SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 1994
Commission File No. 0-3417
CENCOR, INC
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-0914033
(State of other jurisdiction of (I. R. S. Employer Identification Number)
Incorporation or Organization)
1100 Main Street, Suite 2350
Post Office Box 26098
Kansas City, Missouri 64196
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (816) 221-9744
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
As of August 2, 1994, CenCor, Inc. had 1,240,727 shares of Common Stock, $1.00
par value outstanding with a market value of $620,364.
<PAGE>
CENCOR, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1994
INDEX
Item Page
PART I
1. Financial Statements and Supplementary Data. . . . . . . . . . . . .1
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 12
PART II
1. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 19
2. Change in Securities . . . . . . . . . . . . . . . . . . . . . . . 19
3. Defaults Upon Senior Securities. . . . . . . . . . . . . . . . . . 19
4. Submission of Matters to a Vote of Security Holders. . . . . . . . 19
5. Other Materially Important Events. . . . . . . . . . . . . . . . . 20
6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 20
7. Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
As used herein, the term "CenCor" refers to CenCor, Inc. and the term "Century"
refers to CenCor's sole operating subsidiary Century Acceptance Corporation.
The term "the Company" as used herein refers to CenCor collectively with
Century.
Part I
Item I Financial Statements
The Company's Financial Statements are set forth herein, beginning on the
following page.
(The remainder of this page is intentionally blank.)
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
June 30, 1994 and December 31, 1993
ASSETS
<CAPTION>
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
Cash and cash equivalents . . . . . . . . $ 769,000 $ 3,277,000
Net finance receivables, less allowance
for credit losses of $5,114,000
($5,026,000 in 1993). . . . . . . . . 94,478,000 88,972,000
Property and equipment. . . . . . . . . . 1,842,000 1,742,000
Other assets. . . . . . . . . . . . . . . 4,525,000 3,465,000
$ 101,614,000 $ 97,456,000
</TABLE>
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
June 30, 1994 and December 31, 1993
LIABILITIES AND STOCKHOLDERS' DEFICIT
<CAPTION>
June 30, December 31,
1994 1993
(Unaudited)
<S> <C> <C>
Liabilities and stockholders' deficit:
Accounts payable and accrued liabilities. $ 2,223,000 $ 3,189,000
Notes payable . . . . . . . . . . . . . . 4,309,000 --
Accrued interest. . . . . . . . . . . . . 2,207,000 975,000
Accrued interest - warrants . . . . . . . 836,000 513,000
Unearned insurance commissions. . . . . . 2,601,000 2,544,000
Long-term debt. . . . . . . . . . . . . . $ 95,950,000 $ 95,950,000
Total liabilities. . . . . . . . . . $108,126,000 $ 103,171,000
Stockholders' deficit:
Common stock, $1 par value, 2,000,000 shares
authorized, 1,240,727 shares issued
and outstanding . . . . . . . . . . . 1,241,000 1,241,000
Paid-in capital . . . . . . . . . . . . . 2,805,000 2,805,000
Accumulated deficit . . . . . . . . . . . (10,558,000) (9,761,000)
Total stockholders' deficit . . . . . . . (6,512,000) (5,715,000)
$101,614,000 $ 97,456,000
</TABLE>
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Revenue:
Finance charges . . . . . . . . . . . . . $ 11,766,000 $ 11,196,000
Insurance commissions . . . . . . . . . . 1,801,000 915,000
Total revenue. . . . . . . . . . . . 13,567,000 12,111,000
Expenses:
Salaries and other operating expenses . . 6,737,000 9,901,000
Interest expense, net . . . . . . . . . . 5,062,000 5,303,000
Interest expense, warrants. . . . . . . . 323,000 140,000
Provision for credit losses . . . . . . . 2,790,000 321,000
Total expenses . . . . . . . . . . . 14,912,000 15,665,000
Operating loss. . . . . . . . . . . . . . (1,345,000) (3,554,000)
Other income (loss):
Gain on sale of finance receivables . . . 556,000 --
Loss on sale of property and equipment. . (8,000) --
548,000 --
Loss before taxes . . . . . . . . . . . . (797,000) (3,554,000)
Income tax expense. . . . . . . . . . . . -- --
Net loss. . . . . . . . . . . . . . . . . $ (797,000) $ (3,554,000)
Weighted average common and common
equivalent shares outstanding . . . . 1,815,080 1,089,048
Loss per share of common stock and
common equivalent shares of stock:
(Note 7) . . . . . . . . . . . . . .
