance, however, that the Company will be able to comply with these covenants
in the future. The continued availability of the Revolving Facility is subject
to, among other things, substantially similar financial covenants to those of
the CP Facility except that leverage is measured as the ratio of net worth plus
subordinated debt to total liabilities plus net worth, and is tested on the last
day of every month. Additionally, the Company is subject under the documentation
governing the Revolving Facility, to minimum net worth and subordinated debt
plus net worth tests, a limitation on quarterly operating losses and covenants
restricting delinquencies, losses and prepayments of Contracts included in a
Securitization.
DEPENDENCE ON SECURITIZATION PROGRAM. The Company relies significantly upon
securitizations to generate cash proceeds for repayment of its Credit Facilities
and to create availability to purchase additional Contracts. Further, gain on
sale of Contracts generated by the Company's securitizations represents a
significant portion of the Company's revenues. Several factors affect the
Company's ability to complete securitizations of its Contracts, including
conditions in the securities markets generally, conditions in the asset-backed
securities market specifically, the credit quality of the Company's portfolio of
Contracts and the Company's ability to obtain credit enhancement. If the Company
were unable to profitably securitize a sufficient number of its Contracts in a
particular financial reporting period, then the Company's revenues for such
period would decline and could result in lower income or a loss for such period.
In addition, unanticipated delays in closing a securitization could also
increase the Company's interest rate risk by increasing the warehousing period
for its Contracts.
DEPENDENCE ON CREDIT ENHANCEMENT. Each of the Company's securitizations has
utilized credit enhancement in the form of surety bonds issued by CapMAC in
order to achieve "AAA/Aaa" ratings. This form of credit enhancement reduces the
costs of the securitizations relative to alternative forms of credit
enhancements currently available to the Company. CapMAC is not required to
insure future securitizations nor is the Company restricted in its ability to
obtain credit enhancement from providers other than CapMAC or to use other forms
of credit enhancement. There can be no assurance that the Company will be able
to obtain credit enhancement in any form from CapMAC or any other provider of
credit enhancement on acceptable terms or that future securitizations will be
similarly rated. The Company also relies on CapMAC's surety bonds to reduce its
borrowing cost under the "A-1/P-1" rated CP Facility. A downgrading of CapMAC's
credit rating or CapMAC's withdrawal of credit enhancement could result in
higher interest costs for future Company securitizations and financing costs
during the warehousing period. Such events could have a material adverse effect
on the Company's results of operations and financial condition.
INTEREST RATE RISK. The Company's profitability is largely determined by the
difference, or "spread," between the effective rate of interest received by the
Company on the Contracts acquired by the Company and the interest rates payable
under its Credit Facilities during the warehousing period or for certificates
issued in securitizations. Several factors affect the Company's ability to
manage interest rate risk. First, the Contracts are purchased at fixed interest
<PAGE> 16
rates, while amounts borrowed under certain of the Company's credit facilities
bear interest at variable rates that are subject to frequent adjustment to
reflect prevailing rates for short-term borrowings. The Company's policy is to
increase the buy rates it posts with dealerships for Contracts in response to
increases in its cost of funds during the Warehousing period. However, there is
generally a time lag before such increased borrowing costs can be offset by
increases in the buy rates for Contracts and, in certain instances, the rates
charged by its competitors may limit the Company's ability to pass through its
increased costs of warehousing financing. Second, the spread can be adversely
affected after a Contract is purchased and while it is held during the
warehousing period by increases in the prevailing rates in the commercial paper
markets. The CP Facility permits the Company to select maturities of up to 270
days for commercial paper issued under the CP Facility. Third, the interest rate
demanded by investors in securitizations is a function of prevailing market
rates for comparable transactions and the general interest rate environment.
