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, 1998 Commission File No. 0-3417
CENCOR, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-0914033
(State of other jurisdiction (I.R.S. Employer Identification
of Incorporation or Organization Number)
5800 Foxridge Drive, Suite 500
Mission, Kansas 66202
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code: (913) 831-6334
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 19, 1998 CenCor, Inc. had 1,342,301 shares of Common
Stock, $1.00 par value outstanding with a market value of
$8,389,381.
CENCOR, INC.
FORM 10-Q
QUARTER ENDED September 30, 1998
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 8
3. Quantitative and Qualitative Disclosures about
Market Risk 11
PART II
1. Legal Proceedings 12
2. Change in Securities 12
3. Defaults Upon Senior Securities 12
4. Submission of Matters to a Vote of Security
Holders 12
5. Other Information 12
6. Exhibits and Reports on Form 8-K 12
7. Signatures 13
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.)
CenCor, Inc.
(In Process of Liquidation)
Consolidated Statement of Net Assets in Liquidation
Setpember 30, December 31,
1998 1997
(Unaudited)
Assets:
Cash and cash equivalents $ 9,790,000 $11,248,000
Other assets 646,000 6,182,000
Total assets 10,436,000 17,430,000
Liabilities:
Accounts payable and accrued liabilities 422,000 432,000
Partial liquidating distribution payable 57,000 7,225,000
Total liabilities 479,000 7,657,000
Net assets in liquidation $ 9,957,000 9,773,000
Number of common shares outstanding 1,350,384 1,350,384
Net assets in liquidation per share $ 7.37 $ 7.24
See accompanying notes.
CenCor, Inc.
(In Process of Liquidation)
Consolidated Statement of Net Assets in Liquidation
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
Net assets in liquidation $ 9,773,000 $ 17,394,000
December 31, 1997 and 1996
Income from liquidating activities
Investment income 485,000 846,000
Expenses from liquidating activities
Salaries and related benefits 161,000 571,000
Interest expenses -- 709,000
Professional fees 128,000 35,000
Income taxes <111,000> <488,000>
Other expenses 123,000 164,000
301,000 991,000
Retirement of common stock -- 1,157,000
Increase (decrease) in net assets in
liquidation 184,000 <1,302,000>
Net assets in liquidation,
September 30, 1998 and 1997 $ 9,957,000 $ 16,092,000
See accompanying notes.
CenCor, Inc.
(In Process of Liquidation)
Consolidated Statement of Changes in Net Assets in Liquidation
For the Three Months Ended September 30, 1998 and 1997
(Unaudited)
1998 1997
Net assets in liquidation,
June 31, 1998 and 1997 $ 9,912,000 $16,707,000
Income from liquidating activities
Investment income 145,000 220,000
192,000 321,000
Expenses from liquidating activities
Salaries and related benefits 57,000 64,000
Professional fees 25,000 35,000
Income tax -- <488,000>
Other expenses 18,000 67,000
100,000 <322,000>
Retirement of common stock -- 1,157,000
Increase in net assets in liquidation 45,000 <615,000>
Net assets in liquidation,
June 30, 1998 and 1997 $ 9,957,000 $ 16,092,000
See accompanying notes.
CenCor, Inc.
(In Process of Liquidation)
Notes to Consolidated Financial Statements
September 30, 1998
1. Summary of Significant Accounting Policies
Basis of Presentation and Plan of Liquidation
The accompanying consolidated financial statements include accounts
of CenCor, Inc. and its wholly-owned subsidiary Century Acceptance
Corporation ("Century") (collectively, "the Company"). Effective
September 30, 1995, the Company sold substantially all of the assets
of Century, its then only operating subsidiary. Since the date of
the sale of Century, the Company has had no ongoing operations. As
a result, the Company has changed its basis of accounting from going
concern basis to liquidation basis.
As a result of Board of Directors' intent as of December 31, 1995,
the Company adopted a Plan of Dissolution and Liquidation (the "Plan
of Liquidation"). In connection with the Plan of Liquidation, the
officers and director of CenCor are authorized to (i) dissolve CenCor,
including the execution and filing of a Certificate of Dissolution
with the Secretary of State of Delaware, (ii) wind up CenCor's affairs,
including satisfaction of all liabilities and long-term debt of CenCor
and (iii) liquidate CenCor's assets on a pro rata basis in accordance
with the respective interests of its common stockholders. The
Company's stockholders approved the Plan of Liquidation on September
12, 1996 at the Company's annual meeting of stockholders. CenCor is
expected to be fully liquidated by October 1999.
