SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1995
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 ID
Incorporation or Organization) Number)
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
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As of May 23, 1995, CenCor, Inc. had 1,240,498 shares of
Common Stock, $1.00 par value outstanding with a market value
of $1,318,029.
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CENCOR, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
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 2
PART II
1. Legal Proceedings 15
2. Change in Securities 15
3. Defaults Upon Senior Securities 15
4. Submission of Matters to a Vote of
Security Holders 15
5. Other Information 15
6. Exhibits and Reports on Form 8-K 15
7. Signatures 16
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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.
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<CAPTION>
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
ASSETS
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Cash and cash equivalents $ 2,513,000 $ 1,033,000
Net finance receivables, less
allowance for credit losses of
$5,119,000 ($5,194,000 in 1994) 103,168,000 104,125,000
Property and equipment, net 2,179,000 2,154,000
Unamortized debt issuance costs 548,000 667,000
Other assets 3,465,000 3,965,000
Total assets $111,873,000 $111,944,000
</TABLE>
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<TABLE>
<CAPTION>
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
Liabilities and stockholders
equity (deficit):
Accounts payable and liabilities $ 1,811,000 $ 2,265,000
Accrued interest 587,000 --
Accrued interest - warrants 1,327,000 1,152,000
Unearned insurance commissions 2,667,000 2,654,000
Long-term debt 99,541,000 99,407,000
Borrowings under line of credit 13,980,000 13,693,000
Total liabilities $119,913,000 $119,171,000
Stockholders' equity (deficit):
Common stock, $1 par value, 2,000,000
shares authorized, 1,240,498 shares
issued and outstanding 1,241,000 1,241,000
Paid-in capital 2,805,000 2,805,000
Accumulated deficit (12,086,000) (11,273,000)
Total stockholders' deficit (8,040,000) (7,227,000)
Total liabilities and stockholders'
equity (deficit) $111,873,000 $111,944,000
</TABLE>
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<TABLE>
<CAPTION>
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
<S> <C> <C>
Revenue:
Finance charges $6,718,000 $5,730,000
Insurance commissions 749,000 763,000
Total revenue 7,467,000 6,493,000
Expenses:
Salaries and other operating
expenses 3,823,000 3,579,000
Interest expense, net 3,137,000 2,417,000
Interest expense, warrants 175,000 168,000
Provision for credit losses 1,753,000 1,179,000
Total expenses 8,888,000 7,343,000
Operating loss (1,421,000) (850,000)
Other income (loss):
Gain on sale of finance receivables -- 556,000
Loss on sale of property and
equipment (3,000) (6,000)
Other 611,000 --
608,000 550,000
Loss before taxes (813,000) (300,000)
Income tax expense -- --
Net loss $ (813,000) $ (300,000)
Weighted average common and common
equivalent shares outstanding 1,815,080 1,815,080
Earnings (loss) per share of common
stock and common equivalent
shares of stock: (Note 6)
Earnings (loss) per share $ (0.45) $ (0.17)
</TABLE>
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<TABLE>
<CAPTION>
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (813,000) (300,000)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 204,000 79,000
Provision for credit losses 1,753,000 1,179,000
Gain on sale of finance
receivables -- (556,000)
Increase in accrued interest 721,000 614,000
Increase in accrued interest -
warrants 175,000 168,000
Other changes in assets and
liabilities, net 65,000 (1,713,000)
Total adjustments 2,918,000 (229,000)
Net cash provided by (used in)
operating activities 2,105,000 (529,000)
</TABLE>
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<TABLE>
<CAPTION>
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
For the Three Months Ended March 31, 1995 and 1994
(Unaudited)
1995 1994
<S> <C> <C>
INVESTING ACTIVITIES:
Finance receivables originated
or purchased $(18,537,000) $(18,880,000)
Proceeds from finance receivables
repaid or sold 17,739,000 19,240,000
Capital expenditures, net (114,000) (85,000)
Net cash provided by (used in)
investing activities (912,00) 275,000
FINANCING ACTIVITIES:
Net borrowings under line of credit 287,000 --
Net cash provided by financing
activities 287,000 --
Net increase (decrease) in cash and
cash equivalents 1,480,000 (254,000)
Cash and cash equivalents at
beginning of year 1,033,000 3,277,000
Cash and cash equivalents at end of
period $ 2,513,000 $ 3,023,000
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 2,440,000 $ 1,844,000
Income taxes -- --
</TABLE>
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CenCor, Inc.
NOTES TO FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1995
(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 March 31, 1995 and December 31, 1994 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 1994.
Note 2 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, historical charge-off ratios, the
characteristics of the accounts, the value of the underlying
collateral and general economic conditions and trends.
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Management also evaluates the availability of dealer reserves
to absorb finance receivable losses.
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.
Note 3 Line of Credit
On April 1, 1994, Century entered into a $25,000,000 revolving
line of credit. The commitment made under the agreement
expires April 1, 1996, but may be extended annually for
successive one year periods unless terminated by either party.
At March 31, 1995, borrowings outstanding under the facility
totaled $13,980,000.
