SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1994Commission 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
Incorporation or Organization) Identification 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
As of October 24, 1994, CenCor, Inc. had 1,240,498 shares of Common
Stock, $1.00 par value outstanding with a market value of $775,311.
CENCOR, INC.
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1994
INDEX
Item Page
PART I
1. Financial Statements and Supplementary Data. . . . . . 2
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . .15
PART II
1. Legal Proceedings. . . . . . . . . . . . . . . . . . .20
2. Change in Securities . . . . . . . . . . . . . . . . .22
3. Defaults Upon Senior Securities . . . . . . . . . . .22
4. Submission of Matters to a Vote of Security Holders. .22
5. Other Materially Important Events. . . . . . . . . . .22
6. Exhibits and Reports on Form 8-K . . . . . . . . . . .22
7. Signatures . . . . . . . . . . . . . . . . . . . 23
As used herein, the term "CenCor" refers to CenCor, Inc. and the
term "Century" refers to CenCor's sole operating subsidiary Century
Acceptance Corporation. The term "the Company" as used herein
refers to CenCor collectively with Century.
Part I FINANCIAL INFORMATION
Item I Financial Statements
The Company's Financial Statements are set forth herein, beginning
on the following page.
(The remainder of this page is intentionally blank.)
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
September 30, 1994 and December 31, 1993
ASSETS
September 30, December 31,
1994 1993
(Unaudited)
Cash and cash equivalents. . . . . .$ 509,000 $ 3,277,000
Net finance receivables, less allowance
for credit losses of $5,185,000
($5,026,000 in 1993). . . . . . . 96,459,000 88,972,000
Property and equipment . . . . . . . .2,013,000 1,742,000
Other assets . . . . . . . . . . . . .4,772,000 3,465,000
$103,753,000 $ 97,456,000
CenCor, Inc.
CONSOLIDATED BALANCE SHEETS
September 30, 1994 and December 31, 1993
LIABILITIES AND STOCKHOLDERS' DEFICIT
September 30, December 31,
1994 1993
(Unaudited)
Liabilities and stockholders' deficit:
Accounts payable and accrued liabilities$ 1,916,000 $ 3,189,000
Notes payable. . . . . . . . . . . . .6,548,000 --
Accrued interest . . . . . . . . . . .2,827,000 975,000
Accrued interest - warrants. . . . . . .995,000 513,000
Unearned insurance commissions . . . .2,525,000 2,544,000
Long-term debt . . . . . . . . . . $ 95,950,000 $ 95,950,000
Total liabilities. . . . . . . $110,761,000 $103,171,000
Stockholders' 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 . . . . . . . (11,054,000) (9,761,000)
Total stockholders' deficit . . . .(7,008,000) (5,715,000)
. . . . . . . . . . . . . . . . . $103,753,000 $ 97,456,000
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Revenue:
Finance charges. . . . . . . . . . .$18,187,000 $17,053,000
Insurance commissions. . . . . . . . 2,662,000 1,320,000
Total revenue . . . . . . . 20,849,000 18,373,000
Expenses:
Salaries and other operating expenses10,188,000 14,399,000
Interest expense, net . . . . . . . .7,801,000 7,253,000
Interest expense, warrants . . . . . . .482,000 328,000
Provision for credit losses . . . . .4,218,000 1,045,000
Total expenses . . . . . . . 22,689,000 23,025,000
Operating loss . . . . . . . . . . .(1,840,000) (4,652,000)
Other income (loss):
Gain on sale of finance receivables . .556,000 365,000
Loss on sale of property and equipment (10,000) (13,000)
. . . . . . . . . . . . . . . . . . . .546,000 352,000
Loss before taxes and extraordinary item(1,294,000) (4,300,000)
Income tax expense . . . . . . . . . . . . . -- --
Loss before extraordinary item . . .(1,294,000) (4,300,000)
Extraordinary Item: (Note 2)
Gain on restructuring of long-term debt
net of taxes ($0 in 1993) -- 18,033,000
Net income (loss) $. . . . . . . . .(1,294,000) $13,733,000
Weighted average common and common
equivalent shares outstanding . . .1,815,080 1,169,718
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
Earnings per share of common stock and common
equivalent shares of stock: (Note 7)
Earnings (loss) per share
before extraordinary items . . . . . .$(0.71) $(3.68)
Earnings (loss) per share
from extraordinary items. . . . . . . . . . -- 15.42
Earnings per share
from net income (loss) . . . . . . . .$(0.71) $11.74
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
Revenue:
Finance charges $. . . . . . . . . . .6,421,000 $5,857,000
Insurance commissions . . . . . . . . .861,000 405,000
Total revenue . . . . . . . .7,282,000 6,262,000
Expenses:
Salaries and other operating expenses 3,450,000 4,231,000
Interest expense, net . . . . . . . .2,738,000 2,217,000
Interest expense, warrants . . . . . . .159,000 188,000
Provision for credit losses . . . . .1,428,000 724,000
Total expenses . . . . . . . .7,775,000 7,360,000
Operating loss . . . . . . . . . . . .(493,000) (1,098,000)
Other income (loss):
Gain on sale of finance receivables. . . . . -- 365,000
Loss on sale of property and equipment .(2,000) (13,000)
. . . . . . . . . . . . . . . . . . . .(2,000) 352,000
Loss before taxes and extraordinary item(495,000) (746,000)
Income tax expense . . . . . . . . . . . . . -- --
Loss before extraordinary item . . . .(495,000) (746,000)
Extraordinary item: (Note 2)
Gain on restructuring of long-term debt
net of taxes ($0 in 1993) . . . . . . . . -- 18,033,000
Net income (loss). . . . . . . . . . $(495,000) $17,287,000
Weighted average common and common
equivalent shares outstanding. 1,815,080 1,331,058
CenCor, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
For the Three Months Ended September 30, 1994 and 1993
