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 March 31, 1999, 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 1,344,716 shares of Common
Stock, $1.00 par value outstanding with a market value of
$9,244,923.
CENCOR, INC.
FORM 10-Q
QUARTER ENDED March 31, 1999
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 7
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 15
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
March 31, December 31,
1999 1998
(Unaudited)
Assets:
Cash and cash equivalents $10,626,000 $ 9,833,000
Other assets 71,000 860,000
Total assets 10,697,000 10,693,000
Liabilities:
Accounts payable and accrued liabilities 452,000 445,000
Partial liquidating distribution payable 52,000 57,000
Total liabilities 504,000 502,000
Net assets in liquidation $10,193,000 10,191,000
Number of common shares outstanding 1,350,384 1,350,384
Net assets in liquidation per share $ 7.55 $ 7.55
See accompanying notes.
CenCor, Inc.
(In Process of Liquidation)
Consolidated Statement of Changes in Net Assets in Liquidation
For the Three Months Ended March 31, 1999 and 1998
(Unaudited)
1998 1997
Net assets in liquidation,
December 31, 1998 and 1997 $10,191,000 $ 9,773,000
Income from liquidating activities
Investment income 115,000 202,000
Other Income 35,000 --
151,000 202,000
192,000 321,000
Expenses from liquidating activities
Salaries and related benefits 51,000 51,000
Professional fees 37,000 30,000
Other expenses 61,000 48,000
149,000 129,000
Increase in net assets in liquidation 2 73,000
Net assets in liquidation,
March 31, 1999 and 1998 $10,193,000 $ 9,846,000
See accompanying notes.
CenCor, Inc.
(In Process of Liquidation)
Notes to Consolidated Financial Statements
March 31, 1999 and 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
June 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. A partial
liquidation distribution in the amount of $5.35 per share was issued
in March 1998. The Board has authorized the issuance of a second
liquidating distribution during the second quarter of 1999. At such
time as the Board has determined all claims and liabilities have been
identified and paid or provided for, the Board will determine a record
date and issue a final liquidation.
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 March 31, 1999 and December 31, 1998
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.
Principles of Consolidation
The consolidated financial statements include CenCor, Inc. and it's
wholly owned subsidiary, Century. All
material intercompany transactions have been eliminated.
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 fiar value reported in the
statements of net assets in liquidation for cash and cash
equivalents approximate their carrying amounts.
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 fair value
reported in the statements of net assets in liquidation for accounts
payable and accured liabilities approximates their carrying amounts.
Partial liquidating distribution payable: The fair value
reported in the statements of net assets in liquidation approximates
the carrying amounts of the partial liquidating distribution payable.
2. Other Assets
As discussed in Note 3, other assets at December 31, 1998, includes a
net income tax refund receivable of $850,000 from the Company's prior
years' income tax returns. Other assets at March 31, 1999 and December
31, 1998 also include prepaid expenses and fixed assets.
3. Income Taxes
As a result of a settlement with the IRS related to the
examination of the Company's 1990, 1991 and 1992 federal income tax returns,
the Company recorded in other assets a net recoverable for income taxes of
$850,000 at December 31, 1998. The receivable also includes refunds to be
received as a result of net operating loss ("NOL") carryovers to the
Company's 1995 and 1996 federal income tax returns. In February 1999, the
Company received from the IRS a refund of income taxes, including interest,
of approximately $836,000 and an additional refund of $48,000 in March 1999.
As a result of the receipt of the IRS refunds, the Company believes it has
resolved all known issues with the IRS with respect to the Company's 1990, 1991
and 1992 federal income tax returns.
The Company's net operating loss ("NOL") carryforward, for federal income tax
purposes, at March 31, 1999, is approximately $295,000. The NOL carryforward
expires on December 31, 2008. However, the liquidation of the Company is
expected to occur prior the the expiration of the NOL carryforward. The
Company's alternative minimum tax ("AMT") credit carryforward is approximately
$579,000 and can be carried forward indefinitely. Because of the uncertainty
of the amount and timing of the possible realization of the Company's income
tax carryforward at December 31, 1998, and March 31, 1999, no amount has
been recorded as a receivable regarding these carryforwards.
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
March 31, 1999 and December 31, 1998, respectively.
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 May 6, 1999,
8,080 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 3,634 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 Company is attempting to contact the remaining unsurrendered Convertible
Noteholders and advise them of the partial liquidating distribution that
they would be entitled to receive upon surrender of their Convertible Notes.
If the shares of common stock and partial liquidating distribution underlying
the unsurrendered Convertible Notes are not claimed, the Company expects to
release the unclaimed funds based upon the applicable escheat laws.
The partial liquidation distribution payable recorded in the financial
statements at March 31, 1999 and December 31, 1998 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 from the escrow account. The funds received from the escrow account
were distributed to CenCor through an intercompany dividend and 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 as of February 16, 1998.
The Board has authorized the issuance of a second liquidating distribution
during the second quarter of 1999. At such time as the Board has determined
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.
