<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q/A
---------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
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
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 33-0577635
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OR ORGANIZATION)
</TABLE>
ONYX ACCEPTANCE CORPORATION
27051 TOWNE CENTRE DRIVE
FOOTHILL RANCH, CA 92610
(949) 465-3900
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
----------------
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 April 30, 1998, there were 6,027,900 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/A
ONYX ACCEPTANCE CORPORATION (THE "COMPANY") HEREBY AMENDS AND RESTATES IN THEIR
ENTIRETY EACH OF THE FOLLOWING ITEMS OF THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1998 FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ON MAY 15, 1998.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Restated Condensed Consolidated Statements of Financial Condition at
March 31, 1998 and December 31, 1997................................ 3
Restated Condensed Consolidated Statements of Income for the three months
ended March 31, 1998 and March 31, 1997............................... 4
Restated Consolidated Statements of Cash Flows for the three months ended
March 31, 1998, and March 31, 1997................................... 5
Notes to Restated Consolidated Financial Statements....................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................... 19
SIGNATURES......................................................................... 23
EXHIBIT INDEX...................................................................... 24
</TABLE>
2
<PAGE> 3
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
RESTATED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents ........................................ $ 4,662,766 $ 991,010
Trust receivables ................................................ 7,947,728 7,377,801
Contracts held for sale (Net of allowance) ....................... 86,451,394 64,342,309
Retained interest on securitized assets .......................... 72,805,428 64,357,850
Other assets .................................................... 5,378,025 4,767,490
------------ ------------
Total assets .......................................... $177,245,341 $141,836,460
============ ============
LIABILITIES
Accounts payable ................................................. $ 5,683,972 $ 6,564,446
Debt ............................................................. 125,427,968 91,759,281
Other liabilities ................................................ 7,669,076 5,795,323
------------ ------------
Total liabilities ...................................... 138,781,016 104,119,050
EQUITY
Common stock
Par value $.01 per share; authorized 15,000,000 shares;
issued and outstanding 6,026,563 as of
March 31, 1998 and issued and outstanding
6,017,635 as of December 31, 1997 ............................ 60,265 60,176
Paid in capital .................................................. 37,814,624 37,810,158
Retained earnings (deficit) ...................................... 589,436 (152,924)
------------ ------------
Total equity .......................................... 38,464,325 37,717,410
------------ ------------
Total liabilities and equity .......................... $177,245,341 $141,836,460
============ ============
</TABLE>
See the accompanying notes to the restated condensed
consolidated financial statements.
3
<PAGE> 4
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
RESTATED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Interest income ........................ $ 4,480,550 $ 1,881,992
Interest expense ....................... 2,820,986 1,054,909
----------- -----------
Net interest income .................... 1,659,564 827,083
Gain on sale of contracts .............. 8,151,110 3,153,719
Servicing fee income ................... 1,968,641 2,541,413
Total Revenues ......................... 11,779,315 6,522,215
EXPENSES:
Provision for credit losses ........ 306,988 293,270
Salaries and benefits .............. 5,941,169 3,417,324
Depreciation ....................... 426,982 201,983
Occupancy .......................... 372,441 324,091
General and administrative expenses. 3,462,744 1,937,752
----------- -----------
Total expenses ......................... 10,510,324 6,174,420
----------- -----------
Net income before taxes ................ 1,268,991 347,795
Income taxes ....................... 526,631 149,690
----------- -----------
Net Income after taxes ................. $ 742,360 $ 198,105
=========== ===========
Net income per share - Basic ........... $ 0.12 $ 0.03
Net income per share - Diluted ......... $ 0.12 $ 0.03
Basic shares outstanding ............... 6,024,820 5,962,174
Diluted shares outstanding ............. 6,420,551 6,403,911
</TABLE>
See the accompanying notes to the restated condensed
consolidated financial statements.