Earnings per share of common stock and common
equivalent shares of stock: (Note 7)
Earnings (loss) per share
before extraordinary items . . . . . .$(0.27) $(0.56)
Earnings (loss) per share
from extraordinary items . . . . . . . . . -- 13.55
Earnings per share
from net income (loss) . . . . . . . .$(0.27) $12.99
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
OPERATING ACTIVITIES:
Net income (loss) . . . . .$(1,294,000) $ 13,733,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization. . 444,000 196,000
Provision for credit losses. . 4,218,000 1,045,000
Gain on sale of
finance receivables . . . (556,000) (365,000)
Increase (decrease) in
accrued interest. . . . . 1,852,000 (1,014,000)
Increase in accrued interest
- warrants . . . . . . . . 482,000 328,000
Decrease (increase) in
capitalized debt costs . . (561,000) 71,000
Gain on restructure of
long-term debt . . . . . . . . . .-- (18,033,000)
Other changes in assets and
liabilities, net . . . . (2,148,000) 1,188,000
Total adjustments. . . . . . . . . . . 3,731,000 (16,584,000)
Net cash provided by (used in)
operating activities. . . . . . . . 2,437,000 (2,851,000)
CenCor, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
For the Nine Months Ended September 30, 1994 and 1993
(Unaudited)
1994 1993
INVESTING ACTIVITIES:
Increase in finance receivables, net$(11,241,000) $(10,110,000)
Capital expenditures, net. . . . . . . (512,000) (1,151,000)
Net cash used in investing activities(11,753,000) (11,261,000)
FINANCING ACTIVITIES:
Advances on line of credit, net. . . . 6,548,000 --
Net cash provided by financing activities6,548,000 --
Net decrease in cash and cash equivalents(2,768,000)(14,112,000)
Cash and cash equivalents at beginning of year3,277,00023,401,000
Cash and cash equivalents at end of period$509,000 $9,289,000
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest . . . . . . .$5,603,000 $7,133,000
Income taxes . . . . . . . . .-- --
CenCor, Inc.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 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
September 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.
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. As a result of these
transactions, an extraordinary gain of $18,033,000 was recorded.
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.
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 asserted that CenCor (among
other parties) was 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 did not admit liability with
respect to these claims, it 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 and other unsecured creditors (where the
Company had issued a Continuing Guarantee of Collection) were 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.
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.
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 September 30, 1994 and September 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. 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 a 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.
Current Overall Trends
As a result of Century's emphasis on growth, the level of
outstanding finance receivables has increased from the nine months
ended September 30, 1993, consequently producing a 7% increase in
finance charges for the nine months ended September 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
expense for Century is directly related to its 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
Nine Months Ended September 30, 1994, Compared to Nine Months Ended
September 30, 1993
During the nine months ended September 30, 1994, the Company
incurred a net loss of $1,294,000 as compared to a net loss before
extraordinary item of $4,300,000 for the same period in 1993. The
decrease in the net loss from September 30, 1993 to September 30,
1994 was attributable to a decrease in salaries and other operating
expenses of $4,211,000 (29%) and an increase in total revenue of
$2,476,000 (13%). Offsetting this was an increase in the provision
for credit losses from $1,045,000 to $4,218,000 (304%).
Interest on finance receivables increased $1,134,000 (7%) in the
first nine 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 $1,342,000 (102%) from the nine months ended September
30, 1993. 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 increased commissions earned
from the sale of insurance.
The provision for credit losses increased from $1,045,000 to
$4,218,000 for the nine months ended September 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. The 1993 provision results primarily from
the centralized location's collection efforts and lower than
historical charge offs for the first nine months of 1993. The
increase in the provision for credit losses in the nine months
ended September 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.
See Note 4 for additional information regarding the allowance for
credit losses.
Salaries and other operating expenses for the nine month
period ended September 30, 1994, decreased to $10,188,000 from
$14,399,000 in 1993, a decrease of 29%. A reduction in operating
expenses of $1,632,000 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 also
reduced operating expenses from September 30, 1993 to September 30,
1994. These 1993 expenses related to the conversion to an on-line
computer system and the modernization of branch offices.
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 nine months ended September 30, 1994, was $1,421,000.
Century's interest expense on long-term debt and notes payable for
the nine months ended September 30, 1994, was $6,380,000.