Loss per share. . . . . . . . . . . . . . $ (0.44) $ (3.26)
</TABLE>
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Revenue:
Finance charges . . . . . . . . . . . . . $ 6,036,000 $ 5,727,000
Insurance commissions . . . . . . . . . . 1,038,000 484,000
Total revenue. . . . . . . . . . . . 7,074,000 6,211,000
Expenses:
Salaries and other operating expenses . . 3,158,000 5,891,000
Interest expense, net . . . . . . . . . . 2,645,000 2,850,000
Interest expense, warrants. . . . . . . . 155,000 140,000
Provision for credit losses . . . . . . . 1,611,000 272,000
Total expenses . . . . . . . . . . . 7,569,000 9,153,000
Operating loss. . . . . . . . . . . . . . (495,000) (2,942,000)
Other income (loss):
Loss on sale of property and equipment. . (2,000) --
(2,000) --
Loss before taxes . . . . . . . . . . . . (497,000) (2,942,000)
Income tax expense. . . . . . . . . . . . -- --
Net loss. . . . . . . . . . . . . . . . . $ (497,000) $ (2,942,000)
Weighted average common and common
Equivalent shares outstanding . . . . 1,815,080 1,089,048
Loss per share of common stock and
common equivalent shares of stock:
(Note 7) . . . . . . . . . . . . . .
Loss per share. . . . . . . . . . . . . . $ (0.27) $ (2.70)
</TABLE>
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Operating Activities:
Net loss. . . . . . . . . . . . . . . $ (797,000) $ (3,554,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization . . . . 260,000 120,000
Provision for credit losses . . . . . 2,790,000 321,000
Gain on sale of finance receivables . (556,000) --
Increase (decrease) In accrued
interest . . . . . . . . . . . . 1,232,000 (68,000)
Increase in accrued interest -
warrants . . . . . . . . . . . . 323,000 140,000
Decrease (increase) in capitalized
debt costs . . . . . . . . . . . (664,000) 47,000
Other changes in assets and
liabilities, net. . . . . . . . . (1,431,000) 314,000
Total adjustments . . . . . . . . . . . . 1,954,000 874,000
Net cash provided by (used in)
operating activities. . . . . . . . . 1,157,000 2,680,000)
</TABLE>
<PAGE>
<TABLE>
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
For the Six Months Ended June 30, 1994 and 1993
(Unaudited)
<CAPTION>
1994 1993
<S> <C> <C>
Investing Activities:
Increase in finance receivables, net. . . $ (7,718,000) $ (9,582,000)
Capital expenditures, net . . . . . . . . (256,000) (841,000)
Net cash used in investing activities . . (7,974,000) (10,423,000)
Financing Activities:
Advances on line of credit, net . . . . . 4,309,000 --
Net cash provided by financing
activities. . . . . . . . . . . . . . 4,309,000 --
Net decrease in cash and cash
equivalents . . . . . . . . . . . . . (2,508,000) (13,103,000)
Cash and cash equivalents at beginning
of year . . . . . . . . . . . . . . . 3,277,000 23,401,000
Cash and cash equivalents at end of
period. . . . . . . . . . . . . . . . $ 769,000 $ 10,298,000
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest. . . . . . . . . . . . . $ 3,716,000 $ 5,237,000
Income taxes. . . . . . . . . . . -- --
</TABLE>
<PAGE>
CenCor, Inc.
NOTES TO FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1994
(Unaudited)
Note 1 Basis of Presentation
The interim condensed financial statements included herein are unaudited but,
in the opinion of management, present fairly in all material respects, the
consolidated position of CenCor, Inc. at June 30, 1994 and December 31, 1993
and the results of operations and cash flows for all periods presented. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles ("GAAP")
have been condensed or omitted, although the Company believes that the
disclosures are adequate to make the information presented not misleading. Due
to the inherent seasonal nature of the business, annualization of the amounts in
these condensed financial statements may not necessarily be indicative of the
actual operating results for the full year.