Generally accepted accounting principles require the adjustment
of assets and liabilities to estimated fair value under the
liquidation basis of accounting. Accordingly, the statement of
net assets in liquidation at June 30, 1998 and December 31, 1997
reflects assets and liabilities on this basis. Adjustments for
changes in estimated liquidation value are recognized currently.
Estimated costs of liquidation have not been provided since such
costs are not able to be estimated.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles under the liquidation
basis of accounting requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ
significantly from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash, money market accounts,
and short-term government or government agency instruments.
Fair Values of Assets and Liabilities
The following methods and assumptions were used by the Company in
estimating the liquidation value of its assets and liabilities:
Cash and Cash Equivalents: The carrying amount reported in
the statement of net assets in liquidation for cash and cash
equivalents approximates their fair value.
Other Assets: The Company's other assets are reported in
the statement of net assets in liquidation at their fair value.
Accounts Payable and Accrued Liabilities: The carrying
amount reported in the statement of net assets in liquidation for
accounts payable and accrued liabilities approximates their fair
value.
Partial liquidating distribution payable: The carrying
amount reported in the statement of net assets in liquidation
approximates the fair value of the partial liquidating distribution
payable.
2. Other Assets
An escrow account was established in accordance with the provisions of the
agreement pertaining to the sale of Century's assets in order to secure
certain indemnification obligations of Century and CenCor to the buyer,
Fidelity Acceptance Corporation ("Fidelity"), that ran through July 1, 1998.
The escrow account, including accrued interest, is included in other assets
at December 31, 1997, at a value of $5,549,000.
During the quarter ended September 30, 1998, Fidelity withdrew all of its
claims against the escrow account and the Company received approximately
$5.6 million of the escrow funds. The funds received from the escrow
account were immediately invested in short-term government and government
agency instruments.
As discussed in Note 3, other assets at September 30, 1998 and December 31,
1997 also include a net income tax refund receivable of $600,000 and $595,000,
respectively, from the Company's prior years' federal and state income tax
returns.
At December 31, 1997, a portion of the Company's assets consisted of certain
charged-off receivables obtained in full payment of the accrued interest due
on a subordinated debt of Concorde Careers Colleges, Inc ("Concorde").
The receivables consisted of account and notes receivable from students who
attended schools operated by Concorde or its subsidiaries. As of December 31,
1997, the Company had collected approximately $1,046,000 of the total
$1,057,000 discharged interest due from the charged-off receivables. The
balance of the discharged interest was collected in January 1998, and the
Company has subsequently reassigned the charged-off receivables to Concorde.
3. Income Taxes
The Company has recently been notified by Internal Revenue Service ("IRS")
that the tentative agreement reached for the proposed adjustments to the
Company's 1990, 1991, and 1992 federal income tax returns has been approved.
The Company is awaiting processing of the approved agreement.
The Company's net operating loss ("NOL") carryforward, for federal income tax
purposes, at September 30, 1998, is approximately $241,000 and the Company's
alternative minimum tax ("AMT") credit carryforward is approximately $579,000.
The NOL carryforward expires on December 31, 2008 and the AMT credit can be
carried forward indefinitely.
Based upon the terms of the approved agreement, the Company has recorded in
other assets a net recoverable for income taxes of $600,000 and $595,000 at
September 30, 1998 and December 31, 1997, respectively.
4. Per Share Information
Net assets in liquidation per common share was computed by dividing net
assets in liquidation by the outstanding shares of common stock at
September 30, 1998 and December 31, 1997.
