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Home My WebLink About810672.tiff A public hearing was conducted on August 10, 1981, at 10: 00, with the following present: CHUCK CARLSON CHAIRMAN NORMAN CARLSON PRO TEM BILL KIRBY COMMISSIONER JOHN MARTIN COMMISSIONER Also present: THOMAS O. DAVID COUNTY ATTORNEY DONALD WARDEN FINANCE DIRECTOR KEITHA WHITE ACTING CLERK TO THE BOARD The following business was transacted: I hereby certify that pursuant to a notice dated July 27, 1981 and duly published July 30, 1981 in the Johnstown Breeze a public hearing was held on the request of CenCor, Inc. for Industrial Development Revenue Bonds. The proposed bond issue is to construct four child day care centers in Greeley. Mr. Warden reviewed the application and related to the Board the various incomplete items regarding the bond application. Mr. Warden also stated that the applicant' s representative had telephoned him and requested that their application be tabled indefinately. Several people were in attendance to testify against this request. It was a consensus of the Board to allow these persons to testify today. CHANGE TAPE 81-52 The following people are involved in various forms of day care providers in the Greeley area and voiced their opposition to the issuance of revenue bonds for CenCor, Inc. : Sandy Bright, Ann Heiman, Maurine Summers, Marsha Harmon. It was noted that the City of Greeley has voiced their opposition to said request. The general feeling was that there is ample day care providers already established in the area and that 4 new centers would provide unfair competition. Commissioner Carlson made a motion to table this application indefinately, conditional upon the applicant giving the County three weeks notice of when they wish to have the application considered again. This will allow the County ample time for notification of interested parties . Commissioner Martin seconded the motion and it carried unanimously. C IRMAN ,.+ . ATTEST: BOARD OF COUNTY COMMISSIONERS (/ WE D COUNTY CLERK AND RECORDER ,AND LERK TO THE B D BY. ' d7 CKE #81-39 TAPE #81-51 & 52 LHR 2082 810672 rlw5 ATTENDANCE RECORD TODAY' S HEARINGS ARE AS FOLLOWS : DOC 81-39 CenCor, Inc. , Industrial Development Revenue Bonds DOC 81-40 Horace Greeley - Phast II, Industrial Development Revenue Bonds PLEASE write or print legibly your- name , address and the DOC n (as listed above) or the applicants name of the hearing you are attending. NAME ADDRESS HEARING ATTENDING /' •l c‘,Lh- "—;L'S -mua- e�•.�'7 — / 7 p 9 /9// L- 6 Ef✓ G 0 A' /'7' C i l E !1�D r ,_ . tG' 4 i/ ' / �S //?&,'L?„,2 L,L'l ,,,j, Kn'L 2 r77xi( i ', ?737 ._2(.2-/-11. 4 4 . II A-? _ .Lie/ � .�,.c . �.`) l. v�-� I, / r:cu."iC-f1C 3i,..)(1;L.ms ,5+C 1 J 3' S'17 I, J /4e) .{ ,T,cl A}cc) a)q G AA,(-)--i _ rQ ) 9 0 '.--4 ,5---f . ()Q,14 ( O f--- `--"'(---i:/1-/""- X7k.,--e-71^---'2--1.'''-` /1°2 2 -‘6.! cu.i9 -k- ZRzcK Co LLi 9 q+tii ,uLD - rz 4-64-4c._-_, qt-itLy Mot1/4sE1L C-..1*.1 1� M ,^t R a i t 4 -q/ ! lIA XLt)t'- ii /AP-utVd0 u v N � a '?J� " 1LCL., .5r_f Y 6-2.1 17-11' 7.--,_-\ .. ,....14-,2go8 7lrliVQ2 / A- L4r , /. A 4/Ehrie '71 91- .s ,L) F L',-7ff1t/ l` 27D ' -..(--'77;-- ----e—,--4s_—e---' ,--.1f-Z.,„ ..,--_---,-„) ' -. q,,2 -5'-- `/. ii..t._ a-LL_ I I VT f 0 IN GLoJcR.D(et /7/i ill cjc!!.=F' l CU r4 / 1%q e(7/6 -77i-,-../ .L e.r/G/� er,rr NOT I C E PUBLIC HEARING INDUSTRIAL DEVELOPMENT REVENUE BONDS FOR CENCOR, INC. Docket 81-39 NOTICE IS HEREBY GIVEN of a hearing before the Board of County Commissioners of Weld County, Colorado, on the 10th day of August, 1981, at the hour of 10:00 a.m. in the Weld County Commissioners hearing room, first floor, Weld County Centennial Center, 915 10th Street, Greeley, Colorado, for the purpose of considering the application from CenCor, Inc. for Weld County to issue $1,080,000 in Industrial Development Revenue Bonds. The proposed bond issue is to construct four child day care centers in Greeley, Colorado. This procedure is in accordance with the 1967 County and Municipality Development Revenue Bond Act, Section 29-3-101, et. seq. , CRS 1973 as amended. Copies of the application for Industrial Development Revenue Bonds are on file in the Office of the Clerk to the Board of County Commissioners located on the 3rd floor, Weld County Centennial Center, 915 10th Street, Greeley, Colorado, and may be inspected during regular business hours. Following the close of the public hearing, the Board of County Commissioners will consider whether or not to proceed with the issuance of Industrial Development Revenue Bonds. All interested parties under the law will be afforded an opportunity to be heard at said hearing. This notice given and published by order of the Board of County Commissioners, Weld County, Colorado. DATED: July 27, 1981 THE BOARD OF COUNTY COMMISSIONERS BY: MARY ANN FEUERSTEIN COUNTY CLERK AND RECORDER AND CLERK TO THE BOARD OF COUNTY COMMISSIONERS BY: Keitha White, Deputy PUBLISHED: July 30, 1981 PUBLIC NOTICEMENIWOBREi PUBLIC REARING FOR CENCQR,.INC. Docket a1-alt AFFIDAVIT OF PUBLICATION NOTICE IS HEREBY GIVEN of a hearing before the Board of County _mfa9fo�the hour M Om.in•�,I_ u THE JOHNSTOWN BREEZE Cof m fission r Weld County STATE OF COLORADO ) Commissioners l houning room, ) SS first floor Weld Count Street10th ; COUNTY OF WELD ) Greeley, Colorado, for the purpose of considering Co the I, Clyde Briggs, do solemnly swear that I application from Centor' Inc. for Weld county to issue am publisher of The Johnstown Breeze; $1,080,000 entRevenue in Industrial Develop- that the same is a weekly newspaper propos issue'isTto printed, in whole or in part, and published centersci four eley,hild day caadre. in the County of Weld, State of Colorado, This pro in is in'accordance with the 1967 County anti and has a general circulation therein; that Municipality Development said newspaper has been published Revenue Bond Act, Section 29-3-101, et. seq., CRS 1973 as continuously and uninterruptedly in said Camended.o. County of Weld for a period of more than Industrial of the evilcatton for fifty-two consecutive weeks prior to the Intl riot Devel o ment Revenue Bonds are on ties o the first publication of the annexed legal notice Officeof of the Clerk to the Commissioners or advertisement; that said newspaper has to County Cr floor, eld County Centennialon the 3rd floor, , 915 91 been admitted to the United States mails as Countyy , Greeley,Center,Colorado, and mayinspected ring second-class matter under the provisions of and ary be ssrye cted during regular business hours. the Act of March 3, 1879, or any Following the close of the pubuc amendments thereof, and that said hearing, o rBs willrd of nsunty newspaper is a weekly newspaper duly Commissioners nort cedewith whether issuance not Wndust is with qualified for publishing legal notices and the of Industrial De- vel Al,veinlopment Revenue parties u advertisements within the meaning of the the 71 law will bed paffor under laws of the State of Colorado. opportunity to heard at said hearing. That the annexed legal notice or advertise- This notice given and published ment was published in the regular and by order of Rte Board of County C entire issue of every number of aid weekly Colorado.Commissioners, weld County, newspaper for the period of ...... consecu- do. DATED: July 27, 1681 tive insertions; and that the first THE BOARD OF COUNTY publication of said notictw,as in the issuetif COMMISSIONERS said newspaper dated IL,J!4, A.D. l9, (, BY:MARY ANN and that the last publication of said notice COUNTYECLERKTAND was in the issue of said newspaper dated RECORDER AND CLERK , A.D. 19 TO THE BOARD OF COUNTY COMMISSIONERS In witness whetr�� I have h _eullto set BY:Keitha White,Deputy my handdthis .....aL) day of .,./1 PUBLISHED: July 30, 1981 A.D. 19t t coo Legal 811-108-Clerk to the ., oa �� 1' L. ublisher Subscribed and sworn to before me, a Notary Public in and for the County of Weld, State of Colorado, this .,N,..... day of Yd::i./,.{.A.D. 19_.'..:... /. Notary Public. My commission expires s 6 ItirOFFICE OF BOARD OF COUNTY COMMISSIONERS 1'01 PHONE (303) 356-4000 EXT.200 P.O.BOX 758 GREELEY,COLORADO 80631 t COLORADO August 10, 1981 Mr. Jack L. Brozman CenCor, Inc. P.O. Box 26610 Kansas City, MO 64196 and Mr. Robert W. Wallerstedt, President McLiney and Company 15 West 10 Street Kansas City, MO 64105 Gentlemen: At the request of Carla Gray of McLiney and Company on behalf of CenCor, the Industrial Revenue Bond hearing for CenCor was continued indefinitely at the regularly scheduled hearing today. Although the hearing was continued in- definitely, testimony was taken from public members present at the time of the regular scheduled hearing. At the hearing a great deal of opposition was heard from competitors in local day care centers. Letters of opposition filed with the Board are attached for your information. No action was taken by the Board of County Commissioners of Weld County, Colorado, other than to continue the hearing indefinitely with the provision that all present be sent letters of the date and time of the continuance of the hearing and that the hearing be readvertised in the legal newspaper once the date has been determined. Please notify Don Warden, Director of Finance & Administration of the date you wish to reschedule the hearing. Because of the publication requirements, it will be necessary to have at least 21 days advance notice of the new hearing date. Any questions should be addressed to Don Warden at the above address or at 356-4000, extension 218. Very truly yours, BOARD OF COUNTY COMMISSIONERS Chuck Carlson, Chairman CC/ch cc: Carla Gray Clerk to the Board mEmoRAnDum ITo Board of County CommissionersDare August 5, 1981 COLORADO From Don Warden 1,1V-V/ Subject. CENCOR INC. Industrial Revenue Bond Application On August 10, 1981, at 10:00 a.m. a public hearing has been scheduled for the Board of County Commissioners to consider an inducement resolution for Cencor Inc. Cencor has made an application for Industrial Revenue Bonds in the amount of $1,080,000 to construct four child care centers in Greeley, Colorado. Cencor has complied with Ordinance #69-A concerning an application for Industrial Revenue Bonds in Weld County with the following stipulations: 1. A form letter from a bond counsel has been received but not a specific bond counsel's opinion for this specific project. Any approval of an inducement resolution for the issuance of Industrial Revenue Bonds for Cencor should be contingent on receipt of a specific legal opinion from a qualified bond counsel specifying that these specific projects in Greeley, Colorado comply with all applicable statues. 2. Sites are not specified in the application for the construction of the four day care centers. Therefore the planning criteria has not been evaluated and any approved inducement resolution should be contingent upon the sites meeting the planning criteria as outlined in Ordinance #69-A and all applic- able planning criteria of the City of Greeley. 3. If the project is approved it should be contingent upon receipt of an induce- ment resolution from the applicant's bond counsel that has been reviewed and approved by the county attorney. Attached are a number of letters of opposition from other day care centers operated in Greeley, Colorado that should be entered into the record for the Board's consider- ation of this application. With the above cited items the application is ready for the Board of County Commiss- ioners to consider the application as a policy issue for approval or disapproval. /i/r) A-12 GREELEY Cob. TRIBUNE Sat.,Aug �EU4UUflL ,a 1r ,f leitSh a IM70 Orgn.J 4ry'w..rn A,Horace&e'er I ± �E tchardarson�" ` fahlisher , v 44- Rpn S ewartt ,.Bober,t)PidtundR torlaI'PageiEfiitar i�sJtO.a Tribune's Opinion Council right to oppose bonds The City Council deserves applause for opposing a proposal by Cencor Corp.of ,Kansas City to use$1.08 million in Weld County industrial revenue bonds to build four ____....___:.--._--,.__-._.._..---..-.._............. child day-care centers in Greeley.Cencor's __......_.____._ proposal is the type of enterprise that certainly appears undeserving of the use of tax-exempt industrial revenue bonds. , Cencor's proposal would fulfill one purpose of industrial revenue bonds: to attract new industry and business.Fulfillment of another purpose,expansion of business,is ,questionable.Operators of day-care centers here report vacancies now.More centers, therefore,could eventually result in some 'existing ones having to close. _ _..._.___.___.............."............._.__. Obviously,the present centers would be put in an unfair position in the immediate expanded competition.To borrow any money _ _ _ ._...._.....____.____.............._... they might need to meet greater , :competition,locally operated centers would have to pay the much higher going interest rate,which is several percentage points above the interest rate of the industrial `bonds12a :�: Figures supplied by Kent Cooper,assistant city manager,also makes it questionable whether Cencor needs help from industrial ___ revenue bonds backed by government.He ------------ - :told council Cencorhad net assets last year — -- ,of more than$102 million and earned$394,421 •in the fLscal year ending March 31,1981. _ 1 ............ :. ; We have no doubt that Cencor would { t provide high-quality service herewith its La • Petite Academy child-care centers.Its. °' _ °operation of approximately 250 day-care'x centers throughout the country attests to the acceitance of its service.But the financial achievements of its operations indicate very .strongly that the firm is capable of expansion with conventional financing and without goverment subsidization.. :., _* :' r Certainly,two criteria for the issuance of industrial revenue bonds have to be whether the applicant is financially deserving and ',whether in the long run it will expand jobs • and tax revenues at no expense to existing ;firms.We urge the Weld County ' commissioners,in making the final decision on Cencor's proposal,to give serious . .-. j i consideration to the thinking of the Greeley City Oouncil } SW �.-- A--z , -, ai�i � � .`..x..isiy alp .K.�r 3{�g" Y YY t v. }{4'6� Y y } t - to t , n y�'. .—'.iy.��i ' .may "X, •.+. �„r+ .p�u`�;,,, -. t ------______ ;1: : iEk Ti . 'v GREELEY CIVIC CENTER August 6 , 1981 i::' GREELEY, COLORADO 80631 PHONE (303) 353-6123 Don Warden Director of Administrative Services Weld County P .O. Box 758 Greeley, Colorado 80632 Dear Don, This letter is to advise you that at their regular meeting of August 4 , the City Council of the City of Greeley voted to oppose the issuance of Weld County Industrial Revenue Bonds to CenCor, Inc. to build day care centers in Greeley. The Council heard testimony from several local day care pro- viders who indicated that there is not a lack of existing capacity to serve the public and further that local operators , were willing and able to expand their facilities should the demand increase. The sole motivation of CenCor in seeking I .R.B. financing appears to be an improved mortgage rate. Since there is no evident public purpose to justify the request, the City Council opposes the use of a federally subsidized interest rate which may yield an unfair competitive edge against existing local day care provides. I am attaching a copy of the City Council meeting minutes which reflect the official action taken by the Council. Should you have ques- tions, please contact me. Sincerely, I . _ Peter A. Morrell City Manager Enclosure bh "A COMMUNITY OF PROGRESS" WELD COUNTY COMMISSIONERS i AUG 3 1981 .l July 29, 1981 SREELE'V. COLO, ��JJ Mr. Chuck Carlson Board of County Commissioners P. 0. Box 758 Greeley, Co. 80632 Dear Mr. Carlson: The Children' s Resource Network is a recently formed community resource system of individuals committed to quality services to children and their families. One of our goals is to monitor and respond to certain governmental legislation and regulations affecting children. It has recently come to our attention that a large corporation, owner of La Petite Academie day care centers, is applying for an industrial bond to build four day care centers in Greeley. At the present time, there are openings at most day care centers and day care homes to meet the needs of parents looking for child care. We feel that issuing this corporation low interest industrial bonds to build four centers (capacity of 120 children each) would be unfair competition for our small , primarily locally based Weld County day care centers. We would also prefer that money raised from these centers stay in our community rather than benefit a Kansas City based operation. If and when the need for day care increases in our county, we do have local business people who would be willing to expand their operations to meet this need. We urge the community not to issue such a bond, as we feel this is a misuse of the original intention of these industrial bonds. Sincerely, Children' s r Pam Bricker, secretary OM MIllit VIPCISS1ONftli t,.n....„. iii 1 .X..L.... AUGI 1981 ,' Aonaux Go ma. June 29, 1981 Mr. Chuck Carlson Chairman, Board of County Commissioners P.O. Box ?58 Greeley, Colorado 80631 Dear Mr. Carlson: We would like to respond to your letter concerning the issuance of Industrial Revenue Bonds for CenCor, Inc. , for the construction of four day care facilities in Greeley, Colorado. We are of the opinion that such a request should be denied because of the economic and competitive advantages they would permit, and,which are not economically feasible for privately funded and community based day care centers. In our efforts to secure financing for the construction of another day care/preschool facility the best financing available to us was through a Small Business Administration Guaranteed Loan Program. The interest for such a "good" loan was prime plus two and three quarters percent, which at the time would have given us a rate of twenty two and three quarters percent. Needless-to-say, Industrial Revenue Bonds would provide CenCor Inc. capital at a much lower rate and through a means economically prohibitive to the smaller competitor. Lastly, it is our understanding that Industrial Revenue Bonds were initially established to encourage potentially large employers to broaden the employment base of a community, not to provide a competitive edge to a business which would employ a relatively small number of people. Please accept this letter in place of our presence at the August 10, 1981 hearing as we will be out of town and unable to attend. Very truly yours, � icia K. Haas, Director, Pencil Fence Preschool Pres' t, yas Inc. . David M. Haas Vice-President, Koch-Haas, Inc. . ::i r . i 71, 74/L(/irig 74/ �c�V� <� Qg0i /95/ �� JJ �aee y, Ua/w4ana & n Jy \O3 esti PC 3 6216 7" Millik%ratiftkal6 %'063) W kern �f '�CGYtQM v\,. .rko-uAJ • /k -1 dl o 4 ° a,r°, U e X40 vas io,NOLomt% minuz 4 L ,014-18 a„v - ;ice .� � y 1980 - ys,� � ,o�oou 50 �O �tiaT u»o J 1980 40,42ALIA,L 11 '' '' II'' '' 1(1W - N . pkb,Mg' 91 tkittlovt.tijitkiM. ) ka,uk icthoP 41P /ak a00 ,tee. °v"'"i6i ate. n. - ,Aw . eel tetat JAVed a0 4141106k. d orti6m. ena Ameot cow_ toctrio de,c,Thic to Anp.1/2 traiwatA, ionnza;laso -iitatoAL jot a ,0 latt GkU tout .(i\tko Auk) knno fatio1/4 -two iandiAdo gitk /at UnftLo 'S o b /1714kied ttvliataAato/Sat A1V-01-O Mak frt. iotobce_. 0Q paeonaN cu-di /MS IIAA-throilAz Iran /01t2 ma() Aindeto Ay-PAL p 4 A nella The ft/mitng 91411 919 2514 i2eet QQeeleV, Colo4acfo 10631 FL-11s Community College Occupational Education Ott' NEks 100 touNn`tme err, July 30, 1981 05 199 1I' OWES'SCala Mr. Chuck Carlson, Chairman Office of Board of County Commissioners Box 758 Greeley, CO 80632 Dear Mr. Carlson: I am writing in regard to the Industrial Revenue Bonds in the amount of $1, 080,000 initiated by Cen Cox, Inc. for four new day care centers in Greeley. It is my opinion that existing child care facilities in this community are meeting current needs. I also feel that the addition of four new centers would place unfair competition pressures on established day care centers here. As a trainer of child care personnel I believe that there are individuals in our urbanized area capable of answering the need for more child care facilities when that need arises. I therefore urge you and your board to deny the issue of these bonds in the interest of present child care center operators who are providing quality services to Greeley' s children. Sincerely, I yVkAi Kathy Vasa, Director Aims Child Development Center KV: ln cc: Mr. Don Warden, Director of Finance and Administration P.O. Box 69 Greeley, Colorado 80632 303 -330-8008 FILI1 Community College Occupational Education ? UG5iij In COVEY COMMISSIONrR3 1 L • July 30, 1981 Mr. Chuck Carlson, Chairman GREELEY. Co» Office of Board of County Commissioners Box 758 Greeley, CO 80632 Dear Mr. Carlson: As a vocational educator responsible for training child care services personnel for the centers in our community, I would like to respond to the request from Cen Cor, Inc. , to receive an issuance of Industrial Revenue Bonds of $1, 080,000 for four day care centers in Greeley to be ad- ministered by LaPetit ' Academies. I feel that the issuance of these bonds would be highly unfair to the day care centers which are already established and operating in Greeley. The addition of four more centers in Greeley may indeed by needed in this community' s long range plans but the local businesses should have first chance at any revenue bonds based on locally initiated surveys. The centers in our community are directly in time with the needs and requests from parents for day care services. Please do not allow outside corporations to in- terfere with and force unfair competition with our local tax- paying businesses and the families they are serving. Sincerely, %it �l Ln t--yt-ce t L Art__ Maurine Summers, Instructor/Trainer Child Care Services Program MS: ln cc : Don Warden, Director of Finance and Administration P.O. Box 69 Greeley, Colorado 80632 303 -330-8008 McLINEY and COMPANY S MUNICIPAL BONDS 15 West 10th St. Kansas City,Missouri 64105.816-221-4042 July 15, 1981 Mr. Donald D. Warden Director of Finance and Administration Office of Finance P. 0. Box 758 Greeley, Colorado 80631 Dear Mr. Warden: I am herewith submitting an application and supporting material on behalf of our client CenCor, Inc. for approval of a $1 ,080,000 Industrial Revenue Bond Issue to build four child day care centers in Greeley, Colorado. If additional information is required, or a clarification indicated, please contact me. Sincerely, t%Robert W. Wallerstedt President RWW/kg CENCOR, INC. CONTENTS 1 . LEGAL OPINION OF QUALIFIED BOND COUNSEL 2. APPLICATION 3. UNDERWRITER'S LETTER OF INTENT 4. ANNUAL REPORT 5. QUARTERLY REPORT 6. FORM 10-K 7. PRO FORMA ON TYPICAL LA PETITE ACADEMY 8. MARKET AND SITE SELECTION CRITERIA 9. MARKET AND SITE SELECTION CRITERIA AND DEMOGRAPHIC RESPONSIBILITIES AND PROCEDURES FOR ALL LA PETITE ACADEMY SITE SELECTORS 10. PROJECT DESCRIPTION - SITE PLANS 11 . LOCATIONS OF EXISTING LA PETITE ACADEMIES 12. BROCHURE 13. FINANCIAL ANALYSIS Sherman&Howard (DAWSON,NAGEL,SHERMAN&HOWARD) ATTORNEYS AND COUNSELORS AT LAW DENVER OFFICE CHEYENNE OFFICE 2900 FIRST OF DENVER PLAZA TELEPHONE 303893-2900 1712 PIONEER AVENUE 633 SEVENTEENTH STREET TELECOPIER. 303893-2940 CHEYENNE,WYOMING 82001 DENVER,COLORADO 80202 TELEX.454368 TELEPHONE 307632-1712 TELECOPIER. 307 635-4583 Members of the Colorado bar Member of Ine Wyoming bar SAMUEL S.SHERMAN.JR. CONSTANCE L HAUVER DAVID THOMAS III CHRISTINA C.BAUER WINSTON S HOWARD CHAPMAN B.COX CYNTHIA C.BENSON STANLEY M.PAINE CRAIG A.CHRISTENSEN ROBERT M.JOHNSON LEE DALE STUART H.PACK PETERS NAGEL - ARTHUR K.UNDERWOOD.JR. CHRISTOPHER LANE JOSEPH J BRONESKV GREGH SCHLENDER JOINWLOW PAUL J.SCHLAUCH JOHN L DeWEERDT BARBARA FORT JONES THOMAS B.FAKON KURT A.KAUFMANN ROBERT E.YOULE RAYMONDJ TURNER CRAIGA CHRISTENSEN EDWARDA.GLEASON GARTH C GRISSOM R MICHAEL SANCHEZ RICHARD W.WRIGHT THEODORE A.OLSEN WILLIAM P CANTWELL THEODORE E.WORCESTER COUNSEL OATFELD W.WHITNEY III MICHAEL E)GROSHEK ANDREW L.BLAIR.JR JAMES P.KELLEY WILLIAMF SCHOEBERLEIN RODNEYD KNUTSON BETTY CARTERARKELL MARCIAG ENNS MICHAEL A.WILLIAMS H.CLAY WHITLOW CHARLES V TANABE ELAINE A.MENTER ARTHUR J.SEIFERT L BRUCE NELSON ROBERT L.BROWN CRAIG R.MAGINNESS MIESESN�ZNGERPALMER WILLIAM W.R.MARSH ,AMESMBKING THS OMARA S L.VOGELGESANG STI DON H SHERWOOD CHARLES W NEWCOM WILLIAM L HUNNICUTT ELLEN W REATH W DAVID PANTLE MARK L.FULFORD JOHN O.SWENDSE ID RAYMONDM UEENY JAMES L CUNNINGHAM JAMES F.WOOD ROSEMARY M COLLYER SCOTT E.SPENCER MICHAEL L CHEROUTES CASSANDRA GAY SAFSO ARLENE S.BOBROW WILLIAM H.RUTTER DOUGLAS M.CAIN ROBERT P MITCHELL KATHRYN PIETROWIAK MARTHA E RUDOLPH DUANE F.WURZER RICHARD B.BOWLES ROBERT J.WHITNEY JANIS A.BREGGIN DAVID R.JOHNSON DUNCAN A.CAMPBELL:5 JULIAN K QUATTLEBAUM III MICHELLE HOLLAND June 4 , 1981 GARY L GREER KENNETH B.SIEGEL ALAN J.GILBERT MARY E.BOUDREAU STEPHEN M.BRETT DOUGLAS W.FM HAROLD G.MORRIS,JP. WILLIAM W BOTHWELL Mr. George McKliney McKliney & Company 15 West 10th Street Kansas City, Missouri 64105 Industrial Development Revenue Bonds (Cencor Incorporated Project) Dear George: Pursuant to our telephone conversation yesterday, enclosed is the form of opinion letter which you requested. I understand you will be distributing this opinion letter to the various cities, towns and counties who are proposed issuers of industrial development bonds for these various projects. If you have any questions regarding the opinion letter, please feel free to call . Sincerely yours ,``- /� 6g1,-/-xv11i'7 Kurt A. Kaufmann KAK/ccs Enclosure June 4 , 1981 To Whom It May Concern Industrial Development Revenue Bonds (Cencor Incorporated Project) Gentlemen: We have been asked by Cencor Incorporated to render this opinion in connection with a proposed issue of industrial development bonds by you pursuant to the Colorado County and Municipality Development Revenue Bond Act (the "Act" ) . The proceeds of the bond issue will be used to finance the acqui- sition and construction of a building or buildings and related fixtures, furnishings and structures (the "Project" ) to be owned by Cencor Incorporated (the "Company" ) . Each building comprising the Project will be used as a day care center. The Company estimates that the cost of each building and related fixtures, furnishings and structures to be funded by the bonds will be approximately $250, 000. We have also been informed by the Company that no items for the Project have been purchased or contracted for. According to information we have received from the Company, approximately 8 to 15 persons will be employed by the Company at each building to be financed. Page Two June 4 , 1981 Based upon the foregoing facts , we see no legal obstacle to financing the Project under the Act. The Act was held constitutional in Allardice v. Adams County, 173 Colo. 133, 476 P. 2d 982 (1970) . The Project constitutes a "business" project as set forth under the definition of "pro- ject" in Section 29-3-103 (10) (a) of the Act. We are also satisfied that the facts outlined above fulfill the "public purpose" requirement of the Act. Therefore, in our opinion, the proposed financing of the Project falls within the in- tent and meaning of the Act. Very truly yours , Kurt A. Kaufmann KAK/ccs APPLICATION FOR INDUSTRIAL REVENUE BOND AUTHORIZATION NAME OF COMPANY CenCor, Inc. ADDRESS P. 0. Box 26610, Kansas City, MO 64196 TELEPHONE NUMBER (816) 474-4750 REPRESENTATIVE TO CONTACT Mr. Jack L. Brozman STATE AND DATE OF FORMATION OF 1969 - Delaware - (predecessor CORPORATION corporation - 1946 ) TYPE OF BUSINESS: Day care center(s) HISTORY (including description of operations). CenCor, Inc. acquired 10 Les Petite Academies in 1970. At the time of acquisition, the schools provided all-day or part-day care for children ages three to five years. Today our basic program provides a wide range of educational experiences for children from two years to twelve years (sixth grade). We also provide infant care in particular markets that have a great demand for it. By 1975 we had 85 Les Petite Academies in operation; by 1976 there were 106; by 1977 we had 117 ; growing at a steady rate, by 1978 there were 134; by 1979 we had 168; and by the end of 1980 we had 240 La Petite's in operation. Management projects building approxi- mately 60 new schools in 1981. Each center employs a director/head teacher and typically six to fifteen teaching assist- ants. The director is a full-time employee and the assistants are either full or part-time personnel. College students , substitute teachers in the public school system and various other qualified persons are considered for part-time positions. Regulations in most states require that the director have either a college degree in early childhood education or two to three years of experience in a day care or nursery school. La Petite currently employs 27 regional directors. Each director can adequately manage 6 to 12 centers. Above the regional director level, in areas of geographic concentration are three divisional directors supervising the regions. In addition, there are three assistant directors of operation working out of the home office to supervise specific regions. All report directly to the director of operations. The regional director selects , trains and develops the directors within her region. She assists them in implementing programs and curriculum; evaluates the purchase of food and the preparation and serving of meals ; assists directors in interfacing with all state licensing and other regulatory agencies to insure continued compliance ; develops and supervises the follow-through on all marketing and enrollment programs ; and evaluates the financial controls of the individual units. She insures a continued level of high morale among directors , staff and children. From the unit director level up, all managing personnel receive a base salary and an incentive bonus on the operating profit of their center. La Petite has a policy of promoting from within. Experienced directors and staff are usually offered the opportunity to staff new day care centers. Regardless of prior training or experience, each center director is required to parti- cipate in a two-week training program. Assistant directors participate in a one-week training program. Continuing training programs are conducted approximately quarterly either at La Petite's home office or at regional locations. All La Petite personnel are required to meet applicable provincial, state and local licensing regulations. We also have a fleet administrator in home office. Also at home office, we have a real estate manager, a director of property development, and a construction coordinator. La Petite believes there is no single approach to learning. Diversified programs incorp- orate many choices of activities for the children. Two programs that illustrate the La Petite philosophy are "Alpha-Time" and "Learning for Living". -1- HISTORY (continued) 7. Alpha Time is a reading readiness program used in a group situation. Letter sounds and word building are easily mastered using inflatable "letter people" to provide tun and enjoyment while learning. Learning for Living is unique to La Petite and is a program in which each child, through a variety of activities , is given the opportunity to develop , achieve and satisfy his individual needs. There are four major learning centers at La Petite--Practical Lite , Language Arts , Mathematics and Sensorial Activities -- in which the child is free to • choose his own activities under the supervision of the teacher. Montessori techniques and materials are utilized in the centers and La Petite's aim is to help the child build a positive self—image for himself. Supplementary service is provided for families with school age children. Parents may leave children at the center in the morning. The center will provide transportation to and from local elementary schools and supervise the children after school until their parents return. La Petite's carefully planned program for school-age children is completely separate from that of pre-schoolers. Emphasis is placed on crafts , games , music , tumbling, creative drama, and outside activities such as roller skating and bowling -- all challenging and satisfying to the grade-school age child. Centers also provide materials and equipment exclusive to this age group. Approximately 30 percent of the La Petite centers offer kindergarten programs. Classes tend to be small which allows children to receive a thorough academic training in prep- aration for first grade. Centers work in conjunction with local public school kinder- gartens using the same materials and workbooks so that a smooth transition into public school is achieved. Several centers have facilities for infants. This service, which is still being tested , has met with considerable success. Each center has a separate summer program for children up to 12 years of age. The activities scheduled are geared to the school age child's interests and needs. Field trips include skating, bowling, Jr. Olympics , swimming and miniature golf. In-school activities include bi-monthly elections of officer, a monthly group newsletter (composed by the group), arts and crafts , pen pals and games. All these activities promote a "club" atmosphere known as "Pete's Gang", which totally separates the older children from younger La Petites. MARKET SURVEY OR FEASIBILITY STUDY: Determined by experienced internal personnel. (site statistics form attached) DESCRIPTION OF PROPOSED PROJECT: (Physical Description S Location) La Petite day care structures are free-standing and designed to accomodate 99 to 140 children, Although not all La Petite centers are identical , they are similar in appearance and design. Buildings constructed since 1976 are of a standard design, are 4,600 to 5 ,000 square feet and have a uniform exterior appearance. The interiors of the buildings utilize the open-space concept with sections of the interior which can be easily partitioned. Each center is equipped with educational materials and equipment , including self-help books and hand puppets. Teachers have found that the use of the open-space concept in the centers creates a roomy, airy atmosphere and is best suited for supervision of 60 or more youngsters. Buildings are normally located on one-half to two-thirds of an acre of land and provide parking as required by local statute, plus an outdoor play area of approximately 8,000 square feet. Land costs vary with location, generally falling in the range of $45,000 to $75 ,000 In addition, acquisition and construction costs are running in the neighbor- hood of $185,000 for a new center. Construction of a center normally takes 3 to 5 months to complete, , -2- PROPOSED LOCATION(S) ARE: Greeley, Colorado - (exact addresses to be furnished) BOND ISSUE: • 1 . Principal amount of bonds - $270,000 per unit 2. Reserve funds, interest escrow, original issue discount , expenses , etc. - to be determined 3. Estimated interest rate range - to to dclvrminod 4. Estimated debt service schedule - to be determined ' 5. Security provisions i.e. , trustee bank, mortgage, etc. Mortgage on property plus guarantee through company by a lease. Funds to be disbursed throtli a trustee bank. IMPACT ANALYSIS: 1 . Employment Impact Projections a. New Jobs - 10-15 per unit • 'b. Payroll Increase - Depending on the growth of enrollment additional personnel will be added. Also, we stay within the State regulations of student/teacher ratios. c . Hiring Pattern - All available qualified personnel considered. 