<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 June 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 (I.R.S.Employer
incorporation or organization Identification No.)
Delaware 33-0577635
Onyx Acceptance Corporation
8001 Irvine Center Drive, Suite 500, 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 August 12, 1996, there were 5,878,964 shares of registrant's
Common Stock, par value $.01 per share outstanding.
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ONYX ACCEPTANCE CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements
Consolidated Statements of Financial Condition at June 30, 1996
(Unaudited) and December 31, 1995................................... 3
Consolidated Statements of Operations for the six months ended
June 30, 1996 (Unaudited) and June 30, 1995 (Unaudited)............. 4
Consolidated Statements of Cash Flows for the six months ended
June 30, 1996 (Unaudited), and June 30, 1995 (Unaudited)............ 5
Notes to Consolidated Financial Statements (Unaudited)................ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................... 8
PART II. OTHER INFORMATION
Item 5. Other Information .................................................... 17
Item 6. Exhibits and Reports on Form 8-K ..................................... 22
SIGNATURES .................................................................... 23
</TABLE>
2
<PAGE> 3
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CASH & CASH EQUIVALENTS $ 1,741,239 $ 1,622,713
TRUST RECEIVABLES 7,305,119 6,208,617
CONTRACTS HELD FOR SALE (Net of allowance) 78,401,054 120,215,434
EXCESS SERVICING (Net of amortization) 19,761,165 6,181,518
OTHER ASSETS 2,343,185 1,848,559
------------ ------------
TOTAL ASSETS $109,551,762 $136,076,841
============ ============
LIABILITIES AND EQUITY
LIABILITIES
ACCOUNTS PAYABLE 3,125,861 287,519
DEBT 67,833,754 131,949,536
OTHER LIABILITIES 3,186,702 2,356,334
------------ ------------
TOTAL LIABILITIES 74,146,317 134,593,389
REDEEMABLE PREFERRED STOCK SERIES A 0 9,379,177
EQUITY
PREFERRED STOCK SERIES B 0 1,364
COMMON STOCK
Par value $.01 per share; authorized 15,000,000 shares;
issued and outstanding 2,241,454 as of
December 31, 1995 and issued and outstanding
5,878,923 as of June 30, 1996 58,790 22,415
PAID IN CAPITAL 37,601,972 803,109
RETAINED EARNINGS (2,255,317) (8,722,613)
------------ ------------
TOTAL EQUITY 35,405,445 (7,895,725)
------------ ------------
TOTAL LIABILITIES AND EQUITY $109,551,762 $136,076,841
============ ============
</TABLE>
3
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ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Finance Revenue $2,752,428 $ 369,575 $4,887,780 $ 2,602,869
Interest Expense 1,255,688 989,611 3,045,956 2,279,967
---------- ---------- ---------- -----------
Net Finance Revenue 1,496,740 (620,036) 1,841,824 322,902
Provision for Credit Losses 49,824 4,542 (25,070) 183,406
---------- ---------- ---------- -----------
Net Finance Revenue after Provision 1,446,916 (624,578) 1,866,894 139,496
Gain on Sale of Contracts 4,175,387 2,012,365 9,500,098 2,012,365
Service Fee Income 680,701 255,290 1,785,595 498,908
EXPENSES:
Salaries and Benefits 2,065,663 1,196,485 3,871,645 2,279,775
Depreciation 199,041 161,644 369,439 319,891
Occupancy 154,624 85,937 276,747 167,807
General and Administrative Expenses 1,241,377 485,840 2,010,601 910,965
---------- ---------- ---------- -----------
Total Expenses 3,660,705 1,929,905 6,528,432 3,678,438
---------- ---------- ---------- -----------
NET INCOME/(LOSS) BEFORE INCOME TAXES 2,642,299 (286,829) 6,624,155 (1,027,669)
INCOME TAXES 526,591 0 1,308,691 0
---------- ---------- ---------- -----------
NET INCOME $2,115,708 $ (286,829) $5,315,464 $(1,027,669)
========== ========== ========== ===========
NET INCOME PER SHARE (3) $0.33 $(0.08) $1.06 $(0.29)
Weighted Average Number of Shares of Common Stock
and Common Stock Equivalents Outstanding (3) 6,375,451 3,564,959 5,036,488 3,549,705
</TABLE>
(3) On a fully taxed basis the Net Income for the 2nd Quarter 1996 would be
$1,543,103 and Net Income per share would be $0.24. Net Income for the six
months ended June 30, 1996 on a fully taxed basis would be $3,868,507 and
Net Income per share would be $0.77.