Because the Contracts purchased by the Company have fixed rates, the Company
bears the risk of spreads narrowing because of interest-rate increases during
the period from the date the Contracts are purchased until the closing of its
securitization of such Contracts. The Company employs a hedging strategy that is
intended to minimize this risk which historically has involved the forward sale
of U.S. Treasury securities or use of a pre-funding structure for its
securitizations. There can be no assurance, however, that this strategy will
consistently or completely offset adverse interest-rate movements during the
warehousing period or that the Company will not sustain losses on hedging
transactions. The Company's hedging strategy requires estimates by management of
monthly Contract acquisition volume and timing of its securitizations. If such
estimates are materially inaccurate, then the Company's gains on sales of
Contracts and results of operations could be adversely affected. In addition,
the Company has some interest rate exposure to falling interest rates during the
pre-funding period to the extent that the interest rates charged on Contracts
sold in a securitization with a pre-funding structure decline below the rates
prevailing at the time that the securitization closed. Such a rate decline would
reduce the interest rate spread because the interest rate on the certificates
would remain fixed. This, in time, would negatively impact the Gains on Sale of
Contracts and the Company's results of operations.
DEFAULT AND PREPAYMENT RISK. The Company's results of operations, financial
condition and liquidity depend, to a material extent, on the performance of
Contracts purchased and warehoused by the Company. A portion of the Contracts
acquired by the Company may default or prepay during the warehousing period. The
Company bears the risk of losses resulting from payment defaults during the
warehousing period. In the event of a payment default, the collateral value of
the financed vehicle may not cover the outstanding Contract balance and costs of
recovery. The Company maintains an allowance for credit losses on Contracts held
during the warehousing period which reflects management's estimates of
anticipated credit losses during such period. If the allowance is inadequate,
then the Company would recognize as an expense the losses in excess of such
allowance and results of operations could be adversely affected. In addition,
under the terms of the CP Facility, the Company will not be able to borrow
against defaulted Contracts. The Company's servicing income can also be
adversely affected by prepayment or default of Contracts in the servicing
portfolio. The Company's contractual servicing revenue is based on a percentage
of the outstanding balance of such Contracts. Thus, if
<PAGE> 17
Contracts are prepaid or charged-off, then the Company's servicing revenue will
decline to the extent of such prepaid or charged-off Contracts.
VARIABLE QUARTERLY EARNINGS. The Company's revenues and losses have fluctuated
in the past and are expected to fluctuate in the future principally as a result
of the timing and size of its securitizations. Several factors affecting the
Company's business can cause significant variations in its quarterly results of
operations. In particular, variations in the volume of the Company's Contract
acquisitions, the interest rate spreads between the Company's cost of funds and
the average interest rate of purchased Contracts, the effectiveness of the
Company's hedging strategies, the certificate rate for securitizations, and the
timing and size of securitizations, can result in significant increases or
decreases in the Company's revenues from quarter to quarter. Any significant
decrease in the Company's quarterly revenues could have a material adverse
effect on the Company's results of operations and its financial condition.
DEPENDENCE ON KEY PERSONNEL. The Company's future operating results depend in
significant part upon the continued service of its key senior management
personnel, none of whom is bound by an employment agreement. The Company's
future operating results also depend in part upon its ability to attract and
retain qualified management, technical, and sales and support personnel for its
operations. Competition for such personnel is intense, and there can be no
assurance that the Company will be successful in attracting or retaining such
personnel. The loss of any key employee, the failure of any key employee to
perform in his or her current position or the Company's inability to attract and
retain skilled employees, as needed, could materially adversely affect the
Company's results of operations and financial condition.
COMPETITION. Competition in the field of financing retail motor vehicles sales
is intense. The automobile finance market is highly fragmented and historically
has been serviced by a variety of financial entities including the captive
finance affiliates of major automotive manufacturers, banks, savings
associations, independent finance companies, credit unions and leasing
companies. Several of these competitors have greater financial resources than
the Company and may have a significantly lower cost of funds. Many of these
competitors also have long-standing relationships with automobile dealerships
and offer dealerships or their customers other forms of financing or services
not provided by the Company. Furthermore, during the past two years, a number of
automobile finance companies have completed public offerings of common stock,
the proceeds from which are to be used, at least in part, to fund expansion and
finance increased purchases of Contracts. The Company's ability to compete
successfully depends largely upon its relationships with dealerships and the
willingness of dealerships to offer those Contracts that meet the Company's
underwriting criteria to the Company for purchase. There can be no assurance
that the Company will be able to continue to compete successfully in the markets
it serves.
GEOGRAPHIC CONCENTRATION. To date, the Company has purchased all of its
Contracts in California, Arizona, Washington, Hawaii, Oregon and Nevada.