2. Property and sales tax projections - to be determined 3. Public improvement and service requirements - Water, Sewers Lights, Police and Fire. 4. Development time schedule - After identifying the trade market it takes approximately 1 month to locate a site; another 2 months to zone and close; actual construction takes approximately 4 months. BENEFITS THAT WILL ACCRUE TO THE CITIES/COUNTIES INVOLVED: Having a quality total child care center in a particular city/county can be very instrumental in generating extra tax revenues. Quality child care is an extremely important factor when two-income families and single parents consider where to live• and work, thus attracting more people to that city/county. • -3- BENEFITS (continued) Hospitals and large employment institutions also benefit through less absenteeism, tardiness and a high employee morale when their employees know that their children are in good care near-by. The construction of the center(s) will provide employment for builders , their sub- contractors , as well as , business for their suppliers ; and the existence of the center(s) will provide employment for teachers. Distinct pre-school education prepares a child for further education, thus raising the quality of education in the community. ITEMS TO BE PURCHASED OR CONSTRUCTED: When the building is constructed, we purchase a variety of visual and audio aids , educational supplies , games , puzzles , toys , indoor play equipment , kitchen equip- ment , food , tables , chairs , cots , paper supplies , etc. The vehicles are leased. SUMMARY OF COMPANY'S TRADED SECURITIES: 1 . Common Stock 2. Preferred Stock 3. Subordinated Debentures CREDIT RATING OF APPLICANT'S DEBT SECURITIES: n/a FINANCIAL STATEMENTS AND CURRENT UNAUDITED FINANCIAL STATEMENT ATTACHED. SUMMARY OF THE CORPORATE STRUCTURE CAN BE FOUND IN THE SECURITIES AND EXCHANGE COMMISSION FORM 10-K which we have attached. (Part III - Page 1 ) RATIONALE FOR USE OF INDUSTRIAL REVENUE BOND FINANCING: The issuance of these bonds will provide us with a program that is financially feasible and enable us to provide much needed child care at affordable prices. APPLICANT'S EXPECTED METHOD OF MARKETING BONDS: Private placement information; Public offering information. This is being handled by McLiney and Company, Investment Bankers in Kansas City, Missouri. Exact method of market- ing to be determined at a later date depending upon market conditions at that time. Both private placement and public offering are being considered. NAME, ADDRESS AND TELEPHONE NUMBER OF THE FOLLOWING: LEGAL COUNSEL Linde Thomson Fairchild Langworthy & Kohn City Center Square 12th and Baltimore Kansas City, Missouri (816) 474-6420 ACCOUNTANTS Arthur Andersen & Company Commerce Tower Kansas City, Missouri (816) 221-4200 BOND COUNSEL Sherman and Howard 2900 First of Denver Plaza 633 Seventeenth Street Denver, Colorado 80202 (303) 893-2900 -4- NAME ADDRESS AND TELEPHONE NUMBER OF THE FOLLOWING: UNDERWRITERS McLiney and Company 15 West Tenth Suite 700 Kansas City, Missouri (816) 221-4042 RESUMES OF OFFICERS , DIRECTORS & PRINCIPAL OPERATING PERSONNEL. Robert F. Brozman serves as President of CenCor, Inc . and (age : 60) Chairman of the Board of Directors. He founded Century Acceptance Corporation in 1946 which was acquired by CenCor in 1968. Mr. Brozman has spent his entire business career in the finance and per- • sonal services industry. :Ir. Brozman also is Chairman of the Boards of First State Bank, Kansas City, KS , Tower- State Bank of Kansas City , KS, and City !Sink of Wichita , KS. Jack L. Brozman is Vice President of CenCor , Inc. Prior (age: 30) to 1979 , Mr. Brozman hz.d been Chief Executive Officer of Sound Disk—tributors , Inc . Gordon L. Wells is Treasurer and Chief Financial Officer of (age : 43) CenCor, Inc. and Treasurer of Century Accept- • ance Corporation. Mr.. Wells has been with CenCor since 1970 and prior to then had been employed for 15 years as assistant controller of ISC Industries , and also as an accountant. Michael W. Sagan is Secretary of CenCor, Inc . and Attorney for (age : 33) the Company. From 1971 to 1978, Mr. Sagan had been an Attorney with the Chicago Title Insurance Company. Margaret J. Brown is the Director of Operations for the da•, (age : 52) care operation. Mrs. Brown has been with. tut Company since 1971 . Her entire professional career has been in the educational field in both the public and private sectors. Vanda Frantz has been with the Company since 1972. Mrs. (age: 33) Frantz is an assistant director of operations reporting directly to Mrs. Brown. She has been involved in the day care industry since 1972. Karen Maggio has. been with the Company since 1972. Mrs. (age: 26) Maggio is an assistant director of operations reporting to Mrs. Brown. She has been employed in every area of the operation, from teacher to academy director. Kathryn J. Wurster has been with the Company since 1976. Ms. (age: 27) Wurster is director of program and curriculum. She was previously employed as a teacher and academy director. —5— McLINEYand COMPANY S MUNICIPAL BONDS 15 West 10th St. Kansas City,Missouri 64105.816.221-4042 July 15, 1981 Finance Office P. 0. Box 758 Greeley, Colorado 80631 Gentlemen: We have examined the financial statement of CenCor, Inc. and we are familiar with their expansion plans pertaining to their La Petite Academies. This information leads us to the conclusion that the Industrial Development Revenue Bonds that CenCor is requesting are marketable. Sincerely, Robert W. Wallerstedt President RWW/kg I vsw city -. ra se SR EDUCATIONAL Century Acceptance 1 SERVICES Corporation `cA` erk Officers Directors a ROBERT F. BROZMAN ROBERT F BROZMAN President and President and Chairman Chairman of the Board of the Board, CenCor, Inc. J. W. BANKS J. W. BANKS' Vice President Vice President CenCor, Inc. JACK L. BROZMAN JACK L. BROZMAN' Vice President Vice President CenCor, Inc. MOLLY McCARTHY Vice President CHARLES E. JAMES Vice Chairman of the Board ROBERT L. SWAN First State Bank and Vice President Tower State Bank, Kansas City, Kansas GORDON L. WELLS Treasurer B. A. KARBANK President B.A.Karbank&Co. MICHAEL W. SAGAN Industrial&Commercial Realtors Secretary Kansas City, Mo. DANIEL MILLMAN Attorney At Law Kansas City,Mo. 'MEMBERS OF THE EXECUTIVE COMMITTEE Highlights CenCor, Inc. and Subsidiaries 1980 1979 1978 Volume of Business $92,412,704 $90,228,968 $87,272,594 Revenues 46,773,994 38,292,490 32,374,338 Net Income 1,274,029 987,149 1,002,369 Net Income Applicable to Regular Common Stock 1,137,997 851,117 1,002,369 Earnings Per Share: On average common shares outstanding .88 .66 .61 Number of Locations 468 418 378 r To Our Stockholders: The year 1980 established record results Consolidated net income in 1980 was for CenCor, Inc. It was high-lighted by $1,274,029 compared with $987,149 in 1 progress and profitability for your company 1979. After preferred dividend in a period characterized by a remarkable requirements of $136,032, the earnings degree of economic turbulence against a applicable to the common stock were equal backdrop of high inflation. to 88 cents a share versus 66 cents a share a year earlier. Consolidated revenues in 1980 were $46,773,994 compared with As a personal service business, CenCor's $38,292,490 in 1979. five operating divisions generally were not subjected to the full impact of the recessionary influences that affected most The good showing was after charging durable goods industries. Serious operating expenses in connection with the imbalances and over extensions developed opening of 67 new day care centers to in the economy, leaving consumers and earnings rather than capitalizing such businesses vulnerable to a slowdown in expenses. Even more significant in the activity. For your company, however, there year-to-year profits increase was the fact was an increase of 22 percent in revenues that interest expense rose 2.2 million and a 29 percent gain in net income as dollars, an increase of 29 percent. contrasted to 1979, an enviable achievement which reaffirms management's decision to concentrate its endeavors in the The five areas of operation are in 234 La field of education. Petite day care and preschool educational centers for children; 67 Century Acceptance offices making consumer loans While not without some problems that and generally including credit life, accident confront all businesses—spiraling expenses and health insurance; 7 paramedical and government regulations—the most colleges which offer courses for training onerous one to CenCor has been the medical or dental assistants; 151 Mr. Tax abnormally high cost of borrowed funds. company-owned, franchised or satellite Forward planning, however, did cushion offices and 9 Sunny Girls offices providing somewhat the impact of the record interest temporary help to various businesses, expense through the previously placed professional and service organizations. long-term notes at very favorable rates relative to short-term money costs at current levels. Five years ago, La Petite accounted for 37 percent of the total revenues of the company. In 1980, the schools contributed The prime interest rate began 1980 at 50 percent of the total. The consumer 153/4 percent, increased to 20 percent in finance group, on the other hand, April, dropped sharply to 11 percent in accounted for 43 percent of the revenues in August and then rose to a peak of 21 1976 while the 1980 aggregate was percent at the end of the year. In early reduced to 30 percent. This change in A March, 1981, the rate had dropped to emphasis has permitted CenCor to move around 18 percent. The future course of ahead in a period when high interest on rates is confusing and is expected to be borrowed funds placed a restraint on volatile. earnings. In 1980, La Petite entered two new Of the nearly 1,800 students enrolled in 2 markets—Alabama and South Carolina—to the paramedical schools, about 50 percent bring the number of units in 15 states to depend on various government grants and 234, or a net increase of 66 day care guaranteed loans to pay all or part of their centers. In 1979, there was a net increase tuition, which ranges from $1,515 to of 33 units. Enrollment in all centers totaled $2,995, depending on the course and 20,000, an increase of 33 percent for the location of the schools. Revenues of the year. schools in 1980 were $3,338,589 against $2,673,388 in 1979. While enrollment was La Petite is going forward in its up about 8 percent, revenues increased 25 expansion program for 1981. Currently percent. Deferred tution, a source of there are 29 schools under construction. earnings, was $1,448,925 at the end of Plans call for 60 new installations in 1981, 1980. which would bring the total to approximately 300 by year-end. Century Acceptance Corporation, the consumer loan subsidiary, which had Management is continuing its La Petite accounted for the major share of earnings expansion because of the market potential until 1976, continues as an important for growth and profits. More and more contributor to profits. There has been a families now require two incomes, both gradual decrease in the number of offices husband and wife, to keep abreast of but this has not affected the total of inflation and to maintain their standard of receivables outstanding, which has risen. living. More than half of all children under 18 have working mothers. The number of The consumer loan operation has working mothers age 20 and older who benefited from office consolidations, better entered the work force in 1980 was supervision and greater efficiencies. 900,000. The annual average for the last However, the record levels of interest rates five years has been well over 1 million —a have eroded some of the mentioned rate that should continue in light of birth benefits. A source of future earnings is the rate statistics. Income tax credits up to $400 unearned interest balance of $9,548,090 at per child is an added incentive for parents year-end. to enroll their children in day care centers. Two consumer loan offices were In 1980, revenues of the La Petite consolidated in Illinois which reduced the schools aggregated $23,442,270, up from number of offices to 67. When CenCor was $16,863,603 in the prior year. primarily consumer finance oriented, there were well over 100 branches in operation. The other growing educational branch is represented by the seven paramedical schools. Six were operated for all of 1980, The average loan in 1980 was $1,358, one each in Kansas City, Denver, Dallas, down slightly from $1,367 in 1979 but Minneapolis, Tampa and Jacksonville, Fla. substantially higher than in prior years. Late in 1980, a new school was opened in Receivables outstanding of $65,291,514 Ft. Lauderdale, Fla. In January, 1981 a compared with $64,394,863. Revenues 4 new school was acquired in Anaheim, in 1980 were $14,044,321 compared with California. $13,065,236 in 1979. During the 1980 tax season the company CenCor's long-term debt at December operated 151 income tax return preparation 31, 1980 was $47.8 million compared with 3 centers in 15 states. Of the total centers, $43.4 million a year earlier. The financial 111 company-owned storefront offices and condition of your company remains sound. 19 master franchise and satellite offices are Less dependency on bank borrowing and generally operated by public accountants or the use of long-term money at lower bookkeepers located in smaller communities interest rates have been helpful. Of the $47 outside of the metropolitan area. Because million in bank lines available, only $19.8 of its identification, the name of "Mr. Tax of million was in use at the end of 1980. America" over the last 12 years has Current assets of $64 million compared attracted more inquiries from those desiring with current liabilities of $45 million. to join Mr. Tax as a licensed operator. Mr. Retained earnings of $8,280,306 at the end Tax will operate 109 storefront offices and of 1980 compared with $7,154,809 at in 30 banks and savings and loan December 31, 1979. institutions in the 1981 tax season. The company operates tax schools during the CenCor has an excellent potential for fall in most metropolitan areas where it has continued growth. Inflation, excessive tax preparation centers as a means of government regulations and international recruiting and training preparers. Gross unrest continue to challenge business as revenues in 1980 were $1,932,119 against never before. Your management will meet $1,995,690 a year before. these challenges by investing in both personnel and earning assets to assure its future. The decline in full-time employees as a result of the 1980 economic slow-down Management wishes to express its prompted many firms to turn to the gratitude for the loyalty and support from temporary help pool. The Downey, its employees, stockholders, investors and California office was closed in 1980 and financial institutions, all of whom are so one was opened in Overland Park, Kansas, vital to the success of our company. a suburb of Kansas City. The three offices each in Los Angeles, Kansas City and Cleveland had revenues of $3,927,636, up Respectfully, from $3,655,793 in 1979. Present plans call for the development of this division l_ within the offices currently in operation. Fixed assets during the year rose Robert F. Brozman substantially, reflecting the investment in La President Petite schools. Additions to buildings exceeded $10 million. Such assets, before depreciation charges, were $17.2 million at the end of 1980 against $7 million at the end of 1979. Day care centers under construction totaled $2 million against $5.3 million a year before. Locations of CenCor Operations 4 • t�lI • • • 1!w • • La Petite Academies, Inc. Century Acceptance Sunny Girls Alabama Corporation California Arkansas Alabama Missouri Colorado Arizona Ohio Florida Calif ornia Illinois Colorado Indiana Florida Mr. Tax of America Iowa Georgia Arizona Kansas Illinois Arkansas Mississippi Kansas Georgia Missouri Kentucky Illinois North Carolina Louisiana Iowa Oklahoma Missouri Minnesota South Carolina Nebraska Mississippi Tennessee Nevada Missouri Texas New Mexico Nebraska Oklahoma New York CenCor Education Rhode Island Ohio Services South Carolina Tennessee Colorado Tennessee Texas Florida Texas Wisconsin Minnesota Utah Washington Missouri Texas Five Year Summary of CenCor Operations A 5 Year Ended December 31, 1980 1979 1978 1977 1976 REVENUES: Earned discount, interest and finance charges $12,638,212 $11,945,075 $10,528,447 $ 9,091,854 $ 9,425,699 Preschool day-care services 23,442,270 16,863,603 13,552,209 11,092,055 9,427,665 Temporary employment services 3,927,636 3,655,793 2,987,349 2,504,569 1,980,615 Tax return preparation services 1,932,119 1,995,690 1,996,558 1,713,779 1,513,072 insurance commissions 1,406,109 1,067,521 1,115,903 1,309,474 1,441,721 Paramedical education services 3,338,589 2,673,388 2,170,187 1,645,181 1,331,315 Other 89,059 91,420 23,685 92,595 133,055 $46,773,994 $38,292,490 $32,374,338 $27,449,507 $25,253,142 EXPENSES: Operating expenses $33,843,314 $27,555,246 $23,306,979 $20,108,125 $17,801,223 Provision for credit losses 1,432,640 1,629,317 1,453,006 1,521,293 1,304,695 Interest on long-term debt 4,534,339 3,640,756 2,947,494 1,557,260 1,132,371 Interest on notes payable 4,774,630 3,545,931 2,536,324 2,773,496 3,439,285 Amortization of debt expense 206,664 177,849 153,326 96,312 36,518 $44,791,587 $36,549,099 $30,397,129 $26,056,486 $23,714,092 Income before income taxes and minority interest $ 1,982,407 $ 1,743,391 $1,977,209 $ 1,393,021 $ 1,539,050 PROVISION FOR INCOME TAXES $ 695,000 $ 735,000 $ 946,000 $ 643,000 $ 819,000 Income before minority interest $ 1,287,407 $ 1,008,391 $ 1,031,209 $ 750,021 $ 720,050 MINORITY INTEREST: Dividends on preferred stock of subsidiary $ 12,328 $ 20,460 $ 27,736 $ 35,474 $ 52,653 • Net income 1,050 782 1,104 1,326 1,554 $ 13,378 $ 21,242 $ 28,840 $ 36,800 $ 54,207 NET INCOME $ 1,274,029 $ 987,149 $ 1,002,369 $ 713,221 $ 665,843 Preferred Stock Dividends 136,032 136,032 — — — Net Income Applicable to Common Stock $ 1,137,997 $ 851,117 $ 1,002,369 $ 713,221 $ 665,843 EARNINGS PER SHARE: On average common and common equivalent shares outstanding during period $.88 $.66 $.61 $.42 $.40 Ps Managements Discussions and Analysis of Financial Condition and Results of Operations 6 (A) Liquidity and Capital Resources. business and this in part, accounts for the highly leveraged position of the Company The following tables provide a number of measures of liquidity: 1980 1979 1978 Debt to debt plus equity 89% 89% 89% Working Capital Ratios 1980 1979 1978 Total debt to equity 8.1 8.4 8.0 Working capital(in thousands) 18.980 25,366 27,731 Working capital ratio 1 4 to 1 1.6 to 1 1.8 to 1 The debt to debt plus equity ratio and debt to equity ratios have not improved because of Material changes in working capital (in thousands) management's decision not to dilute earnings per are summarized as follows: share or book value per share by issuance of stock. Rather, the Company has financed expansion by financing through banks and by the sale of Increase(Decrease) subordinated notes to the public. 1980 1979 1978 Provided from operations 3,710 3,586 3,462 Long term debt,net 4,420 6,723 9,316 Property, buildings and equipment, (8,885) (10,252) (3,395) net The Company Other (5,751) (2,422) (2,032) P Y has ample funds available to ' (6,506) (2,365) 7.351 resume its consumer loan business when demand returns to normal and for the expansion of its day care operation. The company has approximately $30,000,000 of unused committed bank lines The decline in the working capital ratios from presently available. In addition, historically, 1978 to 1979 and 1979 to 1980 has been due to consumer loans tend to liquidate before maturity, the funding of buildings and property used in the thus providing an additional source of funds for the expansion of the day care centers with short term consumer loan business. Short term borrowings will debt. This was due to the higher interest rates during continue to be used to finance business peaks. The 1979 and 1980 which made it difficult for Company is presently issuing 5 year subordinated „ management to secure permanent financing. It is the notes. Other long term funds will be acquired if they s Company's intention to dispose of a major portion become available at rates which management s of the buildings and land acquired for use in the day considers attractive. • care centers operation. The Company intends to enter into sale and leaseback arrangements as soon 4 as rates become attractive. s 4 a B Results of Operation a Profitability Ratios 1980 1979 1978 ( ) Return on revenues 3% 3% 3% Prior to 1970, CenCor, Inc., had as its principal Return on equity 13% 11% 12% asset Century along with smaller holdings in tax service, temporary employment service and medical and dental education services. Subsequently, the Company has expanded the tax service and medical and dental education division and gradually reduced the size of the temporary help division and Century. Leverage Ratios A preschool day care division has been added and C",, These ratios measure the extent to which the has grown steadily. At December 31, 1980, it had Company has been financed by debt. Historically, reached a size of 234 Academies and was the major i the finance business has been a highly leveraged contributor to revenues. F, S 7 The increase in day care service is due primarily Interest Expense. Interest expense increased to an increase in the number of day care centers $2,151,000 (29%) in 1980 as compared to 1979. operated. The number of centers increased from 1979 increased $1,728,000 (31%) as compared to one hundred thirty-five in 1978 to one hundred 1978. Both increases were due to rising interest sixty-eight at December 31, 1979 to 234 at rates on short term borrowings. The effective December 31, 1980. The increase in consumer borrowing rates were 16.7% in 1980, 12.9% in finance revenues from 1978 to 1979 was due to an 1979 and 9.3% in 1978. increase in the volume of business. The increase in consumer finance revenues from 1979 to 1980 was Provision for Income Taxes. The decrease in the due to an improvement in the yields of new loans tax provision for 1980 compared to 1979 was due made during the period. The increase in temporary to utilization of more investment tax credits. The employment services revenue 1978 to 1979 and reduction in 1979 compared to 1978 was due to 1979 to 1980 was due to an increase in the volume reduced profits. The reduction in the effective rate in of business. The increase in the revenues from the 1980 was due to a large investment tax credit medical and dental educational services from 1978 because of the increase in the number of day care to 1979 and 1979 to 1980 was due to an increase centers constructed in 1980. in the volume of business. The increase in the tax Management has concentrated the growth of the return service revenues in both 1978 and 1979 was Company in the nonfinance area during the past due to an increase in the average fee charged for three years, developing a diversified business which this service. The decline in the tax preparation is not so reliant on the cost of borrowed money. revenues for 1979 to 1980 was due to a decrease in Although this expansion has been costly, these the number of returns prepared. divisions have made a strong contribution to December 31, 1980 revenues compared to consolidated earnings in the year. December 31, 1978, revenues have grown by forty- four percent and, although revenues continued to (C) Inflation and General Economic climb, the rising cost of borrowed money slowed Conditions earnings to a great extent. Because the interest rates Except for the higher cost of borrowed funds' the charged by the finance subsidiary, Century, are fixed Company has not been significantly affected by high by state law, a continued increase in the prime levels of inflation in the economy. Cost increases for interest rate will be detrimental to the earnings of the most part have been reflected in the Company's Century. The changes in the prime interest rate are pricing. The impact of inflation on financial shown in the following table: institutions differs significantly from that exerted on Year service companies. Financial institutions are not Number of End Year Changes High Low Trend heavily involved in making large capital expenditures 1976 7 71/2% 61/4% Up which are used in the production, acquisition or sale 1977 6 73/4% 61/2% Up of products. As a result, the direct results of inflation 1978 17 113/4% 73/4% Up are limited to costs of goods and services used in 1979 11 153/4% 111/4% Up operating the Company. There are, however, 1980 41 21 % 11 % Down indirect effects of inflation such as the impact that inflation has on the level of loan demand. An The increase in operating expenses is in line with example is the impact of customers requiring the increased revenues on a year to year basis. additional funds. This demand is accelerated when customers expand their borrowing to effect current Provisions for Credit Losses. Loss expense was purchases to avoid expected future price increases. reduced by 12% in 1980 as compared to 1979. Financial institutions must then meet this increased 1979 was 11% more than 1978. This reduction in demand for loans by obtaining more funds through 1980 was due primarily to a general upgrading of borrowings. High interest rates have affected the credit requirements which has been installed during margins in the consumer finance division. This has the past years. The increase in 1979 was due to the been offset, where possible, by combining offices write-off of a receivable acquired in the sale of a and increasing yields. The Company expects to management consulting service in 1974. continue this trend. CenCor, Inc. and Subsidiaries Consolidated Balance Sheet December 31, 1980 and 1979 8 ASSETS 1980 1979 CURRENT ASSETS: $ 3,570,052 $ 6,510,014 Cash (Note 3) 445,000 1,730,000 Time deposits(Note 3) Installment notes receivable, maturing generally within 37 months F (Notes 1 and 4): $43,730,673 $46,197,329 Discount-basis cash loans• 3,892,809 3,162,307 Interest-bearing cash loans 17,668,032 15,035,227 Sales contracts $65,291,514 $64,394,863 Less: 9,548,090 9,696,078 ' Unearned discount, interest and finance charges 1,965,419 1,927,248 Reserve for credit losses Net installment notes receivable $53,778,005 $52,771,537 Accounts receivable, less reserve for credit losses of $111,830 3,695,193 2,605,118 a ($73,605 in 1979) 698 197 615,158 Refundable income taxes (Note 7) Advances and notes receivable from affiliates of $189,292 281,792 96,242 ($50,000 in 1979) and others (Note 6) 1,925,837 1,567,287 Prepaid expenses and supplies Total current assets, including estimated notes receivable of a $24,200,000 not due within one year($21,500,000 in 1979) $64,034,666 $65,793,356 INVESTMENT IN PREFERRED STOCK OF AFFILIATE (Note 6) $ 500,000 $ — FIXED ASSETS, at cost (Notes 1, 2 and 8): $ 5,224,942 $ 3,989,004 Land 17,239,765 7,006,445 Buildings 7,803,262 6,243,108 Furniture, equipment and leasehold improvements 762 5,326,214 0 Day-care buildings under construction 1,803,2 $32,263,141 $22,564,771 3,953,237 3,245,944 t Less—Accumulated depreciation and amortization $19,318,827 $28,309,904 Net fixed assets COST IN EXCESS OF NET TANGIBLE ASSETS OF COMPANIES a ACQUIRED, less accumulated amortization of $1,050,817 $ 3,768,694 $ 3,587,604 ($913,480 in 1979) $ 1,164,225 $ 877,710 UNAMORTIZED DEBT EXPENSE (Note 1)OTHER ASSETS (Note 6) $ 1,290,149 $ 1,019,533 1. $99,067,638 $90,597,030 i The accompanying notes are an integral part of this balance sheet. CenCor, Inc. and Subsidiaries Consolidated Balance Sheet • December 31, 1980 and 1979 9 LIABILITIES 1980 1979 CURRENT LIABILITIES: Notes payable, unsecured (Note 3): Banks $19,831,000 $21,334,800 Commerical paper 13,493,754 10,421,430 Investment certificates 450,753 566,192 Accounts payable and accrued liabilities 3,968,727 3,425,306 Deferred and prepaid income taxes (Note 7) 92,000 (45,000) Deferred student tuition (Note 1) 1,448,925 1,115,609 Unearned insurance commissions (Note 1) 415,027 473,722 Security deposits, bearing interest at 9% 400,000 400,000 Current maturities and sinking fund requirements (Note 8) 4,954,800 2,733,400 Total current liabilities $45,054,986 $40,425,459 LONG-TERM DEBT (Note 8): Senior notes $18,715,968 $20,899,468 Senior subordinated notes 4,652,000 6,159,900 Junior subordinated notes 3,365,000 3,770,000 Subordinated debentures and notes 11,230,911 6,698,813 Real estate and other 4,868,626 3,105,700 Total long-term debt $42,832,505 $40,633,881 OTHER LIABILITIES: Deferred income taxes (Note 7) $ 1,012,000 $ 380,000 Minority interest in preferred stock and common equity of subsidiary (Note 9) 61,419 176,459 Total other liabilities $ 1,073,419 $ 556,459 COMMITMENTS (Notes 5 and 11) STOCKHOLDERS' EQUITY (Notes 9 and 10): Preferred stock, $1 par value, 340,079 shares issued and outstanding (liquidation preference$1,700,400) $ 340,079 340,079 Regular common stock, $1 par value, 1,295,771 shares issued and outstanding 1,295,771 1,295,771 Paid-in capital 190,572 190,572 Retained earnings 8,280,306 7,154,809 Total stockholders'equity $10,106,728 $ 8,981,231 $99,067,638 $90,597,030 The accompanying notes are an integral part of this balance sheet. CenCor, Inc. and Subsidiaries Consolidated Statement of Income For the Three Years Ended December 31, 1980 10 1980 1979 1978 REVENUES (Note 1): Day-care and preschool education services $23,442,270 $16,863,603 $13,552,209 Earned discount, interest and finance charges 12,638,212 11,945,075 10,550,303 Temporary employment services 3,927,636 3,655,793 2,987,349 Paramedical education services 3,338,589 2,673,388 2,170,187 Tax return preparation services 1,932,119 1,995,690 1,996,558 Insurance commissions 1,406,109 1,067,521 1,043,153 Other 89,059 91,420 74,579 $46,773,994 $38,292,490 $32,374,338 EXPENSES: Salaries, wages and other payroll costs $19,730,859 $15,938,104 $13,094,391 Occupancy expense 5,908,636 4,684,312 4,062,915 Interest on long-term debt 4,741,003 3,818,605 3,100,820 Interest on notes payable (Note 2) 4,774,630 3,545,931 2,536,324 1 Provision for credit losses 1,432,640 1,629,317 1,453,006 Promotion and advertising 1,449,877 1,245,968 1,063,128 Other operating expenses 6,753,942 5,686,862 5,086,545 $44,791,587 $36,549,099 $30,397,129 Income before income taxes and minority interest $ 1,982,407 $ 1,743,391 $ 1,977,209 PROVISION FOR INCOME TAXES (Note 7) 695,000 735,000 946,000 Income before minority interest $ 1,287,407 $ 1,008,391 $ 1,031,209 MINORITY INTEREST IN SUBSIDIARY: Dividends on preferred stock $ 12,328 $ 20,460 $ 27,736 Net income 1,050 782 1,104 $ 13,378 $ 21,242 $ 28,840 NET INCOME $ 1,274,029 $ 987,149 $ 1,002,369 PREFERRED STOCK DIVIDENDS 136,032 136,032 - NET INCOME APPLICABLE TO COMMON STOCK $ 1,137,997 $ 851,117 $ 1,002,369 AVERAGE SHARES OF REGULAR COMMON 1,295,771 1,295,771 1,636,012 (COMMON STOCK in 1978) OUTSTANDING (Note 9) EARNINGS PER COMMON SHARE $.88 $.66 $.61 II\ The accompanying notes are an integral part of this statement. 