In preparing the financial statements in accordance with GAAP, management is
required to make certain estimates and assumptions that affect both the reported
amounts of assets and liabilities as of the date of the statement of financial
condition and revenues and expenses for the period. Actual results could differ
significantly from those estimates.
It is suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-K for the year 1993.
Certain 1993 amounts have been reclassified to conform to the 1994 presentation.
Note 2 Reorganization
On July 19, 1993, CenCor filed a Voluntary Petition with the United States
Bankruptcy Court. At the same time, CenCor filed an Application with the
Bankruptcy Court seeking expeditious confirmation of its previously creditor
approved prepackaged plan of reorganization. The plan was confirmed by the
Bankruptcy Court on August 30, 1993.
<PAGE>
Pursuant to the plan, the noteholders received the following securities for each
$1,000 aggregate amount of principal and accrued but unpaid interest at December
31, 1992:
(i) $600 principal amount of non-interest bearing New Notes
(ii) $400 principal amount of non-interest bearing Convertible Notes
(iii) 5.2817 shares of CenCor common stock, par value $1 per share
The New Notes and Convertible Notes are non-interest bearing and will mature on
July 1, 1999. The Convertible notes may be converted at the option of the
holder, at any time, into shares of common stock at a ratio of one share of
common stock for each $20 principal amount of Convertible Notes. The
reorganization resulted in the issuance of $17,230,589 of New Notes,
$11,487,060 of Convertible Notes, and 151,679 shares of $1 par value common
stock on November 1, 1993. Simultaneously the Company canceled 271,410 shares
of treasury stock. The New Notes and Convertible Notes were recorded at their
net present value using an estimated market discount rate of 16%. A market
value of $0.125 was assigned to the issuance of each share of common stock.
Note 3 CIKC Loans
Robert F. Brozman, who had been the President and Chairman of the Board of
CenCor since its incorporation in 1968, died on June 10, 1991. Shortly
thereafter, the directors who were serving on CenCor's Board of Directors at
the time of Robert F. Brozman's death, including his son, Jack L. Brozman,
learned for the first time of the "CIKC Loans" described below.
Prior to Robert F. Brozman's death, various banks and other lenders had made
loans, purportedly to CenCor, the proceeds of which were never received by, or
used for the benefit of, CenCor, but rather were credited to the account of and
used by CenCor, Inc. of Kansas City ("CIKC"). CIKC is a wholly-owned subsidiary
of Cor, Inc. ("Cor") which was wholly-owned and controlled by Robert F. Brozman.
CIKC recorded these loans on its financial statements as its obligations.
<PAGE>
The lenders whose loan proceeds were received by and used for the benefit of
CIKC ("CIKC Lenders") apparently believed, based upon actions taken by or at the
direction of Robert F. Brozman, that the loans were being made to CenCor. The
principal amount due to the CIKC Lenders was $23,117,820 at the time of Robert
F. Brozman's death. The CIKC Lenders have asserted that CenCor (among other
parties) is obligated to repay the CIKC Loans.
The Estate of Robert F. Brozman (the "Estate"), CIKC and Cor (collectively, the
"Indemnitors") entered into an indemnity agreement dated July 26, 1991, with
the Company (the "Indemnity Agreement") in which the Estate, CIKC and Cor
acknowledged that they are jointly and severally liable to repay the amounts
due to the CIKC Lenders. The Indemnitors also agreed to indemnify the Company
against certain other injury or loss that the Company might incur as a result
of certain unauthorized actions or omissions of the late president. Although
CenCor has not admitted liability with respect to these claims, it has executed
a Continuing Guarantee of Collection with respect to liability flowing from the
CIKC Loans as well as a Continuing Guarantee of Collection for Certain Creditors
Previously Unsecured of up to $3 million for the benefit of certain unsecured
creditors of the Estate of Robert F. Brozman.
On March 31, 1994 all of the remaining outstanding debt related to the CIKC
Loans was paid in full by the Estate of Robert F. Brozman.
Note 4 Credit Losses
Provisions for credit losses are charged to income in amounts sufficient to
maintain the allowance for credit losses at a level considered adequate to
cover the losses in the existing portfolio. The allowance is determined using
estimated loss percentages established by management for each major category
of receivables. Additions to the allowance are charged to the provision for
credit losses.