Accordingly, adverse economic conditions or other factors particularly affecting
these states could adversely affect the delinquency, loan loss or repossession
experience of the servicing portfolio.
<PAGE> 18
THE EFFECT OF ADVERSE ECONOMIC CONDITIONS. The Company is a motor vehicle
consumer auto finance company whose activities are dependent upon the sale of
motor vehicles. The ability of the Company to continue to acquire Contracts in
the markets in which it operates and to expand into additional markets is
dependent upon the overall level of sales of new and used motor vehicles in
those markets. A prolonged downturn in the sale of new and used motor vehicles,
whether nationwide or in the markets in which the Company operates, could have
an adverse impact upon the Company, the results of its operations and its
ability to implement its business strategy. The automobile industry generally is
sensitive to adverse economic conditions both nationwide and regionally in
California and the western United States. Periods of rising interest rates,
reduced economic activity or higher rates of unemployment generally result in a
reduction in the rate of sales of motor vehicles and higher default rates on
motor vehicle loans. There can be no assurance that such economic conditions
will not occur, or that such conditions will not result in such severe
reductions in the Company's revenues or cash flows available to the Company to
permit the Company to remain current on its credit facilities.
REGULATION. The Company's business is subject to numerous federal and state
consumer protection laws and regulations, which, among other things: (i) require
the Company to obtain and maintain certain licenses and qualifications; (ii)
limit the interest rates, fees and other charges the Company is allowed to
charge; (iii) limit or prescribe certain other terms of the Company's Contracts;
(iv) require specific disclosures; and (v) define the Company's rights to
repossess and sell collateral. The Company believes it is in compliance in all
material respects with all such laws and regulations, and that such laws and
regulations have had no material adverse effect on the Company's ability to
operate its business. However, the Company's failure to comply with applicable
laws and regulations, changes in existing laws or regulations, or in the
interpretation thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's results of
operations and financial condition.
NO PRIOR PUBLIC MARKET FOR COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK PRICE.
Prior to the Common Stock offering, there has been no public market for the
Common Stock, and there can be no assurance that an active trading market will
be sustained or that the market price of the Common Stock will not decline below
the initial public offering price. The market price of the Common Stock could be
subject to significant fluctuations in response to variations in financial
results or announcements of material events by the Company or its competitors;
in addition, changes in the general conditions of the economy or financial
markets could adversely affect the market price of the Common Stock.
POTENTIAL MARKET IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial
amounts of Common Stock on the public market could adversely affect the market
price of the Common Stock.
ITEM 5. OTHER INFORMATION.
Effective September 16, 1996, G.Brian Mac Innis resigned as Chief
Executive Officer of the company to pursue personal interests. John W. Hall,
President and Chief Operating Officer and a Director of the company since its
inception, assumed the role of Chief Executive Officer.
<PAGE> 19
Effective August 15, 1996, Senior Vice President and Manager of the
North Hollywood Auto Finance Center, Kirk B. Kelley, resigned from the company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
*3.1 Restated Articles of Incorporation of the Company.
*3.2 Bylaws of the Company.
*3.3 Amended and Restated Articles of Incorporation of the Company.
*3.4 Form of Certificate of Incorporation of the Company, a Delaware
corporation.
*3.5 Form of Bylaws of the Company, a Delaware corporation.
*3.6 Form of Agreement and Plan of Merger of the Company, a Delaware
corporation, and the Company, a California corporation.
*4.1 Specimen certificate representing shares of Common Stock of the Company.
*10.1 Form of Indemnification Agreement of the Company, a Delaware corporation.
*10.2 Second Amended and Restated 1994 Stock Option Plan.
*10.3 Form of Notice of Grant of Stock Option under Second Amended and Restated
1994 Stock Option Plan.
*10.4 Form of Stock Option Agreement under Second Amended and Restated 1994
Stock Option Plan.
*10.5 Form of Stock Purchase Agreement under Second Amended and Restated 1994
Stock Option Plan.
*10.6 1994 Special Performance Option Grant Plan.
*10.7 Form of Notice of Grant of Stock Option under 1994 Special Performance
Option Grant Plan.
*10.8 Form of Stock Option Agreement under 1994 Special Performance Option Grant
Plan.
*10.9 Form of Stock Purchase Agreement under 1994 Special Performance
Option Grant Plan.