4
<PAGE> 5
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
RESTATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net cash used in operating activities .............................. $ (29,236,094) $ (36,178,828)
INVESTING ACTIVITIES:
Purchases of property and equipment ........................... (678,605) (394,959)
------------- -------------
Cash used in investing activities .................... (678,605) (394,959)
FINANCING ACTIVITIES:
Proceeds from exercise of options/warrants .................... 4,553 52,974
Payments on capital lease obligations ......................... (140,589) (155,884)
Proceeds from excess servicing line of credit ................ 2,451,268 8,000,000
Paydown of warehouse line related to securitization and sale... (184,006,000) (83,500,000)
Proceeds from warehouse line (net of other payments) .......... 205,360,997 112,093,298
Proceeds from subordinated debt ............................... 10,000,000 0
Payments on other loans ....................................... (83,774) (83,773)
------------- -------------
Net cash provided by financing activities ............ 33,586,455 36,406,615
------------- -------------
Increase (decrease) in cash and cash equivalents ..... 3,671,756 (167,172)
Cash and cash equivalents at beginning of period ................... 991,010 603,028
------------- -------------
Cash and cash equivalents at end of period ......................... $ 4,662,766 $ 435,856
============= =============
Supplemental Disclosure of Cash Flow Information:
Interest paid ...................................................... $ 2,826,407 $ 1,003,023
Capital lease additions ............................................ $ 86,786 $ 383,317
</TABLE>
See the accompanying notes to the restated condensed
consolidated financial statements.
5
<PAGE> 6
ONYX ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO RESTATED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- BASIS OF PRESENTATION
The restated condensed consolidated financial statements included herein
are unaudited and have been prepared by the Company 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 the regulations. In the opinion of management, the restated
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
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1998. The restated
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and footnotes thereto for the year ended
December 31, 1997 included in the Company's 1997 Annual Report on Form 10-K.
NOTE 2 - RESTATEMENT
As required by the Financial Accounting Standards Board's ("FASB") Special
Report, "A Guide to Implementation of Statement 125 on Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, Second
Edition," dated December 1998, and related guidance set forth in statements made
by the staff of the Securities and Exchange Commission, ("SEC") on December 8,
1998, the Company has restated its 1998 and 1997 financial statements to reflect
the change in the method of measuring and accounting for Trust Receivables and
Retained Interest in Securitized Assets ("Credit Enhancement Assets") on its
securitization transactions to the cash-out method from the cash-in method.
Initial deposits to restricted cash accounts, if any, and subsequent cash flows
received by securitization trusts sponsored by the Company accumulate as Credit
Enhancement Assets until certain targeted levels are achieved, after which cash
is distributed to the Company on an unrestricted basis. Under the cash-in method
previously used by the Company, (i) the assumed discount period for measuring
the present value of Credit Enhancement Assets ended when cash flows were
received by the securitization trusts and (ii) initial deposits to restricted
cash accounts were recorded at face value. Under the cash-out method now
required by the FASB and SEC, the assumed discount period for measuring the
present value of Credit Enhancement Assets ends when cash, including return of
the initial deposits, if any, is distributed to the Company on an unrestricted
basis.
The change to the cash-out method results only in a difference in the timing of
revenue recognition from a securitization and has no effect on the total cash
flows of such transactions. While the total amount of revenue recognized over
the term of a securitization transaction is the same under either method, the
cash-out method results in (i) lower initial gains on the sale of contracts held
for sale due to the longer discount period and (ii) higher subsequent servicing
fee income from accretion of the additional cash-out discount. Accordingly, the
reductions in previously reported earnings resulting from retroactive
application of the change will generally be recognized in subsequent period
earnings as servicing fee income.