The line of credit is fully secured by a first lien on all of
Century's assets. Century is required to remit all cash
collections to the lender on a daily basis. The line of credit
bears interest at a rate of 2% above the prime commercial rate
plus .25% per annum on the unused portion of the facility. At
March 31, 1995, the interest rate was 10.5%.
Note 4 Long-Term Debt
On January 29, 1993, Century entered into Amendment and
Exchange agreements with the holders of its long-term debt
(collectively the "Restructuring Agreements"), whereby the
holders exchanged their prior notes for new notes and the terms
and covenants of the debt agreements were amended. Century
must comply with various restrictive covenants which require
the maintenance of certain financial ratios and other financial
conditions. The Restructuring Agreements restrict Century's
ability to pay dividends to CenCor.
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In consideration of the noteholders entering into the
Restructuring Agreements, Century issued warrants (the
"Warrants") to the noteholders to acquire 300,000 shares of
Century's common stock which constitutes 25% of Century's
common stock on a fully diluted basis. The Warrants vested on
April 30, 1993 and expire on January 1, 2003. The exercise
price of the Warrants is $.01 per share. Century has the right
to call the Warrants in May 1997 if the notes have been paid in
full. The noteholders can require Century to purchase (at a
per share price based upon the greater of the fair value of the
shares or equity value, equal to the book value of Century plus
a 5% premium on net finance receivables) their Warrants and the
shares obtained from the exercise of the Warrants (at the
greater of their then current market value if an offer exists,
or equity value, as defined) after the notes are paid in full
or upon the occurrence of certain events including the sale of
substantially all of the assets of Century.
On March 30, 1995, the Restructuring Agreements were amended to
modify certain financial ratios Century is required to maintain
during 1995. Such ratios will revert back to more stringent
requirements in 1996. In consideration of this amendment to
the Agreements, Century agreed to deliver to the noteholders
additional warrants (the "Additional Warrants") which
constitute 5% of Century's common stock on a fully diluted
basis. Also, the amendment provides for the noteholders to
surrender all Warrants and Additional Warrants to Century for
cancellation if Century is sold under certain conditions. For
additional information concerning the Warrants and the
Additional Warrants, see Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources" contained in CenCor's Annual
Report for the year ended December 31, 1994 on Form 10-K.
Note 5 Other Income
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During the quarter, the Company received $600,000 from the
Estate of Robert F. Brozman (the "Brozman Estate") which
payment represented the cash portion of the consideration to be
received by the Company as a result of the Company's settlement
of all of its claims against the Brozman Estate, including
claims arising from the CIKC loans. For additional information
concerning the balance of the settlement, including the Brozman
Estate's agreement to surrender for cancellation all or a
portion of the 597,064 shares of CenCor common stock held by
the Robert F. Brozman Trust, see Item 13. Certain Relation-
ships, and Related Transactions in CenCor's Annual Report for
the year ended December 31, 1994 on Form 10-K. Because the
amount of the balance of the settlement is not currently
determinable, it has not been recorded in the accompanying
financial statements. At the time the amount of the transac-
tion becomes determinable (generally December 31, 1995), it
will be recorded as other income.
Note 6 Earnings Per Share
As of March 31, 1995 and March 31, 1994, earnings per common
share and common equivalent shares were computed by dividing
net income by the weighted average number of shares of common
stock and common stock equivalents outstanding during the year.
The number of weighted average common share equivalents was
increased under the assumption that the Company's Convertible
Notes were converted to common stock. 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.
Earnings per share assuming full dilution was determined in the
same manner as earnings per common share and common equivalent
share.<PAGE>
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Note 7 Subsequent Events
See Part II, Item 5 Other Information.
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Although the Company's total revenue for the quarter ended
March 31, 1995 increased by $974,000 (15%) over the same period
in 1994, the Company incurred a net loss of $813,000 for the
first quarter as compared to a net loss of $300,000 for the
same period in 1994. The increase in the net loss from March
31, 1994 to March 31, 1995 is primarily attributable to an
increase in the provision for credit losses from $1,179,000 to
$1,753,000 or 49%, an increase in interest expense from
$2,417,000 to $3,137,000 (30%), and an increase in salaries and
other operating expenses of $244,000 (7%). In addition, the
first quarter revenue for the current year did not have the
benefit of a gain from the sale of branch offices as was the
case in 1994.
During the first quarter of 1994, Century sold three of its
branch 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
net gain on the sale of the branches was $550,000 for the
quarter ended March 31, 1994.
The provision for credit losses increased by $574,000 (49%) for
the three months ended March 31, 1995 from the same period in
1994. The increase in the provision for credit losses in 1995
is primarily due to an increase in net finance receivables
outstanding.
Interest expense increased by $720,000 (30%) in the first
quarter of 1995 from the same period in 1994. The increase in
interest expense is a result of the increase in borrowings
outstanding to fund receivable growth and also an increase in
the cost of those borrowings.
Salaries and other operating expenses increased form $3,579,000
to $3,823,000 (7%) for the quarter ended March 31, 1995. The
increase was primarily due to increases in employee
compensation and benefits. The increase in operating expenses
can also be attributed to the growth in receivables.