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 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 CenCor. In addition, the Vice President of
CenCor will receive a bonus of $100,000 if the officer is still
employed by CenCor on the date CenCor makes its final
liquidation distribution to its shareholders.
The purpose of the additional payments is to encourage these individuals
to continue their service to CenCor through CenCor's final
liquidation and to recognize the directors for their past performance.
The additional payments have been recorded as a liability in the March
31, 1999 and December 31, 1998 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
March 31, 1999 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
$10,193,000 in distributions or approximately $7.55 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.
In accordance with Section 280 of Delaware General Corporation Law ("DGCL"),
on February 26, 1999 CenCor mailed a 60-day bar date notice to all known or
possible creditors of CenCor. The same bar date notice was also published
on March 11, 1999, and March 18, 1999, in the Kansas City Star, Wall Street
Journal, and Wilmington News Journal. The bar date notice required all
persons who believed they had a claim or potential claim against CenCor to
present such claim to CenCor and its outside legal counsel no later than
4:00 p.m. Central Standard Time on April 27, 1999. Individuals or entities
holding stock of record of CenCor or the CenCor Non-Convertible Notes due
July 1, 1999, were advised that they
did not need to file a claim unless they believed they had
other claims unrelated to their ownership of common stock or Non-Convertible
Notes. CenCor was required to respond to or reject any filed claims by May
4, 1999. CenCor subsequently accepted and paid one claim of an immaterial
amount. All other claims received by the April 27 bar date were rejected
on the basis that they were from holders of CenCor's common stock or Non-
Convertible Notes and which did not state a claim unrelated to stock
ownership.
CenCor expects to make a second liquidating distribution in the second
quarter of 1999 and a final distribution by October 1999. If the Company
determines that it is necessary to establish a reserve for potential
claims by the IRS, which was exempt from the necessity to file a claim
under Section 280 of DGCL, the Company would then establish a reserve for
potential IRS claims and then make (subject to cost and expense
considerations) a final distribution if the potential IRS claims are
ultimately settled for less than the amount of the reserve. Due to the
current uncertainty of this issue, the Company is not able to estimate a
reserve amount, if any.
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, 3,639 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 Company
is attempting to contact the remaining unsurrendered Convertible
Noteholders and advise them of the partial liquidating distribution that
they would be entitled to receive upon surrender of their Convertible
Notes. If the shares of common stock and partial liquidating distribution
underlying trhe unsurrendered Convertible Notes are not claimed, the
Company expects to release the unclaimed funds based upon the applicable
escheat laws. The partial
liquidation distribution payable recorded in the financial statements
at March 31, 1999 and December 31, 1998 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 May 6, 1999, 8,080 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.
Assets and Liabilities Following Using Liquidation Accounting
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 asset 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 Statments and the notes
thereto.
The Company's assets at March 31, 1999 and December 31, 1998
consist primarily of cash and cash equivalents. At December 31, 19997,
the Company's assets also
included an income tax receivable fund. The income tax refund was
received by the Company in Februrary and March of 1999.
The Company's liabilities at March 31, 1999 and
December 31, 1998 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 March 31, 1999 and
December 31, 1999
represents the balance due to holders of unsurrendered Convertible Notes.
Results of Operations
During the three months ended March 31, 1999, the Company's
source of income was from short-term government and government-
agency investments. The Company also recorded income as a result of
actual refunds from the settlement of IRS examination.
The Company's expenses for the three months ended March 31,
1999 consisted mainly of salaries, professional and legal fees,
and other recurring expenses.
Activities During Liquidation Period
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. Until a distribution is made to stockholders,
management has invested the Company's cash in short-term government
or government agency instruments.
The Company will be required to satisfy all timely asserted
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.
Internal Revenue Service Examination
As a result of a settlement with the IRS related to
the examination of the Company's 1990, 1991 and 1992 federal income tax
returns, the Company recorded in other assets a net recoverable for
income taxes of $850,000 at December 31, 1998. The receivable also
includes refunds to be received as a result of net operation lost ("NOL")
carryovers to the Company's 1995 and 1996 federal income tax returns. In
February 1999, the Company received from the IRS a refund of income taxes,
including interest, of approximately $836,000 and an additional refund
of $48,000 in March 1999. As a result of the receipt of the IRS refunds,
the Company believes it has resolved all known issues with the IRS with
respect to the Company's 1990, 1991 and 1992 federal income tax returns.
The Company's net operating loss ("NOL") carryforward,
for federal income tax purposes, at March 31, 1999 is approximately
$295,000. The NOL carryforward expires on December 31, 2008. However,
the liquidation of the Company is expected to occur prior to the
expiration of the NOL carryforward. The Company's alternative minimum
tax ("AMT") credit carryforward is approximately $579,000 and can be
carried forward indefinitely. Because of the uncertainty of the amount
and timing of the possible realization of the Company's income tax
carryforward at March 31, 1999, no amount has been recorded as a
receivable regarding these carryforwards.
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
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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 May 17, 1999 /s/ Jack L. Brozman
Jack L. Brozman, President
/s/ Terri L. Rinne
Terri L. Rinne, Vice President and CFO