The restatement resulted in the following changes to prior period financial
statements:
6
<PAGE> 7
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(In thousands)
-----------------------
1998 1997
---------- ---------
<S> <C> <C>
TOTAL
REVENUE:
Previous $11,925 $7,223
As Restated $11,779 $6,522
NET INCOME:
Previous $ 828 $ 612
As Restated $ 742 $ 198
NET INCOME
PER SHARE:
BASIC:
Previous $ 0.14 $ 0.10
As Restated $ 0.12 $ 0.03
DILUTED:
Previous $ 0.13 $ 0.10
As Restated $ 0.12 $ 0.03
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- -----------
<S> <C> <C>
TRUST
RECEIVABLES:
Previous $30,401 $27,629
As Restated $ 7,948 $ 7,378
RISA:
Previous $55,230 $48,839
As Restated $72,805 $64,358
SHAREHOLDERS'
EQUITY:
Previous $41,388 $40,555
As Restated $38,464 $37,717
</TABLE>
7
<PAGE> 8
NOTE 3 - CONTRACTS HELD FOR SALE
Contracts held for sale consisted of the following:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Contracts held for sale $ 94,014,562 $ 71,216,278
Less unearned interest 8,771,578 7,835,794
------------ ------------
85,242,984 63,380,484
Allowance for credit losses (426,215) (316,902)
------------ ------------
84,816,769 63,063,582
Dealer participation 1,634,625 1,278,727
------------ ------------
Total $ 86,451,394 $ 64,342,309
============ ============
</TABLE>
NOTE 4 - RETAINED INTEREST IN SECURITIZED ASSETS
SFAS 125 requires that following a transfer of financial assets, an
entity is to recognize the assets it controls and the liabilities it has
incurred, and derecognize assets for which control has been surrendered and
liabilities that have been extinguished.
Retained interest in securitized assets ("RISA") capitalized upon
securitization of contracts represents the present value of the estimated future
earnings to be received by the Company from the excess spread created in
securitization transactions. Excess spread is calculated by taking the
difference between the coupon rate of the contracts sold and the certificate
rate paid to the investors less contractually specified servicing and guarantor
fees and projected credit losses, after giving effect to estimated prepayments.
Prepayment and credit loss assumptions are utilized to project future
earnings and are based on historical experience. Credit losses are estimated
using cumulative loss frequency and severity estimates by management. All
assumptions are evaluated each quarter and adjusted, if appropriate, to reflect
the actual performance of the contracts.
Future earnings are discounted at a rate management believes to be
representative of market at the time of securitization. The balance of RISA is
amortized against actual excess spread income earned on a monthly basis over the
expected repayment life of the underlying contracts. RISA is classified in a
manner similar to available for sale securities and as such is marked to market
each quarter. Market value changes are calculated by discounting the remaining
projected excess spread using a current market discount rate. Any changes in the
market value of the RISA is reported as a separate component of shareholders'
equity as an unrealized gain or loss, net of deferred taxes. As of March 31,
1998 the market value of RISA approximated cost. The Company retains the rights
to service all contracts it securitizes.
The Company is currently using securitization assumptions that are
consistent with its historical performance. These assumptions are an ABS
prepayment speed of 1.75%, loss assumption of 2.0% and a discount rate of 3.50%
over the pass-through rate
8
<PAGE> 9
The following table presents the balances and activity for retained
interest on securitized assets:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Beginning balance $ 64,357,850 $ 33,530,020
Additions 15,684,092 41,603,001
Amortization (7,236,514) (10,775,171)
------------ ------------
Ending balance $ 72,805,428 $ 64,357,850
============ ============
</TABLE>
In initially valuing the RISA, the Company establishes an off balance
sheet allowance for expected future credit losses. The allowance is based upon
historical experience and management's estimate of future performance regarding
credit losses. The amount is reviewed periodically and adjustments are made if
actual experience or other factors indicate that future performance may differ
from management's prior estimates.
The following table presents the estimated future undiscounted retained
interest earnings to be received from securitizations. Estimated future
undiscounted RISA earnings are calculated by taking the difference between the
coupon rate of the contracts sold and the certificate rate paid to the
investors, less the contractually specified servicing fee of 1.0% and guarantor
fees, after giving effect to estimated prepayments and assuming no losses. To
arrive at the RISA, this amount is reduced by the off balance sheet allowance
established for potential future losses and by discounting to present value.
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
----------- -----------
<S> <C> <C>
Estimated net undiscounted RISA earnings ........................ $114,117,068 $ 99,613,524
Off balance sheet allowance for losses .......................... 31,099,916 25,546,412
Discount to present value ....................................... 10,211,724 9,709,262
------------ ------------
Retained interest in securitized assets ......................... $ 72,805,428 $ 64,357,850
============ ============
Outstanding balance of contracts sold through securitizations ... $784,922,131 $693,896,100
============ ============
</TABLE>
Management believes that the off balance sheet allowance for losses is
currently adequate to absorb potential losses in the sold portfolio.