Management evaluates allowance requirements by examining current delinquencies,
the characteristics of the accounts, the value of the underlying collateral
and general economic conditions and trends. Management also evaluates the
availability of dealer reserves to absorb finance receivable losses.
<PAGE>
Finance receivables are charged to allowance for credit losses when they are
deemed to be uncollectible but, in any event, all accounts (except for real
estate secured loans) for which an amount aggregating a full contractual payment
has not been received after six consecutive months are written off. Real estate
secured loans are charged to the allowance for credit losses when a full
contractual payment has not been received for twelve months, unless the property
has been foreclosed. Uncollectible accounts are handled as follows:
Bankruptcy - Chapter 7 - The balance of the account will be charged off in the
month following the date of discharge.
Bankruptcy - Chapter 13 - The unsecured portion of the balance will be charged
off in the month following the confirmation hearing.
Settlement - The remaining balance will be charged off in the month following
the final payment.
Repossession Deficiency - The deficiency balance will be charged off after the
appropriate proceeds of the sale of security have been posted. The appropriate
supervisor must warrant that there is limited potential for additional
collection.
Note 5 Line of Credit
On April 1, 1994, Century completed an agreement with Congress Financial
Corporation ("Congress") establishing a revolving line of credit in the amount
of $25,000,000 to be used for future working capital. The facility is fully
secured by a first lien on all of Century's assets. The revolving line is
provided for a minimum of two years with automatic year-to-year renewals unless
terminated by either party.
<PAGE>
Note 6 Sale of Branch Offices During January and February of 1994, Century sold
three of its branch offices and closed an additional three offices. Management
determined that these locations were outside of its focused market area and the
cost of operating the offices was not providing adequate benefits. The
elimination of these branches will enable Century to focus on its more
profitable and geographically desirable locations. The gain on the sale of the
three branches is classified as other income (loss) in the accompanying
financial statements.
Note 7 Earnings Per Share
As of June 30, 1994 and June 30, 1993, earnings per common share and common
equivalent shares were computed by dividing net loss by the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period. For the period ended June 30, 1994, the number of weighted average
common share equivalents was increased under the assumption that all of the
Convertible Notes were converted to common stock. As indicated in Note 2, the
Convertible Notes may be converted, at the option of the holder at any time,
into shares of common stock at a ratio of one share of common stock for each $20
principal amount of Convertible Notes.
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
On January 29, 1993, Century completed a restructuring of its debt obligations
with its principal creditors. Subsequent to the restructuring, Century sold or
closed twelve non-strategic branches to obtain operating efficiencies. Century
has also modernized many of its offices and has converted to an on-line computer
system. According to its business plan, Century intends to achieve financial
stability and profitability through internal growth with a program to grow its
current branches and expand the branch network in states with strong operations.
In addition, the business plan calls for the acquisition of compatible
receivables and/or companies to achieve growth of receivables of $100 million
in the next four years. The plan assumes that Century will be able to retain a
substantial portion of acquired accounts as active customers and that
acquisitions can be negotiated with acceptable yields and levels of credit risk.
<PAGE>
Current Overall Trends
In addition to the growth in the receivables, Century has also shifted its
emphasis away from sales finance contracts acquired from automobile dealers,
and is focusing on more desirable and profitable direct loans, including home
equity loans. As a result, the level of outstanding finance receivables has
increased from the six months ended June 30, 1993 as compared to the six months
ended June 30, 1994, consequently producing a slight increase in finance charges
for the six months ended June 30, 1994. Insurance commissions increased as a
result of increased loan originations and the renegotiation of terms with
Century's insurance carrier.
Due to the elimination and consolidation of non-strategic offices and the
elimination of many non-recurring expenses incurred in 1993, management expects
the level of salaries and operating expenses to decrease from the levels
incurred in 1993. Interest expenses for Century is directly related to it loan
origination activity and is therefore expected to increase as Century expands
its portfolio. CenCor's annual interest expense is expected to increase on a
monthly basis as interest is accrued on its restructured debt.