4
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -----------------------------
1996 1995 1996 1995
------------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,079,619 $ 49,724,932 $ 36,328,936 $ 14,692,605
INVESTING ACTIVITIES:
PURCHASES OF PROPERTY AND EQUIPMENT (331,266) (54,909) (725,808) (151,981)
------------ ------------ ------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (331,266) (54,909) (725,808) (151,981)
FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF COMMON STOCK 4,010,626 30,337,128 2,836
PROCEEDS FROM EXERCISE OF OPTIONS/WARRANTS 3,750 5,070
PAYMENTS OF IPO RELATED AND OTHER CAPITALIZED FEES (1,549,638) (13,961) (1,735,669) (13,961)
PROCEEDS FROM DRAWDOWNS ON WAREHOUSE LINE OF CREDIT 2,500,000 1,048,568 2,500,000
PAYMENTS ON CAPITAL LEASE OBLIGATIONS (Net of proceeds) 32,664 (83,758) 24,651 (193,818)
PROCEEDS FROM DRAWDOWNS ON EXCESS SERVICING LINE OF CREDIT 12,800,000
PAYOFF OF EXCESS SERVICING LINE OF CREDIT (12,800,000)
PAYOFF OF DEALER PARTICIPATION LINE OF CREDIT (10,617,786)
PAYDOWN OF COMMERCIAL PAPER RELATED TO SECURITIZATION (81,000,000) (71,304,507) (176,000,000) (71,304,507)
PROCEEDS FROM ISSUANCE OF COMMERCIAL PAPER 71,163,151 16,004,230 130,699,469 46,458,650
PAYOFF OF SUBORDINATED DEBT (10,000,000)
PROCEEDS FROM OTHER DEBT (Net of payments) 753,967 753,967
------------ ------------ ------------- ------------
NET CASH USED IN FINANCING ACTIVITIES (6,585,480) (52,897,996) (35,484,602) (22,550,800)
------------ ------------ ------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,162,873 (3,227,973) 118,526 (8,010,176)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 578,366 5,469,667 1,622,713 10,251,870
------------ ------------ ------------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,741,239 $ 2,241,694 $ 1,741,239 $ 2,241,694
============ ============ ============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID FOR INTEREST $ 1,423,866 $ 1,027,826 $ 3,936,722 $ 2,280,972
</TABLE>
5
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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 six months ended June 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
6,375,451 and 3,564,959 for the three months ended June 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. On April 25, 1996, the Underwriters elected to exercise
their 30 day over-allotment to purchase 375,000 additional shares of common
stock. Net proceeds to the Company were 4.0 million. For further information
about the Offering, refer to the Company's Registration Statement on Form S-1
(No. 333-680).
6
<PAGE> 7
NOTE 4 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Contracts held for sale $97,009,948 $157,552,745
Less Unearned interest 20,554,826 40,660,123
----------- ------------
76,455,122 116,892,622
Allowance for credit losses (375,983) (591,765)
----------- ------------
76,079,139 116,300,857
Dealer Participation 2,321,915 3,914,577
----------- ------------
Total $78,401,054 $120,215,434
=========== ============
</TABLE>
NOTE 5 - EXCESS SERVICING RECEIVABLE
The following table presents the balances and activity for excess
servicing receivable:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
<S> <C> <C>
Beginning Balance $ 6,181,518 $ 2,060,738
Additions 18,400,000 8,718,596
Amortization (4,820,353) (4,597,816)
----------- -----------
Ending Balance $19,761,165 $ 6,181,518
=========== ===========
</TABLE>
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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, Nevada, and Hawaii. 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 June 30, 1996, the Company had acquired in
excess of $442 million in Contracts from 1,108 dealerships in California,
Arizona, Washington, Nevada and Hawaii.