41121 CenCor, Inc. and Subsidiaries Consolidated Statement of Stockholders' Equity For the Three Years Ended December 31, 1980 11 Regular Preferred Common Common Treasury Paid-in Retained Stock Stock Stock Stock Capital Earnings BALANCE, DECEMBER 31, 1977 $ — $1,822,290 $ — $ (785,558) $1,090,739 $5,294,151 Premium on retirement of preferred stock of subsidiary — — — — (10,475) — Redemption of common stock warrants (172,790 shares) — — — — (246,053) — Purchase of treasury stock (13,000 shares) — — — (34,375) — — Issuance of stock for minority interest in subsidiary — 2,180 — — (27) 7,172 Plan of Recapitalization (Note 9): Issue new preferred stock 1,824,470 (1,824,470) — — — — Treasury stock retired (188,620 shares) (188,620) — — 819,933 (631,312) — Conversion to new regular common stock (1,295,771) — 1,295,771 — —Net income — — — — — 1,002,369 BALANCE, DECEMBER 31, 1978 $ 340,079 $ — $1,295,771 $ — $ 202,872 $6,303,692 Premium on retirement of preferred stock of subsidiary — — — — (12,300) — Preferred stock dividends ($.40pershare) — — — — — (136,032) Net income — — — — — 987,149 BALANCE, DECEMBER 31, 1979 $ 340,079 $ — $1,295,771 $ — $ 190,572 $7,154,809 Premium on retirement of preferred stock of subsidiary — — — — (12,500) Preferred stock dividends ($.40 per share) — — — — — (136,032) Net income — — — — — 1,274,029 BALANCE, DECEMBER 31, 1980 $ 340,079 $ — $1,295,771 $ — $ 190,572 $8,280,306 0 The accompanying notes are an integral part of this statement. II CenCor, Inc. and Subsidiaries Consolidated Statement of Changes in Financial Position For the Three Years Ended December 31, 1980 r 12 1980 1979 1978 FUNDS WERE PROVIDED BY: Operations: Net income $ 1,274,029 $ 987,149 $ 1,002,369 Add items not requiring funds: Provision for credit losses 1,432,640 1,629,317 1,453,006 Depreciation 1,007,938 728,169 692,965 Amortization 398,647 420,725 427,404 Interest capitalized during construction (1,114,000) (705,000) — Provision for deferred and prepaid income taxes 769,000 503,000 (124,000) Increase (decrease) in unearned insurance commissions (58,695) 22,450 10,683 Total from operations $ 3,709,559 $ 3,585,810 $ 3,462,427 Proceeds from issuance of long-term debt 8,082,137 9,219,589 11,436,353 Bulk sales of installment notes receivable — — 254,284 Increase in notes payable 1,453,085 3,838,721 724,339 Increase in accounts payable and accrued liabilities 475,909 1,637,331 80,744 Increase in security deposits — 400,000 — Decrease in cash and time deposits 4,224,962 20,521 6,094 Changes in other assets and liabilities, net (833,459) (368,447) 867,897 Total funds provided $17,112,193 $18,333,525 $16,832,138 FUNDS WERE USED FOR: Cost in excess of net tangible assets on acquisitions $ 318,426 $ — $ 80,518 Increase (decrease) in installment loans, net of unearned discount, interest and finance charges (2,043,245) 1,396,899 7,238,759 Bulk purchases of installment notes receivable 4,417,090 3,099,050 3,203,641 Additions to fixed assets, net of related sales 8,885,015 10,252,388 3,394,893 Payments on long-term debt 3,662,113 2,496,521 2,119,539 Increase in accounts receivable 1,224,434 932,175 486,624 Investment in preferred stock of affiliate 500,000 — — Purchase of treasury stock — — 34,375 Retirement of stock warrants — — 246,053 Cash dividends on preferred stock 136,032 136,032 — Cash dividends on preferred stock of subsidiary 12,328 20,460 27,736 Total funds used $17,112,193 $18,333,525 $16,832,138 The accompanying notes are an integral part of this statement. g a """.:4 CenCor, Inc. and Subsidiaries Notes to Consolidated Financial Statements • For the Three Years Ended December 31, 1980 13 (1) Summary of Accounting Policies: estimated useful lives of the assets using primarily the (a) Principles of Consolidation. The consolidated straight-line method. Leasehold improvements are financial statements include the accounts of CenCor, amortized over the terms of the related leases. Inc. and its subsidiaries, all of which are wholly owned Buildings are depreciated over 40 years; leasehold except for a nominal minority interest in its finance improvements over 3 to 20 years; and furniture and subsidiary, Century Acceptance Corporation. All equipment over 2 to 15 years. significant intercompany accounts and transactions are eliminated in consolidation. Maintenance and repairs are charged to expense as incurred. The cost of additions and improvements is (b) Recognition of Revenues. Income of the capitalized and depreciated over the remaining useful finance companies from discount-basis cash loans and lives of the assets. The cost and accumulated sales contracts and commissions on the related sales of depreciation of assets sold or retired are removed from credit life and accident and health insurance are the accounts and any gain or loss is recognized in the recognized over the terms of the loans using the sum of year of disposal. the months-digits method. No income is recognized in the month a loan is made; one and one-half months' (e) Sales and Leasebacks. Gains and losses on income is recognized in the following month. Income fixed assets which have been sold and leased back are from interest-bearing cash loans, delinquency fees and recognized over the terms of the related lease sales of term life insurance are recognized on a agreements. collection basis. (f) Debt Expense. Debt expense is amortized over The Company's operations also include day-care and the life of the related debt. preschool education, paramedical education, tax return preparation and temporary employment services. Income from day-care and preschool education and (g) Acquisitions. Substantially all acquisitions by temporary employment services is recognized as the the Company, except for the acquisition of the finance services are performed. Income from the tax subsidiary, have been accounted for by the purchase preparation services is recognized upon collection. In method, under which a portion of the purchase price is 1979, the Company changed its method of recognizing assigned to net tangible assets acquired based upon tuition income from paramedical education services. their estimated value. The unallocated excess of the Thirty-five percent of the tuition charged students is purchase price over net tangible assets acquired recognized in the month the student contracts to take subsequent to October 31, 1970, is being charged j the course to offset costs incurred in obtaining new against net income using terms of 4 to 40 years. The students. The remaining portion of the tuition is total amount charged against net income was $137,337 recognized over the course life, using the straight-line in 1980, $184,797 in 1979 and $182,997 in 1978. method. Prior to 1979, 30% of the tuition was The unallocated excess of purchase price over net recognized in the month the student contracted to take tangible assets acquired prior to October 31, 1970 the course and the remaining portion was recognized ($1,302,549), is not being amortized. over the course life using the sum of the months-digits method. The effect of the change was not significant. (2) Capitalization of Interest Beginning in 1979 in compliance with Statement of (c) Credit Losses. The unpaid balances of installment notes receivable on which no installments Financial Accounting Standards No. 34, the Company capitalized interest as part of the cost of constructing have been received for 180 days and which are new day-care buildings instead of expensing interest considered uncollectible by management are charged costs as incurred. Interest capitalized before income tax off against the reserve for credit losses. effect during 1980 and 1979 was $1,114,000 and $705,000, respectively. Total interest incurred, (d) Depreciation and Amortization. Buildings, including the amount capitalized, was $10,630,000 in furniture and equipment are depreciated over the 1980 and $8,069,000 in 1979. • (3) Notes Payable The Company sells commercial paper with maturities The terms and amounts of notes payable were as from 5 to 270 days to institutions and individuals. The follows: finance subsidiary discontinued the sale of commercial paper in 1979. 1980 1979 1978 Notes payable to banks: Available bank (4) Installment Notes Receivable 14 lines of credit The maximum term of installment notes receivable at end of year $47,305,000 $53,091,000 $44,790,000 was 96 months in 1980 and 1979, although the Compensating balances maintained finance subsidiary generally restricts maturities to 37 by the companies at end o of year 2,311,000 6,914,000 6,112,000 months. Interest rates on installment notes receivable Outstanding at end of year: ranged from 7% to 36% per annum. Contractual Notes payable to maturities at December 31, 1980, were estimated to be banks 19,831,000 21,334,800 20,305,000 Commercial paper 13,493,754 10,421,430 7,507,554 as follows:Maximum outstanding Total 1981 1982 1983 Thereafter 9herea84 pfter at monthend during the year: Discount-basis and Notes payable to interest-bearing cash banks 27,346,000 24,921,000 23,200,000 loans 100% 50% 34% 14% 2% Commercial paper. . 15,124,000 12,167,000 8,135,000 Sales contracts 100% 71% 25% 4% - Combined 39,551,000 35,852,000 30,326,000 Average monthend balance: Experience of the finance industry indicates that a Notes payable to banks $22,913,000 $22,066,000 $19,503,000 substantial portion of the installment notes receivable Commercial paper 12,339,000 9,999,000 7,431,000 will be renewed many months prior to contractual Combined 35,252,000 32,065,000 26,934,000 maturity dates. Accordingly, the preceding tabulation Weighted average interest rate on borrowings cannot be regarded as a forecast of future cash during the period: collections. In the years ended December 31, 1980 Combined 16.7% 12.9% 9.3% and 1979, cash collections on installment notes Weighted average interest rate on borrowings at receivable were $46,669,000 and $48,680,000, end of year: respectively, and the ratio of collections to average Notes payable to receivable balances was 74.6% and 78.3%, banks 21.6% 15,5% 11.2% Commercial paper 17.8% 15.7% 10.6% respectively. (5) Leases The availability of the bank lines of credit is subject to The Companies rent office space and buildings financial condition, generally under long-term lease arrangements ranging the Companies' remaining in sound having no outstanding borrowings for a specified period from 3 to 20 years. Such arrangements contain each year and the maintenance by CenCor of renewal options and provide that the Companies pay operating accounts,or compensating balances at the utilities, maintenance, insurance and property taxes. banks or the payment by the finance subsidiary of a The Companies also rent various equipment and commitment fee of 3/4 of 1% of the total lines in lieu of automobiles under leases of less than three years, compensating balances. These lines can be withdrawn which are generally cancelable within 30 days. The at the banks' option. During 1980 the finance Companies' leases are operating leases as defined by subsidiary revised its arrangements with the banks to Financial Accounting Standards Board Statement No. require the above described commitment fee in lieu of 13. Rental expense for these leases was $3,258,000 in the 1980, $2,652,000 in 1979 and $2,201,800 in 1978. compensating balances previously maintained. The banks expect CenCor to maintain a minimum Aggregate minimum future rentals payable under the operating account or compensating balance ranging operating leases at December 31, 1980, were: from 15% to 20% of the line of credit or 10% of the line of credit plus 10% of any outstanding borrowings. 1981 $ 2,855,000 1982 2,374,000 In certain cases, third parties maintain compensating 1983 2,062,000 balances on behalf of CenCor equal to 20% of the line 1984 1,919,000 of credit, for which CenCor pays interest at the prime 1985 1,824,000 rate. The effective interest rate on notes payable to 1986-1990 7,300,000 banks was 23.1% during 1980, 18.7% during 1979 1991 and thereafter 5,783,000 and 12.6% during 1978, after giving effect to $24,117,000 compensating balances and commitment fees. There is no legal restriction on the withdrawal of these balances. NC (6) Transactions with Affiliates 1980 1979 1978 Provision computed at statutory Prior to 1978, CenCor, Inc. advanced amounts to federal rate $912,000 $802,000 $949,000 and received payments from an income tax service State income taxes 116,000 83,000 88,000 company (Cor, Inc.) and its subsidiaries owned by Other 22,000 34,000 8,000 411 CenCor, Inc.'s chief executive officer. No advances Investment and new jobs tax credits (355,000) (184,000) (99,000) were made in 1980. The balance of advances and 15 Provision for income taxes as notes receivable from Cor, Inc. and its subsidiaries at reported in the statement December 31, 1980 and 1979, was $180,000 and of income $695,000 $735,000 $946,000 $231,000, respectively. The note receivable bears interest at 7% and is secured by the chief executive officer's personal guarantee and 100,000 shares of CenCor, Inc.'s Regular Common Stock which has a quoted market value of $700,000 at March 4, 1981. (8) Long-term Debt The balance of the note plus accrued interest is due on The covenants of the various long-term debt r June 30, 1981. Management of CenCor, Inc. has agreements of the Company and its finance subsidiary represented that no additional advances will be made provide certain limitations on the amount and type of directly or indirectly to any officer, director or indebtedness. Among other provisions, these covenants employee. require the Companies to maintain net worth at certain minimum levels. Long-term debt at December 31, In August 1980, the Company acquired for 1980 and 1979 consisted of: investment purposes, $500,000 Series B Preferred Stock in Jayhawk Bancshares, Inc. This stock has no voting rights and has a divided rate of 12% per annum. CenCor's chief executive officer owns the 1980 1979 controlling interest in Jayhawk Bancshares, Inc. Century Acceptance Corporation Senior debt: 71/4% payable$250,000 (7) Income Taxes annually through 1982 $ 500,000 $ 750,000 91/4% payable at various dates The Companies file a consolidated federal income through 1982 174,075 211,075 tax return. Investment tax credits are recorded as a 93/4% payable at various dates through 1985 566,893 688,393 reduction of the provision for income taxes in the year 95/s% payable $1,250,000 in which the credits are realized. The provision for annually through 1989 11,250,000 12,500,000 income taxes for the three years ended December 31, 10.15% payable $525,000 annually 1981 through 1990 5,250,000 5,250,000 1980, consisted of the following: 103/8% payable$300,000 annually 1982 through 1991 3,000,000 3,000,000 Total senior debt $20,740,968 $22,399,468 1980 1979 1978 Subordinated debt: Federal income taxes: Senior subordinated notes: Payable currently(refundable) . . $(137,100) $167,800 $990,900 101/4%payable in 1981 $ 1,033,800 $ 1,284,400 Timing differences arising from: 8/ Capitalized interest 512,400 324,300 — annually a $220,000 through 1984 880,000 1,100,000 Accelerated depreciation 187,700 — — 81/s% payable $168,000 s Insurance commissions annually through 1986 and recognized on cash basis $152,000 in 1987 1,160,000 1,328,000 for tax purposes 27,000 (10,300) (5,100) 113/896 payable $300,000 Initial fees recognized on cash annually 1982 through 1991 . . 3,000,000 3,000,000 basis for tax purposes 19,100 16,600 (61,600) Total senior subordinated debt .$ 6,073,800 $ 6,712,400 Prepaid expenses deducted currently for tax purposes 46,100 75,300 16,900 Other (76,100) 78,300 (83,100) Junior subordinated notes: State income taxes: 6%payable$100,000 annually. . . .$ — $ 100,000 Payable currently 20,200 56,700 96,600 9% payable $30,000 Deferred and prepaid 95,700 26,300 (8,600) annually through 1984 120,000 150,000 $695,000 $735,000 $946,000 91/4% payable $300,000 annually through 1988 2,400,000 2,700,000 9% payable $75,000 annually 1981 through 1990 750,000 750,000 101/2% payable $50,000 annually A reconciliation between the provisions for income 1983 through 1992 500,000 500,000 0 taxes as reported in the statements of income and the Total junior subordinated debt $ 3,770,000 $ 4,200,000 provision computed at the statutory federal rates of Total Century Acceptance 48% in 1978 and 46% in 1979 and 1980 follows: Corporation $30,584,768 $33,311,868 N. ___-_- (8) Long-term Debt (Continued) than 270 days after notice. Upon termination of the 1980 1979 chief executive officer for other than death or physical inability, maturity could be accelerated to not less than CenCor,Inc.: Subordinated debentures: 60 days. 93/a%due 1982 $ 1,500,862 $ 1,702,1120.44 9'/2% due 1983,Series A 144,300 152,700 The 10% real estate note agreement provides that 16 101/4%due 1984 2,722,265 3,075,929 $250,000 of the principal shall become due upon the 10%due 1986,SeriesA 948,256 1,062,022 failure of CenCor, Inc.'s president to be the chief Subordinated notes: executive officer of CenCor, Inc. and own or control at 151/2%due 1984,Series B $ 4,769,385 $ 10,000 133/<%due 1985,SeriesC 940,280 — least 25% of the Regular Common Stock of CenCor, 151/2%due 1985,Series C — — Inc. The note is secured by day-care facilities with a 151/2%due 1987,Series8 227,615 5,500 cost of $4,627,000 and an assignment of a $250,000 71/2%due 1989 688,600 690,550 insurance policy on the life of the president of the Total Subordinated Company. The 14% real estate note is secured by day- debentures and notes $11,941,563 $ 6,698,813 care facilities with a cost of $2,653,000. Real estate and other: 10% payable semiannually through 1990 $ 2,739,487 $ 2,893,538 14% payable semiannually through 1991 1,989,537 (9) Regular Common and Preferred Stock Real estate notes and mortgages, 7% to 12% payable in monthly In 1978 the board of directors approved and the installments through 1997 487,501 377,550 stockholders adopted a Plan of Recapitalization. The Notes payable on acquisitions, Plan provided that: (a) each outstanding share of 71/2% to 81/2% payable in installments through 1985 44,449 85,512 common stock, $1 par value, became one Preferred Total real estate and other $ 5,260,974 $ 3,356,600 Share, $1 par value, with cumulative cash dividends at Total CenCor,Inc. $17,202,537 $10,055,413 the rate of $.40 per share per annum; (b) each Total consolidated $47,787,305 43,367,281 stockholder was entitled to convert on or before Less—Current maturities and January 22, 1979, all such Preferred Shares held into sinking fund requirements. 4,954,800 2,733 400 Regular Common Shares, $1 par value, on a share for Total consolidated share basis; (c) the Preferred Shares have a liquidation long-term debt $42,832,505 $40,633,881 preference of $5 senior to other stockholders' claims and (d) the Preferred Shares will be redeemable at the Scheduled maturities and sinking fund requirements option of the Company at $5 per share after January on long-term debt for Century Acceptance Corporation 1, 1984. and CenCor, Inc. and Subsidiaries at December 31, 1980, were: At the completion of the Recapitalization on January Century Acceptance CenCor, Inc. 22, 1979, and after retirement of all the Company's Corporation (Including Century) reacquired common stock, there were 340,079 1981 $ 3,851,800 $ 4,954,800 Preferred Shares and 1,295,771 Regular Common 1982 3,582,000 4,808,068 Shares issued and outstanding, all with $1 par value. 1983 3,228,075 3,803,591 There are 1,650,000 shares of Preferred Stock and 1984 3,218,000 5,554,682 1985 3,534,893 11,303,682 1,825,000 shares of Regular Common Stock 1986 and thereafter 13,170,000 17,362,482 authorized. The Preferred Stock has the same voting $30,584,768 $47,787,305 rights as the Regular Common Stock. The accompanying financial statements reflect the results of the Plan of Recapitalization as though it had become Effective January 26, 1981, the Company increased effective as of December 31, 1978. the interest rates on its unissued Subordinated Notes, Series C, from 133/4% to 151/2%. Of the $5,000,000 At December 31, 1980, 1,348 shares of the of authorized notes in Series C, $940,280 have been Company's unissued Regular Common Stock were issued as of December 31, 1980. Subordinated Notes, reserved for acquisition of minority interest in Century Series C, were the only debentures and notes being Acceptance Corporation. offered for sale to the public at December 31, 1980. A stock option plan was established in July 1978 Upon the death or physical inability of the chief providing for the purchase of 189,730 shares of executive officer to exercise the full authority of that CenCor's Regular Common Stock by officers and key office, the holders of substantially all of Century employees of CenCor and its subsidiaries. No options A Acceptance Corporation's long-term debt may give have been granted under the plan as of December 31, notice accelerating the maturity of the debt to not less 1980. (10) Paid-in Capital and Retained (12) Segment Information Earnings Restrictions The Company operates principally in five personal At December 31, 1980, under the provisions of the service industries as described below: Certificate of Incorporation of Century Acceptance a. Day-care and Preschool Education— 0 Corporation, $796,000 of its paid-in capital was involves the operation of day-care and preschool unavailable for payment of common stock dividends, education centers for children. 17 for purchase of outstanding common stock or for b. Consumer Finance—involves the making making unscheduled retirements of subordinated debt. of consumer loans to individuals, generally including credit life, accident and health insurance The various note agreements of the Company and and the purchasing of retail installment sales Century Acceptance Corporation contain certain contracts. restrictions as to the amount of retained earnings c. Temporary Help—involves providing available for paying cash dividends, purchasing temporary personnel to various businesses, 4 outstanding capital stock and for making unscheduled professional and service organizations to perform retirements of subordinated debt. At December 31, general office functions. 1980, $4,862,000 of Century's retained earnings and d. Paramedical Education—involves the t $3,532,000 of the consolidated retained earnings were operation of schools which offer courses for unavailable for these purposes. vocational training as a medical or dental assistant. e. Tax Return Preparation—involves preparation of tax returns by public accountants or bookkeepers through Company-owned, franchise (11) Commitments or satellite offices. The Company has contracted for and is in the Revenues by industry include revenues from process of negotiating contracts for the construction of additional day-care buildings. The total estimated cost unaffiliated sources, as reported in the consolidated income statement, and intersegment interest income. of these buildings under contract and contract negotiation at December 31, 1980, excluding interest Operating profit represents total revenues less that will be capitalized, was $1,806,000. operating expenses, excluding general corporate expenses, income taxes and minority interest. Operating profit in the consumer finance segment is net In January 1981, the Company purchased all of the of interest and debt expenses. outstanding stock of the Southern California College of Medical and Dental Assistants, Inc. for $400,000 cash. Identifiable assets are those used in the Company's The acquisition was accounted for as a purchase in operations in each industry. Corporate assets consist 1981. principally of cash. Industry Segments at December 31, 1980 Day-care and Adjustments Preschool Consumer Temporary Paramedical Tax Return and Education Finance Help Education Preparation Other Eliminations Consolidated Revenues from unaffilated sources. $23,442,270 $14,067,337 $3,927,636 $3,338,589 $1,932,119 $66,043 $ — $46,773,994 Intersegment revenues — 27,896 — (27,896) — Totalrevenues $23,442,270 $14,095,233 $3,927,636 $3,338,589 $1,932,119 $66,043 $ (27,896) $46,773,994 Operating profit $ 3,385,092 $ 1,421,817 $ 313,920 662,008 $ 209,430 $ — $ — $ 5,992,267 General corporate expenses 96,972 Interest and debt expenses for segments other than 3,912,888 consumer finance Income before income taxes and minority interest $ 1,982,407 Identifiable assets at December31, 1980 $31,875,944 $56,327,499 867,590 $4,033,664 $1,662,917 $45,381 $ — $94,812,995 Corporate assets 4,254,643 Total assets at December31, 1980 $99,067,638 Depreciation and amortization $ 826,446 $ 192,629 $ 17,381 $ 82,200 $ 90,715 $ — Capital expenditures $11,418,042 $ 315,378 $ 3,825 $ 147,245 $ 43,749 $ - (12) Segment Information (Continued): Industry Segments at December 31, 1979 Day-care and Adjustments Preschool Consumer Temporary Paramedical Tax Return and 18 Education Finance Help Education Preparation Other Eliminations Consolidated Revenues from unaffilated sources $16,863,603 $13,033,208 $3,655,793 $2,673,388 $1,995,690 $70,808 $ - $38,292,490 Intersegment revenues — 32,028 - - - - (32,028) — Totalrevenues $16,863,603 $13,065,236 $3,655,793 $2,673,388 $1,995,690 $70,808 $(32,028) $38,292,490 Operating profit $ 2,505,533 $ 817,314 $ 250,105 402,703 $ 160,856 $ — $ — $ 4,136,511 General corporate expenses 95,930 Interest and debt expenses for segments other than 2,297,190 consumer finance Income before income taxes and minority $ 1,743,391 interest Identifiable assets at December31, 1979 $21,726,188 $61,303,205 $1,032,568 $2,962,462 $1,764,043 $46,114 $ - $88,834,580 Corporate assets 1,762,450 Total assets at December 31,1979 $90,597,030 Depreciation and amortization $ 576,835 $ 124,591 $ 69,571 $ 69,771 $ 145,625 $ — Capital expenditures $10,557,046 $ 175,566 $ 5,477 $ 211,319 $ 7,979 $ - Industry Segments at December 31, 1978 Day-care and Adjustments Preschool Consumer Temporary Paramedical Tax Return and Education Finance Help Education Preparation Other Eliminations Consolidated Revenues from unaffilated sources. $13,552,209 $11,644,350 $2,987,349 $2,170,187 $1,996,558 $23,685 $ — $32,374,338 Intersegment revenues — 21,856 — — — 4,355 (26,211) — Totalrevenues $13,552,209 $11,666,206 $2,987,349 $2,170,187 $1,996,558 $28,040 $(26,211) $32,374,338 Operating profit $ 2,156,495 $ 1,150,109 $ 160,711 401,479 $ 119,754 $(56,755) $ — $ 3,931,793 General corporate expenses 67,438 Interest and debt expenses for segments other than consumer financer 1,887,146 Income before income taxes and minority interest $ 1,977,209 Identifiable assets at December 31, 1978 $12,500,574 $57,560,100 $ 956,884 $2,456,947 $1,952,610 $32,766 $ — $75,459,881 Corporate assets 1,795,960 Total assets at December31, 1978 $77,255,841 Depreciation and amortization $ 556,861 $ 145,405 $ 69,336 $ 41,768 $ 142,846 $ 7,944 Capital expenditures $ 3,155,452 $ 77,160 $ - $ 123,673 $ 32,943 $ 5,665 r Ilir (13) Quarterly Financial Information (Unaudited): The results of operations for each of the four quarters of 1980 and 1979 are summarized below. The results of operations for the third and fourth quarters of 1980 are restated from the information previously reported to consider the f1 effect of adjustments to interest expenses. Such restatements had the effect of increasing previously reported net income in the fourth quarter and reducing net income in the third quarter by $70,000 ($.06 per share). 