NOTE 5 - NET INCOME PER SHARE
The following is an illustration of the dilutive effect of the Company's
potential common stock on net income per share ("EPS")
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, 1998 1997
------------------------
<S> <C> <C>
Net Income........................................................ $ 742,360 $ 198,105
========== ===========
Weighted average shares outstanding............................... 6,024,820 5,962,174
Net effect of dilutive stock options/warrants..................... 395,731 441,737
Diluted weighted average shares outstanding....................... 6,420,551 6,403,911
Net income per share:
Basic............................................................. $ 0.12 $ 0.03
=========== ===========
Diluted........................................................... $ 0.12 $ 0.03
=========== ===========
</TABLE>
9
<PAGE> 10
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 Contracts originated by franchised and select independent
automobile dealerships in 18 states and to a lesser extent the origination of
motor vehicle loans on a direct basis to consumers (collectively the
"Contracts"). The Company focuses its efforts on acquiring Contracts that are
collateralized by late model used and, to a lesser extent, new automobiles, that
are entered into with purchasers whom the Company believes have a favorable
credit profile. Since commencing the purchase of Contracts in February 1994, the
Company has acquired more than $1.4 billion in Contracts from over 3,300
dealerships and has expanded its operations from a single office in Irvine,
California to eleven Auto Finance Centers.
As required by the Financial Accounting Standards Board's ("FASB")
Special Report, "A Guide to Implementation of Statement 125 on Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,
Second Edition," dated December 1998, and related guidance set forth in
statements made by the staff of the Securities and Exchange Commission, ("SEC")
on December 8, 1998, the Company has restated its 1998 and 1997 financial
statements to reflect the change in the method of measuring and accounting for
Credit Enhancement Assets on its securitization transactions to the cash-out
method from the cash-in method.
The Company generates revenues primarily through the purchase,
origination, warehousing, subsequent securitization and ongoing servicing of
Contracts. The Company earns net interest income on Contracts held during the
warehousing period. Upon the securitization and sale of Contracts, the Company
recognizes a gain on sale of Contracts, receives future excess cash flows and
earns servicing fees from the trusts in the amount of one percent per annum of
the outstanding principal balance of the Contracts securitized.
The Company experienced significant growth in its purchased volume of
Contracts. Purchased Contract volume increased to $218.2 million for the first
three months of 1998 from $125.7 million for the first three months of 1997,
representing an increase of 73.6%. This growth in acquisition volume is
attributable to the opening of three additional Auto Finance Centers since the
end of the first quarter of 1997 and the continued market penetration within the
Company's existing centers. The Company's servicing portfolio at March 31, 1998
was $884.7 million compared to $478.4 at March 31, 1997, an increase of 84.9%.
Total revenues, including servicing fee income, during the first three months of
1998 were $11.8 million compared to $6.5 million for the same period ended March
31, 1997.
Net income for the first quarter of 1998 was $742,360 or $0.12 per
diluted share compared to $198,105 or $0.03 per diluted share in the first
quarter of 1997. The increase in net income and net income per diluted share
resulted from an increase in Contracts purchased or originated in addition to
the sale of $188.0 million in Contracts during the first quarter of 1998
compared to $90.0 million in the first quarter of 1997. Of the total Contracts
sold during the first quarter of 1998, $173.0 million of the sale was
securitized through a public offering similar in structure to the ten prior
securitizations completed by the Company since 1994, while $15.0 million was
sold on a whole loan basis, with servicing retained.
The following table illustrates the changes in the Company's Contract
acquisition volume, securitization activity and servicing portfolio during the
past five fiscal quarters:
SELECTED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
-------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DEC. 31, MARCH 31,
1997 1997 1997 1997 1998
--------- -------- ------------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Contracts purchased/originated during period .. $125,713 $145,548 $152,334 $182,310 $218,204
Average monthly volume during period .......... 41,904 48,516 50,778 60,770 72,735
Gain on sale of Contracts ..................... 3,154 3,554 6,073 6,806 8,151
Contracts securitized during period ........... 90,000 121,676 149,600 166,000 173,000
Contracts sold during period .................. 0 0 0 0 15,000
Servicing portfolio at period end ............. 478,440 564,922 649,563 757,277 884,692
</TABLE>
10
<PAGE> 11
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 1998 AND 1997
Net Interest Income. Net interest income increased to $1,659,564 for the
quarter ended March 31, 1998 from $827,083 for the same period in 1997. The
increase is primarily attributable to an increase in the average amount of
Contracts held for sale during the quarter. Average Contracts held for sale were
$128.9 million during the first quarter of 1998, compared to $47.4 million
during the first quarter of 1997.