The following table illustrates the changes in the Company's Contract
acquisition volume, total revenue, securitization activity and servicing
portfolio during the past ten fiscal quarters:
Selected Quarterly Financial Information
For the Quarters Ended
<TABLE>
<CAPTION>
March 31, June 30, Sept 30, Dec.31, March 31, June 30, Sept. 30, Dec.31, March 31, June 30,
1994 1994 1994 1994 1995 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Contracts purchased during
period .......................... $8,208 $18,141 $25,858 $33,516 $ 38,964 $ 46,883 $ 52,940 $ 60,610 $ 73,300 $ 83,555
Average monthly purchases
during period ................... 2,736 6,047 8,619 11,172 12,988 15,628 17,646 20,203 24,433 27,852
Gain on Sale of Contracts ....... -- -- -- 515 -- 2,012 -- -- 5,325 4,175
Total revenue.(1) ............... 85 380 743 887 1,187 1,647 971 1,813 6,775 6,353
Contracts Securitized
during period ................... -- -- -- 38,601 -- 105,000 -- -- 100,500 85,013
Servicing Portfolio at period
end ............................. 8,088 24,510 46,898 74,581 104,895 140,198 177,532 218,207 266,251 317,054
</TABLE>
(1) Total revenue is comprised of net finance revenue, servicing fee income and
gain on sale of Contracts
While contract origination volume, earnings and the expansion of the
Company's operations outside California were in accordance with management's
objectives, management believes that the delinquency and loss performance of
contracts were above acceptable levels for the quarter ended June 30, 1996. In
particular, contracts originated through the Company's North Hollywood Auto
Finance Center experienced higher levels of loss and delinquency.
Management noted that the North Hollywood Auto Finance Center had a
higher concentration of used car dealerships than the Company's other Auto
Finance Centers, and this concentration of used car dealerships was principally
responsible for the performance of the portfolio during the second quarter. As
a result, management has re-underwritten all used car dealerships throughout
the Company and has terminated its relationships with a majority of the used
car dealerships serviced by the North Hollywood Auto Finance Center.
Management expects the Company's delinquencies and losses, due to the
delinquency and loss levels in the North Hollywood Auto Finance Center, to
continue at second quarter levels into the third quarter of 1996. The Company's
annualized net charge-offs excluding the North Hollywood Auto Finance Center
were 0.86% for the quarter ended June 30, 1996.
Contracts Purchased and Servicing Portfolio.
The Company experienced significant growth in its purchased volume of
Contracts. Purchased Contract volume increased to $156.9 million for the first
half of 1996 from $85.8 million for the first half of 1995, representing an
increase of 83%. Volume for the three months ended June 30, 1996 increased to
$83.6 million from $46.9 million for the like period of 1995. This growth in
acquisitions is attributable to the opening of four additional Auto Finance
Centers since the end of the first half of 1995 and increasing market
penetration within the Company's existing centers. The Company's servicing
portfolio at June 30, 1996 was $317.1 million compared to $140.2 at June 30,
1995, an increase of 126%. Total revenues during the first half of 1996 were
$13.1 million compared to $2.8 million for the same period ended June 30, 1995.
8
<PAGE> 9
RESULTS OF OPERATIONS
Quarters ended June 30, 1996 and 1995 and six months ended June 30, 1996 and
1995
Net Finance Revenue. Net finance revenue increased to $1.5 million for the
quarter ended June 30, 1996 from $(620,030) for the same period in 1995. Net
finance revenue for the six month period ending June 30, 1996 increased by 457%
to $1.8 million from $323,000 for the like period in 1995. The increase is
primarily attributable to an increase in Contracts held for sale during the
quarter and the six month period ending June 30, 1996 compared to the quarter
and six month period ending June 30, 1995.
Provisions for Credit Losses. During the quarter ended June 30, 1996, the
provision for credit losses totaled $49,824 compared to $4,542 for the same
period ended in 1995. This increase is attributable to an increase in contracts
held for sale during the quarter which has resulted in higher future provisions
for loss. Provision for credit losses for the six month period ending June 30,
1996 were ($25,070) compared to $183,406 for the first half of 1995. This
reduction is attributable to asset sales totaling $185.5 million in the first
half of 1996 and the associated reversal of the book allowance. At June 30, 1996
Contracts held for sale were $76.4 million compared to $15.5 million at June 30,
1995.
Gain on Sale of Contracts. The Company completed a $85.0 million securitization
with a net spread of 3.61% during the quarter ended June 30, 1996, resulting in
a gain on sale of Contracts of $4.2 million. The Company completed a
securitization in the second quarter of 1995 in the amount of $105.0 million
with a net spread of 1.86% resulting in a gain on sale of $2.0 million. Gain on
Sale of Contracts for the six months period ending June 30, 1996 was $9.5
million with sales of 185.5 million and an average net spread of 3.32% as
compared to a gain of $2.0 million with the sale of $105.0 million and a net
spread of 1.86% for the same period in 1995.