*10.10 Second Amended and Restated Loan and Security Agreement between Onyx
Acceptance Corporation and ContiTrade Services Corporation dated as of April 17,
1995.
*10.11 Letter Agreement between Onyx Acceptance Corporation and ContiTrade
Services Corporation regarding extension of the Dealer Participation Note
Purchase Facility and the Spread Account Deposit Note Purchase Facility dated
August 7, 1995.
*10.12 Letter Agreement between Onyx Acceptance Corporation and ContiTrade
Services L.L.C. regarding extension of Contract Purchase Facility dated as of
November 22, 1995.
*10.13 Third Amendment to Amended and Restated Investors' Rights Agreement
between and among Onyx Acceptance Corporation and the Investors identified
therein dated as of November 27, 1995.
*10.14 Warrant to purchase Common Stock in favor of ContiTrade Services
Corporation from Onyx Acceptance Corporation dated as of February 1, 1994.
*10.15 First Amendment to Co-Sale and First Refusal Agreement between and among
Onyx Acceptance Corporation, ContiFinancial Services Corporation, the Investors
and Managers, as defined therein, dated as of February 1, 1994.
<PAGE> 20
*10.16 First Amendment to and Waiver of Certain Provisions of Investors' Rights
Agreement between Onyx Acceptance Corporation, ContiFinancial Services
Corporation, the Investors and the Management Holders, as defined therein, dated
as of February 1, 1994.
*10.17 Senior Subordinated Note and Warrant Purchase Agreement between and among
Onyx Acceptance Corporation, Capital Resource Lenders II, L.P. and Dominion Fund
III, L.P., dated as of November 17, 1994.
*10.18 Senior Subordinated Note due 1999 in favor of Capital Resource Lenders
II, L.P. from Onyx Acceptance Corporation dated as of November 17, 1994.
*10.19 Senior Subordinated Note due 1999 in favor of Dominion Fund III, L.P.
from Onyx Acceptance Corporation dated as of November 17, 1994.
*10.20 Warrant to purchase Common Stock in favor of Capital Resource Lenders II,
L.P. from Onyx Acceptance Corporation dated as of November 17, 1994.
*10.21 Warrant to purchase Common Stock in favor of Dominion Fund III, L.P. from
Onyx Acceptance Corporation dated as of November 17, 1994.
*10.22 Amended and Restated Co-Sale and First Refusal Agreement between and
among Onyx Acceptance Corporation and the Shareholders identified therein dated
as of November 17, 1994.
*10.23 Amended and Restated Investors' Rights Agreement between and among Onyx
Acceptance Corporation, the Investors and the Management Holders identified
therein dated as of November 17, 1994.
*10.24 Amended and Restated Voting Agreement between and among Onyx Acceptance
Corporation and the Shareholders identified therein dated as of November 17,
1994.
*10.25 Preferred Stock Subordination Agreement between and among Onyx Acceptance
Corporation, Capital Resource Lenders II, L.P., Dominion Fund III, L.P. and
certain holders of Preferred Stock identified therein dated as of November 17,
1994.
*10.26 Subordination and Intercreditor Agreement between and among Onyx
Acceptance Corporation, ContiTrade Services Corporation, Capital Resource
Lenders II, L.P., Dominion Fund III, L.P., dated as of November 17, 1994.
*10.27 Amendment of Subordination and Intercreditor Agreement dated as of April
17, 1995, between and among Onyx Acceptance Corporation, Capital Resource
Lenders II, L.P., Dominion Fund III, L.P. and ContiTrade Services Corporation.
*10.28 ISDA Master Agreement between Onyx Acceptance Financial Corporation and
Dai-Ichi Kangyo Bank, Ltd. dated as of September 8, 1994.
*10.29 Side Letter to ISDA Master Agreement between Onyx Acceptance Corporation
and Dai-Ichi Kangyo Bank, Ltd. dated as of September 12, 1994.
*10.30 Sale and Servicing Agreement between Onyx Acceptance Corporation and Onyx
Acceptance Financial Corporation dated as of September 8, 1994.
*10.31 Triple-A One Funding Corporation Credit Agreement between and among Onyx
Acceptance Financial Corporation, Triple-A One Funding Corporation, CapMAC
Financial Services, Inc. and Capital Markets Assurance Corporation dated as of
September 8, 1994.