Provision for Credit Losses. During the quarter ended March 31, 1998,
the provision for credit losses totaled $306,988 compared to $293,270 for the
same period ended in 1997. Provision for credit losses consists of net credit
losses incurred during the period plus future provision for losses reserved
against the net changes in contracts held for sale during the period. Net credit
losses accounted for $197,700 during the first quarter of 1998 compared to
$151,300 in the first quarter of 1997 due to an increase in the average
contracts held for sale in the period. Future provisions declined to $109,300
from $142,000 as the contracts held for sale increased $21.8 million during the
first quarter of 1998 vs. $28.4 million during the first quarter of 1997.
Gain on Sale of Contracts. The Company sold $188.0 million of Contracts
during the quarter ended March 31, 1998, resulting in a gain on sale of
Contracts of $8.2 million compared to a securitization of $90.0 million for the
first quarter of 1997 resulting in a gain on sale of $3.2 million. The gain on
the sale of contracts increased to 4.4% vs. 3.6% of the amount of Contracts
securitized and sold, as the net interest rate spread widened to 3.40% from
2.78%.
Servicing Fee Income. Servicing fee income declined to $2.0 million
during the first quarter of 1998 from $2.5 million during the same period in
1997. Higher contractual service fees due to the growth of the servicing
portfolio were offset by a reduction in the accrual for servicing advances on
delinquent contracts and by an acceleration of the amortization of the RISA.
Salaries and Benefits Expense. The Company incurred salary and benefit
expenses of $5.9 million during the first quarter of 1998 compared with $3.4
million for the first quarter of 1997, an increase of 73.5%. This increase is
attributable to the incremental staffing requirements from the expansion of
operations and the growth of the servicing portfolio. The number of employees at
the Company increased from 250 at March 31, 1997 to 403 at March 31, 1998
Other Operating Expenses. Other operating expenses increased by 72% to
$4.3 million for the quarter ended March 31, 1998 from $2.5 million for the same
period ended March 31, 1997. The majority of the increases are due to the growth
of the servicing portfolio, to costs related to collection and customer service
operations and the opening of additional auto finance centers.
Net Income. The Company posted net income of $742,360 for the quarter
ended March 31, 1998 or $0.12 per diluted share compared to $198,105 or $0.03
per diluted share for the same period of 1997. The increase in net income and
net income per diluted share resulted from an increase in the purchase and
origination of Contracts and the size of the Company's securitization during the
quarter. The Company securitized and sold $188.0 million in Contracts during the
first quarter of 1998 compared to $90.0 million in the first quarter of 1997.
$173.0 million was securitized through a public offering similar in structure to
the ten prior securitizations completed by the Company since 1994, while $15.0
million was sold on a whole loan basis, with servicing retained.
11
<PAGE> 12
ASSET QUALITY
With the continued expansion of the Company in the eastern United States
and the significant growth in the existing branches, the Company undertook a
project to centralize and improve its servicing and collection process. The
Company believes that a centralized group is efficient, effective and assures
that collection practices and policies are applied consistently throughout the
Company. Management continues to rely on the use of current technology such as
predictive dialers utilizing an automated processing for contacting delinquent
borrowers, including a payment system that allows electronic payment on
delinquent accounts to be applied the same day as the contact with the borrower.
Over the past few quarters, management has focused on the hiring, training and
retention of a centralized collection staff. During the first quarter of 1998
the Company realized some of the benefits of the centralization and training of
the collection department. At March 31, 1998, delinquencies for the servicing
portfolio represented 1.77% of the amount of Contracts in the Company's
servicing portfolio or $15.63 million as compared to 3.13% at March 31, 1997 or
$14.96 million. Loan losses for the servicing portfolio as a percentage of
average serviced loans outstanding increased to 1.84% during the quarter
compared to 1.83% for the first quarter of 1997. It is anticipated that with the
reduction in the delinquency rate in 1998 over that experienced during 1997, the
annualized loss rate will improve in 1998 over the 2.03% loss rate for the year
ended December 31, 1997.