19 For the Quarter Ended 1980 March 31 June 30 September 30 December 31 Revenues $11,467,297 $11,486,519 $11,420,998 $12,399,180 Provision for credit losses $309,750 $294,750 $398,150 $429,990 Income before income taxes and minority interest $645,141 $545,143 $262,857 $529,266 Net income $346,470 $369,371 $217,322 $340,866 Preferred stock dividends 34,008 34,008 34,008 34,008 Net income applicable to regular common stock $312,462 $335,363 $183,314 $306,858 Earnings per regular common share $.24 $.26 $.14 $.24 For the Quarter Ended 1979 March 31 June 30 September 30 December 31 Revenues $10,264,123 $ 9,427,351 $ 8,913,050 $ 9,687,966 Provision for credit losses $373,359 $539,914 $380,892 $335,152 Income before income taxes and minority interest $824,085 $499,605 $407,360 $ 12,341 Net income $432,679 $269,722 $199,651 $ 85,097 Preferred stock dividends 34,008 34,008 34,008 34,008 Net income applicable to regular common stock $398,671 $235,714 $165,643 $ 51,089 Earnings per regular common share $.31 $.18 $.13 $.04 L. ON Auditor's Report Transfer Agents and Trustees To the stockholders of CENCOR, INC. CenCor, Inc.: Transfer Agent and Registrar 20 We have examined the consolidated balance sheet Preferred Stock of CENCOR, INC. (a Delaware corporation) AND Regular Common Stock SUBSIDIARIES as of December 31, 1980 and Subordinated Debentures due January 1, 1989 1979, and the related statements of income, UNITED MISSOURI BANK OF stockholders' equity and changes in financial position KANSAS CITY, N.A. for each of the three years in the period ended Senior Subordinated Notes Payable through 1983 December 31, 1980. Our examinations were made FIRST NATIONAL BANK OF in accordance with generally accepted auditing KANSAS CITY, MO. standards and, accordingly, included such tests of CenCor, Inc. Subordinated Notes Series A the accounting records and such other auditing BOATMEN'S BANK & TRUST OF procedures as we considered necessary in the KANSAS CITY, MO. circumstances. CenCor, Inc. Subordinated Notes Series B SECURITY NATIONAL BANK OF In our opinion, the financial statements referred to KANSAS CITY, KS. above present fairly the financial position of CenCor, Inc. and Subsidiaries as of December 31, 1980 and CenCor, Inc. Subordinated Notes Series C 1979, and the results of their operations and the COMMERCIAL NATIONAL BANK OF changes in their financial position for each of the KANSAS CITY, KS. three years in the period ended December 31, 1980, in conformity with generally accepted CENTURY ACCEPTANCE CORPORATION accounting principles, which, except for the change Transfer Agent and Registrar in 1979 (with which we concur) in the method of Cumulative Preferred Stock, 70C Convertible accounting for interest cost in compliance with a Series statement of the Financial Accounting Standards Regular Common Stock Board and as explained in Note 2 to the financial UNITED MISSOURI BANK OF statements, have been applied on a consistent basis. KANSAS CITY, N.A. ARTHUR ANDERSEN & CO. Senior Subordinated Notes Series A COLUMBIA UNION NATIONAL BANK & Kansas City, Missouri, TRUST CO. March 4, 1981. Senior Notes, Payable through 1984 COMMERCIAL NATIONAL BANK OF KANSAS CITY, KS. • Market Prices 1980 and 1979 Regular Common Stock Preferred Stock High Low High Low First Quarter, 1980 8 41/s 2/8 27/a Second Quarter, 1980 51/2 3 31/4 21/4 Third Quarter, 1980 107/s 45/8 35/8 31/s Fourth Quarter, 1980 115/s 53/4 3 2s/a First Quarter, 1979 53/s 4 4 35/s Second Quarter, 1979 77/s 5 35/8 31/2 Third Quarter, 1979 77/s 61/4 41/4 35/s Fourth Quarter, 1979 67/s 43/4 31/2 31/4 We will furnish a copy of our 1980 report to the SEC(Form 10-K)to any beneficial owner upon written request.Please specify Form 10-K when requesting. Olt This report has been prepared and distributed solely for the purpose of furnishing information about the activities of the Company for the year of 1980 and contains financial information pertaining to preuious years. It is not a representation, prospectus nor circular in connection with any present or future sale or purchase, offer of sole or purchase of any stock or other security of the Company. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter ended March 31 , 1981 Commission file number 0-3417 CENCOR, INC. (Exact name of registrant as specified in its charter) Delaware 43-09140333 (State or other jurisdiction of (I .R.S. Employer Identification Incorporation or organization) Number) 10th Floor City Center Square 12th and Baltimore P. 0. Box 26610 Kansas City, Missouri 64196 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, included area code (816) 474-4750 Securities registered pursuant to Section 12 (g) of the Act: Regular Common Stock $1 .00 Par Value 1 ,295,771 Shares Outstanding (Title of Class) Indicate by check mark whether the registrant (1 ) has filed all annual , quarterly and other 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 periods that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. (1 ) Yes X No (2) Yes X No CENCOR, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE PERIOD ENDING MARCH 31 , 1981 AND COMPARATIVE FIGURES FOR MARCH 31 , 1980 (Unaudited) REVENUES 1981 1980 PRESCHOOL DAY CARE SERVICES $ 7,284,484 $ 5,182,850 EARNED DISCOUNT, INTEREST AND FINANCE CHARGES 3,740,611 2,870,614 TEMPORARY EMPLOYMENT SERVICES 1 ,029,700 1 ,065,815 MEDICAL AND DENTAL EDUCATION SERVICES 1 ,538,560 683,624 TAX RETURN PREPARATION SERVICES 1 ,337,480 1 ,234,836 INSURANCE COMMISSIONS 257,842 429,558 TOTAL REVENUES $ 15,188,677 $ 11 ,467,297 EXPENSES OPERATING EXPENSES $ 10,923,755 $ 8,370,615 PROVISION FOR CREDIT LOSSES 548,992 309,750 INTEREST AND OTHER DEBT EXPENSE 3,056,438 2,141 ,791 TOTAL EXPENSES $ 14,529,185 $ 10,822,156 NET INCOME BEFORE INCOME TAXES AND MINORITY INTEREST $ 659,492 $ 645,141 PROVISION FOR INCOME TAXES $ 263,000 $ 295,000 MINORITY INTEREST DIVIDENDS ON PREFERRED STOCK OF SUBSIDIARIES, HELD BY OTHERS $ 1 ,629 $ 3,566 MINORITY INTEREST IN NET INCOME 442 105 $ 2,071 $ 3,671 NET INCOME $ 394,421 $ 346,470 PREFERRED STOCK DIVIDENDS $ 34,008 $ 34,008 NET INCOME AVAILABLE FOR COMMON STOCK $ 360,413 $ 312,462 EARNINGS PER SHARE ON AVERAGE SHARES OUTSTANDING $ .28 $ .24 DIVIDENDS PER SHARE $ - $ - AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 1 ,295,771 1 ,295,771 CENCOR, INC. CONSOLIDATED BALANCE SHEET MARCH 31 , 1981 AND DECEMBER 31 , 1980 (Unaudited) ASSETS MARCH 31 , DECEMBER 31 , 1981 1980 CASH AND TIME DEPOSITS $ 4,747,866 $ 4,015,052 II$$TALLMENT NOTE RECEIVABLE $ 64,959,560 $ 65,291 ,514 LESS: RESERVES FOR UNEARNED DISCOUNT 9,176,165 9,584,090 LESS: RESERVES FOR CREDIT LOSSES 1 ,948,786 1 ,965,419 INSTALLMENT RECEIVABLES - NET $ 53,834,609 $ 53,778,005 OTHER RECEIVABLES - NET 4,951 ,640 3,695,193 PREPAID EXPENSES AND SUPPLIES 1 ,693,247 1 ,925,837 REFUNDABLE INCOME TAXES 101 ,787 338,787 NOTES RECEIVABLES FROM AFFILIATES 182,412 281 ,792 TOTAL CURRENT ASSETS $ 65,511 ,561 $ 64,034,666 INVESTMENT IN PREFERRED STOCK OF AFFILIATE $ 500,000 $ 500,000 FIXED ASSETS - NET 29,515,374 28,309,904 COSTS IN EXCESS OF NET TANGIBLE ASSETS OF COMPANIES ACQUIRED 3,964,523 3,768,694 OTHER ASSETS 2,593,178 2,454,374 TOTAL ASSETS $102,084,636 $ 99,067,638 LIABILITIES AND STOCKHOLDERS' EQUITY NOTES PAYABLE - UNSECURED BANKS $ 19,581 ,000 $ 19,831 ,000 Commercial Paper and Other 16,987,890 13,944,507 UNEARNED INSURANCE COMMISSION AND DEFERRED TUITIONS 2,228,799 1 ,863,952 ACCOUNTS PAYABLE AND ACCRUALS 3,964,935 4,060,727 SECURITY DEPOSITS 400,000 400,000 CURRENT MATURITIES OF LONG TERM DEBT 4,923,908 4,954,800 TOTAL CURRENT LIABILITIES $ 48,086,532 $ 45,054,986 SENIOR NOTES $ 18,544,968 $ 18,715,968 SUBORDINATED NOTES 18,926,674 19,247 ,911 OTHER NOTES AND MORTGAGES 4,847 ,652 4,868,626 TOTAL LONG TERM DEBT $ 42,319,294 $ 42,832,505 DEFERRED INCOME TAXES $ 1 ,165,000 $ 1 ,012,000 MINORITY INTEREST 53,429 61 ,419 TOTAL OTHER LIABILITIES $ 1 ,218,429 $ 1 ,073,419 PREFERRED STOCK $ 340,079 $ 340,079 COMMON STOCK 1 ,295,771 1 ,295,771 CAPITAL SURPLUS 190,572 190,572 EARNED SURPLUS 8,633,959 8,280,306 TOTAL STOCKHOLDERS' EQUITY $ 10,460,381 $ 10,106,728 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $102,084,636 $ 99,067,638 CENCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION FOR THE THREE MONTHS ENDED MARCH 31 , 1981 and MARCH 31 , 1980 (Unaudited) 1981 1980 Funds were provided by: Operations: Net income $ 394,421 $ 346,470 Items not requiring funds: Provision for Credit Losses 548,992 309,750 Depreciation 321 ,367 186,342 Amortization 113,816 55,620 Interest capitalized during construction (223,477) (401 ,000) Provision for deferred and prepaid income taxes 120,702 295,000 Decrease in unearned insurance commissions (67,865) (75,036) TOTAL FROM OPERATIONS $ 1 ,207,956 $ 717,146 Increase in notes payable $ 2,793,383 $ 2,162,400 Changes in other Asset and liabilities, net $ 767,279 $ (465,203) TOTAL FUNDS PROVIDED $ 4,768,618 $ 2,414,343 Funds were used for: Increase in cash and time deposits $ 732,814 $ 217,223 Cost in excess of net tangible assets acquired 225,738 - Decrease in installment loans, net of unearned discount, interest and finance charges (40,568) (967,695) Bulk purchases of installment notes receivable 470,605 962,521 Additions to fixed assets, net of related sales 1 ,303,360 1 ,654,600 (Increase) decrease long-term debt 544,103 166,000 Increase in accounts receivable 1 ,496,929 344,120 Dividends on preferred stock 34,008 34,008 Cash dividends on preferred stock of subsidiary 1 ,629 3,566 TOTAL FUNDS USED $ 4,768,618 $ 2,414,343 PART II OTHER INFORMATION Item 1 . ) Legal Proceedings No change in previously reported. Item 2. ) Changes 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 Materially Important Events and reports on Form 8-K. None. NOTES TO FINANCIAL STATEMENTS The condensed financial statements included herein have been preapred by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accord- ance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. 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. SALES OF UNREGISTERED SECURITIES NONE The information included in the financial statements reflect all adjustments which are, in the opinion of management necessary to fairly state the results for the period. SIGNATURES s Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned who is duly authorized. CENCOR, INC. Date: May 14, 1981 By: Gordon L. Wells Treasurer SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1980 Commission file number 0-3417 CENCOR, INC. 12th & Baltimore, City Center Square P.O. Box 26610 Kansas City, Missouri 64196 Telephone: (816) 474-4750 Incorporated in the State of Delaware 43-0914033 (I.R.S. Employer Identification No.) Securities registered pursuant to Section 12(g) of the Act: Regular Common Stock, $1.00 par value Preferred Stock, $1.00 par value 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 the number of shares outstanding of each of the issuer's classes of Common Stock, as of March 25, 1981. 1,295,771 shares of Regular Common Stock, $1.00 par value Market value at March 25, 1981 was approximately $9,070,000 Documents incorporated by reference—None. CENCOR, INC. a FORM 10-K YEAR ENDED DECEMBER 31, 1980 Index Item Page PART I 1. Business I-1 2. Properties I-12 3. Legal Proceedings 1-12 4. Security Ownership of Certain Beneficial Owners and Management I-12 PART II 5. Market for the Registrant's Common Stock and Related Security Holder Matters 11-1 6. Selected Financial Data lI-1 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-1 8. Financial Statements and Supplementary Data 1I-4 PART III 9. Directors and Executive Officers of the Registrant I1I-1 10. Management Remuneration and Transactions 111-2 PART IV 11. Exhibits, Financial Statement Schedules, and Reports on Form 8-K _ IV-1 Signatures IV-17 S IV PART I Item 1: Business The Company is engaged in personal service businesses in 32 states. Its operations include 67 consumer finance offices, 234 day care and preschool education centers, 151 tax return preparation centers, 9 temporary help offices, and 7 paramedical schools as of December 31, 1980. The following table sets forth the contribution to the Company's total revenues, operating profit and assets by each of the major lines of business as of December 31 of the respective year. (See Note 1 of Notes to Financial Statements for principles of consolidation and acquisitions.) 1976 1977 1978 1979 1980 Total Revenue: Consumer finance $10,915,320 $10,420,828 $11,666,206 $13,065,236 $14,095,233 Day care and preschool education 9,490,826 11,092,055 13,552,209 16,863,603 23,442,270 Tax return preparation 1,529,605 1,713,779 1,996,558 1,995,690 1,932,119 Temporary help 1,984,031 2,504,569 2,987,349 3,655,793 3,927,636 Paramedical education 1,331,315 1,645,181 2,170,187 2,673,388 3,338,589 Other 2,045 131,033 28,040 70,808 66,043 Operating Profit (Loss): Consumer finance $ 1,244,206 $ 1,140,287 $ 1,150,109 $ 817,314 $ 1,421,817 Day care and preschool education 333,017 343,477 725,492 508,093 3,385,092 Tax return preparation (85,200) (120,546) (99,195) 96,624 209,430 Temporary help 47,258 (39,116) 87,728 185,873 313,920 Paramedical education 178,510 147,376 237,268 231,417 662,008 Other (178,741) (24,545) (56,755) Identifiable Assets: Consumer finance $52,763,157 $49,697,651 $57,560,100 $61,348,205 $56,327,499 Day care and preschool education 8,504,253 10,418,376 12,500,574 21,726,188 31,875,944 Tax return preparation 2,187,983 2,150,735 1,952,610 1,764,043 1,662,917 Temporary help 412,366 835,658 956,884 1,032,568 867,590 Paramedical education 1,225,523 1,666,373 2,456,947 2,962,462 4,033,664 Other 319,614 24.815 32,766 46,114 45,381 Consumer Finance The Company's consumer finance business is conducted through Century Acceptance Corporation, a 99.86% owned subsidiary. Century makes consumer loans to individuals, usually selling credit life and accident and health in- surance in the amount of the loan and, to a lesser degree, purchases retail installment sales contracts. Most of the lending operations are conducted under the name "Century Finance Company". The percentages of gross revenue from consumer financing and insurance commissions during each of the last five years were as follows: Consumer Loans and Installment Insurance Year Ended December 31, Contracts Operations 1976 86.0% 14.0% 1977 86.1 13.9 1978 90.4 9.6 1979 91.4 8.6 1980 90.0 10.0 Since the consumer finance business involves the carrying of receivables, a relatively high ratio of borrowings to invested capital is customary. At December 31, 1980, the ratio was 3.42% to 1. Net income of the Company and Century is materially dependent on the cost to it of borrowed funds, and because the maximum rates charged for Part 7—Page 1 1 Century's lending operations are limited by statute, any increase or decrease in interest costs tends to have an ad- verse or favorable effect on the Company's and Century's net income. Sec "Sources of Funds" below. The following tables set forth certain information concerning development of the Company's consumer finance business: Interest and Charges For the Aggregate as a% ' Year Principal Average of Net Ended Aggregate Cash Net Loans December 31, Volume Collections Receivables Outstanding 1976 $55,541,933 $30,499,202 $44,339,686 21.4% 1977 54,650,282 35,495,672 40,063,986 18.9 1978 63,412,578 40,699,684 45,430,384 20.3 1979 64,969,686 47,734,005 52,963,226 18.4 1980 58,196,886 37,614,093 53,564,919 19.0 New Borrowers Present Borroweres During the Year Number %of Amount %of Number %of Amount %of Ended of Total of Total of Total of Total December 31, Loans Number Loans Amount Loans Number Loans Amount (000's) (000's) 1976 10,233 26.9% $6,537 16.2% 27,788 73.1% $33,788 83.8% 1977 9,926 29.4 6,925 17.5 23,859 70.6 32,673 82.5 1978 11,591 33.7 9,190 20.9 22,810 66.3 34,689 79.1 1979 10,778 33.2 9,396 21.2 21,645 66.8 34,953 78.8 1980 9,438 34.9 8,043 21.9 17,581 65.1 28,640 78.1 Number of Aggregate Number of Average i Offices Receivables Loans Balance As of December 31, Operated Outstanding Outstanding Per Loan 1976 80 $51,264,100 76,674 $669 1977 69 50,391,393 72,764 691 1978 69 60,829,089 89,122 683 1979 68 64,394,863 93,915 686 1980 67 65,291,514 95,524 683 During the last five years, Century has consolidated some of its smaller offices or sold them to others in an attempt to achieve more economy in operations through higher average volume of business per office. Management intends to continue this policy. Plans are to consolidate an additional 4 or 5 offices in 1981. Location of Offices Century's business requires only a relatively small investment in fixed assets. Substantially all offices occupied by Century are leased, with terms generally for periods of 5 years or less. Part I--Page 2 r The geographic distribution of the business on December 31, 1980 was as follows: Per Cent of Per Cent of Total Total State Offices Receivables State Offices Receivables Alabama 4 4.30% Missouri 4 8.48% Arizona 2 3.35 Nebraska 1 1.08 California 1 2.14 Nevada 2 2.07 Colorado 2 1.78 New Mexico 1 2.78 Florida 6 7.84 Oklahoma 5 11.79 Georgia 15 20.92 Rhode Island 1 1.18 Illinois 1 2.09 South Carolina 1 1.73 Kansas 6 7.55 Tennessee 6 7.03 Kentucky 1 2.31 Texas 4 6.53 Louisiana 1 1.25 Utah 3 3.80 Total 67 100.00% Consumer Loans Century makes loans primarily to hourly wage earners and people earning moderate salaries. Consumer loans are typically made for purposes of consolidating existing obligations, purchasing consumer goods and services or meeting unforeseen emergencies. Prior to the granting of a loan, a credit investigation is undertaken to de- termine the income, existing indebtedness, length and stability of employment and other relevant factors con- cerning the customer's financial status. It is Century's policy to take a security interest in personal property of the borrower and, if the borrower is married, to require the borrower's spouse to co-sign the note. Of the outstanding receivables at December 31, 1980, 93% were secured, primarily by household goods alone or household goods and automobiles. The balance of the receivables was unsecured. Of the secured loans, approximately 93% were collateralized by household goods and automobiles and 7% by miscellaneous real and personal property. Liens on household goods are cus- tomarily taken without examination of title or appraisal, and it is recognized that in most cases the proceeds from resale of such goods would be less than the amount of the loan. It is not the policy of Century to seek recourse through repossession of household goods used as security, except in rare instances, such as attempted fraud or abandonment of security. Consumer finance operations are generally confined to two types of loans, as authorized by the laws of the respective states in which business is conducted: (a) loans on which the interest and fees are reflected in the face amount of the note (precompute loans) and (b) loans on which the interest is computed on monthly unpaid bal- ances (interest bearing loans). As of December 31, 1980, 92% of Century's consumer loans receivable were pre- compute loans. Permitted effective rates for precompute loans vary from 7% per annum to 36% per annum with maximum allowable loans ranging from $1,500 to an unlimited amount. Monthly interest rates allowed on interest bearing loans vary from 1% to 3%; maximum interest bearing loans allowable by law vary from $2,500 to an unlimited amount. In general, Century charges the maximum amount permitted. Maximum interest rates and loan amounts in certain significant states are as follows: Maximum Precompute Loan State Loans Amount Georgia 16.0%(1) $ 3,000 Oklahoma 18.0 3,500 Missouri 26.6 500(2) Tennessee 22.8 — (3) Kansas 18.0 2,500 (1) Includes an 8% loan fee on the first $600, which is reduced to 4% on the excess. (2) There is no limit on the amount which may be loaned in excess of $500; however, the maximum interest rate Alt on such excess is 10%. (3) The maximum which may be loaned to one borrower is 10% of the net worth of Century's subsidiary op- erating in Tennessee, which is substantially greater than the amount needed to make maximum loans under its current policy. Part I—Page 3 1 r- 1 In several states, the maximum maturity of loans is limited by law. Century generally restricts maturities to 37 months and the maximum amount loaned to $2,500 even though particular state laws authorized loans for longer terms or in greater amounts. Some loans are made from $2,500 to $5,000 and above, but the number and dollar t^ amount are not significant. If a borrower needs additional money before repaying his loan in full, it is Century's policy to extend addi- tional accommodation if the borrower's credit circumstances warrant. This is done by making a new loan in an amount sufficient to pay off the balance of the old loan and to supply the needed new money. Of the 27,019 loans made during the year ended December 31, 1980, 17,581 were to borrowers who still owed a balance under an existing loan. It is not the policy of Century to make loans to borrowers whose accounts are delinquent for the purpose of curing such delinquency and making the account current. Insurance Operations Century sells credit life insurance and accident and health insurance in the amount of the loan on approximately 99% of the consumer loans where the sale of such insurance is not prohibited by law. Also property insurance is written where authorized by law on household goods belonging to borrowers. Charges for such insurance are made at the maximum authorized rates and are stated separately in determining the cost of the loan. In such transactions, Century acts as an agent or broker for various insurance companies. When acting as agent or broker for an in- surance company, policies can only be written within the limitations established in the agency contract by the insurer. - Credit life insurance is usually sold in connection with consumer loans, but is seldom sold in connection with the purchase of installment sales contracts. Insurance is sold only to Century's loan customers. Century currently has agency agreements with two insurance companies and sells credit insurance in all states where it has loan offices. In each office, the Branch Manager is the insurance agent and operates only in the state where his office is located. Commissions from the sale of such insurance by Century are a significant factor in the total income of Cen- tury. The following table sets forth the percentage of revenues from insurance operations attributable to accident and health, fire and casualty, and credit life policies for the periods indicated. Year Ended Accident Fire& Credit December 31, &Health Casualty Life 1976 42% 24% 34% 1977 42 25 33 1978 44 26 30 1979 46 25 29 1980 45 26 29 Installment Contracts Century purchases installment contracts arising primarily from the sale of service contracts. Contracts are purchased only where the down payment by, and credit of, installment purchasers appear satisfactory. The credit standards applied are generally the same as for consumer applicants. Contracts are usually repayable in install- ments over periods ranging from 3 to 36 months. Frequently a portion of the purchase price of the contract is withheld as a reserve or Century obtains full or limited guarantees, repurchase agreements or security deposits. The following table sets forth information pertaining to installment contracts as of the dates indicated. Unmatured Portion of Amount Past Past Due Effective As of December 31, Outstanding Due Installments Yield 1976 $ 7,629,043 $234,369 $164,835 14.14% 1977 8,182,746 268,573 95,703 12.60 1978 13,517,317 409,755 255,936 14.77 1979 15,035,227 483,052 149,693 12.89 1980 17,668,032 565,106 179,105 12.25 Part I—Page 4 r Credit Loss Experience Past-due receivables which management believes to be uncollectib!e are written off, although in most in- stances collection efforts do not cease. Substantially all unpaid balances are charged off against the reserve for credit losses if no installments have been received for 180 days. Century charges against current income, as pro- vision for credit losses, such amounts as are believed by management to be adequate. The credit loss experience of Century for each of the five years ended December 31, 1980 is set forth below: 1976 1977 1978 1979 1980 Gross charge-offs: Amount $1,549,502 $1,660,475 $1,643,316 $1,763,935 $1,865,347 Percent of average receivables outstanding 3.00% 3.40% 2.96% 2.84% 3.15% Recoveries from customers' loans charged-off in prior periods $ 194,793 $ 335,422 $ 143,329 $ 159,428 $ 128,410 Net charge-offs (gross charge-offs less recoveries): Amount $1,354,709 $1,325,053 $1,499,987 $1,604,507 $1,736,937 Percent of average net receivables outstanding 2.61% 2.73% 2.70% 2.58% 2.93% Provision for credit losses charged to income $1,227,547 $1,297,313 $1,394,354 $1,359,695 $1,298,081 As reported by First National Bank of Chicago, the industry average during the year ended December 31, 1979 for net charge-offs as a percentage of average net receivables outstanding was 1.85% on an annualized basis. This represents the most recent information available. The following is a table of outstanding receivables, net receivables (gross receivables less unearned discount, reserve for credit losses and reserve withheld from dealer), reserve for credit losses, percent of reserves to net receivables at year-end and net credit losses at the dates indicated: Total Reserve Net Outstanding Net For Credit %of Net Credit December 31, Receivables Receivables Losses Receivables Losses 1976 $51,264,100 $42,313,717 $1,532,598 3.62% $1,354,709 1977 50,391,393 41,179,118 1,649,456 4.00 1,325,053 1978 60,829,089 49,681,650 1,910,784 3.85 1,499,987 1979 64,394,863 52,771,537 1,927,248 3.65 1,604,507 1980 65,291,514 53,778,005 1,965,419 3.65 1,736,937 A summary of past-due receivables as of December 31, 1976 through 1980 is set forth below. The table includes accounts which have had no collections of principal, interest or charges for 60 days or more, classified as to the period during which the last collection was received. Thus, if any payment has been made on an account within 60 days, even though such payment was more than 60 days delinquent, the account is not included in the amounts shown in the table. Age of Delinquent Installments 1976 1977 1978 1979 1980 60-89 days $ 917,799 $ 916,709 $ 681,563 $ 691,738 $ 738,343 90-179 days 1,006,864 853,589 866,689 814,678 885,921 180 days and over 117,570 41,688 31,449 18,796 16,875 Total $2,042,233 $1,811,986 $1,579,701 $1,525,212 $1,641,139 aSources of Funds In addition to the invested capital and retained earnings of Century, its operations are financed primarily by means of borrowings on unsecured short-term notes against lines of credit with banks, sales of commercial paper Part I—Page 5 1 (discontinued during 1979) and issuance of long-term unsecured debt. At December 31, 1980, Century had lines of credit aggregating $29,000,000 with 17 banks, of which $10,500,000 was borrowed at that date, and $30,584,768 of long-term unsecured debt, including current maturities. A The maturities of the short-term notes generally range from three to six months. The cost of short-term bor- rowing will continue to be affected by changes in money rates generally. At March 23, 1981, the bank prime rate for short-term borrowing was 171/2% per annum. The average annual interest rates on short-term borrowings for the years 1976 through 1980 were 7.5%, 7.0%, 9.5%, 12.7% and 16.8%, respectively. The following table summarizes information concerning changes in interest rates for the years indicated: Average Interest Rates Average Interest Rates on Borrowed Funds Excluding on Borrowed Funds Including Year Average Compensating Arrangements Compensating Arrangements Ended Yield _.. December 31, on Loans Short Term Long Term All Debt Short Term Long Term All Debt 1976 15.4% 7.5% 8.8% 7.6% 9.6% 8.8% 9.3% 1977 15.5 7.0 8.9 7.5 9.7 8.9 9.3 1978 15.7 9.5 9.3 9.4 14.7 9.3 10.2 1979 15.9 12.7 9.8 10.8 18.6 9.8 12.1 1980 16.4 16.8 9.8 11.8 23.0 9.8 13.6 Regulation Century operates under various types of state laws which regulate the direct consumer loan business, although the degree and nature of such regulation vary from state to state and depend on the laws involved. In general, the laws under which a substantial amount of Century's business is conducted provide for state licensing of lenders (which licenses may be revoked for cause), impose limitations on the maximum duration and amount of indi- vidual loans and the maximum rates of interest and charges and prohibit the taking of assignments of wages. In addition, certain of these laws prohibit the taking of liens on real estate except liens resulting from judgments. In accordance with the Federal Consumer Credit Protection Act, Century discloses to its customers various charges and expenses, including the total finance charge and the annual percentage rate of charges applicable to each transaction. Century also discloses either monthly interest rates or total dollar credit charges as required by almost all of the states in which it operates. Century also is subject to the provisions of the Fair Credit Reporting Act ("FCRA") and makes the disclosures to consumers required by the FCRA. Consumers are advised when adverse action, such as the denial of credit or insurance or an increase in charges for credit or insurance, is taken based in whole or in part on information con- tained in consumer reports received from consumer reporting agencies, such as credit bureaus, or other sources. A rule of the Federal Trade Commission permits a debtor to assert against a purchaser of a consumer credit con- tract, such as the installment contracts purchased by Century, all claims and defenses which the debtor could assert against the seller of the goods or services obtained by the debtor pursuant to the contract. Since Century withholds a reserve or otherwise has rights directly against the seller of substantially all installment contracts which it pur- chases, management does not anticipate any material impact on its operations as a result of the rule. Approximately 27% of Century's receivables result from the purchase of installment contracts. Century is subject to the Equal Credit Opportunity Act, Title VII, prohibiting discrimination on the basis of sex or marital status, race, color, religion, national origin, age, receipt of income under public aid or good faith exercise of rights under the Consumer Credit Protection Act. The federal bankruptcy law affects the business of the Century in the following principal respects: (A) Rights of the creditor and debtor to reaffirm obligations are limited by necessity of court approval, and then the debtor has 30 days to change his mind; (B) Debtor next has choice of federal exemptions or state exemptions and in many instances federal exemptions are more liberal so that creditor's rights are limited; Part I—Page 6 F - 1 (C) Payments made by a debtor to a creditor 90 days before bankruptcy may have to be returned be- cause of presumption of insolvency; (D) The value of secured property can be determined by the court