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Interest on finance receivables increased by $988,000 (17%) in
the first quarter of 1995 from the same period in 1994. The
increase is primarily attributable to the increase in net
finance receivables outstanding as a result of Century's
emphasis on growth of its loan portfolio. Insurance
commissions, which are earned on the sale of insurance upon
origination of consumer and home equity loans, decreased
slightly (2%) from the first quarter of 1994.
As indicated in Note 5 to the financial statements, the Company
received $600,000 from the Brozman Estate in March 1995
pursuant to a settlement agreement. The $600,000 cash
settlement is included in other income for the quarter ended
March 31, 1995.
Liquidity and Capital Resources
Debt Availability
Prior to 1992, Century historically funded its operations
through borrowings. Between 1992 and 1994, Century's growth
had been severely limited because of the unavailability 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 is
automatically renewable on a year-to-year basis unless
terminated by either party. As of March 31, 1995, the
outstanding balance on the line of credit was $13,980,000.
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 provides certain limits
on Century's ability to incur additional indebtedness.
Capital Obligations
The Company has no significant obligations for capital
purchases.
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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 (collectively the
"Restructuring 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.
As recently reported, the Restructuring Agreements were amended
on March 30, 1995 to relax certain financial ratios that
Century is
required to maintain during 1995. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources" in CenCor's Annual Report for
the year ended December 31, 1994 on Form 10-K. Century is in
compliance with all of the covenants in the Restructuring
Agreements, including the amended financial ratios at March 31,
1995.
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. The Company is in compliance with all covenants and
terms under the new indenture.
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.
In addition, the Company's 1991 income tax return is currently
under examination by the IRS.
As a result of the unresolved IRS examination, management
cannot precisely estimate the amount of the Company's net
operating loss carryforward for financial statement or federal
income tax purposes.
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Continuing Operations
On May 19, 1995, the Company agreed to sell Century to Fidelity
Acceptance Corporation, a subsidiary of the Bank of Boston.
See Part II, Item 5 Other Information.
If the sale of Century is completed, CenCor's operations will
continue to focus on the collection of various amounts owed to
it, including the collection of the Concorde Career Colleges
("Concorde") Junior Secured Debenture, and the previously
charged-off Concorde receivables received in payment of accrued
interest. CenCor will also closely monitor claims arising from
indemnification obligations to the buyer of Century in order to
maximize the value of an escrow fund to be established upon
consummation of the Purchase Agreement.
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Part II
Item 1 Legal Proceedings
On April 13, 1995 a Century subsidiary was named as a
defendant, along with a number of other consumer finance
companies, in a lawsuit filed in the Circuit Court of Jefferson
County by certain alleged borrowers from the defendant
creditor/lenders. In the action, styled Dorothy McCurdy, et
al. v. American General Finance, Inc., et al., the plaintiffs
allege that the defendants engaged in violations of the Alabama
Mini Code, fraud, and conspiracy with respect to the sale of
credit property insurance. The plaintiffs' complaint seeks
statutory damages sustained by the plaintiffs, compensatory and
punitive damages, and attorneys' fees. The Century subsidiary
has denied the allegations presented in the suit and is
actively defending the charges.
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 Information - As recently reported, CenCor and
Century signed a definitive agreement on May 19, 1995 whereby
Century's consumer finance business would be sold to Fidelity
Acceptance Corporation, a subsidiary of the Bank of Boston
Corporation. See CenCor's Current Report dated May 19, 1995 on
Form 8-K.
Item 6 Exhibits and Reports on Form 8-K
EXHIBIT NUMBER DESCRIPTION
27 Financial Data Schedule
No reports on Form 8-K were filed during the quarter ended
March 31, 1995; however, CenCor did file a Current Report on
Form 8-K dated May 19, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this amended report
to be signed by the undersigned, thereunto duly authorized.
CENCOR, INC.
Dated September 20, 1995 /s/ Jack L. Brozman
Jack L. Brozman, President
/s/ Patrick F. Healy
Patrick F. Healy, Vice President-
Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> MAR-31-1995
<CASH> 2,513,000
<SECURITIES> 0
<RECEIVABLES> 108,287,000
<ALLOWANCES> 5,119,000
<INVENTORY> 0
<CURRENT-ASSETS> 109,694,000
<PP&E> 2,856,000
<DEPRECIATION> 677,000
<TOTAL-ASSETS> 111,873,000
<CURRENT-LIABILITIES> 6,392,000
<BONDS> 113,521,000
<COMMON> 1,241,000
0
0
<OTHER-SE> (9,281,000)
<TOTAL-LIABILITY-AND-EQUITY> 111,873,000
<SALES> 0
<TOTAL-REVENUES> 8,078,000
<CGS> 0
<TOTAL-COSTS> 3,823,000
<OTHER-EXPENSES> 3,000
<LOSS-PROVISION> 1,753,000
<INTEREST-EXPENSE> 3,312,000
<INCOME-PRETAX> (813,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (813,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (813,000)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
</TABLE>