DELINQUENCY EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED MARCH 31,
--------------------------------------------------
1998 1997
---------------------- ----------------------
AMOUNT NO. AMOUNT NO.
-------- -------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing portfolio ................ $884,692 86,327 $478,440 45,740
Delinquencies(1)(2)
31-59 days ............ $ 9,194 937 $ 9,867 904
60-89 days ............ $ 2,863 277 $ 2,551 242
90+ days .............. $ 3,572 320 $ 2,542 214
-------- -------- -------- --------
Total .............................. $ 15,629 1,534 $ 14,960 1,360
======== ======== ======== ========
Total delinquencies as a percent of
Servicing portfolio ................ 1.77% 1.78% 3.13% 2.97%
</TABLE>
- ------------
(1) Delinquencies include principal amounts only.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
LOAN LOSS EXPERIENCE OF SERVICING PORTFOLIO
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED
MARCH 31,
1998 1997
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Period end contracts outstanding .................... $ 884,692 $ 478,440
Average servicing portfolio(1) ...................... $ 815,922 $ 433,147
Number of gross charge-offs 818 367
Gross charge-offs ................................... $ 4,457.6 $ 2,309.2
Net charge-offs ..................................... $ 3,761.8 $ 1,979.7
Annualized net charge-offs as a percent of average
servicing portfolio ................................. 1.84% 1.83%
</TABLE>
- ------------
(1) Average is based on daily balances.
(2) Net charge-offs are gross charge-offs minus recoveries of Contracts
previously charged off.
12
<PAGE> 13
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) excess servicing cash flows released from
spread accounts; (iv) settlements of hedging transactions; (v) sales of
Contracts in securitizations; and (vi) borrowings under its credit facilities.
Management believes that the resources available to the Company provide the
needed capital to fund the expansion of the Company, Contract purchases, and
investments in origination and servicing capabilities.
Cash used in operating activities was $29.2 million for the quarter
ended March 31, 1998, compared to $36.2 million used in the quarter ended March
31, 1997. Cash used in investing activities was $678,605 for the quarter ended
March 31, 1998 compared to $394,959 for the quarter ended March 31, 1997. A
reduction in the use of the Company's capital lease lines contributed to the
increase in investing activities.
Cash provided by financing activities was $33.6 million for the quarter
ended March 31, 1998, compared to $36.4 million for the quarter ended March 31,
1997. Warehouse facilities and the issuance of subordinated debt contributed to
the cash increase during the quarter ended March 31, 1998. 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 MBIA ("MBIA") and is
currently rated A-1/P-1 by Standard & Poor's Ratings Group and Moody's Investor
Services, Inc., respectively (such ratings are not recommendations to invest and
are subject to change). This facility provides funds to purchase Contracts. The
advance rate to OAFC was increased during the first quarter of 1998 from 95% to
98% of adjusted eligible principal balance of each Contract.
Additionally, the Company has a $30 million collateralized credit
facility with State Street Bank of Boston and BankBoston (the "Revolving Credit
Facility") under which the Company may (subject to borrowing base availability)
borrow for working capital and expenditures for which the Company's $200 million
CP Facility is not otherwise available. Under the term of the Revolving Credit
Facility, the available borrowings are based on the following collateral based
formula: up to the lesser of 65% of the net book value of the Company's RISA and
trust receivables deemed eligible by the lenders or 75% of the value of such
RISA 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 June 30, 1998 or if
earlier, upon the occurrence of certain "credit triggers".