Three Months Ended September 30, 1994 Compared to Three Months
Ended September 30, 1993
Interest on finance receivables increased $564,000 (10%) in the
three month period ended September 30, 1994 from the same period in
1993. The increase is a result of the increased loan activity as
previously discussed. Insurance commissions increased $456,000
(113%) for the same period. A discussion of the increase in
insurance commissions is included in the nine month analysis.
The provision for credit losses increased from $724,000 to
$1,428,000 for the three months ended September 30, 1994. As
previously mentioned in the results of operations for the nine
months, the 1993 provision results primarily from the centralized
location's collection efforts and lower than historical charge
offs for the three month period ended September 30, 1993. The
increase in the provision for credit losses for the three month
period ended September 30, 1994, 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. 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 September 30, 1994 decreased from $4,231,000 to $3,450,000,
a decrease of 18%. 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 $542,000
for the three month period. In addition, as previously mentioned,
many one-time expenses incurred in 1993 were not incurred 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 because of 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 is automatically renewable on a year-to-year
basis unless terminated by either party. As of September 30, 1994,
the outstanding balance on the line of credit was $6,548,000.
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.
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.
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.
The Company has also been notified by the IRS that its 1991 income
tax return has been selected for examination.
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
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, Hillsborough County, against Lloyds of London seeking
recovery of $1,000,000 for breach of contract. The suit is
presently in the discovery stage and a trial hearing date has not
yet been set by the Circuit Court.
As previously reported, on June 28, 1994, 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, Alabama. The Century subsidiary was dismissed without
prejudice from the case on September 9, 1994.
The same Century subsidiary, along with virtually the same consumer
finance companies named in the previous suit, was also named as a
defendant on July 21, 1994, in a lawsuit filed in the United States
District Court for the Middle District of Alabama Southern
Division. The plaintiffs' complaint alleges that the Century
subsidiary engaged in violations of the Federal Truth-In-Lending
Act and the Racketeer Influenced and Corrupt Organizations Act and
seeks the certification of a national class action. The
plaintiffs' complaint seeks statutory and actual damages sustained
by the plaintiffs, attorney fees and litigation costs, and such
other relief deemed appropriate by the Court. The Century
subsidiary has denied the allegations presented in the suit and is
actively defending the charges.
On September 9, 1994, CenCor was also named as a defendant in the
Federal suit discussed above. The plaintiffs' amended complaint
alleges that CenCor and the parent corporations of certain
previously named defendant finance companies directed the conduct
and exerted control over their subsidiary finance companies and
thus are also being named in the class action suit. CenCor has
filed a motion seeking dismissal from the case based upon being
inaccurately named as the parent corporation of the Century
subsidiary.
On October 25, 1994 a number of the same defendants in the
above-captioned action, including Century and its same subsidiary,
were named as defendants in a lawsuit filed in the Circuit Court of
Jefferson County, Alabama by certain alleged borrowers from the
defendant creditor/lenders. In the action, styled Alfonzo Calaway,
et al. v. Baker Furniture Company, et al., the plaintiffs allege
that the defendants, including Century and its subsidiary, engaged
in violations of the Alabama Mini Code and Alabama Small Loan Act,
fraud, and civil conspiracy and request the certification of a
state-wide class action. The plaintiffs ask for compensatory
damages, punitive damages, attorneys fees, interest and costs. The
plaintiffs also seek injunctive relief. Century and its subsidiary
deny the allegations and will actively defend 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 Materially Important Events - None
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
September 30, 1994.
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 November 15, 1994 /s/ Jack L. Brozman
Jack L. Brozman, President
/s/ Patrick F. Healy
Patrick F. Healy, Vice President-Finance
and Treasurer
EXHIBIT 27
CENCOR, INC.
FINANCIAL DATA SCHEDULE
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
Cash and cash items $509,000
Marketable securities -0-
Notes and accounts receivable-trade 101,644,000
Allowances for doubtful accounts 5,185,000
Inventory -0-
Total current assets 101,740,000
Property, plant and equipment 2,556,000
Accumulated depreciation 543,000
Total assets 103,753,000
Total current liabilities 14,811,000
Bonds, mortgages, and similar debt 95,950,000
Preferred stock -0-
Common stock 1,241,000
Other stockholders' equity (8,249,000)
Total liabilities and stockholders' equity 103,753,000
Net sales of tangible products -0-
Total revenues 20,849,000
Cost of tangible goods sold -0-
Total costs and expenses applicable to sales and revenue10,188,000
Other costs and expenses (546,000)
Provision for doubtful accounts and notes 4,218,000
Interest and amortization of debt discount 8,283,000
Income before taxes and other items (1,294,000)
Income tax expense -0-
Income/loss continuing operations (1,294,000)
Discontinued operations -0-
Extraordinary items -0-
FINANCIAL DATA SCHEDULE (CONT.)
EXHIBIT 27
Cumulative effect-changes in accounting principles -0-
Net income or loss (1,294,000)
Earnings per share--primary ($0.71)
Earnings per share-fully diluted ($0.71)