rather than by the balance of the loan, thus making it possible for the debtor to retain property free and clear through payoff of the debt. Century continuously changes its finance forms in order to conform with new interpretations of the various laws and regulations to which it is subject. However, it is virtually impossible, because of numerous new court decisions with retroactive application, to avoid technical violations, especially with respect to the truth-in-lending laws, which may subject Century to substantial liabilities including penalties and attorneys' fees payable to its customers. To date, there has not been a significant number of such claims asserted against Century. Sale of credit insurance is subject to various insurance regulations in each state where Century writes such insurance. Day Care and Preschool Education At December 31, 1980, the Company operated a total of 234 day care and preschool education centers for children between the ages of 21/2 and 6 under the name of "La Petite Academy". The Company entered the day care and preschool education business in May, 1970, by acquiring Les Petite Academies, Inc. It is the present inten- tion of management to develop only Company-operated Academies. The Company intends to expand its operations in 1981 primarily by opening new Academies. The following table sets forth the annual revenues, number of Academies and average number of students per Academy for the year ended December 31: 1976 1977 1978 1979 1980 Gross revenue $9,490,826 $11,092,055 $13,552,209 $16,863,603 $23,442,270 Number of Academies at December 31 111 115 135 168 234 Average number of students per academy* 64.2 70.7 66.8 72.2 71.3 *Full-time equivalent. Description and Location of Academies A typical La Petite Academy is housed in a new, free-standing building of 3,600-4,800 square feet designed to accommodate 80 to 120 children. Although not all Academies are identical, most are similar in appearance and de- sign. The buildings constructed since 1976 are of a standard design and have a uniform exterior appearance. The interior utilizes the open-space concept and each facility is completely equipped with educational materials and equipment, including self-help books, hand puppets, chalk boards, cork boards, aquariums, television, audio-visual equipment and numerous educational toys and games. The current cost of building an Academy, including capitalized interest is $140,000 to $210,000, plus land costs of $25,000 to $60,000. Under the current method of developing new Academies, the Company selects the site, contracts for the construction and temporarily owns the building until a sale and lease-back agreement can be satis- factorily concluded. Several of the Academies have been constructed by the landowner to the Company's specifica- tions and leased by the Company on a net lease basis. At December 31, 1980, 114 of the Academies were lo- cated in buildings leased for periods ranging from 15 to 20 years with aggregate annual rentals of approximately $1,665,000. The remaining Academies are owned by the Company, most of which are financed with long term mortgages. Part I—Page 7 As of December 31, 1980, Academies were located as follows: Number of Number of State Academies State Academies Alabama 2 South Carolina 14 Arkansas 5 Kansas 4 Colorado 6 Mississippi 2 Florida 30 Missouri 18 Illinois 13 Oklahoma 11 Indiana 7 Tennessee 28 Iowa 3 Texas 83 North Carolina 8 234 Operation of Academies The Academies operate year around on a five-day week schedule, generally opening at 6:30 a.m. for arrivals and remaining open until 6:30 p.m. All Academies employ a standard curriculum designed to stimulate the early learning ability of children, which includes 3-hour sessions in the morning and afternoon. The basic curriculum is reviewed and updated annually with supplemental curriculum guides published monthly. A child may be enrolled in a variety of programs from a full-time, five-day week plan to as little as two or three half days a week. Weekly tuition is from $32 to $40 for the full-time program depending upon the location of the Academy, and proportion- ately higher for the part-time program. Two snacks are served during the day without charge, and a hot lunch is provided free for full-time children and available for a small fee to children on the half-day programs. Transpor- tation to and from the Academy is provided at certain times of the day for an additional fee. Each Academy employs a master teacher and teaching assistants. The average ratio of paid staff to students is approximately 1 to 10. All purchasing, billing and accounting is handled at the Company's principal office so the director's major efforts may be devoted to the development of the Academy. In addition to a base salary, the di- rector receives 10% of the pre-tax profit of the Academy. Regulation In most communities, day care and preschool facilities are subject to state and local government regulation and licensing. Governmental agencies review the safety, fitness and adequacy of the buildings and equipment, the ratio of staff personnel to enrolled children, the dietary program, the daily curriculum and compliance with health standards. The Company has experienced no difficulty, and anticipates no difficulty, in complying with the regula- tions and licensing requirements of the states and municipalities in which it is currently operating or intends to operate. Compliance with local zoning ordinances is also an important factor in site selection for Academies. Although no federal license is required at this time, there are minimum standards which must be met to qual- ify for participation in certain federal programs. The Company plans to participate in federal programs only on a limited basis in light of current requirements. Tax Credits Effective for the years beginning after 1975, the itemized deduction for qualifying child and dependent care expenses was repealed and replaced by a tax credit equal to 20% of the qualifying expenses. The credit is limited to the lesser of $400 per child (up to a maximum of $800) or the amount of the tax liability. Tax Return Preparation During the 1980 tax season, the Company operated 151 income tax return preparation centers in 15 states. Of the total centers, 111 Company-owned storefront offices and 19 master franchise and satellite offices were operated by CenCor, Inc. d/b/a "Mr. Tax of America". Master franchise and satellite offices are generally operated by public accountants or bookkeepers located in smaller communities outside a metropolitan area. It is the Company's intention to sell additional franchises in 1981. No increase in the Company owned storefront offices is planned. An additional 21 centers were operated in bank and savings and loan facilities and in Century finance offices. See "MANAGEMENT—Interest of Management in Certain Transactions" regarding tax return preparation centers op- erated in the Kansas City area under the name "Mr. Tax of America" by a corporation owned by the Company's President. The Company also operates tax schools during the fall in most metropolitan areas where it has tax preparation centers as a means of recruiting and training preparers. Part I—Page 8 F - 1 The following table sets forth the gross revenues from the Company's tax return business and the approximate number of tax returns prepared by the Company for the tax seasons indicated. a 1976 1977 1978 1979 1980 Gross revenue $1,529,605 $1,713,779 $1,996,558 $1.995,690 $1,932,119 Tax returns 87,029 86,844 85,853 73,677 64,370 The declines in 1979 and 1980 was due to a reduction in the number of returns prepared. Through the first two months of the 1981 tax season, overall operating performance was in line with that of 1980. Description and Location of Tax Centers The Company leases office space for its tax centers for periods ranging from 31/2 months to 5 years with rentals ranging from $50 to $500 per month. Leases for new offices are generally signed for a short term and the Company attempts to secure longer terms for offices which have a record of substantial volume. Except for the headquarters office in each metropolitan area, all tax centers arc closed other than during the tax season (January 1 through April 15). The Company attempts to sublease unused offices during the off-season. The following table indicates the locations of Company-owned storefront offices during the 1981 tax season. Number of Number of State Offices State Offices Arizona 3 Missouri 11 Georgia 22 Nebraska 4 Illinois 13 New York 5 Iowa 7 Ohio 5 Minnesota 12 Tennessee 18 Mississippi 4 Wisconsin 7 111 The Company intends to limit its expansion only to areas that are presently profitable. Operation of Tax Centers Customers of the tax return service are obtained as a result of television and newspaper advertising during the tax season, referrals and repeat business. During the last two weeks of the tax season, most offices are open 7 days a week from 9:00 a.m. to 10:00 p.m. on weekdays and 9:00 a.m. to 5:00 p.m. on weekends. The Company follows the procedure of preparing a customer's tax return in his presence, in most instances in less than one hour, on the basis of information furnished by him. After the customer's return has been ini- tially prepared, he is advised of the amount of the tax due or of any refund. The Company guarantees to pay any penalties or interest resulting from errors made in preparation of a return based on information supplied by the customer. The return is checked for mathematical accuracy by computer and the return is signed and filed. No further visit is necessary for the customer. The Company's charges are determined by the amount of work involved and not by the customer's income or tax refund. The minimum charge is $5.00, covering preparation of one federal and one state return where the cus- tomer has only income from salaries and does not itemize deductions. The Company records revenue on a collec- tion basis and during the 1979 and 1980 tax seasons, charges averaged $27.08 and $30.02, respectively, per customer. The training schools operated by the Company offer basic and refresher courses in income tax return prepara- tion. Classes are held in the headquarters office for most metropolitan areas and are generally conducted by the city manager. Tuition ranges from $15 to $50 for a new trainee which includes $10 for books and supplies. The course is offered to the general public and provides an important recruiting source and training for tax return pre- parers employed by the Company. Instruction employs the problem-solving technique and emphasizes interviewing techniques designed to draw all relevant information for proper preparation of returns. The training schools are in- tended to be operated essentially on a break-even basis. Part I—Page 9 Regulation Tax return preparers are subject to regulations under the Tax Reform Act of 1976. Penalties are imposed for negligent and fraudulent preparation of tax returns ranging from $25 for failure of the preparer to sign the return to $500 for fraudulently understating tax liability. Employers of tax preparers are required to submit information an- nually about such preparers to the Internal Revenue Service. Compliance with such regulations has not had a mate- rial impact on the Company. In Arkansas, Illinois, Minnesota, Texas and Wisconsin, licensing or certification requirements imposed on all private educational institutions charging tuition are applicable to the training schools for tax return preparation. The Company has satisfied the requirements in those states. In 1972, the Company entered into an Agreement containing a Consent Order by the Federal Trade Commis- sion. Basically, the Company agreed not to engage in any misleading advertising practices in connection with its tax return preparation business. The Company has conducted its operations within the terms of the Order since it was entered. Temporary Help The Company currently operates a total of 9 temporary help offices in Cleveland, Kansas City and Los Angeles. Entry into the business was made in January, 1969 with 3 substantial acquisitions. The Company generally operates the temporary help agencies under the names used prior to acquisition. See "MANAGEMENT—Interest of Management in Certain Transactions" regarding temporary help offices in Utah operated under the CenCor name by a corporation owned by the Company's President. Description and Location of Offices The Company provides temporary personnel to a variety of business, professional and service organizations. It furnishes temporary personnel who perform office services, including typing, filing, switchboard operations, calcu- lating, bookkeeping and other commonly performed office operations (referred to as "office services"). Employees who work as temporary help personnel are recruited through advertising and referrals by other employees. Tem- porary help personnel are employed by the Company and paid only for actual hours for which a client of the Company is charged. In the temporary help business, assignment of personnel may be for days, weeks or months. Clients pay only for the actual hours worked by temporary personnel and eliminate certain costs and inconveniences associated with direct hiring, including interviewing, training, record keeping, payroll taxes and fringe benefits. Clients are obtained through direct sales efforts, advertising and referrals from other clients. The geographic distribution of the Company's temporary help business during the twelve months ended December 31, 1980 was as follows: Gross Percent of Location Offices Revenues Revenues Los Angeles 3 $1,175,805 29.94% Kansas City 3 664,545 16.92 Cleveland 3 2,087,286 53.14 9 $3,927,636 100.00% Trend of the Business The following table sets forth the amount of gross revenues, number of offices at December 31 and the aver- age number of temporary personnel available during the years indicated. Statistics with regard to number of temporary personnel are based upon weekly payroll reports or monthly reports filed with governmental agencies. 1976 1977 1978 1979 1980 Gross revenues $1,984,031 $2,504,569 $2,987,349 $3,655,793 $3,927,636 i Number of offices 7 8 7 9 9 Average temporary personnel 750 795 930 1,075 1,178 Part I—Page 10 The increase in revenues and personnel during the last three years was due primarily to an increased demand for the temporary employment services provided by this division. Present plans call for development of this division a within the offices currently in operation. Paramedical Education The Company operates 7 paramedical schools, one each in Denver, Kansas City, Dallas, Minneapolis, Tampa, Fort Lauderdale and Jacksonville. All the schools, with the exception of Tampa and Fort Lauderdale were ac- quired. Each school now offers courses for vocational training as a medical or dental assistant. The faculty con- sists primarily of registered and practical nurses with certain seminars conducted by practicing physicians and den- tists. Effective January 1, 1981 a new school was acquired in Anaheim, California. The Company will continue to explore the possibilities of expansion in this area. Description of Curriculum and Facilities The curriculum includes 4 to 6 months of classroom instruction and 1 month of internship involving on-the- job training and evaluation. Tuition, including a $100 registration fee, ranges from $1,515 to $2,995, depending on the course and location of the school. Although new classes commence bi-monthly, the fall enrollments are substantially higher than during other terms. Approximately fifty percent of the students depend on various gov- ernment grants to pay all or part of their tuition. All schools are operated in leased buildings with an aggregate monthly rent of $28,345. The lease terms run to 1986. Each of the facilities is specially designed for paramedical school operations and includes a laboratory. Development of Schools The following table sets forth the gross revenues from student fees and the average number of students en- rolled in the schools then owned by the Company during each of the years indicated. 1976 1977 1978 1979 1980 Gross revenues $1,331,315 $1,645,181 $2,170,187 $2,673,388 $3,338,589 Average number of students 1,126 1,416 1,565 1,675 1,858 Regulation The Federal Trade Commission has promulgated rules applicable to the operation of trade schools. Thus far, the rules have not had a material effect on the Company. Certain of the schools are required to be licensed by state and local agencies which includes approval of the curriculum, faculty and general operations. All schools are subject to state and local regulations regarding solicita- tion of students. Competition In each of the fields in which the Company is engaged, it is subject to intense competition from a large num- ber of firms, many of which are older and larger and have greater financial resources than the Company. Century constitutes a relatively small factor in the consumer finance industry and competes with other loan companies, per- sonal loan departments of commercial banks, credit unions, sales finance companies, mutual or cooperative agen- cies and others, some of which make charges at monthly rates lower than the rates charged by Century. The strongest competition is that offered by commercial banks, which in recent years have greatly increased their small loan activities. Commercial banks generally attract the better credit risks and are usually able to loan substanti- ally larger sums to an individual borrower. Small loan companies have endeavored to offset the competition re- sulting from the rate and other competitive advantages of the commercial banks by offering more satisfactory ser- vice through eliminating complicated details, delay and embarrassment in obtaining loans and by improving the efficiency of their operations. wThe Company's day care and preschool educational centers compete with all types of child care centers, includ- ing privately owned, church related and other non-profit organizations. Several church and cooperative nursery centers have no rental costs for use of their facilities. Part 1—Page 11 In the temporary help business, several firms which operate nationally offer services competing with the office services provided by the Company. The tax return preparation business is highly seasonal, and it is dependent to a great extent on advertising and favorable location of offices. Paramedical schools operated by the Company compete with public educational institutions in addition to other private concerns. It is impossible for the Company to predict to what extent its business might be adversely affected by, among other things, changes in economic, competitive, political and international conditions, increased cost of funds, taxa- tion or other significant legislative enactments, wide-spread unemployment or other factors not now foreseen. Employees As of December 31, 1980, the Company had approximately 4,800 employees, of which approximately 354 were employed full time in the consumer finance business, 30 were permanent and 1,178 were temporary personnel in the temporary help business, 28 were permanent and 789 were seasonal in the tax return preparation business and 2,455 were permanent in the day care, preschool and paramedical education businesses. The Company has no contract with any labor union representing its employees. A substantial number of personnel in the Company's consumer finance, day care and preschool education and tax return preparation businesses are compensated at the minimum wage level. Thus, the recent and prospective in- creases in the minimum wage may have a significant impact upon the Company's labor costs. However, where pos- sible the Company may reduce the number of hours worked by an employee in order to combat the increases. Item 2: Properties Reference is made to Item I where the properties of the Company are described. Item 3: Legal Poceedings None. Item 4: Security Ownership of Certain Beneficial Owners and Management A. The following table sets forth, with respect to the Company's Preferred Stock and Regular Common Stock (the only classes of voting securities), all persons known to be the beneficial owner of more than five percent (5%) of any class of the Company's voting securities as of March 20, 1981 : Number of Shares and Name and Nature of Percent Title Address of Beneficial Percent of Voting of Class Beneficial Owner Ownership(1) of Class Securities Regular Common Robert F. Brozman 623,042(2) 48.08% 38.09% 1235 W. 55th Street Kansas City,Missouri Part 1—Pape 12 B. The following table sets forth, with respect to the Company's Preferred Stock and Regular Common Stock, (i) shares beneficially owned by each director as of March 20, 1981, and (ii) total shares beneficially owned by Olk directors and officers as a group as of March 20, 1981: Number of Shares and Nature of Percent Name of Title Beneficial Percent of Voting Director of Class Ownership(1) of Class Securities Robert F. Brozman Regular Common 623,042(2) 48.08% 38.09% Jack L.Brozman Regular Common 13,250 1.02% .81% John W.Banks Regular Common 20,076 1.55% 1.23% Barney A. Karbank Regular Common 11,360(3) .88% .69% Charles E.James Regular Common 110 .01% .01% Daniel S. Millman Preferred 2,000 .59% .12% MI Directors and Officers as a Group Regular Common 667,838 51.54% 40.83% Preferred 2,000 .59% .12% Aggregate 669,838 40.95% (1) Nature of beneficial ownership of securities is direct unless otherwise indicated by footnote. Beneficial owner- ship as shown in the table arises from sole voting power and sole investment power unless otherwise indicated by footnote. (2) This does not include 41,500 shares held by or for the benefit of Mr. Brozman's children, in which he disclaims any beneficial interest. (3) This does not include 1,104 shares held by or for the benefit of Mr. Karbank's children, in which he disclaims any beneficial interest. a Part I—Page 13 PART II Item 5: Market for the Registrants Common Stock and Related Security Holder Matters (A) Market CenCor's common stock is traded on the over-the-counter market. (B) Regular Common Stock prices and dividend information: Stock prices were obtained from the National Association of Securities Dealers. Quarter Ended High Low March 31, 1980 8 4'/s June 30, 1980 53 3 September 30, 1980 107/8 45/s December 31, 1980 '11% 53/4 March 31, 1979 53/s 4 June 30, 1979 71/4 5 September 30, 1979 75/s 63/4 December 31, 1979 6% 43/4 No dividends have been paid on regular common stock. (C) Approximate number of holders of record of the Company's common stock at December 31, 1980 was 401. Item 6: Selected Financial Data Year Ended December 31, 1976 1977 1978 1979 1980 (In Thousands) Total revenues $25,253 $27,449 $32,374 $38,292 $46,774 Interest expense $ 4,608 $ 4,427 $ 5,637 $ 7,365 $ 9,516 Provision for credit losses $ 1,305 $ 1,521 $ 1,453 $ 1,629 $ 1,433 Net income $ 665 $ 713 $ 1,002 $ 987 $ 1,274 Net income applicable to common stock $ 665 $ 713 $ 1,002 $ 851 $ 1,138 Earnings per share $ .40 $ .42 $ .61 $ .66 $ .88 Cash dividends per common share $ - $ - $ - $ - $ - Net installment notes receivable $42,314 $41,179 $49,682 $52,772 $53,778 Net fixed assets $ 6,344 $ 8,150 $10,282 $19,319 $28,310 Total assets $67,252 $66,114 $77,256 $90,642 $99,068 Debt: Notes payable (unsecured) $42,399 $27,759 $28,484 $32,322 $33,776 Long term (including current maturities) $15,605 $27,624 $36,644 $43,367 $47,787 Stockholders' equity $ 6,835 $ 7,421 $ 8,142 $ 8,981 $10,107 Item 7: Managements Discussion and Analysis of Financial Condition and Results of Operations (A) Liquidity and Capital Resources. The following tables provide a number of measures of liquidity: Working Capital Ratios 1978 1979 1980 Working capital (in thousands) $27,731 $25,366 $18,980 Working capital ratio 1 8 to 1 1.6 to 1 1.4 to 1 Part 1I—Page 1 Material changes in working capital (in thousands) are summarized as follows: Increase (Decrease) IBIS 1979 1980 Provided from operations $ 3,462 $ 3,586 $ 3,710 Long term debt, net 9.316 6,723 4,420 Property, buildings and equipment, net (3,395) (10,252) (8,885) Other (2,032) (2,422) (5,751) $ 7,351 $ (2,365) $(6,506) The decline in the working capital ratios from 1978 to 1979 and 1979 to 1980 has been due to the fund- ing of buildings and property used in the expansion of the day care centers with short term debt. This was due to the higher interest rates during 1979 and 1980 which made it difficult for management to secure permanent fi- nancing. It is the Company's intention to dispose of a major portion of the buildings and land acquired for use in the day care centers operation. The Company intends to enter into sale and leaseback arrangements as soon as rates be- come attractive. Profitability Ratios 1978 1979 1980 Return on revenues 3% 3% 3% Return on equity 12% 11% 13% Leverage Ratios These ratios measure the extent to which the Company has been financed by debt. Historically, the finance business has been a highly leveraged business and this in part accounts for the highly leveraged position of the Company. 1978 1979 1980 Debt to debt plus equity 89% 89% 89% Total debt to equity 8.0 8.4 8.1 The debt to debt plus equity ratio and debt to equity ratios have not improved because of management's de- cision not to dilute earnings per share or book value per share by issuance of stock. Rather, the Company has fi- nanced their expansion by financing through banks and by the sale of subordinated notes to the public. The Company has ample funds available to resume its consumer loan business when normal demand returns and for the expansion of its day care operation. The Company has approximately $30,000,000 of unused committed bank lines presently available. In addition, historically, consumer loans tend to liquidate before maturity, thus pro- viding an additional source of funds for the consumer loan business. Short term borrowings will continue to be used to finance business peaks. The Company is presently issuing 5 year subordinated notes. Other long term funds will be acquired if they become available at rates which management considers attractive. (B) Results of Operation Prior to 1970, CenCor, Inc.'s principal asset was Century along with smaller holdings in tax service, tem- porary employment service and medical and dental education services. Subsequently, the Company has expanded the tax service and medical and dental education division and gradually reduced the size of the temporary help division and Century. A preschool day care division has been added and has grown steadily, and at December 31, 1980, had reached a size of 234 Academies and was the major contributor to revenues. The increase in day care service revenues is due primarily to an increase in the number of day care centers operated. The number of centers increased from one hundred thirty-five in 1978 to one hundred sixty-eight at De- cember 31, 1979 to 234 at December 31, 1980. The increase in consumer finance revenues from 1978 to 1979 was due to an increase in the volume of business. The increase from 1979 to 1980 was due to an improvement in the yields of new loans made during the period. The increase in insurance commissions from 1978 to 1979 and 1979 to 1980 was due to an improvement in loss ratios. The increase in temporary employment services revenue from 1978 to 1979 and 1979 to 1980 was due to an increase in the volume of business. The increase in the revenues Part 11—Page 2 from the medical and dental educational services from 1978 to 1979 and 1979 to 1980 was due to an increase in the volume of business. The increase in the tax return service revenues in both 1978 and 1.979 was due to an a increase in the average fee charged for this service. The decline in the tax preparation revenues from 1979 to 1980 was due to a decrease in the number of returns prepared. December 31, 1980 revenues compared to December 31, 1978 revenues have grown by forty-four percent and, although revenues continued to climb, the rising cost of borrowed money slowed earnings. Because the inter- est rates charged by the finance subsidiary, Century, are fixed by state law, a continued increase in the prime interest rate will be detrimental to the earnings of Century. The changes in the prime interest rate are shown in the following table: Year Number of End Year Changes High Low Trend 1976 7 71/2% 61./4% Up 1977 6 7'/ % 61/2% Up 1978 17 113/4% 73/ % Up 1979 11 153/4% 111/2% Up 1980 41 21 % 11 % Down On a year to year basis, operating expenses have increased as revenues increased. Provisions for Credit Losses. Loss expense was reduced by 12% in 1980 as compared to 1979. 1979 was 11% more than 1978. This reduction in 1980 is due primarily to a general upgrading of credit requirements which has been installed during the past few years. The increase in 1979 was due to the write-off of a receivable acquired in the sale of a management consulting service in 1974. Interest Expense. Interest expense increased $2,151,000 (29%) in 1980 as compared to 1979. 