Results of Operations
Six Months Ended June 30, 1994, Compared to Six Months Ended June 30, 1993
During the six months ended June 30, 1994, the Company incurred a net loss of
$797,000 as compared to a net loss of $3,554,000 for the same period in 1993.
The decrease in the net loss from June 30, 1993 to June 30, 1994 was
attributable to a decrease in salaries and other operating expenses of
$3,164,000 (32%) and an increase in total revenue of $1,456,000 (12%).
Offsetting this was an increase in the provision for credit losses from $321,000
to $2,790,000.
Interest on finance receivables increased $570,000 (5%) in the first six months
of 1994 from the same period in 1993. As previously mentioned, this resulted
primarily from an increase in the level of earning assets.
Insurance commissions, which are earned on the sale of insurance upon
origination of consumer and home equity loans, increased by $886,000 (97%) from
the six months ended June 30, 1993.
<PAGE>
The increase is also partially a result of the increase in the outstanding
finance receivables and the emphasis on direct loans. In addition, Century
renegotiated the terms with its' insurance carrier, which resulted in an
acceleration of income recognition on commissions earned from the sale of
insurance.
The provision for credit losses increased from $321,000 to $2,790,000 for the
six months ended June 30, 1994 from the same period in 1993. During the fourth
quarter of 1992, Century established a centralized location for the purposes of
collecting charged off receivables. Subsequently, a large amount of delinquent
receivables were charged off in the fourth quarter of 1992 and delivered to the
centralized collection location to pursue further collection efforts. As a
result of the collection efforts and the low charge-off's for the first six
months of 1993, the amount of provision necessary to set the allowance at an
adequate level for the first six months of 1993 was minimal. The increase in
the provision for credit losses in the six months ended June 30, 1994, is a
result of setting the allowance for credit losses at an adequate level to cover
expected losses for the existing portfolio and is consistent with historical
trends.
The allowance is maintained at a level which management feels is adequate to
provide for loan losses currently existing in the portfolio.
<PAGE>
See Note 4 for additional information regarding the allowance for credit losses.
Salaries and other operating expenses for the six month period ended June 30,
1994, decreased to $6,737,000 from $9,901,000 in 1993, a decrease of 32%. A
reduction in operating expenses of $1,089,000 was realized as a result of the
elimination and consolidation of several of Century's offices. In addition, the
elimination of many one-time expenses incurred in 1993 related to the conversion
to an on-line computer system and the modernization of branch offices also
reduced operating expenses from June 30, 1993 to June 30, 1994.
As discussed earlier, a financial reorganization plan was confirmed by the U.S.
Bankruptcy Court and approved by the majority of CenCor's noteholders and other
creditors. The Company accounted for the reorganization as a troubled debt
restructuring, whereby the New Notes were recorded at their net present value on
August 30, 1993, using an estimated market discount rate of 16%. Interest on
the New Notes is accruing monthly until the date of maturity of the New Notes,
July 1, 1999. Interest expense on the New Notes for the six months ended June
30, 1994, was $950,000. Century's interest expense on long-term debt and notes
payable for the six months ended June 30, 1994, was $4,112,000.
Three Months Ended June 30, 1994 Compared to Three Months Ended June 30, 1993
Interest on finance receivables increased $309,000 (5%) in the three month
period ended June 30, 1994 from the same period in 1993. The increase is a
result of the increased loan activity as previously discussed. Insurance
commissions increased $554,000 (114%) for the same period. A discussion of the
increase in insurance commissions is included in the six months ended June 30,
1994 compared to six months ended June 30, 1993 analysis.
The provision for credit losses increased from $272,000 to $1,611,000 for the
three months ended June 30, 1994. As previously mentioned, the increase in the
provision for credit losses is a result of setting the allowance at an adequate
level to cover expected losses for the existing portfolio and is consistent with
historical trends.
<PAGE>
The allowance is maintained at a level which management feels is adequate to
provide for loan losses currently existing in the portfolio.
See Note 4 (Credit Losses) for additional information regarding the allowance
for credit losses.
Salaries and other operating expenses for the three month period ended June 30,
1994 decreased from $5,891,000 to $3,158,000, a decrease of 46%. The decrease
is primarily the result of the elimination and consolidation of several of
Century's offices which provided a reduction in salaries and operating expenses
of $522,000 for the three month period. In addition, as previously mentioned,
many one-time expenses incurred in 1993 were eliminated in 1994.