*10.32 Triple-A One Funding Corporation Note in favor of Onyx Acceptance
Financial Corporation from Triple-A One Funding Corporation dated as of
September 12, 1994.
<PAGE> 21
*10.33 Triple-A One Funding Corporation Security Agreement between and among
Onyx Acceptance Financial Corporation, Triple-A One Funding Corporation and
Capital Markets Assurance Corporation dated as of September 8, 1994.
*10.34 Subordinated Security Agreement between Onyx Acceptance Corporation and
Onyx Acceptance Financial Corporation dated as of September 8, 1994.
*10.35 Insurance and Indemnity Agreement between and among Onyx Acceptance
Corporation, Capital Markets Assurance Corporation, Onyx Acceptance Financial
Corporation and Triple-A One Funding Corporation dated as of September 8, 1994.
*10.36 Seller Note in favor of Onyx Acceptance Corporation from Onyx Acceptance
Financial Corporation dated September 12, 1994.
*10.37 Subordinated Note in favor of Onyx Acceptance Corporation from Onyx
Acceptance Financial Corporation dated September 12, 1994.
*10.38 Sublease and Administrative Services Agreement between Onyx Acceptance
Corporation and Onyx Acceptance Financial Corporation dated as of September 8,
1994.
*10.39 Tax Allocation Agreement between Onyx Acceptance Corporation and Onyx
Acceptance Financial Corporation dated as of September 1, 1994.
*10.40 Corporate Separateness Agreement between Onyx Acceptance Corporation and
Onyx Acceptance Financial Corporation dated September 8, 1994.
*10.41 Amendment Number One to Security Agreement, Subordinated Security
Agreement, Sale and Servicing Agreement and Definitions List between and among
Onyx Acceptance Financial Corporation, Onyx Acceptance Corporation, Triple-A One
Funding Corporation and Capital Markets Assurance Corporation dated March 1,
1995.
*10.42 Series B Preferred Stock Purchase Agreement between Onyx Acceptance
Corporation and Comdisco, Inc. dated as of November 26, 1994.
*10.43 Series B Preferred Stock Purchase Agreement between Onyx Acceptance
Corporation and Jack Slevin dated as of November 26, 1994.
*10.44 Series B Preferred Stock Purchase Agreement between Onyx Acceptance
Corporation and Individuals' Venture Fund dated as of November 30, 1994.
*10.45 First Amendment to Amended and Restated Investors' Rights Agreement
between and among Onyx Acceptance Corporation and certain Investors identified
therein dated as of December 15, 1994.
*10.46 Pooling & Servicing Agreement between and among Onyx Acceptance
Corporation, Onyx Acceptance Financial Corporation and Bankers Trust Company
dated as of September 1, 1994.
*10.47 Indemnification Agreement between and among Onyx Acceptance Corporation,
Onyx Acceptance Financial Corporation, Capital Markets Assurance Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated as of September 27,
1994.
*10.48 Indemnification Agreement between Onyx Acceptance Corporation and Merrill
Lynch, Pierce, Fenner & Smith Incorporated dated as of September 28, 194.
*10.49 Underwriting Agreement between and among Onyx Acceptance Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated as of September 28,
1994.
*10.50 Pooling & Servicing Agreement between and among Onyx Acceptance
Corporation, Onyx Acceptance Financial Corporation and Bankers Trust Company
dated as of April 1, 1995.
<PAGE> 22
*10.51 Indemnification Agreement between and among Onyx Acceptance Corporation
and Merrill Lynch, Pierce, Fenner & Smith Incorporated dated as of April 11,
1995.
*10.52 Indemnification Agreement between and among Onyx Acceptance Corporation,
Onyx Acceptance Financial Corporation, Capital Markets Assurance Corporation,
ContiFinancial Services Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated dated as of April 11, 1995.
*10.53 Underwriting Agreement between Onyx Acceptance Financial Corporation and
Onyx Acceptance Corporation and Merrill Lynch, Pierce, Fenner & Smith
Incorporated dated as of April 11, 1995.
*10.54 Master Lease Agreement between Onyx Acceptance Corporation and Comdisco,
Inc. dated January 7, 1994.