In the first quarter of 1998, the Company created a new finance
subsidiary, Onyx Acceptance Funding Corporation ("Fundco") through which two new
lending lines have been developed, each with Merrill Lynch Mortgage Capital,
Inc. A $100 million line (the "Merrill Line") provides funding for the purchase
and origination of Contracts. It provides an advance rate of approximately 95%
of the principal balance of each the Contracts that are used for collateral. The
interest rate is based on LIBOR and has a term of one year and matures in
February, 1999. A $50 million line (the "Residual Line") is used by the Company
to finance operating requirements. The amount available for borrowing is based
on a collateral based formula of a percentage of the value of excess cash flow
to be received from certain securitizations and a percentage of the amount of
the Merrill Line outstanding on a quarterly basis. The interest rate is based on
LIBOR and the facility has a term of one year and matures in February 1999.
The Company during the first quarter of 1998, completed a $10.0 million
subordinated debt offering. The term of the debt is for two years ending
February 27, 2000, with an option by the Company to extend the term by three
years during which the loan would fully amortize. The debt bears a fixed
interest rate of 9.5%
13
<PAGE> 14
SECURITIZATIONS AND LOAN SALES.
In March 1998, the Company consummated a securitization in the amount of
$173.0 million with a pass-through rate of 5.95% and a net interest rate spread
inclusive of all costs of 3.40%, and a whole loan sale of $15.0 million. As a
result of these transactions, the Company realized a gain on securitization and
sale of approximately $8.2 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 mitigate interest rate
exposure. Further the Company employs a hedging strategy which primarily
includes the execution of forward interest rate swaps. These hedges are entered
into by the Company in numbers and amounts, which generally correspond, to the
anticipated principal amount of the related securitization or whole loan sale.
As of May 5, 1998, the Company had in effect an interest rate hedges for $210
million, which mature June 12, 1998, which the Company believes are adequate to
cover its next securitization or loan sale.
FORWARD LOOKING INFORMATION
The preceding Management's Discussion and Analysis of the Company's
Financial Condition and Results of Operations contain certain "forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995, which can be identified by the use of forward-looking terminology such as
"may, "will," "expect," "anticipate," "estimate," "should" or "continue" or the
negative thereof or other variations thereon or comparable terminology. The
matters set forth in this Form 10-Q/A constitute cautionary statements
identifying important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from those in such forward-looking statements.
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 and fund spread accounts; (iv)
settle hedge transactions; (v) satisfy working capital requirements and pay
operating expenses; and (vi) pay interest expense. These cash requirements
increase as the Company's volume of purchases or originations 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, cash flows and financial condition.
Dependence on Warehouse and Residual Financing. The Company depends on
warehousing facilities with financial institutions to finance the purchase or
origination of Contracts pending securitization. The Company's warehousing
facilities include a $200 million asset-backed commercial paper conduit program
(the "CP Facility"),
14
<PAGE> 15
of which MBIA is the program manager, and a $100 million Libor based repurchase
facility provided by Merrill Lynch Mortgage Capital Inc. ("Merrill Line"). The
combined facilities allow the Company to finance up to 98% of the purchase price
of Contracts. The CP Facility expires in September 1998. The Merrill Line has a
term of one year and matures in February 1999. The Company currently has two
revolving credit loans with institutional lenders for working capital and
expenditures for which the Company's warehouse facilities are not otherwise
available. The $30 million Revolving Facility, unless extended, converts on June
30, 1998 into fully amortizing two-year term loans maturing on June 29, 2000,
and the $50 million Residual Line has a term of one year and matures in February
1999.
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, cash flows 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 the Company's wholly owned special purpose
finance subsidiary, 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.
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, prepayments and net yields of Contracts
included in a Securitization. The continued availability of the Merrill Line and
the Residual Line are subject to certain financial covenants, which are
primarily dependent upon the net worth of the Company.
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. Since inception, through March 31,
1998 each of the Company's securitizations has utilized credit enhancement in
the form of a financial guarantee insurance policy issued by MBIA 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. MBIA is not required to insure future
securitizations nor is the Company restricted in its ability to obtain credit
enhancement from providers other than MBIA 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 MBIA or any other provider of credit
enhancement on acceptable terms or that future securitizations will be similarly
rated. The Company also relies on MBIA's financial guarantee insurance policy to
reduce its borrowing cost under the "A-1/P-1" rated CP Facility. A downgrading
of MBIA's credit rating or MBIA'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, cash flows 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
15
<PAGE> 16
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 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 or to increase
rates it uses to solicit to consumers 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 execution of forward
interest rate swaps 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, 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 the Company has some interest rate exposure to falling
interest rates during the pre-funding period. 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, cash
flows, 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 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.