Servicing Fee Income. Servicing fee income increased to $681,000 for the quarter
ended June 30, 1996 from $255,000 for the quarter ended June 30, 1995. The
increase was attributable to a significant increase in the size of the servicing
portfolio. Servicing fee income for the six months ending June 30, 1996 was $1.8
million compared to $499,000 for the like period in 1995. The size of the
servicing portfolio at June 30, 1996 increased to $317.1 million from $140.2
million at June 30, 1995. Servicing income for the quarter ended June 30, 1996
was $681,000 compared to $1.1 million for the quarter ended March 31, 1996, a
decrease of 38%. This decrease is the result of increased losses in the
Company's servicing portfolio in its North Hollywood Auto Finance Center.
Salaries and Benefits Expense. The Company incurred salary and benefit expenses
of $2.1 million during the second quarter of 1996 compared with $1.2 million for
the second quarter of 1995, an increase of 75%. Salary and benefits increased in
the first six months to $3.9 million from $2.3 million for the first six 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 60 at June 30, 1995 to 131 at June 30, 1996.
Other Operating Expenses. Other operating expenses increased by 118% to $1.6
million for the Quarter ended June 30,1996 from $733,000 for the same period
ended June 30 , 1995. For the first six months of 1996 other operating expenses
were $2.7 million compared to $1.4 million for the first six months of 1995. The
majority of the increases are due to growth of the servicing portfolio and the
opening of four new auto finance centers.
Net Income. The Company posted net income of $2.1 million for the quarter ended
June 30, 1996 or $.33 per share compared to a net loss of ($287,000) or ($.08)
per share for the same
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period of 1995. Net income for the six months ending June 30, 1996 was $5.3
million compared to ($1.0 million) for the first six months of 1995. The higher
earnings are the result of the Company's continuing focus on its growth strategy
within the western United States.
Asset Quality. At June 30, 1996, delinquencies for the Servicing Portfolio
represented 1.52% of the amount of Contracts in the Company's Servicing
Portfolio or $4.8 million as compared to 0.97% at June 30, 1995 or $1.4 million.
Loan losses for the Servicing Portfolio as a percentage of average serviced
loans outstanding increased to 1.29% during the quarter compared to 0.19% for
the second quarter of 1995 and increased to 0.99% for the first six months of
1996 compared with 0.13% for the first six months of 1995. Delinquency and loss
increases are due to several factors including seasoning of the Servicing
Portfolio and an increase in loan losses and delinquencies arising from
Contracts originated by independent used car dealers through the Company's North
Hollywood Auto Finance Center.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
June 30,
---------------------------------------------------------
1996 1995
------------------------ -------------------------
AMOUNT NO. AMOUNT NO.
------ --- ------ ---
(Dollars in thousands)
<S> <C> <C> <C> <C>
Servicing portfolio ............... $317,054 29,494 $140,198 13,006
Delinquencies(1)(2)
30-59 days ............... $ 2,317 191 $ 999 65
60-89 days ............... $ 1,274 104 $ 192 14
90+ days ................ $ 1,219 97 $ 175 11
Total ............................. $ 4,810 392 $ 1,366 90
Total delinquencies as a percent of
Servicing Portfolio ............... 1.52% 1.33% 0.97% 0.69%
</TABLE>
- --------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
10
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LOAN LOSS EXPERIENCE OF SERVICING PORTFOLIO
FOR THE QUARTERS ENDED
<TABLE>
<CAPTION>
June 30,
-------------------------
1996 1995
---- ----
(Dollars in thousands)
<S> <C> <C>
Period end contracts outstanding .................................... $ 317,054 $140,198
Average servicing portfolio(1) ...................................... $ 290,848 $121,892
Number of gross charge-offs ......................................... 231 29
Gross charge-offs ................................................... $ 1,043 $ 58
Net charge-offs ..................................................... $ 937 $ 57
--------- --------
Annualized net charge-offs as a percent of average servicing portfolio 1.29% .19%
</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 $8.1 million for the quarter ended
June 30, 1996, compared to $49.7 million provided by operating activities in
the quarter ended June 30, 1995. Onyx completed a securitization in the second
quarter of 1995 in the amount of $105,000,000.
Cash used in investing activities was $331,000 for the quarter ended June 30,
1996 compared to $55,000 for the quarter ended June 30, 1995.
Cash used by financing activities was $6.6 million for the quarter ended June
30, 1996, compared to $52.8 million used in financing activities for the
quarter ended June 30, 1995. Cash was used to pay down $81.0 million of the
CP Facility due to the securitization and sale of Contracts during the quarter
ended June 30, 1996.