*10.55 Warrant to purchase Series A Preferred Stock in favor of Comdisco, Inc.
from Onyx Acceptance Corporation dated as of January 7, 1994.
*10.56 Warrant to purchase Common Stock in favor of Lighthouse Capital Partners
from Onyx Acceptance Corporation dated November 3, 1995.
*10.57 Master Lease Agreement between Lighthouse Capital Partners and Onyx
Acceptance Corporation dated November 3, 1995.
*10.58 Second Amendment to Amended and Restated Investors' Rights Agreement
between and among Onyx Acceptance Corporation and the Investors identified
therein dated as of November 3, 1995.
*10.59 Agreement for On-Line Services between On-Line Computer Systems, Inc. and
Onyx Acceptance Corporation dated as of November 19, 1993.
*10.60 Agreement for On-Line Service between On-Line Computer Systems, Inc. and
Onyx Acceptance Financial Corporation dated as of September 7, 1994.
*10.61 Option Agreement between Onyx Acceptance Corporation and John W. Hall
dated as of December 20, 1994.
*10.62 Promissory Note in favor of Onyx Acceptance Corporation from John Hall
dated as of December 20, 1994.
*10.63 Option Agreement between Onyx Acceptance Corporation and Brian Mac Innis
dated as of December 20, 1994.
*10.64 Promissory Note in favor of Onyx Acceptance Corporation from Brian Mac
Innis dated as of December 20, 1994.
*10.65 Stock Purchase Agreement between and among Brian Mac Innis and certain
Investors identified therein dated as of June 7, 1995.
*10.66 Stock Purchase Agreement between and among John W. Hall and certain
Investors identified therein dated as of June 7, 1995.
*10.67 Sublease Agreement between Onyx Acceptance Corporation and AT&T Resource
Management Corporation dated as of August 31, 1993.
*10.68 Office Space Lease (Master Lease) between and among The Irvine Company
and American Telephone and Telegraph Company dated as of April 29, 1987.
*10.69 First Amendment To Sublease between and among AT&T Resource Management
Corporation and Onyx Acceptance Corporation dated as of September 1, 1993. *
10.70 Onyx Acceptance Corporation 401(k) Plan dated January 1, 1994.
<PAGE> 23
*10.71 Pooling and Servicing Agreement between Onyx Acceptance Financial
Corporation, Onyx Acceptance Corporation and Bankers Trust Company dated as of
January 1, 1996.
*10.72 Underwriting Agreement between Onyx Acceptance Financial Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated January 31, 1996.
*10.73 Indemnification Agreement by and among Capital Markets Assurance
Corporation, Onyx Acceptance Corporation, Onyx Acceptance Financial Corporation
and Merrill Lynch, Pierce, Fenner & Smith Incorporated dated January 31, 1996.
*10.74 Indemnification Agreement by and between Onyx Acceptance Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated dated as of January 31, 1996.
*10.75 Excess Servicing and Trust Receivable Revolving Credit and Term Loan
Agreement among Onyx Acceptance Corporation, State Street Bank and Trust Company
and The First National Bank of Boston dated as of January 31, 1996.
*10.76 Pledge and Security Agreement by and among Onyx Acceptance Corporation,
State Street Bank and Trust Company and The First National Bank of Boston dated
as of January 31, 1996.
*10.77 Subordination and Intercreditor Agreement by and among State Street Bank
and Trust Company, The First National Bank of Boston, Capital Resource Lenders
II, L.P., Dominion Fund III and Onyx Acceptance Corporation dated as of January
31, 1996.
*10.78 1996-1 Spread Account Trust Agreement between Onyx Acceptance Financial
Corporation and Bankers Trust (Delaware) dated as of February 6, 1996.
*10.79 1995-1 Spread Account Trust Agreement between Onyx Acceptance Financial
Corporation and Bankers Trust (Delaware) dated as of February 6, 1996.
*10.80 1995-1 Purchase Agreement between Onyx Acceptance Corporation and Onyx
Acceptance Financial Corporation dated as of February 6, 1996.
*10.81 1994-1 Spread Account Trust Agreement between Onyx Acceptance Financial
Corporation and Bankers Trust (Delaware) dated as of February 6, 1996.
*10.82 1994-1 Purchase Agreement between Onyx Acceptance Corporation and Onyx
Acceptance Financial Corporation dated as of February 6, 1996.