Prepayment or default of Contracts in the servicing portfolio can also
adversely affect the Company's servicing income. 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.
The gain on sale of Contracts recognized by the Company in each
securitization and the value of the RISA in each transaction reflects
management's estimate of future credit losses and prepayments for the Contracts
included in that securitization. If actual rates of credit loss or prepayments,
or both, on such Contracts exceeded those estimated, the value of the RISA would
be impaired. The Company periodically reviews its credit loss and prepayment
assumptions relative to the performance of the securitized contracts and to
market conditions. If necessary, the Company would adjust the value of the RISA
by making a charge to servicing fee income. However, the Company's results of
operations and liquidity could be adversely affected if credit loss or
prepayment levels on securitized Contracts substantially exceeded anticipated
levels. Further, any write down of RISA would reduce the amount available to the
Company under the Revolving Facility or Residual Line, thus requiring the
Company to pay down amounts outstanding under the Revolving Facility or Residual
Line or provide additional collateral to cure the borrowing base deficiency.
16
<PAGE> 17
Loss of Servicing Rights and Suspension of Future Servicing Cash Flows.
The Company is entitled to receive servicing income only while it acts as
servicer for Contracts during the warehousing period and under the pooling and
servicing agreement for securitized Contracts. Any loss of the servicing rights
would have a material adverse effect on the Company's operations, cash flows and
financial condition.
The Company's right to act as servicer can be terminated by MBIA on
Contracts funded by the Facility as program manager, upon the occurrence of
certain servicer termination events (as defined in the sale and servicing
agreement). Servicer termination events include material misrepresentations or
material breaches of warranties or covenants by Onyx or OAFC, including the
financial covenants of Onyx contained in the sale and servicing agreement.
The Company's loss of the servicing rights under the Company's sale and
servicing agreements or the pooling and servicing agreements or the occurrence
of a trigger event that would block release of future servicing cash flows from
the Grantor Trusts' spread accounts would have a material adverse effect on the
Company's results of operations, cash flows and financial condition.
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, cash flows 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, cash flows and financial condition.
The Company presently maintains a key man life insurance policy on John W. Hall
in the amount of $3 million.
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. However, in 1996 and 1997, many of
these auto finance companies experienced significant liquidity and performance
challenges due to the intense competition. 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.
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
17
<PAGE> 18
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 in California. 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, cash flows and financial condition.
18
<PAGE> 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT TITLE
----------- -------------
<S> <C>
*3.1 Omitted.
*3.2 Omitted.
*3.3 Omitted.
*3.4 Certificate of Incorporation of the Company.
*3.5 Bylaws of the Company.
21.1 Subsidiaries of the Registrant.
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K
None.
19
<PAGE> 20
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
By: /s/ JOHN W. HALL
------------------------------------
John W. Hall
President and Principal Executive
Officer
Date: March 30, 1999
By: /s/ DON P. DUFFY
------------------------------------
Don P. Duffy
Executive Vice President and
Principal Financial Officer
Date: March 30, 1999
20
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ---------- ----------- ----
<S> <C> <C>
21.1 Subsidiaries of the Registrant.............................................
27.1 Financial Data Schedule....................................................
</TABLE>
21
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Onyx Acceptance Financial Corporation, a Delaware corporation
ABNI, Inc., a Delaware corporation
Onyx Acceptance Funding Corporation, a Delaware corporation
CU Acceptance Corporation, a Delaware corporation
22
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,662,766
<SECURITIES> 0
<RECEIVABLES> 86,451,394
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 177,245,341
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 60,265
<OTHER-SE> 38,404,063
<TOTAL-LIABILITY-AND-EQUITY> 177,245,341
<SALES> 0
<TOTAL-REVENUES> 11,779,315
<CGS> 0
<TOTAL-COSTS> 10,510,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 306,988
<INTEREST-EXPENSE> 2,820,986
<INCOME-PRETAX> 1,268,991
<INCOME-TAX> 526,631
<INCOME-CONTINUING> 742,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 742,360
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