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 credit 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. The
Company has a Revolving Credit Facility under which the Company may (subject to
borrowing base availability) borrow up to $20
11
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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 if earlier, upon
the occurrence of certain "credit triggers".
Securitizations. In May of 1996, the Company consummated, with a pass-through
rate of 6.40%, and a net interest rate spread inclusive of all costs of 3.61%,
a securitization in the amount of $85.0 million. As a result of this
securitization, the Company realized a gain on sale of approximately $4.2
million.
Interest Rate Exposure and Hedging. 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 August 10, 1996, the Company had in effect various
interest rate hedges totaling $125 million which mature September 16, 1996 which
the Company believes is adequate to cover its next securitization.
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
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<PAGE> 13
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. 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
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<PAGE> 14
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
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
14
<PAGE> 15
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 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.
15
<PAGE> 16
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 substantially all
of its Contracts in California. Accordingly, adverse economic conditions or
other factors particularly affecting California could adversely affect the
delinquency, loan loss or repossession experience of the servicing portfolio.]
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 California markets, 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
16
<PAGE> 17
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.
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.
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<PAGE> 18
*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.
*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.
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<PAGE> 19
*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.
*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.
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<PAGE> 20
*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.
*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.
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<PAGE> 21
*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.
*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.
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<PAGE> 22
*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 April 30, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of April 15, 1996. No financial statements.
Form 8-K dated June 14, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of May 15, 1996 for the Onyx Acceptance Grantor
Trust 1996-1. Audited Financial Statement of Capital Markets Assurance
Corporation for the year ended 1995.
Form 8-K dated June 17, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of June 15, 1996 for the Onyx Acceptance Grantor
Trust 1996-1.
Form 8-K dated June 17, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of June 15, 1996 for the Onyx Acceptance Grantor
Trust 1996-2.
Form 8-K dated July 30, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of July 15, 1996 for the Onyx Acceptance Grantor
Trust 1996-1.
Form 8-K dated July 30, 1996. Item 5 providing the Distribution Date
Statement for Distribution Date of July 15, 1996 for the Onyx Acceptance Grantor
Trust 1996-2.
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<PAGE> 23
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: August 12, 1996
By: /s/ John W. Hall
--------------------------------
John W. Hall
President
Date: August 12, 1996
By: /s/ Don P. Duffy
--------------------------------
Don P. Duffy
Executive Vice President and
Principal Financial Officer
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<PAGE> 24
EXHIBIT INDEX
Exhibit No. Description Page
----------- ----------- ----
11.1 Computation of Earnings Per Share
27.1 Financial Data Schedule
<PAGE> 1
ONYX ACCEPTANCE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Exhibit 11.1
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------------
1996 1995
----------- -----------
PRIMARY:
<S> <C> <C>
Net Income (loss) $ 2,115,708 $ (286,829)
=========== ===========
Shares as adjusted:
Weighted average common shares
outstanding 5,789,216 2,241,541
Assumed conversion of Series A and
B convertible preferred stock 755,179
Assumed conversion of common
stock warrants 233,280 264,643
Incremental shares from outstanding
stock options as determined under
the treasury stock method 352,955 303,596
----------- -----------
Shares as adjusted 6,375,451 3,564,959
=========== ===========
Net income (loss) per share $ .33 $ (.08)
=========== ===========
FULLY DILUTED: Net Income (loss)
$ 2,115,708 $ (286,829)
=========== ===========
Shares as adjusted:
Weighted average common shares
outstanding 5,789,216 2,241,541
Assumed conversion of Series A and
B convertible preferred stock 755,179
Assumed conversion of common
stock warrants 233,280 264,643
Incremental shares from outstanding
stock options as determined under
the treasury stock method 352,955 303,596
----------- -----------
Shares as adjusted 6,375,451 3,564,959
=========== ===========
Net income (loss) per share $ .33 $ (0.8)
=========== ===========
</TABLE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,741,239
<SECURITIES> 0
<RECEIVABLES> 78,401,054
<ALLOWANCES> 375,983
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 109,551,762
<CURRENT-LIABILITIES> 0
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0
0
<COMMON> 58,790
<OTHER-SE> 35,346,655
<TOTAL-LIABILITY-AND-EQUITY> 109,551,762
<SALES> 0
<TOTAL-REVENUES> 6,303,004
<CGS> 0
<TOTAL-COSTS> 3,660,705
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 49,824
<INTEREST-EXPENSE> 1,255,608
<INCOME-PRETAX> 2,642,299
<INCOME-TAX> 526,591
<INCOME-CONTINUING> 2,115,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,115,708
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