Liquidity and Capital Resources
Debt Availability
Prior to 1992, Century historically funded its operations through borrowings.
Since that time, Century's growth has been severely limited due to the
unavailability (until recently) of a credit facility.
On April 1, 1994, Century obtained a $25 million revolving line of credit with
Congress Financial Corporation ("Congress"). Borrowings under the line of
credit are now being used by Century to provide working capital for the
financing of its portfolio growth. Borrowings under the line of credit are
fully secured by a first lien on all of Century's assets. Funds borrowed under
the line of credit bear interest at 2% above the prime commercial interest rate,
adjusted monthly. The line of credit expires on April 1, 1996, but it's
automatically renewable on a year-to-year basis unless terminated by either
party. As of June 30, 1994, the line of credit debt was $4,309,000.
Century's acquisition of the line of credit follows the restructuring of its
debt and CenCor's debt restructuring. On January 29, 1993, after extensive
negotiations with its major creditors, Century successfully completed its debt
restructuring. Prior to that date, Century had been in default on all its debt
due to various covenant violations. The terms of Century's restructuring
agreements limit Century's ability to incur additional indebtedness, within
certain limits.
<PAGE>
As previously mentioned, CenCor successfully restructured its debt on August 30,
1993. For a further discussion of CenCor's debt restructure, refer to Note 2 of
the financial statements.
Capital Obligations
The Company has no significant obligations for capital purchases.
Defaults on Long-Term Debt
At December 31, 1992, Century was in default of certain covenants in its
long-term debt agreements. On January 29, 1993, Century entered into amendment
and exchange agreements with the holders of its long-term debt (the Agreements),
whereby the holders agreed to defer all principal payments until April 30, 1997.
Additionally, many covenants of the debt agreements were amended. The covenants
include, in part, maintaining net worth at certain minimum levels and
limitations on indebtedness and payment of dividends. Century is in compliance
with the amended covenants of the long-term debt agreements.
Pursuant to the Agreements, all of Century's long-term debt will mature on April
30, 1997. However, scheduled principal installments as provided for in the
original debt agreements are due prior to this date. In lieu of cash payment of
the scheduled principal installments, Century will deliver Secured Deferred
Payment Notes for the related senior debt and a combination of Secured Deferred
Payment Notes and Secured Compound PIK Notes for the related subordinated and
junior subordinated debt. These notes will bear interest at a fixed rate equal
to the rate of 4.5 year Treasury notes as of the installment due date, plus
2.25% (senior notes), 3.75% (subordinated notes) and 5% (junior subordinated
notes).
Interest is payable monthly under all of the notes, except for the Secured
Compound PIK Notes, for which interest compounds monthly and is payable on April
30, 1997.
Prior to the restructuring of its debt, CenCor was in default on both its public
and private debt. As part of the Restructuring, which was consummated on August
30, 1993, the old debt was exchanged for New Notes, Convertible Notes, and stock
(see Note 2 to the financial statements). The Company is in compliance with
all covenants and terms under the new indenture.
<PAGE>
Internal Revenue Service Examination
The Company's income tax returns for 1988 and 1989 were examined by the
Internal Revenue Service (IRS), which has proposed certain adjustments, a
portion of which have been protested by the Company. The Company has also
claimed additional deductions in these years. Management believes that the
ultimate disposition of the IRS examination will not have a material effect on
the financial position of the Company.
As a result of the IRS examination, management cannot precisely estimate the
amount of the Company's net operating loss carryforward for financial statement
or federal income tax purposes.
Continuing Operations
As noted earlier, CenCor successfully restructured its long-term debt pursuant
to a plan confirmed by the U.S. Bankruptcy Court and approved by the majority of
its creditors. Management believes that CenCor's financial condition will not
have a material adverse impact on Century's financial condition, operations, or
its ability to fund its operations. Funds that are available to CenCor,
including cash on hand, investment income and the collection of certain
receivables, are expected to be sufficient to support CenCor's limited
activities through at least 1996.
In addition, with the availability of the line of credit provided by Congress,
Century intends to pursue its business plans of expansion through acquisitions
of consumer finance businesses and portfolios of consumer loans and also through
expansion of business with its existing and former customers.