Effective April 1, 1996, CenCor converted its outstanding non-interest bearing
convertible notes due July 1, 1999 (the "Convertible Notes") in the principal
amount of $11,449,771 into shares of CenCor's common stock at a ratio of one
share of common stock for each $20 principal amount of Convertible Notes. As
a result of the conversion, the holders of the Convertible Notes were entitled
to 572,554 shares of CenCor common stock upon surrender of their Convertible
Notes. The outstanding share amount reflected in the financial statements
assumes all 572,554 shares issued as a result of the conversion of the
Convertible Notes are outstanding. However, as of October 20, 1998,
10,494 shares issuable remain unclaimed by the holders of the Convertible
Notes.
On February 2, 1998, CenCor announced a partial liquidating distribution of
$5.35 per share to shareholders of record on February 16, 1998. On
March 9, 1998 CenCor distributed $7,159,049 to its 1,338,140 outstanding
shareholder of record as of February 16, 1998.
The outstanding shares of stock at February 16, 1998 that received the partial
liquidating distribution on March 9, 1998 did not include 11,713 of common
shares issuable to holders of Convertible Notes who had failed to surrender
their Convertible Notes in exchange for common stock. Subsequently 1,219 shares
of common stock and the underlying partial liquidating distribution of $5.35
per share have been issued as a result of the surrender of Convertible Notes.
The partial liquidation distribution payable recorded in the financial
statements at September 30, 1998 and December 31, 1997 includes the partial
liquidating distribution due to the holders of unsurrendered Convertible Notes.
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Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Financial Condition
Sale of Century
Effective June 30, 1995, Century consummated the sale of its
consumer finance business to Fidelity Acceptance Corporation ("Fidelity").
Under the terms of the sale, Century received $128.7 million
for substantially all of its assets. In accordance with the
provisions of the sales agreement, $5 million of the sale
proceeds were placed in escrow to secure certain indemnification
obligations of the Company that expired on July 1, 1998. During the
quarter ended September 30, 1998, Fidelity withdrew all of its claims
against the escrow account and the Company received approximately $5.6
million of the escrow funds. The funds received from the escrow account
were immediately invested in short-term government and government agency
instruments.
Plan of Liquidation
With the sale of its consumer finance business, CenCor's
business purpose no longer exists. For that reason, CenCor's
Board of Directors (the "Board") adopted a resolution on January 22, 1996
that CenCor be liquidated and that the Plan of Liquidation be
submitted to the stockholders for approval. The Company's
Stockholders approved the Plan of Liquidation at the Company's
annual meeting of Stockholders held on September 12, 1996 and a
Certificate of Dissolution was subsequently filed with the State
of Delaware.
Under Delaware law, CenCor will continue as a corporate
entity for three years after the effective date of the
dissolution (October 1, 1996) or for such longer period as the
Delaware Court of Chancery directs, in its own discretion, for the
purpose of prosecuting and defending suits by or against CenCor
and winding up the business and affairs of CenCor, but not for
the purpose of continuing the business of CenCor.
The Plan of Liquidation provides that the implementation of
the plan is intended to be completed by October 1, 1999. During
this three year period, CenCor will not engage in any business
activities, except for preserving the value of its assets,
adjusting and winding up its business and affairs, and
distributing its assets in accordance with the Plan of
Liquidation. CenCor's debts and liabilities, whether fixed,
conditioned or contingent, will either be paid as they become due
or provided for.
The Board determined that a partial liquidating distribution of
$5.35 per share would be issued to stockholders of record on February
16, 1998. At such time as the Board has determined that all claims and
liabilities have been identified and paid or provided for, the Board
will determine a record date and issue a final liquidating distribution.
CenCor does not expect this to occur prior to 1999. The timing of the
final distribution will depend in large part upon the Company's receipt of
an IRS determination of the Company's income tax liabilities for its most
recent tax years. See "Activities During Liquidation Period" below.
During the period of liquidation CenCor's directors and
officers are authorized to implement and carry out the
provisions of the Plan of Liquidation and will receive
compensation for their services. The Board recently determined
that, in addition to the regular directors fees paid to each
member of the Board of Directors, each Director shall receive a
payment equal to $75,000 immediately prior to the final
distribution of the liquidation proceeds to the shareholders
as additional consideration for the performance of
services to the Company. In addition, the Vice President of the
Company will receive a bonus of $100,000 if the officer is still
employed by the Company on the date the Company makes its final
liquidation distribution to its shareholders.