1979 in- creased $1,728,000 (31%) as compared to 1978. Both increases were due to rising interest rates on short term borrowings. The effective borrowing rates were 16.7% in 1980, 12.9% in 1979 and 9.3% in 1978. Provision for Income Taxes. The decrease in the tax provision for 1980 compared to 1979 was due to the utilization of large investment tax credits because of the increase in the number of day care centers constructed in 1980. The reduction in 1979 compared to 1978 was due to reduced profits. The growth of the Company has been concentrate.l in the nonfinance area during the past three years, de- veloping a diversified business which is not so reliant on the cost of borrowed money. Although this expansion has been a costly undertaking, these divisions have made a strong contribution to the consolidated earnings picture in the year. (C) Inflation and General Economic Conditions Except for the high cost of borrowed funds, the Company has not been significantly affected by high levels of inflation in the economy. Cost increases for the most part have been reflected in the Company's pricing. The impact of inflation on financial institutions differs significantly from that exerted on service companies. Financial institu- tions are not heavily involved in making large capital expenditures which are used in the production, acquisition or sale of products. As a result, the direct results of inflation are limited to costs of goods and services used in operating the Company. There are, however, indirect effects of inflation such as the impact that inflation has on the level of loan demand. An example is the impact of customers requiring additional funds. This demand is ac- celerated when customers expand their borrowing to effect current purchases to avoid expected future price in- creases. Financial institutions must then meet this increased demand for loans by obtaining more funds through borrowings. High interest rates have affected the margins in the consumer finance division. This has been offset, where possible, by combining offices and increasing yields. The Company expects to continue this trend. Part 11—Page 3 a Item 8. Financial Statements and Supplementary Data. :CENCOR, INC. (Parent Company Only) BALANCE SHEET—DECEMBER 31, 1980 AND 1979 ASSETS 1980 1919 Current assets: Cash (Note 3) $ 3,257,616 $ 1,417,760 Time deposits (Note 3) 135,000 40,000 Accounts receivable, less reserve for credit losses of$99,428 ($71,166 in 1979) 3,040,616 1,886,686 Refundable income taxes 338,787 513,158 Advances and notes receivable from affiliates of $189,292 ($50,000 in 1979) and others (Note 6) 281,792 96,242 Prepaid expenses and supplies 1,584,982 1,227,414 Total current assets $ 8,638,793 $ 5,181,260 Investments in and advances to subsidiaries: (Eliminated in consolidation): Investments in subsidiaries $12,404,295 $11,704,424 Intercompany receivables 174,384 74,709 Total investments and advances . $12,578,679 $11,779,133 Investment in preferred stock of affiliate (Note 6) $ 500,000 $ — Fixed assets, at cost (Notes 1, 2 and 8): Land $ 5,214,942 $ 3,979,004 Buildings 17,235,693 7,002,373 Furniture, equipment and leasehold improvements 6,120,749 4,890,069 Day care buildings under construction 1,995,172 5,326,214 $30,566,556 $21,197,660 Less—Accumulated depreciation and amortization 2,988,176 2,410,512 Net fixed assets $27,578,380 $18,787,148 Cost in excess of net tangible assets of companies acquired,less accumulated amortization of $1,050,817 ($913,480 in 1979) $ 3,768,694 $ 3,587,604 Unamortized debt expense (Note 1) 898,676 551,769 Other assets (Note 6) 1,164,090 903,125 $55,127,312 $40,790,039 The accompanying notes are an integral part of this balance sheet. Part 11—Page d CENCOR, INC. (Parent Company Only) a BALANCE SHEET—DECEMBER 31, 1980 AND 1979 LIABILITIES AND SHAREHOLDERS' EQUITY 1980 1979 Current liabilities: Notes payable, unsecured (Note 3): Banks $ 9,331,000 $ 7,571,000 Commercial paper 13,753,754 10,681,430 Investment certificates 39,955 37,570 Accounts payable and accrued liabilities 2,677,914 2,022,718 Accrued and deferred income taxes (77,162) 315,557 Deferred student tuition (Note 1) 1,080,586 745,120 Current maturities and sinking fund requirements (Note 8) 1,103,000 250,900 Total current liabilities $27,909,047 $21,624,295 Long-term debt (Note 8): Subordinated debentures and notes $11,230,911 $ 6,698,813 Real estate and other 4,868,626 3,105,700 Total long-term debt $16,099,537 $ 9,804,513 Deferred income taxes $ 1,012,000 $ 380,000 Commitments (Notes 5 and 11) Stockholders' equity (Notes 9 and 10): Preferred stock, $1 par value, 340,079 shares issued and outstanding (liquidation preference $1,700,400) $ 340,079 $ 340,079 Regular common stock, $1 par value, 1,295,771 shares issued and outstanding 1,295,771 1,295,771 Paid-in capital 190,572 190,572 Retained earnings 8,280,306 7,154,809 Total stockholders' equity $10,106,728 $ 8,981,231 $55,127,312 $40,790,039 The accompanying notes are an integral part of this balance sheet. a Part II—Page 5 NMI CENCOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET-DECEMBER 31, 1980 AND 1979 ASSETS 1980 1979 Current assets: Cash (Note 3) $ 3,570,052 $ 6,510,014 Time deposits (Note 3) 445,000 1,730,000 Installment notes receivable, maturing generally within 37 months (Notes 1 and 4): Discount-basis cash loans $43,730,673 $46,197,329 Interest-bearing cash loans 3,892,809 3,162,307 Sales contracts 17,668,032 15,035,227 $65,291,514 $64,394,863 Less: Unearned discount, interest and finance charges 9,548,090 9,696,078 Reserve for credit losses 1,965,419 1,927,248 Net installment notes receivable $53,778,005 $52,771,537 Accounts receivable, less reserve for credit losses of $111,830 ($73,605 in 1979) 3,695,193 2,605,118 Refundable income taxes (Note 7) 338,787 513,158 Advances and notes receivable from affiliates of $189,292 ($50,000 in 1979) and others (Note 6) 281,792 96,242 Prepaid expenses and supplies 1,925,837 1,567,287 Total current assets, including estimated notes receivable of $24,200,000 not due within one year ($21,500,000 in 1979) . - $64,034,666 $65,793,356 Investment in preferred stock of affiliate (Note 6) $ 500,000 $ — Fixed assets, at cost (Notes 1, 2 and 8): Land $ 5,224,942 $ 3,989,004 Buildings 17,239,765 7,006,445 Furniture, equipment and leasehold improvements 7,803,262 6,243,108 Day-care buildings under construction 1,995,172 5,326,214 $32,263,141 $22,564,771 Less—Accumulated depreciation and amortization 3,953,237 3,245,944 Net fixed assets $28,309,904 $19,318,827 Cost in excess of net tangible assets of companies acquired, less accumu- lated amortization of $1,050,817 ($913,480 in 1979) $ 3,768,694 $ 3,587,604 Unamortized debt expense (Note 1) $ 1,164,225 $ 877,710 Other assets (Note 6) $ 1,290,149 $ 1,019,533 $99,067,638 $90,597,030 The accompanying notes are an integral part of this balance sheet. Part II—Page 6 CENCOR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET-DECEMBER 31, 1980 AND 1979 a LIABILITIES AND SHAREHOLDERS' EQUITY 1980 1979 Current liabilities: Notes payable, unsecured (Note 3): Banks $19,831,000 $21,334,800 Commercial paper 13,493,754 10,421,430 Investment certificates 450,753 566,192 Accounts payable and accrued liabilities 3,968,727 3,425,306 Deferred and prepaid income taxes (Note 7) 92,000 (45,000) Deferred student tuition (Note 1) 1,448,925 1,1 15,609 Unearned insurance commissions (Note 1) 415,027 473,722 Security deposits, bearing interest at 9% 400,000 400,000 Current maturities and sinking fund requirements (Note 8) 4,954,800 2,733,400 Total current liabilities $45,054,986 $40,425,459 Long-term debt (Note 8): Senior notes $18,715,968 $20,899,468 Senior subordinated notes 4,652,000 6,159,900 Junior subordinated notes 3,365,000 3,770,000 Subordinated debentures and notes 11,230,911 6,698,813 Real estate and other 4,868,626 3,105,700 Total long-term debt $42,832,505 $40,633,881 Other liabilities: Deferred income taxes (Note 7) $ 1,012,000 $ 380,000 Minority interest in preferred stock and common equity of subsidiary (Note 9) 61,419 176,459 Total other liabilities $ 1,073,419 $ 556,459 Commitments (Notes 5 and 11) Stockholders' equity (Notes 9 and 10): Preferred stock, $1 par value, 340,079 shares issued and outstanding (liquidation preference $1,700,400) $ 340,079 $ 340,079 Regular common stock, $1 par value, 1,295,771 shares issued and outstanding 1,295,771 1,295,771 Paid-in capital 190,572 190,572 Retained earnings 8,280,306 7,154,809 Total stockholders' equity $10,106,728 $ 8,981,231 • $99,067,638 $90,597,030 The accompanying notes are an integral part of this balance sheet. Part 11—Page-7 r a CENCOR, INC. (Parent Company Only) STATEMENT OF INCOME For the Three Years Ended December 31, 1980 1980 1979 1978 Revenues (Note 1): Day-care and preschool education services $23,442,270 $16,863,603 $13,552,209 Temporary employment services 3,927,636 3,655,793 2,987,349 Paramedical education services 2,628,444 1,832,335 1,461,219 Tax return preparation services 1,932,119 1,995,690 1,996,558 Other 66,043 70,808 28,040 $31,996,512 $24,418,229 $20,025,375 Expenses: Salaries, wages and other payroll costs $16,027,707 $12,390,258 $ 9,932,893 Occupancy expense 4,892,678 3,676,909 3,127,928 Interest on long-term debt 1,466,681 1,056,310 766,885 Interest on notes payable (Note 2) 2,474,103 1,341,344 1,146,015 Provision for credit losses 109,080 257,622 44,537 Promotion and advertising 1,101,678 944,805 737,386 Other operating expenses 5,296,368 4,213,637 3,719,354 $31,368,295 $23,880,885 $19,474,998 Income before income taxes and equity in undistributed earnings of subsidiaries $ 628,217 $ 537,344 $ 550,377 Provision for income taxes 60,869 201,761 256,445 Income before equity in undistributed earnings of sub- sidiaries $ 567,348 $ 335,583 $ 293,932 Equity in undistributed earnings of subsidiaries 706,681 651,566 708,437 Net income $ 1,274,029 $ 987,149 $ 1,002,369 Preferred stock dividends 136,032 136,032 Net income applicable to common stock $ 1,137,997 $ 851,117 $ 1,002,369 Average shares of regular common stock (common stock in 1978) outstanding (Note 9) 1,295,771 1,295,771 1,636,012 Earnings per common share $.88 $.66 $.61 The accompanying notes are an integral part of this statement. Part II—Page 8 CENCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Three Years Ended-December 31, 1980 1980 1979 1978 Revenues (Note 1): Day-care and preschool education services $23,442,270 $16,863,603 $13,552,209 Earned discount, interest and finance charges 12,638,212 11,945,075 10,550,303 Temporary employment services 3,927,636 3,655,793 2,987,349 Paramedical education services 3,338,589 2,673,388 2,170,187 Tax return preparation services 1,932,119 1,995,690 1,996,558 Insurance commissions 1,406,109 1,067,521 1,043,153 Other 89,059 91,420 74,579 $46,773,994 $38,292,490 $32,374,338 Expenses: Salaries, wages and other payroll costs $19,730,859 $15,938,104 $13,094,391 Occupancy expense 5,908,636 4,684,312 4,062,915 Interest on long-term debt 4,741,003 3,818,605 3,100,820 Interest on notes payable (Note 2) 4,774,630 3,545,931 2,536,324 Provision for credit losses 1,432,640 1,629,317 1,453,006 Promotion and advertising 1,449,877 1,245,968 1;063,128 Other operating expenses 6,753,942 5,686,862 5,086,545 $44,791,587 $36,549,099 $30,397,129 Income before income taxes and minority interest $ 1,982,407 $ 1,743,391 $ 1,977,209 Provision for income taxes (Note 7) 695,000 735,000 946,000 Income before minority interest $ 1,287,407 $ 1,008,391 $ 1,031,209 Minority interest in subsidiary: Dividends on preferred stock $ 12,328 $ 20,460 $ 27,736 Net income 1,050 782 1,104 $ 13,378 $ 21,242 $ 28,840 Net income $ 1,274,029 $ 987,149 $ 1,002,369 Preferred stock dividends 136,032 136,032 Net income applicable to common stock $ 1,137,997 $ 851,117 $ 1,002,369 Average shares of regular common stock (common stock in 1978) outstanding (Note 9) 1,295,771 1,295,771 1,636,012 Earnings per common share $.88 $.66 $.61 The accompanying notes are an integral part of this statement. Part 1I—Page9 CENCOR, INC. AND SUBSIDIARIES (Parent Company Only and Consolidated) STATEMENT OF STOCKHOLDERS' EQUITY For the Three Years Ended December 31, 1980 Regular Preferred Common Common Treasury Paid-in Retained Stock Stock Stock Stock Capital Earnings Balance, December 31, 1977 $ — $ 1,822,290 $ - $(785,558) $1,090,739 $5,294,151 Premium on retirement of preferred stock of subsi- diary — — — — (10,475) -- Redemption of common stock warrants (172,790 shares) — — (246,053) — Purchase of treasury stock (13,000 shares) — — — (34,375) —Issuance of stock for mi- nority interest in subsi- diary — 2,180 — — (27) 7,172 Plan of Recapitalization (Note 9): Issue new preferred stock 1,824,470 (1,824,470) — — — — Treasury stock retired (188,620 shares) (188,620) — — 819,933 (631,312) — Conversion to new regu- lar common stock (1,295,771) — 1,295,771 — — — Net income — — — 1,002,369 Balance, December 31, 1978 $ 340,079 $ - $1,295,771 $ - $ 202,872 $6,303,692 Premium on retirement of preferred stock of sub- sidiary — — (12,300) — Preferred stock dividends ($.40 per share) — — — (136,032) Net income — — — — — 987,149 Balance, December 31, 1979 $ 340,079 $ - $1,295,771 $ - $ 190,572 $7,154,809 Premium on retirement of preferred stock of sub- sidiary — — — -- — (12,500) Preferred stock dividends ($.40 per share) — — — (136,032) Net income — — — — — 1,274,029 Balance, December 31, 1980 $ 340,079 $ - $1,295,771 $ - $ 190,572 $8,280,306 The accompanying notes are an integral part of this statement. Part 11—Page 10 CENCOR, INC. (Parent Company Only) STATEMENT OF CHANGES IN FINANCIAL POSITION For the Three Years Ended December 31, 1980 1980 1979 1978 Funds were provided by: Operations— Net income $ 1,274,029 $ 987,149 $ 1,002,369 Items not requiring funds— Provision for credit losses 109,080 257,622 44,537 Depreciation 888,588 627,808 597,874 Amortization 299,911 322,476 297,069 Interest capitalized during construction (1,114,000) (705,000)Provision for deferred and prepaid income taxes 753,000 479,800 (37,812) Equity in undistributed earnings of subsidiaries (706,681) (651,566) (708,437) Total from operations $ 1,503,927 $ 1,318,289 $ 1,195,600 Proceeds from issuance of long-term debt 8,082,137 3,219,589 1,133,853 Increase in notes payable 4,834,709 5,307,526 2,288,703 Increase in accounts payable and accrued liabilities 655,196 1,123,451 116,552 Decrease (increase) in cash and time deposits (1,934,856) 841,088 (556,351) Changes in other assets and liabilities, net (1,422,812) (1,276,753) 367,559 Total funds provided $11,718,301 $10,533,190 $ 4,545,916 Funds were used for: Cost in excess of net tangible assets acquired $ 318,426 $ — $ 80,518 Additions to fixed assets, net of related sales 8,565,820 8,816,842 2,721,010 Payments on long-term debt 935,013 916,221 923,039 Increase in accounts receivable 1,263,010 664,095 540,921 Investment in preferred stock of affiliate 500,000 — — Purchase of treasury stock — — 34,375 Retirement of stock warrants — — 246,053 Cash dividends on preferred stock 136,032 136,032 — Total funds used $11,718,301 $10,533,190 $ 4,545,916 The accompanying notes are an integral part of this statement. S Part 1I—Page 11 I 7� CENCOR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION For the Three Years Ended December 31, 1980 1980 1979 1978 Funds were provided by: Operations: Net income $ 1,274,029 $ 987,149 $ 1,002,369 Items not requiring funds: Provision for credit losses 1,432,640 1,629,317 1,453,006 Depreciation 1,007,938 728,169 692,965 Amortization 398,647 420,725 427,404 Interest capitalized during construction (1,114,000) (705,000) — Provision for deferred and prepaid income taxes 769,000 503,000 (124,000) Increase (decrease) in unearned insurance commissions (58,695) 22,450 10,683 Total from operations $ 3,709,559 $ 3,585,810 $ 3,462,427 Proceeds from issuance of long-term debt 8,082,137 9,219,589 11,436,353 Bulk sales of installment notes receivable — — 254,284 Increase in notes payable 1,453,085 3,838,721 724,339 Increase in accounts payable and accrued liabilities 475,909 1,637,331 80,744 Increase in security deposits — 400,000 — Decrease in cash and time deposits 4,224,962 20,521 6,094 Changes in other asset and liabilities, net (833,459) (368,447) 867,897 Total funds provided $17,112,193 $18,333,525 $16,832,138 Funds were used for: Cost in excess of net tangible assets acquired $ 318,426 $ — $ 80,518 Increase (decrease) in installment loans, net of unearned discount, interest and finance charges (2,043,245) 1,396,899 7,238,759 Bulk purchases of installment notes receivable 4,417,090 3,099,050 3,203,641 Additions to fixed assets, net of related sales 8,885,015 10,252,388 3,394,893 Payments on long-term debt 3,662,113 2,496,521 2,119,539 Increase in accounts receivable 1,224,434 932,175 486,624 Investment in preferred stock of affiliate 500,000 — — Purchase of treasury stock — — 34,375 Retirement of stock warrants — — 246,053 Cash dividends on preferred stock 136,032 136,032 — Cash dividends on preferred stock of subsidiary 12,328 20,460 27,736 Total funds used $17,112,193 $18,333,525 $16,832,138 The accompanying notes are an integral part of this statement. Part I1—Page 12 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET-DECEMBER 31, 1980 AND 1979 ASSETS 1980 1979 Cash (Note 3) $ 577,757 $ 5,350,657 Time deposits (Note 3) 310,000 1,690,000 Installment notes receivable (Notes 1 and 4): Discount-basis cash loans $43,730,673 $46,197,329 Interest-bearing cash loans 3,892,809 3,162,307 Sales contracts 17,668,032 15,035,227 $65,291,514 $64,394,863 Less: Unearned discount, interest and finance charges 9,548,090 9,696,078 Reserve for credit losses 1,965,419 1,927,248 Net installment notes receivable $53,778,005 $52,771,537 Prepaid and deferred income taxes (Note 7) 410,000 426,000 Prepaid expenses and supplies 260,684 284,937 Fixed assets,at cost (Notes 1 and 5): Land $ 10,000 $ 10,000 Building 4,072 4,072 Furniture, equipment and leasehold improvements 1,462,196 1,167,788 $ 1,476,268 $ 1,181,860 Less—Accumulated depreciation and amortization 871,425 772,851 Net fixed assets $ 604,843 $ 409,009 Unamortized debt expense (Note 1) 265,549 325,941 Other assets 120,661 204,686 $56,327,499 $61,462,767 The accompanying notes are an integral part of this balance sheet. 11 Part II—Page 13 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET-DECEMBER 31, 1980 AND 1979 LIABILITIES AND STOCKHOLDERS' EQUITY 1980 1979 Notes payable,unsecured (Note 3): Banks $10,500,000 $13,763,800 Investment certificates 410,798 528,622 Accounts payable and accrued liabilities 1,312,383 1,408,375 Accrued income taxes (Note 7) 579,162 65,443 Unearned insurance commissions (Note 1) 415,027 473,722 Security deposits, bearing interest at 9% 400,000 400,000 Senior debt (Note 8) 20,740,968 22,399,468 Subordinated debt (Note 8) 9,843,800 10,912,400 Stockholders'equity (Notes 9 and 10): Junior Prior Preferred Stock, 6%, $100 par value $ — $ 100,000 Cumulative Preferred Stock, $5 par value: $.70 Convertible Series 46,465 59,030 $.50 Second Series 250,000 250,000 $.50 Third Series 500,000 500,000 Common Stock, $1 par value: Regular, 940,938 shares issued and outstanding 940,938 940,938 Class B, 10,000 shares issued and outstanding 10,000 10,000 Paid-in capital 4,006,866 4,019,366 Retained earnings 6,371,092 5,631,603 Total stockholders' equity $12,125,361 $11,510,937 $56,327,499 $61,462,767 The accompanying notes are an integral part of this balance sheet. Part 11—Page 14 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME For the Three Years Ended December 31, 1980 1980 1979 1978 Revenues (Note 1): Earned discount, interest and finance charges $12,689,124 $11,945,075 $10,550,303 Insurance commissions and other 1,406,109 1,120,161 1,115,903 $14,095,233 $13,065,236 $11,666,206 Expenses: Operating expenses $ 5,772,590 $ 5,574,155 $ 5,203,227 Provision for credit losses 1,298,081 1,359,695 1,394,354 Interest on long-term debt 3,206,711 2,762,295 2,268,937 Interest on notes payable 2,328,423 2,236,615 1,416,520 Amortization of debt expense 67,611 68,346 64,998 $12,673,416 $12,001,106 $10,348,036 Income before provision for income taxes $ 1,421,817 $ 1,064,130 $ 1,318,170 Provision for income taxes (Note 7) 670,000 493,000 656,000 Net income $ 751,817 $ 571,130 $ 662,170 Preferred stock dividends 12,328 20,460 27,736 Net income applicable to common stock $ 739,489 $ 550,670 $ 634,434 Average common shares outstanding 950,938 877,433 778,525 Net income per common share $.78 $.63 $.81 The accompanying notes and consolidated statement of operating expenses are an integral part of this statement. 1 Part 11—Page 15 411 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT or PAID-IN CAPITAL AND RETAINED EARNINGS For the Three Years Ended December 31, 1980 PAID-IN CAPITAL 1980 1979 1978 Beginning balance $4,019,366 $1,704,079 $1,714,554 Add—Premium on issuance of 172,413 shares of Regular Common Stock (Note 9) — 2,327,587 — Deduct—Premium paid on retirement of Cumulative Preferred Stock, $.70 Convertible Series (Note 6) 12,500 12,300 10,475 Ending balance (Note 10) $4,006,866 $4,019,366 $1,704,079 RETAINED EARNINGS Beginning balance $5,631,603 $7,580,933 $6,946,499 Add—Net income 751,817 571,130 662,170 Deduct: Cash dividends (Note 9): Junior Prior Preferred Stock, $6.00 per share $ 4,500 $ 10,500 $ 16,500 Cumulative Preferred Stock, $.70 Convertible Series, $.70 per share 7,828 9,960 11,236 Class B Common Stock, $250.00 per share — 2,500,000 - $ 12,328 $2,520,460 $ 27,736 Ending balance (Note 10) $6,371,092 $5,631,603 $7,580,933 The accompanying notes are an integral part of this statement. Part II—Page 16 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION For the Three Years Ended December 31, 1980 1980 1979 1978 Funds were provided by : Operations: Net income $ 751,817 $ 571,130 $ 662,170 Items not requiring the use of funds: Provision for credit losses 1,298,081 1,359,695 1,394,354 Depreciation and amortization 192,629 192,937 210,403 Provision for prepaid and deferred income taxes 14,200 2,900 (95,400) Increase (decrease) in unearned insurance commissions (58,695) 22,450 10,683 Total from operations $ 2,198,032 $ 2,149,112 $ 2,182,210 Bulk sales of installment notes receivable — — 254,284 Proceeds from issuance of Regular Common Stock — 2,500,000 — Proceeds from issuance of long-term debt — 6,000,000 10,302,500 Increase (decrease) in other assets and liabilities, net 256,530 432,722 (277,070) Total funds provided $ 2,454,562 $11,081,834 $12,461,924 Funds were used for: Increase (decrease) in cash and time deposits $(6,152,900) $ 841,520 $ (580,691) Increase (decrease) in installment loans, net of unearned discount, interest and finance charges (2,043,245) 1,396,899 7,238,759 Bulk purchases of installment notes receivable 4,417,090 3,099,050 3,203,641 Payments on long-term debt 2,727,100 1,580,300 1,196,500 Decrease in notes payable 3,381,624 1,518,805 1,254,364 Retirement of preferred stock 112,565 124,800 121,615 Cash dividends on preferred stock 12,328 20,460 27,736 Cash dividend on Class B Common Stock — 2,500,000 Total funds used $ 2,454,562 $11,081,834 $12,461,924 The accompanying notes are an integral part of this statement. 1 Part 1I—Page 17 . 7 CENTURY ACCEPTANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATING EXPENSES For the Three Years Ended December 31, 1980 1980 1979 1978 Salaries and wages $3,106,528 $3,053,067 $2,692,744 Rent 356,148 369,667 341,083 Telephone and telegraph 295,314 279,961 263,463 Payroll taxes 232,586 243,671 227,888 Advertising 191,623 170,875 192,728 Office supplies 183,039 194,042 190,323 Professional fees 178,105 156,658 166,899 Postage 164,814 167,765 151,601 Car allowance and collection 156,210 135,317 127,023 Travel 150,995 112,411 97,927 Other taxes and licenses 143,342 166,931 154,397 Credit reports 134,747 132,119 127,129 Utilities 103,451 89,468 84,931 Depreciation 93,893 81,355 80,068 Maintenance and repairs 90,493 74,948 71,227 Insurance and bonding 44,867 13,495 79,401 Dues and subscriptions 39,882 39,872 37,823 Other 106,553 92,533 116,572 $5,772,590 $5,574,155 $5,203,227 Part II—Page IS CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS For the Three Years Ended December 31, 1980 (1) Summary of Accounting Policies: (a) Principles of Consolidation—The consolidated financial statements include the accounts of CenCor, Inc. and its subsidiaries, all of which are wholly owned except for a nominal minority interest in its finance sub- sidiary. Century Acceptance Corporation. All significant intercompany accounts and transactions are eliminated in consolidation. CenCor, Inc. owns substantially all of the Common and Cumulative Preferred Stock, $.50 Second Series and $.50 Third Series, of Century Acceptance Corporation. (b) Recognition of Revenues—Income of the finance companies from discount-basis cash loans and sales contracts and commissions on the related sales of credit life and accident and health insurance are recognized over the terms of the loans using the sum of the months-digits method. No income is recognized in the month a loan is made; one and one-half months' income is recognized in the following month. Income from interest-bearing cash loans, delinquency fees and sales of term life insurance are recognized on a collection basis. The Company's operations also include day-care and preschool education, paramedical education, tax return preparation and temporary employment services. Income from day-care and preschool education and temporary employment services is recognized as the services are performed. Income from the tax preparation services is recog- nized upon collection. In 1979, the Company changed its method of recognizing tuition income from paramedical education services. Thirty-five percent of the tuition charged students is recognized in the month the student con- tracts to take the course to offset costs incurred in obtaining new students. The remaining portion of the tuition is recognized over the course life, using the straight-line method. Prior to 1979, 30% of the tuition was recognized in the month the student contracted to take the course and the remaining portion was recognized over the course life using the sum of the months-digits method. The effect of the change was not significant. (c) Credit Losses—The unpaid balances of installment notes receivable on which no installments have been received for 180 days and which are considered uncollectible by management are charged off against the reserve for credit losses. (d) Depreciation and Amortization—Buildings, furniture and equipment are depreciated over the estimated useful lives of the assets using primarily the straight-line method. Leasehold improvements are amortized over the terms of the related leases. Buildings are depreciated over 40 years; lease-hold improvements over 3 to 20 years; and furniture and equipment over 2 to 15 years. Maintenance and repairs are charged to expense as incurred. The cost of additions and improvements is capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the accounts and any gain or loss is recognized in the year of diposal. (e) Sales and Leasebacks—Gains and losses on fixed assets which have been sold and leased back are recognized over the term of the related lease agreements. (f) Debt Expense—Debt expense is amortized over the life of the related debt. (g) Acquisitions—Substantially all acquisitions by the Company, except for the acquisition of the finance subsidiary, have been accounted for by the purchase method, under which a portion of the purchase price is as- signed to net tangible assets acquired based upon their estimated value. The unallocated excess of the purchase price over net tangible assets acquired subsequent to October 31, 1970, is being charged against net income using terms of 4 to 40 years. The total amount charged against net income was $137,337 in 1980, $184,797 in 1979 and $182,997 in 1978. The unallocated excess of purchase price over net tangible assets acquired prior to Octo- ber 31, 1970 ($1,302,549), is not being amortized. (2) Capitalization of Interest: Beginning in 1979 in compliance with Statement of Financial Accounting Standards No. 34, the Company capitalized interest as part of the cost of constructing new day-care buildings instead of expensing interest costs as incurred. Interest capitalized before income tax effect during 1980 and 1979 was $1,114,000 and $705,000, respectively. Total interest incurred, including the amount capitalized, was $10,630,000 in 1980 and $8,069,000 in 1979. Part I1—Page 19 CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (3) Notes Payable: The terms and amounts of notes payable were as follows: 1980 1979 1978 CenCar,Inc. and Subsidiaries Notes payable to banks: Available bank lines of credit at end of year $47,305,000 $53,091,000 $44,790,000 Compensating balances maintained by the companies at end of year 2,311,000 6,914,000 6,112,000 Outstanding at end of year: Notes payable to banks 19,831,000 21,334,800 20,305,000 Commercial.paper 13,493,754 10,421,430 7,507,554 Maximum outstanding at monthend during the year: Notes payable to banks 27,346,000 24,921,000 23,200,000 Commercial paper 15,124,000 12,167,000 8,135,000 Combined 39,551,000 35,852,000 30,326,000 Average monthend balance: Notes payable to banks 22,913,000 22,066,000 19,503,000 Commercial paper 12,339,000 9,999,000 7,431,000 Combined 35,252,000 32,065,000 26,934,000 Weighted average interest rate on borrowings during the period: Combined 16.7% 12.9% 9.3% Weighted average interest rate on borrowings at end of year: Notes payable to banks 21.6% 15.5% 11.2% Commercial paper 17.8% 15.7% 10.6% Century Acceptance Corporation and Subsidiaries Notes payable to banks: Available bank lines of credit at end of year $29,000,000 $42,910,000 $35,910,000 Outstanding at December 31 10,500,000 13,763,800 14,723,000 Compensating balances maintained by Century at end of year — 5,457,000 5,267,000 Notes payable to banks and commercial paper— Maximum outstanding at monthend during the year 17,200,000 20,122,000 17,800,000 Average monthend balance outstanding during the year 13,316,667 16,980,000 14,867,000 Weighted average interest rate on monthend borrowings dur- ing the period 16.8% 12.7% 9.5% Weighted average interest rate on borrowings at end of year: Notes payable to banks 24.2% 15.4% 11.2% Commercial paper — — 11.1% The availability of the bank lines of credit is subject to the Companies remaining in sound financial con- dition, having no outstanding borrowings for a specified period each year and the maintenance by CenCor of operating accounts or compensating balances at the banks or the payment by Century of a commitment fee of 3/a of 1% of the total lines in lieu of compensating balances. These lines can be withdrawn at the banks' option. During 1980 Century revised its arrangements with the banks to require the above described commitment fee in lieu of the compensating balances previously maintained. The banks expect CenCor to maintain a minimum operating.account or compensating balance ranging from 15% to 20% of the line of credit or 10% of the line of credit plus 10% of the outstanding borrowings. In certain cases, third parties maintain compensating balances on behalf of CenCor equal to 20% of the line of credit, for Part 11—Page 20 CENCOR, INC. AND SUBSIDIARIES 1 NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (3) Notes Payable (Continued): which CenCor pays interest at the prime rate. The effective interest rate on notes payable to banks for CenCor, Inc. and Subsidiaries was 23.1% during 1980, 18.7% during 1979 and 12.6% during 1978, after giving effect to compensating balances and commitment fees. Century's effective interest rate on notes payable to banks, after giv- ing effect to commitment fees or compensating balances, was 23.0% during 1980, 18.6% during 1979 and 14.7% during 1978. There is no legal restriction on the withdrawal of these balances. CenCor, Inc. sells commercial paper with maturities from 5 to 270 days to institutions and individuals. Century discontinued the sale of commercial paper in 1979. (4) Installment Notes Receivable: The maximum term of installment notes receivable was 96 months in 1980 and 1979, although the finance sub- sidiary generally restricts maturities to 37 months. Interest rates on installment notes receivable ranged from 7% to 36% per annum. Contractual maturities at December 31, 1980, were estimated to be as follows: 1984 and Total 1981 1982 1983 Thereafter Discounts-basis and interest-bearing cash loans 100% 50% 34% 14% 2% Sales contracts 100% 71% 25% 4% — Experience of the finance industry indicates that a substantial portion of the installment notes receivable will be renewed many months prior to contractual maturity dates. Accordingly, the preceding tabulation cannot be regarded as a forecast of future cash collections. In the years ended December 31, 1980 and 1979, cash collections on installment notes receivable were $46,669,000 and $48,680,000, respectively, and the ratio of collections to average receivable balances was 74.6% and 78.3%, respectively. (5) Leases: The Companies rent office space and buildings generally under long-term lease arrangements ranging from 3 to 20 years. Such arrangements contain renewal options and provide that the Companies pay utilities, main- tenance, insurance and property taxes. The Companies also rent various equipment and automobiles under leases of less than three years, which are generally cancelable within 30 days. The Companies' leases are operating leases as defined by Financial Accounting Standards Board Statement No. 13. Rental expense for these leases was $3,258,000 in 1980, $2,652,000 in 1979 and $2,201,800 in 1978 for CenCor, Inc. and Subsidiaries. Aggregate minimum future rentals payable under the operating leases at December 31, 1980, were: Century Acceptance CenCor,Inc. Corporation (Includes Century) 1981 $212,000 $ 2,855,000 1982 121,000 2,374,000 1983 74,000 2,062,000 1984 50,000 1,919,000 1985 41,000 1,824,000 1986-1990 107,000 7,300,00O 1991 and thereafter — 5,783,000 $605,000 $24,117,000 (6) Transactions with Affiliates: Prior to 1978, CenCor, Inc. advanced amounts to and received payments from an income tax service company (Cor, Inc.) and its subsidiaries owned by CenCor, Inc.'s chief executive officer. No advances were made in 1980. The balance of advances and notes receivable from Cor, Inc. and its subsidiaries at December 31, 1980 and 1979, was $180,000 and $231,000, respectively. The note receivable bears interest at 7% and is secured by the Part 1I—Page 21 1 CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 III (6) Transactions with Affiliates—(Continued): chief executive officer's personal guarantee and 100,000 shares of CenCor, Inc.'s Regular Common Stock which had a quoted market value of $700,000 at March 4, 1981. The balance of the note plus accrued interest is due on June 30, 1981. Management of CenCor, Inc. has represented that no additional advances will be made di- rectly or indirectly to any officer, director or employee. In August 1980, the Company acquired for investment purposes, $500,000 Series B Preferred Stock in Jayhawk Bancshares, Inc. This stock has no voting rights and has a dividend rate of 12% per annum. CenC,or's chief executive officer owns the controlling interest in Jayhawk Bancshares, Inc. (7) Income Taxes: The Companies file a consolidated federal income tax return. Investment tax credits are recorded as a reduc- tion of the provision for income taxes in the year in which the credits are realized. The provision for income taxes for the three years ended December 31, 1980, consisted of the following: CenCor, Inc. and Subsidiaries 1980 1979 1978 Federal income taxes: Payable currently (refundable) $(137,100) $167,800 $990,900 Timing differences arising from: Capitalized interest 512,400 324,300 — Accelerated depreciation 187,700 - - Insurance commissions recognized on cash basis for tax purposes 27,000 (10,300) (5,100) Initial fees recognized on cash basis for tax purposes 19,100 16,600 (61,600) Prepaid expenses deducted currently for tax purposes 46,100 75,300 16,900 Other (76,100) 78,300 (83,100) State income taxes: Payable currently 20,200 56,700 96,600 Deferred and prepaid 95,700 26,300 (8,600) Income tax provision $ 695,000 $735,000 $946,000 Century Acceptance Corporation and Subsidiaries Federal income taxes: Payable currently $ 581,000 $434,100 $690,400 Timing differences arising from: Insurance commissions recognized on cash basis for tax purposes. 