Part II - Other Information
Item 1 Legal Proceedings
On April 12, 1993, Century terminated the employment of its President and Chief
Executive Officer (CEO). Century and the former CEO subsequently entered into
a settlement agreement which detailed the economic terms of severance benefits
to the former CEO. The settlement agreement also provided for the possible
payment of a bonus in the event that a majority of Century's assets or stock is
sold prior to April 13, 1996. On April 26, 1994, Century made a final
accelerated payment to the former CEO in full satisfaction of the settlement
agreement and CenCor and Century were released from any future obligations to
the former CEO.
<PAGE>
As previously reported, during 1991 a Century subsidiary was the victim of a
fraudulent scheme involving the purchase of automobile financing contracts which
Century determined were fictitious. Century recorded a multi-million dollar loss
in 1991 as a result of the fraudulent automobile contracts. At the time of the
fraudulent scheme the Century subsidiary was insured by Lloyds of London for a
maximum of $1,000,000 under a fidelity policy. Lloyds of London has denied the
claim filed by Century as a result of the fraudulent scheme. On April 22, 1994,
the Century subsidiary filed suit in the Circuit Court of the Thirteenth
Judicial Circuit of the State of Florida, in and for Hillsborough County,
against Lloyds of London seeking restitution of $1,000,000 for breach of
contract.
On June 28, 1994, a Century subsidiary was named as a defendant, along with a
number of other consumer finance companies, in a law suit filed in the Circuit
Court of Jefferson County, Alabama. The plaintiffs' complaint alleges that the
defendants engaged in common law fraud and seeks the certification of a class
action and compensatory and punitive damages. The plaintiffs and the Century
subsidiary have both filed motions seeking the dismissal of the Century
subsidiary from the case.
Item 2 Change in Securities - None
Item 3 Defaults Upon Senior Securities - For a discussion of defaults in prior
periods, see Part I, Item 2, Liquidity and Capital Resources - Defaults on
Long-Term Debt.
Item 4 Submission of Matters to a Vote of Security Holders - None
Item 5 Other Materially Important Events - None
Item 6 Exhibits and Reports on Form 8-K
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EXHIBIT NUMBER DESCRIPTION
<C> <C>
99 Financial Data Schedule
</TABLE>
No reports on Form 8-K were filed during the quarter ending June 30, 1994.
(The remainder of this page is intentionally blank.)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
CENCOR, INC.
Dated August 11, 1994 /s/ Jack L. Brozman
Jack L. Brozman, President
/s/ Patrick F. Healy
Patrick F. Healy, Vice President-
Finance and Treasurer
<PAGE>
EXHIBIT 99
<TABLE>
CENCOR, INC.
FINANCIAL DATA SCHEDULE
FOR THE QUARTER ENDED JUNE 30, 1994
<S> <C>
Cash and cash items $ 769,000
Marketable securities -0-
Notes and accounts receivable-trade 99,592,000
Allowances for doubtful accounts 5,114,000
Inventory -0-
Total current assets 99,772,000
Property, plant and equipment 2,359,000
Accumulated depreciation 517,000
Total assets 101,614,000
Total current liabilities 12,176,000
Bonds, mortgages, and similar debt 95,950,000
Preferred stock--no mandatory redemption -0-
Preferred stock--no mandatory redemption -0-
Common stock 1,241,000
Other stockholders' equity (7,753,000)
Total liabilities and stockholders' equity 101,614,000
Net sales of tangible products -0-
Total revenues 13,567,000
Cost of tangible goods sold -0-
Total costs and expenses applicable to sales and revenue 6,737,000
Other costs and expenses (548,000)
Provision for doubtful accounts and notes 2,790,000
Interest and amortization of debt discount 5,385,000
Income before taxes and other items (797,000)
Income tax expense -0-
Income/loss continuing operations (797,000)
Discontinued operations -0-
Extraordinary items -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL DATA SCHEDULE (CONT.) EXHIBIT 99
<S> <C>
Cumulative effect-changes in accounting principles -0-
Net income or loss (797,000)
Earnings per share--primary ($0.44)
Earnings per share-fully diluted ($0.44)
</TABLE>