The purpose of the additional payments is to encourage these individuals
to continue their service to the Company through the Company's final
liquidation and to recognize the directors for their past performance.
The additional payments have been recorded as a liability in the September
30, 1998 and December 31, 1997 financial statements.
As discussed below, on February 2, 1998, CenCor announced a partial
liquidating distribution in the amount of $5.35 per share to be paid
on March 9, 1998. After the partial liquidating distribution
and assuming CenCor had fully liquidated and distributed its assets by
September 30, 1998 and the Company's actual realizable value of its assets
and liabilities is identical to the Company's estimated realized value of these
items, CenCor's stockholders would have received an additional
$9,957,000 in distributions or approximately $7.37 per share, less costs to
liquidate. The actual amount to be received upon complete
liquidation may be adversely affected by unanticipated tax liabilities,
liquidating costs, or other unforeseen factors.
Partial Liquidating Distribution
CenCor's 1993 plan of reorganization entitled holders of Old
Notes to receive Non-Convertible Notes, Convertible Notes, and
common stock in exchange for their Old Notes. The Convertible Notes
were converted into shares of common stock at a ratio of one share of common
stock for each $20 principal amount of Convertible Notes on April 1,
1996.
On February 2, 1998 CenCor announced payment of a partial
liquidating distribution on March 9, 1998 in the amount of $5.35
per share to common stockholders of record as of February 16, 1998.
The Company distributed $7,159,049 on 1,338,140 outstanding shares
of common stock on March 9, 1998.
The outstanding shares of stock at February 16, 1998 that
received the partial liquidating distribution on March 9, 1998 did
not include 11,713 of common shares issuable to holders of Convertible
Notes who have failed to surrender their Convertible Notes in exchange
for common stock. Subsequently, 1,219 shares of common stock and the
underlying partial liquidating distribution of $5.35 per share have been
issued as a result of the surrender of Convertible Notes. The partial
liquidation distribution payable recorded in the financial statements
at September 30, 1998 and December 31, 1997 reflects the partial liquidating
distribution due to the holders of unsurrendered Convertible Notes.
Conversion of Convertible Notes
On December 31, 1995, CenCor had outstanding non-interest
bearing convertible notes due July 1, 1999 in the principal amount
of $11,449,771. Effective April 1, 1996, CenCor converted these Convertible
Notes into shares of CenCor's common stock at a ratio of one share of common
stock for each $20 principal amount of Convertible Notes. As a result of
this conversion, the holders of the Convertible Notes are entitled to be issued
572,554 shares of CenCor common stock upon surrender of their Convertible Notes.
As of October 20, 1998, 10,495 shares issuable remain unclaimed by the holders
of the Convertible Notes.
Long - Term Debt
On August 19, 1996 CenCor offered to redeem all of its
outstanding Non-Convertible Notes due July 1, 1999 at a cash
price equal to 74% of their principal amount. Prior to the
offer, the principal balance of the Non-Convertible Notes was
$17,174,656. CenCor redeemed outstanding Non-Convertible Notes
in the principal amount of $9,970,930 as of the November 18, 1996
offer expiration date at a cost of $7,374,415. On May 30, 1997,
pursuant to the indenture governing the Non-Convertible Notes,
CenCor defeased its outstanding Non-Convertible Notes in the
principal amount of $7,203,726 by delivering approximately $6.4
million in U.S. Government Securities to the indenture trustee.
The Non-Convertible Notes will be paid in full on July 1, 1999 by the
indenture trustee.
Concorde Career Colleges, Inc. Agreements
In February, 1997 the Company retired in full its holding
in a junior secured debenture (the "Debenture") of Concorde
Career Colleges, Inc. ("Concorde") in the principal amount of
approximately $2.4 million plus interest and redeemed all of its
shares of Concorde's cumulative preferred stock.
In 1993 and 1994, Concorde agreed to assign certain
charged-off receivables to the Company in full payment of the accrued
interest due on the Debenture through December 31,
1993 and 1994, respectively. The receivables, which consisted of
account and notes receivable from students who attended schools
operated by Concorde or its subsidiaries, were assigned to the Company
without recourse with the Company assuming all risk of non-payment of
the receivables. As of December 31, 1997, the Company had
collected approximately $1,046,000 of the total $1,057,000
discharged interest due from the charged-off receivables. The
balance of the discharged interest was collected in January, 1998
and the Company had subsequently reassigned the charged off receivables
to Concorde.