27,000 (10,300) (5,100) Initial fees recognized on cash basis for tax purposes 19,000 16,600 (61,600) Expenses recognized on cash basis for tax purposes (19,700) 13,200 (26,500) Other (13,900) (15,500) 5,600 State income taxes: Payable currently 74,800 56,000 61,000 Prepaid and deferred 1,800 (1,100) (7,800) Income tax provision $ 670,000 $493,000 $656,000 Part 11—Page 22 CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) 11 For the Three Years Ended December 31, 1980 (7) Income Taxes—(Continued) A reconciliation between the provision for income taxes as reported in the statement of income and the provision computed at the statutory federal rates of 48% in 1978 and 46% in 1979 and 1980 follows: CenCor, Inc. and Subsidiaries 1980 1979 1978 Provision computed at statutory federal rate $912,000 $802,000 $949,000 State income taxes 116,000 83,000 88,000 Other 22,000 34,000 8,000 Investment and new jobs tax credits (355,000) (184,000) (99,000) Provision for income taxes as reported in the statement of income $695,000 $735,000 $946,000 Century Acceptance Corporation and Subsidiaries Provision computed at statutory federal rate $654,000 $489,500 $632,700 State income taxes 76,600 54,900 53,200 Other (34,600) (44,400) (26,200) Investment and new jobs tax credit (26,000) (7,000) (3,700) Provision for income taxes as reported in the statement of income $670,000 $493,000 $656,000 (8) Long-Term Debt: The covenants of the various long-term debt agreements of the Company and its finance subsidiary provide certain limitations on the amount and type of indebtedness. Among other provisions, these covenants require the Companies to maintain net worth at certain minimum levels. Long-term debt at December 31, 1980 and 1979 consisted of: 1980 1979 Century Acceptance Corporation: Senior debt: 71/4% payable $250,000 annually through 1982 $ 500,000 $ 750,000 9'/4% payable at various dates through 1982 174,075 211,075 93/4% payable at various dates through 1985 566,893 688,393 95/e% payable $1,250,000 annually 1980 through 1989 11,250,000 12,500,000 10.15% payable $525,000 annually 1981 through 1990 5,250,000 5,250,000 105% payable $300,000 annually 1982 through 1991 3,000,000 3,000,000 Total senior debt $20,740,968 $22,399,468 Subordinated debt: i Senior subordinated notes: 101/4% payable in 1981 $ 1,033,800 $ 1,284,400 1 81/4% payable $220,000 annually through 1984 880,000 1,100,000 87/s% payable $168,000 annually through 1986 and $152,000 in 1987 1,160,000 1,328,000 113% payable $300,000 annually 1982 through 1991 3,000,000 3,000,000 Total senior subordinated debt $ 6,073,800 $ 6,712,400 Junior subordinated notes: 6% payable$100,000 annually $ — $ 100,000 9% payable $30,000 annually through 1984 120,000 150,000 91/4% payable $300,000 annually through 1988 2,400,000 2,700,000 9% payable $75,000 annually 1981 through 1990 750,000 750,000 101/2% payable $50,000 annually 1983 through 1992 500,000 500,000 Total junior subordinated debt $ 3,770,000 $ 4,200,000 Total Century Acceptance Corporation $30,584,768 $33,311,868 Part 11—Page 23 A- CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (8) Long-Term Debt—(Continued): 1980 1979 CenCor, Inc.: Subordinated debentures- 9441% due 1982 $ 1,500,862 $ 1,702,112 91/2% due 1983, Series A 144,300 152,700 101/4% due 1984 2,722,265 3,075,929 10% due 1986, Series A 948,256 1,062,022 Subordinated notes: 151/2% due 1984, Series B $ 4,769,385 $ 10,000 134% due 1985, Series C 940,280 — 151/% due 1985, Series C — — 151/2% due 1987, Series B 227,615 5,500 71/2% due 1989 688,600 690,550 Total subordinated debentures and notes $11,941,563 $ 6,698,813 Real estate and other: 10% payable seminannually through 1990 $ 2,739,487 $ 2,893,538 14% payable semiannually through 1991 1,989,537 — Real estate notes and mortgages, 7% to 12% payable in monthly installments through 1997 487,501 377,550 Notes payable on acquisitions, 71/2% to 81/2% payable in installments through 1985 44,449 85,512 Total real estate and other $ 5,260,974 $ 3,356,600 Total CenCor, Inc. $17,202,537 $10,055,413 Total consolidated $47,787,305 $43,367,281 Less—Current maturities and sinking fund requirements 4,954,800 2,733,400 Total consolidated long-term debt $42,832,505 $40,633,881 Scheduled maturities and sinking fund requirements on long-term debt for Century Acceptance Corporation and CenCor, Inc. and Subsidiaries at December 31, 1980, were: Century Acceptance CenCor,Inc. Corporation (Including Century) 1981 $ 3,851,800 $ 4,954,800 1982 3,582,000 4,808,068 1983 3,228,075 3,803,591 1984 3,218,000 5,554,682 1985 3,534,893 11,303,682 1986 and thereafter 13,170,000 17,362,482 $30,584,768 $47,787,305 Part 11—Page 24 CENCOR, INC. AND SUBSIDIARIES ( 1 NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (8) Long-Term Debt—(Continued): Effective January 26, 1981, the Company increased the interest rates on its unissued Subordinated Notes, Series C, from 1334% to 151/2%. Of the $5,500,000 of authorized notes in Series C, $940,280 have been issued as of December 31, 1980. Subordinated Notes, Series C. were the only debentures and notes being offered for sale to the public at December 31, 1980. Upon the death or physical inability of the chief executive officer to exercise the full authority of that office, the holders of substantially all of the Century Acceptance Corporation's long-term debt may give notice accelerating the maturity of the debt to not less than 270 days after notice. Upon termination of the chief executive officer for other than death or physical inability, maturity could be accelerated to not less than 60 days. The 10% real estate note agreement provides that $250,000 of the principal shall become due upon the failure of CenCor, Inc.'s president to be the chief executive officer of CenCor, Inc. and own or control at least 25% of the Regular Common Stock of CenCor, Inc. The note is secured by day-care facilities with a cost of $4,627,000 and an assignment of a $250,000 insurance policy on the life of the president of the Company. The 14% real estate note is secured by day-care facilities with a cost of $2,653,000. (9) Common and Preferred Stock: CenCor,Inc. and Subsidiaries In 1978 the board of directors approved and the stockholders adopted a Plan of Recapitalization. The Plan provided that: (a) each outstanding share of common stock, $1 par value, became one Preferred Share, $1 par value, with cumulative cash dividends at the rate of$.40 per share per annum; (b) each stockholder was entitled to convert on or before January 22, 1979, all such Preferred Shares held into Regular Common Shares, $1 par value, on a share for share basis; (c) the Preferred Shares have a liquidation preference of $5 senior to other stockholders' claims and (d) the Preferred Shares will be redeemable at the option of the Company at $5 per share after January 1, 1984. At the completion of the Recapitalization on January 22, 1979, and after retirement of all CenCor's re- acquired common stock, there were 340,079 Preferred Shares and 1,295,771 Regular Common Shares issued and outstanding, all with $1 par value. There are 1,650,000 shares of Preferred Stock and 1,825,000 shares of Regular Common Stock authorized. The Preferred Stock has the same voting rights as the Regular Common Stock. The accompanying financial statements reflect the results of the Plan of Recapitalization as though it had become effective as of December 31, 1978. At December 31, 1980, 1,348 shares of CenCor's unissued Regular Common Stock were reserved for acquisi- tion of the minority interest in Century Acceptance Corporation. A stock option plan was established in July, 1978 providing for the purchase of 189,730 shares of CenCor's Regular Common Stock by officers and key employees of CenCor and its subsidiaries. No options have been granted under the plan as of December 31, 1980. ( Part 11—Page 25 ti CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (9) Common and Preferred Stock—(Continued): Century Acceptance Corporation and Subsidiaries The number of authorized and outstanding shares of capital stock of Century at December 31, 1980, 1979 and 1978, was as follows: Outstanding Authorized 1980 1979 1978 Prior Preferred Stock, $100 par value, 40,000 shares au- thorized, issuable in series— First Series, 61/2% 5,000 Second Series, 6'/4% 3,000 — — — Third Series, 7r/2%a 5,000 — — — Junior Prior Preferred Stock, 6% 10,000 — 1,000 2,000 Preferred Stock, 250,000 shares authorized, issuable in series— Cumulative— $.70 Convertible Series 50,000 9,293 11,806 14,306 $.50 Series 40,000 — — — $.50 Second Series 50,000 50,000 50,000 50,000 $.50 Third Series 100,000 100,000 100,000 100,000 Common Stock— Regular 1,100,000 940,938 940,938 768,525 Class B 500,000 10,000 10,000 10,000 Cumulative Preferred Stock, $.70 Convertible Series, has cumulative dividend preference of $.70 per share per annum over the Common Stock. The stock has a preference in involuntary liquidation of $10.00 per share plus accrued dividends and is redeemable at $10.50 per share plus accrued dividends. Century is required to make annual deposits into a sinking fund of the lesser of $25,000 or 5% of the preceding fiscal year's consolidated net earnings, as defined, or of the equivalent in reacquired stock valued at the redemption price. Cumulative Preferred Stock, $30 Second Series and $.50 Third Series, have cumulative dividend preference of $.50 per share per annum over the Common Stock. The stock has a preference in involuntary liquidation of $10.00 per share plus accrued dividends. CenCor, Inc., owner of these outstanding shares, has permanently waived its right to dividends. The 10,000 shares of 6% Junior Prior Preferred Stock may be issued by resolution of the board of directors. In addition, the 40,000 shares of Cumulative Preferred Stock, $.50 Series, have been redeemed and may be re- issued by resolution of the board of directors. (10) Paid-In Capital and Retained Earnings Restrictions: At December 31, 1980, under the provisions of the Certificate of Incorporation of Century Acceptance Corporation, $796,000 of its paid-in capital was unavailable for payment of common stock dividends, for pur- chase of outstanding common stock or for making unscheduled retirements of subordinated debt. The various note agreements of the Company and Century Acceptance Corporation contain certain restrictions as to the amount of retained earnings available for paying cash dividends, purchasing outstanding capital stock and for making unscheduled retirements of subordinated debt. At December 31, 1980, $4,862,000 of Century's retained earnings and $3,532,000 of the consolidated retained earnings were unavailable for these purposes. (11) Commitments: The Company has contracted for and is in the process of negotiating contracts for the construction of ad- ditional day-care buildings. The total estimated cost of these buildings under contract and contract negotiation at December 31, 1980, excluding interest that will be capitalized, was $1,806,000. Part II—Page 26 L CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December 31, 1980 (11) Commitments—(Continued): In January 1981, the Company purchased all of the outstanding stock of the Southern California College of Medical and Dental Assistants, Inc. for $400,000 cash. The acquisition was accounted for as a purchase in 1981. (12) Segment Information: The Company operates principally in five personal service industries as described below: a. Day-care and Preschool Education—involves the operation of day-care and preschool education centers for children. b. Consumer Finance—involves the making of consumer loans to individuals, generally including credit life, accident and health insurance and the purchasing of retail installment sales contracts. c. Temporary Help—involves providing temporary personnel to various business, professional and service organizations to perform general office functions. d. Paramedical Education—involves the operation of schools which offer courses for vocational train- ing as a medical or dental assistant. e. Tax Return Preparation—involves preparation of tax returns by public accountants or bookkeepers through Company-owned, franchise or satellite offices. Revenues by industry include revenues from unaffiliated sources, as reported in the consolidated income state- ment, and intersegment interest income. Operating profit represents total revenues less operating expenses, excluding general corporate expenses, in- come taxes and minority interest. Operating profit in the consumer finance segment is net of interest and debt expenses. Identifiable assets are those used in the Company's operations in each industry. Corporate assets consist principally of cash. Industry Segments at December 31,1980 Daycare Tax Adjustments and Para- Return and Preschool Consumer Temporary medical Prepara• Elimina- Education Finance help Education Lion Other Hone Consolidated Revenues from unaffiliated sources $23,442,270 $14,067,337 $3,927,636 $3,338,589 $1,932,119 $ 66,043 $ - $46,773,994 Intersegment revenues — 27,896 — — — — (27,896) — Total revenues $23,442,270 $14,095,233 $3,927,636 $3,338,589 $1,932,119 $ 66,043 $(27,896) $46,773,994 rte" Operating profit $ 3,385,092 $ 1,421,817 $ 313,920 $ 662,008 $ 209,430 $ — $ — $ 5,992,267 1 General corporate expenses 96,972 ;` Interest and debt expenses for segments other than consumer finance 3,912,888 Income before income taxes and minority interest $ 1,982,407 Identifiable assets at December 31, 1980 $31,875,944 $56,327,499 $ 867,590 $4,033,664 $1,662,917 $ 45,381 $ — $94,812,995 Corporate assets 4,254,643 Total assets at December 31, 1980 $99,067,638 1 Depreciation and amortiza- tion $ 826,446 $ 192,629 $ 17,381 $ 82,200 $ 90,715 $ — Capital expenditures $11,418,042 S 315,378 $ 3,825 $ 147,245 $ 43,749 $ — Part II—Page 27 �In CENCOR, INC. AND. SUBSIDIARIES NOTES-TO FINANCIAL STATEMENTS—(Continued) For the Three Years Ended December'31, 1980 (12) Segment Information—(Continued): Industry Segments at December 31,1979 Day-care Tax Adjustments and Para- Return and Preschool Consumer Temporary medical Preppaare- Elimtna- Education Pinance Help Education tlon Other tlons Consolidated Revenues from unaffiliated sources $16,863,603 $13,033,208 $3,655,793 $2,673,388 $1,995,690 $ 70,808 $ - $38,292,490 Intersegment revenues — 32,028 — —.. — — (32,028) — Total revenues $16,863,603 $13,065,236 $3,655,793 $2,673,388 $1,995,690 $ 70,808 $(32,028) $38,292,490 Operating profit $ 2,505,533 $ 817,314 $ 250,105 $ 402,703 $ 160,856 $ — $ — $ 4,136,511 General corporate expenses 95,930 Interest and debt expenses for segments other than consumer finance 2,297,190 Income before income taxes and minority interest $ 1,743,391 Identifiable assets at December 31, 1979 $21,726,188 $61,303,205 $1,032,568 $2,962,462 $1,764,043 $ 46,114 $ - $88,834,580 Corporate assets 1,762,450 Total assets at December 31, 1979 $90,597,030 Depreciation and amortiza- tion $ 576,835 $ 124,591 $ 69,571 $ 69,771 $ 145,625 $ — Capital expenditures $10,557,046 $ 175,566 $ 5,477 $ 211,319 $ 7,979 $ — Industry Segments at December 31,1978 Day-care Tax Adjustments and Para- Return and Preschool Consumer Temporary medical Prepara- Eltmtna- Edacation Finance Help Education tlon Other tlona Consolidated Revenues from unaffiliated sources $13,552,209 $11,644,350 $2,987,349 $2,170,187 $1,996,558 $ 23,685 $ — $32,374,338 Intersegment revenues — 21,856 -- -- — 4,355 (26,211) — Total revenues $13,552,209 $11,666,206 $2,987,349 $2,170,187 $1,996,558 $ 28,040 $(26,211) $32,374,338 Operating profit $ 2,156,495 $ 1,150,109 $ I60,711 $ 401,479 $ 119,754 $(56,755) $ — $ 3,931,793 General corporate expenses 67,438 Interest and debt expenses for segments other than consumer finance 1,887,146 Income before income taxes and minority interest $ 1,977,209 Identifiable assets at December 31, 1978 $12,500,574 $57,560,100 $ 956,884 $2,456,947 S1,952,610 $ 32,766 $ — $75,459,881 Corporate assets 1,795,960 Total assets at December 31, 1978 $77,235,841 Depreciation and amortiza- tion $ 556,861 $ 145,405 $ 69,336 $ 41,768 $ 142,846 $ 7,944 ; Capital expenditures $ 3,155,452 $ 77,160 $ — $ 123,673. $ 32,943 $ 5,665 Part II—Page 28 CENCOR, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS-(Continued) For the Three Years Ended December 31, 1980 (13) Quarterly Financial Information (Unaudited): The results of operations for each of the four quarters of 1980 and 1979 are summarized below. The results of operations for the third and fourth quarters of 1980 are restated from the information previously reported to consider the effect of adjustments to interest expenses. Such restatements had the effect of increasing previously reported net income in the fourth quarter and reducing net income in the third quarter by $70,000 ($.06 per share). For the Quarter Ended 1980 March 31 June 30 September 30 December 31 Revenues $11,467,297 $11,486,519 $11,420,998 $12,399,180 Provision for credit losses $ 309,750 $ 294,750 $ 398,150 $ 429,990 Income before income taxes and minority interest $ 645,141 $ 545,143 $ 262,857 $ 529,266 Net income $ 346,470 $ 369,371 $ 217,322 $ 340,866 Preferred stock dividends 34,008 34,008 34,008 34,008 Net income applicable to regular common stock $ 312,462 $ 335,363 $ 183,314 $ 306,858 Earnings per regular common share $ .24 $ .26 $ .14 $ .24 For the Quarter Ended 1979 March 31 June 30 September 30 December 31 Revenues $10,264,123 $9,427,351 $8,913,050 $9,687,966 Provision for credit losses $ 373,359 $ 539,914 $ 380,892 $ 335,152 Income before income taxes and minority interest $ 824,085 $ 499,605 $ 407,360 $ 12,341 Net income $ 432,679 $ 269,722 $ 199,651 $ 85,097 Preferred stock dividends 34,008 34,008 34,008 34,008 Net income applicable to regular common stock $ 398,671 $ 235,714 $ 165,643 $ 51,089 Earnings per regular common share $ .31 $ .18 $ .13 $ .04 II Part 11—Page 29 REPORT OF INDEPENDENT ACCOUNTANTS To CenCor, Inc.: We have examined the balance sheet of CENCOR, INC. (a Delaware Corporation) and the consolidated balance sheets of CENCOR, INC. AND SUBSIDIARIES and CENTURY ACCEPTANCE CORPORATION (a Delaware Corporation and a subsidiary of CenCor, Inc.) AND SUBSIDIARIES as of December 31, 1980 and 1979, and the related statements of income, stockholders' equity (for CenCor, Inc. and CenCor, Inc. and Sub- sidiaries), paid-in capital and retained earnings (for Century Acceptance Corporation and Subsidiaries) and changes in financial position for each of the three years in the period ended December 31, 1980, and the sup- porting schedules listed in Item 11 of this Form 10-K. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of CenCor, Inc., CenCor, Inc. and Subsidiaries and Century Acceptance Corporation and Subsidiaries as of December 31, 1980 and 1979, and the results of their operations and changes in their financial position for each of the three years in the period ended December 31, 1980, and the supporting schedules present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles, which, except for the change in 1979 by CenCor, Inc. (with which we concur) in the method of accounting for interest cost in compli- ance with a statement of the Financial Accounting Standards Board and as explained in Note 2 to the financial statements, have been applied on a consistent basis. ARTHUR ANDERSEN & CO. Kansas City, Missouri, March 4, 1981. Part 11—Page 30 PART III Item 9: Directors and Executive Officers of the Registrant MANAGEMENT Officers and Directors The names of the directors* and executive officers of the Company are set forth below: Served Principal Position,Occupation for Name Since Age Last Five Years and Directorships Robert F. Brozman* 1968 60 President of the Company and of Century. Also Chairman of the (1)(2)(3) Boards of First State Bank of Kansas City, Kansas; Tower State Bank of Kansas City, Kansas; City Bank of Wichita, Kansas; Law- rence National Bank, Lawrence, Kansas; and Jayhawk Bancshares, Inc. Jack L. Brozman* 1979 31 Vice President of the Company. For over five years prior to (1)(3) January 1, 1979, Chief Executive Officer of Sound Disk-Tributors, Inc., d/b/a Streetside Records, a retail operation selling records and tapes in three locations in the St. Louis, Missouri area. Michael W. Sagan 1979 34 Secretary of the Company and Century since October 15, 1979. Attorney with the Company since June 1, 1978. For six years prior to that, attorney with Chicago Title Insurance Company. John W. Banks* 1976 66 Vice President of the Company and Executive Vice President of (1) Century (primarily responsible for operation of the consumer finance business). Robert L. Swan 1979 55 Vice President of the Company since April 26, 1979, and director of operations of the tax division of the Company for over five years. Molly M. McCarthy 1980 33 Vice President of the Company since January 14, 1980. During 1979, Salesperson for United Computing Services, Inc. (marketing computer hardware and software). February 1975 to January 1979, Salesperson for Office Products/Office Systems Division of IBM. Gordon L. Wells 1971 45 Treasurer of the Company and Century. Barney A. Karbank* 1968 57 President of B. A. Karbank and Company (industrial real estate). (2) Also a director of Mercantile Bank & Trust Company of Kansas City, Missouri, First Federal Savings and Loan of Kansas City, Missouri, and Chicago Title Company of Kansas City, Missouri. Charles E. James* 1968 76 Retired. Vice Chairman of the Boards of the First State Bank of Kansas City, Kansas and Tower State Bank of Kansas City, Kansas and, prior to 1975, Chairman of the Board of First National Bank of Liberty, Missouri. Daniel S. Millman* 1968 76 Attorney, Kansas City, Missouri. (2) (1) Messrs. Robert F. Brozman, Jack L. Brozman and Banks are members of the executive committee. (2) Messrs. Robert F. Brozman, Karbank and Millman are members of the compensation committee. (3) Messrs. Robert F. Brozman and Jack L. Brozman are father and son. The Company's Board of Directors has a standing compensation committee. It does not have either an audit or a nomination committee. Directors were elected April 24, 1980 to serve until the next annual meeting of stockholders or until their suc- cessors are duly elected and qualified. Officers serve at the pleasure of the Board of Directors. Part III—Page 1 rah smog. Item 10: Management Remuneration and Transactions (A) Remuneration The following table sets forth all remuneration paid by the Company and its subsidiaries during 1980 to each person who is a director of the Company whose aggregate direct remuneration exceeded $50,000 and each of the executive officers of the Company or its subsidiaries whose aggregate direct remuneration exceeded that amount, and to all directors, executive officers and other officers of the Company as a group. It also sets forth benefits payable upon retirement for such individuals and group. Cash and Cash Equivalent Forms of Remuneration Securities or Property, Salaries,Fees, Benefit or Aggregate of Name of Individual Directors'Fees, Reimbursement, Contingent or Number of Capacities in Commissions and Personal Forms of Persons in Group Which Served Bonuses Benefits Remuneration Robert F.Brozman President of the Company and Century. $ 87,170 $1,200(1) None All Directors, Executive Officers and Other Officers as a Group: eight $234,083 $3,600(1) —(2) persons (1) Mr. Brozman and two other officers are provided with automobiles which are available for their personal use as well as Company business. The Company estimates that the value of such personal use is approximately $1,200 per year for each automobile. (2) Upon the retirement in November 1979 of L. G. Feld, a former executive officer and director of the Com- pany and Century Acceptance Corporation, the Board of Directors approved retirement payments aggregat- ing $20,000 per year for the remainder of the lives of Mr. Feld and his spouse, subject to monthly review and approval by the Executive Committee based upon the financial condition of the Company. Each non-officer director is paid a director's fee of $100 for certain meetings of the Board which he attends. Officer directors do not receive any fees for attendance at meetings. The Company paid a total of $200 in directors' fees in the last fiscal year. No director received more than the standard fees disclosed above. On July 3, 1978, the Company adopted an Employee Stock Option Plan, which, prior to the grant of any options under such plan, was subsequently amended on November 11, 1978 (the "Amended Plan"). The Amended Plan covers officers and key employees of the Company and any subsidiary. A total of 189,730 shares of Regu- lar Common Stock may be issued pursuant to the Amended Plan. The option price will not be less than 100% of the fair market value of the Regular Common Stock on the date of the grant of the option. No options have been granted under the Amended Plan. (B) Interest of Management in Certain Transactions Mr. Brozman is the owner of Cor, Inc., a Delaware corporation, which operates 10 tax return preparation offices in the Kansas City area. One subsidiary of Cor. Inc. operates a temporary help office under the name CenCor Temporary Services in the State of Utah. Cor, Inc. was established in 1968 with the intention that it would be sold to the Company in the future without profit to Mr. Brozman. The Company has made no commitment to acquire Cor, Inc. Such an acquisition would not be considered prior to repayment of all indebtedness owed to the Company by Cor, Inc., the final installment of which is due in June, 1981. Management personnel of the Company, including Mr. Brozman, oversee the operations of Cor, Inc. In addition, the Company prepares the payroll and purchases supplies for Cor, Inc. which it then charges to Cor, Inc. in the same manner it does for subsidiaries of the Compary. Commencing January 1, 1978 the Company instituted a procedure whereby deposits from Cor, Inc, are obtained before making any payroll or purchase payments on behalf of Cor, Inc. Mr. Brozman spends, on the average, less than one hour per week on the business of Cor, Inc., and other Company personnel spend on the average, less than five hours per week on its business. Cor, Part I11—Page 2 Inc. was charged a management fee of $25,000 for all services rendered by Company personnel for the years 1977 and 1978. No fee was charged for 1979 or 1980. Cor, Inc. has a conflict of interest with the Company since the Company will not open tax return preparation offices in Kansas City or a temporary help office in Utah while Cor, Inc. continues with its present operations. Cor, Inc. is not expected to expand its operations in the future. Prior to January 31, 1977, the Company had receivables due from Cor, Inc. and subsidiaries in the maximum amount of $2,109,892, including accumulated interest at the rates of 4% and 7% per annum. During that same period, Cor, Inc. had receivables for advances made to Mr. Brozman in the maximum amount of $1,676,778. The advances to Cor, Inc. were made to finance its operations and to enable Cor, Inc. to make advances to Mr. Brozman. The advances made to Mr. Brozman were for personal investments. The Company's Board of Directors had approved the advances of the Company, and 90,000 shares of common stock of the Company were pledged by Mr. Brozman as collateral for advances receivable. Effective August 1, 1976, Cor, Inc. executed a Note for $1,229,907 in favor of the Company (which repre- sented the full balance of the receivable due from Cor, Inc.), with interest at the rate of 7% per annum, payable as follows: $547,778 plus accrued interest on or before January 31, 1977, and payment of $50,000 of principal plus accrued interest on or before June 30, 1977 through 1980 with the balance due June 30, 1981. The balances of advances and the Note Receivable at December 31, 1980 was $179,592 plus accrued interest since July 1, 1980. The Note is personally guaranteed by Mr. Brozman and secured by 100,000 shares of Regular Common Stock of the Company with a market value of approximately $700,000 at March 20, 1981. In the opinion of Manage- ment, the terms of the foregoing transactions were as fair as those which might have been obtained from a non- affiliated party. All amounts due from Mr. Brozman were paid on January 31, 1977. As of March 25, 1981, all amounts due the Company from Cor, Inc. have been paid when due. The Company has no receivables due from any officer or director, nor from any affiliate of an officer or director of the Company, except for the balance of $179,592 from Cor, Inc. The Company and Mr. Brozman have represented that no additional advances will be made directly or indirectly to any officer, director or em- ployee of the Company or their affiliates. Among the banks from which the Company and Century borrows money under established lines of credit are the First State Bank of Kansas City, Kansas, the Lawrence National Bank of Lawrence, Kansas and Tower State Bank of Kansas City, Kansas. Mr. Brozman is Chairman of the Board and Mr. James is Vice Chairman of the Board of First State Bank and Tower State Bank. Mr. Brozman is also Chairman of the Board of Lawrence National Bank of Lawrence, Kansas. During the 3 years ended December 31, 1980, the Company had loans outstanding from First State Bank in the maximum amount of $450,000 and paid interest of $78,222, and from Tower State Bank in the maximum amount of $200,000 and paid interest of $22,306 and from Lawrence National Bank in the maximum amount of $500,000 and paid interest in the amount of $33,610. In each case the maximum rate of interest paid during the period was 21%. The interest rates on such loans were comparable to those available at non-affiliated banks. At December 31, 1980 loans totaling $700,000 were outstanding. 