*10.83 Form of Dealer Agreement Non-Recourse (U) between Dealership and Onyx
Acceptance Corporation.
*10.84 Form of Dealer Agreement Non-Recourse (N) between Dealership and Onyx
Acceptance Corporation.
*10.85 1996 Stock Option/Stock Issuance Plan. 11.1 Computation of Earnings per
Share.
27.1 Financial Data Schedule.
- ---------------
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (Registration No. 333-680).
(b) Reports on Form 8-K
Form 8-K dated August 28, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of August 15, 1996 for the Onyx Acceptance
Grantor Trust 1996-1. Unaudited Financial Statement of Capital Markets Assurance
Corporation for the period ended June 30, 1996.
<PAGE> 24
Form 8-K dated August 28, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of August 15, 1996 for the Onyx Acceptance
Grantor Trust 1996-2. Unaudited Financial Statement of Capital Markets Assurance
Corporation for the period ended June 30, 1996.
Form 8-K dated September 26 , 1996. Item 5 providing the Distribution
Date Statement for Distribution Date of September 15, 1996 for the Onyx
Acceptance Grantor Trust 1996-1.
Form 8-K dated September 26, 1996. Item 5 providing the Distribution
Date Statement for Distribution Date of September 15, 1996 for the Onyx
Acceptance Grantor Trust 1996-2.
Form 8-K dated November 8, 1996. Item 5 providing the Distribution
Date Statement for Distribution Date of October 15, 1996 for the Onyx
Acceptance Grantor Trust 1996-1.
Form 8-K dated November 8, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of October 15, 1996 for the Onyx Acceptance
Grantor Trust 1996-2.
Form 8-K dated October 24, 1996. Item 5 providing the Distribution
Date Statement for Distribution Date of October 15, 1996 for the Onyx Acceptance
Grantor Trust 1996-3.
<PAGE> 25
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ONYX ACCEPTANCE CORPORATION
Date: November 13, 1996
By: /s/ JOHN W. HALL
----------------------------------------------------
John W. Hall President
Date: November 13, 1996
By: /s/ DON P. DUFFY
----------------------------------------------------
Don P. Duffy Executive Vice President and
Principal Financial Officer
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
---------- ----------- ----
<S> <C> <C> <C>
11.1 Computation of Earnings Per Share 27
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
ONYX ACCEPTANCE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Exhibit 11.1
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
PRIMARY:
Net Income (loss) $1,504,294 $(1,198,003)
=========== ===========
Shares as adjusted:
Weighted average common shares outstanding 5,874,703 2,241,003
Assumed conversion of Series A and 715,422
B convertible preferred stock 39,757
Assumed conversion of common
stock warrants 228,246 264,643
Incremental shares from outstanding
stock options as determined under
the treasury stock method 298,334 368,251
---------- -----------
Shares as adjusted
6,401,283 3,629,614
========== ===========
Net income (loss) per share $ 0.23 ($0.33)
========== ===========
FULLY DILUTED: Net Income (loss) $1,504,294 $(1,198,003)
========== ===========
Shares as adjusted:
Weighted average common shares
outstanding 5,874,703 2,241,541
Assumed conversion of Series A and 715,422
B convertible preferred stock 39,757
Assumed conversion of common
stock warrants 228,246 264,643
Incremental shares from outstanding
stock options as determined under
the treasury stock method 298,334 368,251
---------- -----------
Shares as adjusted 6,401,283 3,629,614
========== ===========
Net income (loss) per share $0.23 ($0.33)
========== ===========
</TABLE>
ONYX ACCEPTANCE CORPORATION
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,638,355
<SECURITIES> 0
<RECEIVABLES> 30,131,870
<ALLOWANCES> 145,766
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 69,187,261
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 58,975
<OTHER-SE> 36,859,490
<TOTAL-LIABILITY-AND-EQUITY> 69,187,261
<SALES> 0
<TOTAL-REVENUES> 6,135,064
<CGS> 0
<TOTAL-COSTS> 4,260,770
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 167,963
<INTEREST-EXPENSE> 1,492,629
<INCOME-PRETAX> 1,874,294
<INCOME-TAX> 370,000
<INCOME-CONTINUING> 1,504,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,504,294
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