Assets and Liabilities Following Using Liquidation Accounting
The Company's assets at September 30, 1998 and December 31, 1997
consist primarily of cash and cash equivalents, and an income tax
receivable refund. At December 31, 1997, the Company's assets also
included the escrow account established to secure the indemnification
obligations of the Company to the buyer of Century.
The Company's liabilities at September 30, 1998 and
December 31, 1997 consist primarily of accounts payable and other
accrued liabilities, including the accrued additional payments
due to the Company's officers and directors prior to liquidation.
At December 31, 1997 the Company has also recorded a liability
for the partial liquidating distribution payable to its share-
holders on March 9, 1998. The Company distributed $7,159,040 on
March 9, 1998 to the stockholders of record on February 16, 1998.
The partial liquidating distribution payable at September 30, 1998
represents the balance due to holders of unsurrendered Convertible Notes.
As a result of being in the process of liquidation, the Company is
required to adopt the liquidation basis of accounting. Generally accepted
accounting principles require the adjustment of assets and liabilities to
estimated fair value under the liquidation basis of accounting. For information
concerning the estimated fair values given these items by the Company and the
methods and assumptions used to arrive at such values, see the Company's
Financial Statements and the notes thereto.
Results of Operations
During the nine months ended September 30, 1998, the Company's
source of income was from short-term government and government-
agency investments.
The Company's expenses for the nine months ended September 30,
1998 consisted mainly of salaries, professional and legal fees,
and other recurring expenses. The Company also recorded a
reduction to income tax expense as a result of expected refunds
from the settlement of the IRS examiniation.
Activities During Liquidation Period
The Company's activities during the period of liquidation
will focus on the collection of various amounts owed to it,
including the refund of prior years' taxes from the IRS. Until a
distribution is made to the stockholders, management has invested the
Company's cash in short-term government of government agency instruments.
The Company's expenses during the period of liquidation are
expected to consist mostly of salaries, professional fees,
stockholder communication expenses, income taxes and other
liquidating expenses.
The Company has several pending tax matters with the IRS (see
Internal Revenue Service Examination below). The Company will be required
to pay or provide for all liabilities, including any unanticipated tax
liabilities and any estimated post-liquidation costs, prior to any final
distribution on its outstanding common stock. The Company believes
that it has adequate reserves for all of its material known contingent tax
and other liabilities and is currently attempting to have any potential income
tax liabilities for its most recent tax years determined by the IRS. The
Company has not received a response to its request to the IRS.
The Company is unable to estimate the date of the final
distribution to stockholders due to the pending matters with the IRS.
However, the Company is expected to be fully liquidated by October 1999.
Internal Revenue Service Examination
The Company has recently been notified by the Internal
Revenue Service ("IRS") that the tentative agreement reached
for the proposed adjustments to the Company's 1990, 1991, and
1992 federal income tax returns has been approved. The Company
is awaiting processing of the approved agreement.
The Company's net operating loss ("NOL") carryforward,
for federal income tax purposes, at September 30, 1998 is expected to be
approximately $241,000 and the Company's alternative minimum tax ("AMT")
credit carryforward is expected to be approximately $579,000. The NOL
carryforward expires on December 31, 2008 and the AMT credit can be carried
forward indefinitely.
Based upon the terms of the approved agreement, the
Company has recorded in other assets a net recoverable for income
taxes of $600,000 and $595,000 at September 30, 1998 and December 31,
1997, respectively.
Capital Obligations
The Company has no obligations for capital purchases.
Item. 3 Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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Part II
Item 1 Legal Proceedings - None
Item 2 Change in Securities - None
Item 3 Defaults Upon Senior Securities - None
Item 4 Submission of Matters to a Vote of Security Holders - None
Item 5 Other Information - 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 by the Company during the quarter ended
September 30, 1998.
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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 16, 1998 /s/ Jack L. Brozman
Jack L. Brozman, President
/s/ Terri L. Rinne
Terri L. Rinne, Vice President and CFO