1 Part 111—Page 3 a PART IV Item 11. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Description Page 1. Financial Statements: CenCor, Inc. (Parent Company Only) Balance Sheet II-4 Statement of Income II-8 Statement of Stockholders' Equity II-10 Statement of Changes in Financial Position II-11 Notes to Financial Statements II-19 Report of Independent Public Accountants II-30 CenCor, Inc. and Subsidiaries Consolidated Balance Sheet II-6 Consolidated Statement of Income II-9 Consolidated Statement of Stockholders' Equity II-10 Consolidated Statement of Changes in Financial Position II-12 Notes to Financial Statements II-19 Report of Independent Public Accountants II-30 Century Acceptance Corporation and Subsidiaries Consolidated Balance Sheet II-13 Consolidated Statement of Income II-15 Consolidated Statement of Paid-In Capital and Retained Earnings II-16 Consolidated Statement of Changes in Financial Position II-17 Consolidated Statement of Operating Expenses II-18 Notes to Financial Statements II-19 Report of Independent Public Accountants II-30 2. Financial Statement Schedules: CenCor, Inc. (Parent Company Only) Schedule V—Fixed Assets IV-8 Schedule VI—Accumulated Depreciation and Amortization of Fixed Assets 1V-10 Schedule VIII—Valuation and Qualifying Accounts and Reserves IV-12 Schedule IX—Short-term Borrowings IV-14 Schedule X—Supplementary Income Statement Information IV-15 I Part IV—Pape 1 A Description Page CenCor, Inc. and Subsidiaries Schedule V—Fixed Assets IV-9 Schedule VI—Accumulated Depreciation and Amortization of Fixed Assets IV-11 Schedule VIII—Valuation and Qualifying Accounts and Reserves IV-13 Schedule X—Supplementary Income Statement Information 1V-15 CenCor, Inc. (Parent Company Only) and CenCor, Inc. and Subsidiaries Schedule II—Amounts Receivable from Underwriters, Promoters, Directors, Officers, Employees, and Principal Holders (Other Than Affiliates) of Equity Securities of the Person and its Affiliates IV-3 Schedule III-Investment in, Equity in Earnings of, and Dividends Received from Affiliates and Other Persons IV-4 Schedule IV-Indebtedness of Subsidiaries and Affiliates—Noncurrent IV-7 Schedules other than those referred to above have been omitted as not ap- plicable or not required under the instructions contained in Regulation S-X or the information is included elsewhere in the financial statements or notes thereto. 3. Exhibits: Exhibit 3—Articles of incorporation and by-laws (Previously filed with the Securities and Exchange Commission) Exhibit 22—Subsidiaries of the Registrant IV-16 4. Reports on Form 8-K: No reports on Form 8-K were filed for the three months ended December 31, 1980. Part IV—Page 2 lum Schedule H CENCOR, INC. AND CENCOR, INC. AND SUBSIDIARIES (Parent Company Only and Consolidated) SCHEDULE II-AMOUNIS RECEIVABLE FROM UNDERWRITERS, PROMOTERS, DIRECTORS, OFFICERS, EMPLOYEES, AND PRINCIPAL HOLDERS (OTHER THAN AFFILIATES) OF EQUITY SECURITIES OF THE PERSON AND ITS AFFILIATES Balance at Balance at Beginning Collected Amounts End Name of Debtor of Period Additions Amounts Written Off of Period YEAR ENDED DECEMBER 31, 1978: Cor, Inc. and Subsidiaries $324,276 $ — $54,905 $ — $269,371 YEAR ENDED DECEMBER 31, 1979: Cor, Inc. and Subsidiaries $269,371 $ 7,390(2) $45,794 $ — $230,967 YEAR ENDED DECEMBER 31, 1980: Cor, Inc. and Subsidiaries $230,967 $12,866(2) $64,241 $ — $179,592(1) Notes: (1) Cor, Inc. is owned by R. F. Brozman, President of CenCor, Inc. The balance of advances and note receivable from Cor, Inc. at December 31, 1980, is evidenced by a note in the amount of $166,785, which bears interest at 7% and is secured by 100,000 shares of CenCor, Inc.'s regular common stock and Mr. Brozman's personal guarantee. The note plus accrued interest is due June 30, 1981. (2) Represents accrued interest on the note receivable. I Part 1V—Page 3 Schedule HI 0 v °' v 00 -' o M 6 v , 'r+ F A 7 cc oo N O O N 0o 0 in ,O Bo a' .—, u w 4s v s9 69 eW Fa, w� A e o h —, -, .Ni q�g aJ W a m l� A 0 0 O o N W L 4 r A O O O V A ea •--i 00 h In O O a: N�� 08 za ��o � .. Z A I I I I I Ili I O o ds 64 EA y as 3 cie o A At I I I I I I I _ :w 11 2E 6 v ± m T.c. o 3 -0 ads 3 I I I I I I I -.- 4g Wtd . ° 0 a - z A w to a � Pe = Oco U D P' pN a 4 •9,gp 0 o M en a ^t W W W 7 F rec M M I O • O VV L� s 0. WW EA EA 44 F U d 00 en O o ClN 0 dr.. 0 q W .. 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"'U A �,'Y v >MM va in U A V o W En U.� C) Y 4 L Od 4 ..H 8 a O 2 U Ln tiro R K q U .a+ Otiw W Mw Vi V3 Q 8F 8'i � RRR0 LI K g.z � OTQ �UUd >� c0,-. dU aP+ a SUP,ca oa'� � LY. � aav� N GQ y A U� V 0.r UG�.aa�"yU o ..,vv W VI W d z U U Part IV—Page 5 S Schedule III (Concluded) n m o v oo g $ M 0 8 8 N c� N dd cc 8 oo atIg O O en , b an h In in ra el 9 '" at u a a a `' et "-' .� ^ N CpC II: O y v O wF os0 .o g §8 i 0 .0 'n oo u, v' O 6 cz ta d.� '". do Lel O Z o 0''-4a 0 o el 0 g - z he I I I I I 0 4, 69 4 0 p4 CC0,4 ° O co 0 0 i "/ O O m ~ zq � ° a I I I I I I I I I Pe Q� 69 4 69 4 U II. 7 0' p . C q N N1 y O rji .. 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O cc y v h y h iGi. �dw `„"'� �"'oyno¢ o �'�0O Et o ar to ' yvu'o w n poop fl 'nt >tn"n U/AV44W`n ^.>^ o3a aaa= OO U W a t'el Nb'4aosptiog ° Nb U O N 4J tuaciat6464 [] 'OF Q• �+ EJ fO N N N V Zi O p� }�Uv ..it ). @., M a a0. a 0 Oh Zr, E, . d `° ..,-..-. RS >.� F yU pzpm,Goa oP+ IC y,,eie � Op 0. z....VEd 0. 0.. y U U Part IV—Page 6 U Schedule IV CENCOR, INC..AND CENCOR, INC. AND SUBSIDIARIES (Parent Company Only and Consolidated) SCHEDULE IV-INDEBTEDNESS OF AND TO SUBSIDIARIES AND AFFILIATES-NONCURRENT Balance at Balance at Balance at Balance at December 31, December 31, December 31, December 31, Name 1980 1979 1978 1977 CENCOR, INC. (Parent Company Only): SUBSIDIARIES: Century Acceptance Corporation $ 25,560(1) $(28,900)(1) $(67,200)(1) $(98,334)(1) Minnesota Institute of Medical and Dental Assistants, Inc. 72,325(1) 48,240 (1) 22,941 (1) 53,126 (1) Texas College of Medical and Dental Assistants, Inc. 76,499(1) 55,369 (1) 105,907 (1) 120,949 (1) $174,384 $ 74,709 $ 61,648 $ 75,741 CENCOR, INC. AND CENCOR, INC. AND SUBSIDIARIES (Parent Company Only and Consolidated): AFFILIATES: Practice Management Services $ — $ — (2) $255,249 $255,249 Jayhawk Bancshares, Inc. 23,167(3) — — — $ 23,167 $ — $255,249 $255,249 Notes: (1) Represents intercompany advances to and (from) subsidiaries that are eliminated in consolidation. (2) During 1979, this receivable was written off. (3) Represents preferred stock dividends receivable. S Part 1V—Page 7 I. Schedule V CENCOR, INC. (Parent Company Only) SCHEDULE V—FIXED ASSETS Balance at . Other Balance at Beginning Additions Retirements Changes(2) End Classification of Period at Cost(1) or Sales(1) Add (Deduct) of Period YEAR ENDED DECEMBER 31, 1978: Land $ 1,804,077 $ 900,938 $ 353,896 $ — $ 2,351,119 Buildings 3,502,384 311,513 798,671 1,312,215 4,327,441 Day-care buildings under construction 511,034 2,694,209 4,576 (1,923,117) 1,277,550 Furniture, equipment and lease- hold improvements 3,576,123 561,635 226,220 — 3,911,538 $ 9,393,618 $ 4,468,295 $ 1,383,363 $ (610,902) $11,867,648 YEAR ENDED DECEMBER 31, 1979: Land $ 2,351,119 $ 1,840,173 $ 207,788 $ (4,500) $ 3,979,004 Buildings 4,327,441 70,057 604,566 3,209,441(4) 7,002,373 Day-care buildings under construction 1,277,550 7,666,069 400,132 (3,217,273) 5,326,214(3) Furniture, equipment and lease- hold improvements 3,911,538 1,154,726 139,277 (36,918) 4,890,069 $11,867,648 $10,731,025 $ 1,351,763 $ (49,250) $21,197,660 YEAR ENDED DECEMBER 31, 1980: Land $ 3,979,004 $ 1,722,607 $ 486,669 $ — $ 5,214,942 Buildings 7,002,373 258,453 1,362,696 11,337,563(4) 17,235,693 Day-care buildings under construction 5,326,214 8,099,523 1,149,193 (10,281,372) 1,995,172(3) Furniture, equipment and lease- hold improvements 4,890,069 1,497,212 266,532 — 6,120,749 $21,197,660 $11,577,795 $ 3,265,090 $ 1,056,191 $30,566,556 Notes: (1) The majority of these additions and retirements are related to the acquisition of day-care buildings and the sale and leaseback arrangements related thereto. (2) The majority of these amounts represent transfers from day-care buildings under construction to completed buildings, including capitalized interest. (3) Includes interest capitalized at end of period. (4) Includes interest capitalized on day-care buildings completed during the period. Part IV—Page 8 Schedule V ih CENCOR, INC. AND SUBSIDIARIES SCHEDULE V—FIXED ASSETS Balance at Other Balance Beginning Additions Retirements Changes(2) at End Classification of Period at Cost(1) or Sales(1) Add (Deduct) of Period YEAR ENDED DECEMBER 31, 1978: Land $ 1,814,077 $ 900,938 $ 353,896 $ — $ 2,361,119 Buildings 3,506,456 311,513 798,671 1,312,215 4,331,513 Day-care buildings under construction 511,034 2,694,209 4,576 (1,923,117) 1,277,550 Furniture, equipment and lease- hold improvements 4,637,412 670,544 245,930 — 5,062,026 $10,468,979 $ 4,577,204 $ 1,403,073 $ (610,902) $13,032,208 YEAR ENDED DECEMBER 31, 1979: Land $ 2,361,119 $ 1,840,173 $ 207,788 $ (4,500) $ 3,989,004 Buildings 4,331,513 70,057 604,566 3,209,441(4) 7,006,445 Day-care buildings under construction 1,277,550 7,666,069 400,132 (3,217,273) 5,326,214(3) Furniture, equipment and lease- hold improvements 5,062,026 1,319,249 194,048 55,881 6,243,108 $13,032,208 $10,895,548 $ 1,406,534 $ 43,549 $22,564,771 YEAR ENDED DECEMBER 31, 1980: Land $ 3,989,004 $ 1,722,607 $ 486,669 $ — $ 5,224,942 Buildings 7,006,445 258,453 1,362,696 11,337,563(4) 17,239,765 Day-care buildings under construction 5,326,214 8,099,523 1,149,193 (10,281,372) 1,995,172(3) Furniture, equipment and lease- hold improvements 6,243,108 1,847,656 287,502 — 7,803,262 $22,564,771 $11,928,239 $ 3,286,060 $ 1,056,191 $32,263,141 Notes: (1) The majority of these additions and retirements are related to the acquisition of day-care buildings and the sale and leaseback arrangements related thereto. (2) The majority of these amounts represent transfers from day-care buildings under construction to completed buildings, including capitalized interest. (3) Includes interest capitalized at end of period. (4) Includes interest capitalized on day-care buildings completed during the period. Part IV—Page 9 Schedule VI CENCOR, INC. (Parent Company Only) SCHEDULE VI—ACCUMULATED DEPRECIATION AND AMORTIZATION OF FIXED ASSETS Balance at Balance at Beginning Retirements Other End Classification of Period Provision or Sales - Changes of Period YEAR ENDED DECEMBER 31, 1978: Buildings $ 242,842 $ 90,282 $ 25,691 $ — $ 307,433 Furniture, equipment and leasehold improvements 1,380,798 507,592 221,289 — 1,667,101 $1,623,640 $597,874 $246,980 $ — $1,974,534 YEAR ENDED DECEMBER 31, 1979: Buildings $ 307,433 $122,829 $ 43,751 $ — $ 386,511 Furniture, equipment and leasehold improvements 1,667,101 504,979 148,079 — 2,024,001 $1,974,534 $627,808 $191,830 $ — $2,410,512 YEAR ENDED DECEMBER 31, 1980: Buildings $ 386,511 $285,602 $ 48,962 $ — $ 623,151 Furniture, equipment and leasehold improvements 2,024,001 602,986 261,962 — 2,365,025 $2,410,512 $888,588 $310,924 $ — $2,988,176 Page 1V—Page 10 Schedule VI CENCOR, INC. AND SUBSIDIARIES SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF FIXED ASSETS Balance at Balance at Beginning Retirements Other End Classification of Period Provision or Sales Changes of Period YEAR ENDED DECEMBER 31, 1978: Buildings $ 243,353 $ 90,406 $ 25,691 $ - $ 308,068 Furniture, equipment and leasehold improvements 2,075,173 602,559 236,037 2,441,695 $2,318,526 $ 692,965 $261,728 $ — $2,749,763 YEAR ENDED DECEMBER 31, 1979: Buildings $ 308,068 $ 122,976 $ 43,751 $ — $ 387,293 Furniture, equipment and leasehold improvements 2,441,695 605,193 188,237 - 2,858,651 $2,749,763 $ 728,169 $231,988 $ - $3,245,944 YEAR ENDED DECEMBER 31, 1980: Buildings $ 387,293 $ 285,749 $ 48,962 $ — $ 624,080 Furniture, equipment and leasehold improvements 2,858,651 722,189 251,683 — 3,329,157 $3,245,944 $1,007,938 $300,645 $ — $3,953,237 Page IV—Page 11 r- w *NM �y p O Schedule VIII O O N ; q p tcaw a. I In .-0 V m ea a I O N O I a o a a a w m o= H Q\ le) G\ oo � v i. i+'"+ W n N 00 .,d ti in ti oo Q r. N N b9 b9 Yi o W T Z o i W 4 h w o z faa A I I I I I 2 F w a a a in rl) 9 0 ] 60" ° I I I I I O Ion U a .9 Pri Z C 2 40 0 en et o z o t d 0 0 N M o � d q, go � - - g U W s9 Fsa fa a zE: u a w k b0 0o O0 0 o Sl 04 rn ' to" o N Z MCA o a a a !]+ • a as m a) y N V .O y a.) y Ct H fis H .0 1' y 1 J N y Et .> U+ O N H G co w U 01 w 'O O\ w G O\ y Q 1-4 ❑ p — 7 A .-1 w C .-i 0 ,y. ti OU `� .-i 0 M U M U d en V n o [W[�� o W O W F PI Q fey' 0 0 N Q V ce )44 U 6 G Q - o d o O W N W LS w W A '45O y A •LS� Q,S A o A v o A U ° A v H H W 4 M ^W H A o 0 A .2 0 q w W a) a0 0W EU rile) � x h a s W a a a Part IV—Page 12 II Schedule VIII 11 ,$ I N 't v, Op in00 00 0 Q O 0, 00 v1 O 0 V N N1 mq N . N b O 'O N O o0 7 q m N O b p N N ON — V7 00 ell (11.11114 en .-. m 0 N N ON 10 a 'xi aT N .-' aT 10 aT in Fl ,--i CA Cr;' 69 ES 64 W y Cn 0O V1 .-. CT 't 0 L A v v1 N VD en C en 0 .„g4 0o O I I V1 N I N M 01 rqWalt 00 en v, c6 a.1 CC C I Al U v'A —, .. Cr) N N o .,GC it .-i — ., z; 69 64 En ro al 00 o0 00 m 4) co 0 ti; En wFen M UI W d.. ct N D O F w° IC oo" 0, 2 69 fR 64 lilt en s 4 4 —4 0 A0 I I � I — I I � I N I to a et v an a,U V o 00 U o EA .n v1 a 0 m U 0 mrnv 1/4O m 1 0 En ' I N Crec UI o ,� ....a 1n• 01 0 1° °- Ln en o, I H] p Y4 (+1 — ,-• M N U a W �' ,� 64 -- 69 -^ At a z 0 0 a CO Il "�I o•q.� V 00 1 r- t VO O `O N O Al A ai M 0 N N O 45 O M IC 1/46 0 z a v a 0 S 1/40 t m O' N 0 b (�, 0.1 Flo ,� l� .• Oi a, n 4 c9 v • v • • v a v v ot co A N a. v o ho a) U �+ N V co) '• too a) A '• 00 N 0 ''' 000 Il > a.) i0 A y j a"i .n D N N ai O a≥ O U O •• a� O u 1W.7 N w C u C o 2 C u C 000 i. C u r7 0 rn y m b 0 d C 'O o, v a C C a E yCd ❑ 5 a G 5 c p a � w i C w y _ C w C M ii, (J h A a) M U rn •O a)E. M O rx U w C t p4 •C C h w C C vi C C oo rn � O La A ,4 y N N G a O y N C ra N y N V en 0 •C C U O G •= O V OO O O W A I) 9 O Cli i a 'O 'O CO 01 a v d 0 Ga U U si 0 a G G h 0 a U U m W .. .. .-o >~ 14 .. .. ;o .. W .. ., .-o ca• w o o l w a0. b o Q a w b i q q v v v -0 W u Wa. 44 W W Wawa Wawa W a a P. Part IV--Page 13 Schedule IX CENCOR, INC. (Parent Company Only) SCHEDULE IX-SHORT-TERM BORROWINGS 1980 1979 1978 Notes payable to banks: Available bank lines of credit at end of year $18,305,000 $10,181,000 $8,800,000 Compensating balances maintained at end of year . . 2,311,000 1,457,000 845,000 Outstanding at end of year: Notes payable to banks 9,331,000 7,571,000 5,582,000 Commercial paper 13,753,754 10,681,430 7,400,474 Maximum outstanding at monthend during the year: Notes payable to banks 11,136,000 7,571,000 5,800,000 Commercial paper 15,124,000 12,167,000 7,557,000 Combined 26,260,000 19,331,000 13,257,000 Average monthend balance: Notes payable to banks 9,544,000 5,470,000 4,958,000 Commercial paper 12,599,000 9,875,000 7,045,000 Combined 22,143,000 15,345,000 12,003,000 Weighted average interest rate on borrowings during the period: Combined 16.1% 13.1% 9.0% Weighted average interest rate on borrowings at end of year: Notes payable to banks 18.8% 15.7% 11.2% Commercial paper 17.8% 15.7% 10.5% t Part IV—Page 14 Schedule X CENCOR, INC. (Parent Company Only) AND CENCOR, INC. AND SUBSIDIARIES SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION(1) Charged to Costs and Expenses 1980 1979 1978 CENCOR, INC. (Parent Company Only): Maintenance and repairs $ 548,906 $ 403,010 $ 359,137 Taxes other than payroll and income—property taxes 309,596 254,170 211,714 CENCOR, INC. AND SUBSIDIARIES: Maintenance and repairs $ 643,387 $ 478,740 $ 433,573 Note: (1) Amounts for amortization of costs in excess of net tangible assets of companies acquired, royalties, deprecia- tion, advertising costs and taxes other than payroll and income (for CenCor, Inc. and Subsidiaries) are not presented as the amounts are less than 1% of total revenues or are presented elsewhere herein. Port IV—Page 15 411. EXHIBIT 22 CENCOR, INC. AND SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT Minnesota Institute of Medical and Dental Assistants, Inc. Texas College of Medical and Dental Assistants, Inc. Century Acceptance Corporation. All subsidiaries are 100% owned except for a 99%-;- ownership of Century. The following is a list of Century's wholly-owned subsidiaries: Name State of Incorporation Century Finance Company of Alabama Alabama Century Finance Company of Arizona Arizona Delta Acceptance Corporation of Costa Mesa California Century Finance Company of Colorado Colorado Century Finance Company of Florida Florida Century Finance Company, Inc. Georgia Century Finance Company, Inc. of Buckhead d/b/a Century Finance Company, Inc. of Augusta Georgia Century Finance Company, Inc. of Brunswick Georgia Century Finance Company, Inc. of Carrollton Georgia Century Finance Company, Inc. of Columbus Georgia Century Finance Company, Inc. of Dalton Georgia Century Finance Company, Inc. No. 4 Georgia Century Finance Company,Inc. of Grove Park d/b/a Century Finance Company, Inc. of Dublin Georgia Century Finance Company, Inc. of East Point Georgia Century Finance Company, Inc. of Georgia Georgia Century Finance Company of Macon Georgia Century Finance Company, Inc. of Marietta Georgia Century Finance Company, Inc. of Rome Georgia Century Finance Company, Inc. of Savannah Georgia Century Finance Company, Inc. of Valdosta Georgia Century Finance Company of Illinois Illinois Iola Finance Company, Inc. Kansas Century Finance Company of Kansas Kansas Century Finance Company of Kentucky Kentucky Century Finance Company of Louisiana Louisiana Century Finance Company of Missouri Missouri Century Finance Company of Omaha,Inc. Nebraska Century Finance Company of Nevada Nevada Century Finance Company of New Mexico New Mexico Century Finance Company of Oklahoma,Inc. Oklahoma Century Finance Company of Providence Rhode Island Century Finance Company of Greenville, Inc. South Carolina Century Finance Company of Tennessee Tennessee Century Acceptance Corporation of Texas Texas Century Finance Company of Keames Utah Century Acceptance Corporation of Keames,Inc. Utah Century Finance Company of Ogden Utah Century Acceptance Corp. of Ogden, Inc. Utah Utah Finance Company of Provo, Inc. Utah Utah Finance Company of Provo Utah Century Finance Company of Main Utah !' Century Acceptance Corp. of Main, Inc. Utah Century Finance Company of Tooele Utah Century Acceptance Corp. of Tooele Utah Part IV—Page 16 ■ /' Irk SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENCOR, INC. Date /s/ ROBERT F. BROZMAN March 30, 1981 Robert F.Brozman (Chief Executive Officer and Director) /s/ JACK L. BROZMAN March 30, 1981 Jack L.Brozman (Chief Operating Officer and Director) /s/ GORDON L.WELLS March 30, 1981 Gordon L. Wells (Chief Financial Officer) /s/ JOHN W. BANKS March 30, 1981 John W. Banks (Director) /S/ BARNEY A. KARBANK March 30, 1981 Barney A. Karbank (Director) /s/ CHARLES E. JAMES March 30, 1981 Charles E. James (Director) /S/ DANIEL S. MILLMAN March 30, 1981 _- - Daniel S. Millman (Director) Part IV—Page 17 PROFORMA ON TYPICAL LA PETITE ACADEMY FIRST SECOND WHOLE YEAR PERCENT OF WHOLE YEAR PERCENT OF PROJECTED REVENUES PROJECTED REVENUES TOTAL TUITION INCOME $100,000 100.0% $140,000 100.0% EXPENSES Salaries - Directors 12,000 8.3 12,000 8.5 Salaries - Aids 23,000 23.0 37,200 26.5 Payroll Taxes 3,000 3.0 4,500 3.2 Total Salaries $ 38,000 38.0% $ 53,700 38.2% Total Food $ 5,000 5.0% $ 7,000 5.0% Rent 30,000 30.0 30,000 21.4 Repairs & Maintenance 800 .8 900 .6 Real Estate Taxes 1,500 1.5 1,500 1.0 Utilities 5,000 5.0 5,000 3.5 Total Building Expenses $ 37,300 37.3% $ 37,400 26.5% Auto - Gas 1,500 1.5 2 ,000 1.4 Auto - Lease 3,600 3.6 3,600 2.5 Auto - Repairs 400 .4 500 .3 Total Auto Expense $ 5,500 5.5% $ 6,100 4.2% Radio/TV - Advertising 1,000 1.0 1 ,600 1 . 1 Promotional Advertising 100 .1 175 . 1 Yellow Page Advertising 600 .6 700 .5 Total Advertising $ 1,700 1.7% $ 2 ,475 1.7 Academy Supplies 1,300 1.3 2,000 1.4 Petty Cash 500 .5 1,000 .7 Classified - Help Wanted 300 .3 400 .3 Interest & Depreciation 2,500 2.5 4,000 2.8 Telephone 800 .8 900 .7 Insurance 1,000 1.0 1,500 1.0 Sub Total $ 6,400 6.4% $ 9,800 6.9% Total General Expenses $ 8,100 8.1% $ 12,275 8.6% TOTAL EXPENSES $ 93,900 93.9% $116,475 83. 1% OPERATING PROFIT $ 6,100 6.1% $ 23,525 16.8% MARKET AND SITE SELECTION CRITERIA I. General Market Area A designated metropolitan area that CenCor Inc. has ureMaear:;._ _, _. offers all indications of having: A. Strong economy, B. Rapid population growth, C. Steady deversified employment, D. Average to better than average new housing growth, E. Residential, commercial, retail and employment c._,t_..5h.: growth expectation. II. Immediate Market Area The effective residential market area within a 2 - 2.5 mite r:tei,.r, ci a potential site and within the boundaries of significant pays.-Leal c: man made barriers, with no more than one site per each effact.;v, market area. Prior to consideration and/or actual site selection, immediate market areas shall be determined through research, ci..flLi of basic criteria and complete familiarazation with the reetronolitmn and suburban areas in general. It shall first be determined that the immediate market arc;., i . crtr. - of further consideration. If so, where within the immedi; _e area would be the ideal location for a La Petite Academy care center. Once these two priorities have been established, actual site .s_ _ccLi.m then becomes a process of elimination until the best possible, r_..lesrec site has been determined. III. Immediate Market Area Criteria A. New growth areas within a designated metropolite;: :_ _ B. Growth communities outside the metropolitan area - „trMa a 30 - 35 mile radius . C. Growing housing markets - designed to attract young cc of child bearing years (25 - 40 years old) . D. At least 500 existing homes - 0 - 5 years old - median price range. E. Usable land availability - visable and documented evidence of sustained housing growth continuation and adaquata utility availability to assure a 10 - 15 year growth potential. F. Diversified industry and/or employment availability - , rcaeur and anticipated. G. Adequate percentage of female employees in local work H. Existing elementary schools - escalating enrollments - anticipated new schools to accommodate growth. I. Community pride and educational awareness. J. Minimum competition. K. Need - community desire for additional, more conveneeec of more adequate child care availability. L. Optimum location - based on criteria and work flow traffic patterns, etc. N . Site Selection Criteria A. Actual site selection process to begin only after areas have been justifiably determined. B. Consideration for purchase approval - based on 1. Accessibility, 2. Visibility, 3. Aesthetic appeal, 4. Immediate use , 5.. Possible convertibility, 6. Affordibility. *-not necessarily in order of importance C. Location within the immediate market area 1 . First preference_directly on a main or preferrotflow traffic route — A.M. side. 2. Options a. Back Site, visible and easily accessible to mein A.M. side. b. Side Ibad - A.M. side of main road within 1C0-1C; it. from corner for best possible exposure. c. P.M. Side of main road (including option,) i::-.o__ A.Y. :. Ida is not feasible, providing traffic controls allow gale ingress and egress (traffic lights, turn stacking lanes where necessary) . Options will be considered when: 1. Frontage property is not available, 2. Price of frontage property is prohibitive, 3. Traffic conditions are hazardous, and 4. Lot size prohibits safe ingress and egress conditions. E. Traffic Collector Points: 1. Convenient to, and easily accessible to, the entire or majority of the potential market area. 2. Preferably a traffic collector point where the majority of the A.M. work traffic feeds to, and at a point just before commuters must make a choice in direction or route of travel. 3. Near an interstate exchange or at the funnel where feeder roads join or branch off the main road. 4. Best possible visibility and at a point where the majority of our market must feed in the general direction in route to employees. 5. At times it is more advantageous for us to locate in the center of our market, and other times when we need to locate in front of our market. We never want to be et t'.-, back of the market where a large portion of our market would reed to back up to get to our center (convenience) . It has been our experience that most mothers prefee a child care center close and convenient to where they live, rather than where they work. They also tend to choose a center enroute to employment, in preference to going out of their way. 6. New Growth Markets a. We wish to be well located within new growth markets, offering adequate initial enrollment with a substantial • continuing growth potential as the market area matures and intensifies in density. b. Although a heavily populated existing market area may indicate fantastic immediate enrollment for a new center, it could also severely limit our enrollment In a few years as one or more of the following possibilities occur. 1. Market area no longer growing, 2. Area becomes a less desirable place to live, 3. Children grow up and no longer need child care , 4. Over abundance of child care competition, and possibility of government funded child care, 5. Environmental or aesthetic decline, 6. Ethnic or lower income infiltration, 7. Income level decline - making our services unaffordable, 8. Elementary school enrollment decline 9. Schools beirg closed as a result of declining enrollment, 10. No new schools being built. c. Potential housing - at least 500 existing homes 0-5 years old, with evidence of sustained growth continuation within the immediate market area - taking into consideration all items listed under Immediate Market Area Criteria. Multi market areas may be feasible where physical and/or man made barriers divide markets. d. Environment - actual site and immediate vicinity must be aesthetically conducive to child care and compatible with potential housing market. F. Competition 1. Interceptor Location - our preference is to locate outside of major competition. L.P.A. having first access to market potential. 2. Anticipation of future competition - must be considered making it extremely important that we not locate where we could easily be cut off and/or isolated to a closed market. 3. Awareness to all existing competition - in relation to market area; name of center (including churches) ; location; licensing capacity; present enrollment and 5-full day rates must be noted, considered and determined that the market will support additional child care. 4. Prefer to be first and only major child care center in the market area - this is not always possible due to site availability; we are aware that competition breeds business, however, there are definite advantages to being the first professional or major child care center in a market area. G. Elementary Schools 1. La Petite's after-school program is designed for children ages 6-12 in grades Kindergarten - 6th with working mothers. This age group accounts for approximately 1/3 of total enrollment. 2. We prefer to locate in a market and at a location easily accessable to as many elementary schools as possible. Combined enrollment of no less than 750 students. 3. Locations next to or near the newest elementary schools in the market (rather than an older school) has n definite advantage, providing that visibility and exposure to the entire market and accessibility is not forfeited. 4. New schools generally follow new growth and young families buying new homes tend to seek out new schools. 5. Exact locations of all elementary schools within a 3 mila radius is very important. 6. School enrollment is also extremely important. It is necessary for us to know if enrollments (0-6 population) is on an increase or decline. Data to include enrollment figures on each school going 3 years back, present enrollment and 3 years forward. 7. Hopefully crowded schools indicate a need for school expansions and/or additional schools to be built. 8. Residential and community pride often dictates char parents also have an awareness and desire for quality, educationally oriented child care, in preference to a baby sitting service for their young children. H. Immediate Use 1. Our building measures approximately 60'x90' . 2. Occupies approximately 4,800 square feet. 3. Generally required to have 10 parking spaces. 4. Generally have 2-24 foot driveways. 5. The remainder of site used for playground. 6. Minimum lot size - 23-25,000 square foot. 7. Minimum frontage 100-110 feet. 8. Ideal lot size - 110 ft. frontage by 220 ft. depth. 9. Must be in accordance with local and state building codes and licensing regulations. Taking into consideration - front, back and side yard required set backs, building siza, parking, driveways, drainage and playground requirements. 10. Site to be of an elevation offering greatest exposure, as flat as possible, requiring a minimum of grading and other costly site improvements - eliminating the need for retainer walls, drainage problems, ingress and egress problems, safety hazards for the children, and costly maintenance and upkeep problems. 11. It is preferred that we purchase sites that already have water, sewage, electricity and gas on premises. :f not, we must be made aware of availability to the site, estimated cost and time involved to provide. 12. Site should be properly zoned for child care or a definite probability of zoning variance. If variance is needed we must know what changes are necessary, estimated cost and time involved. 13. Early warning if possible of any title binders, deed restrictions and/or probable causes that would delay or prevent purchase of site. I. Affordability 1. Our services must be kept at an affordable price tc the parents and within a reasonable competitive range. Property cost becomes extremely critical and since additional land costs must be passed on to the parents in tuition fees, we could very easily price an individual center out of business. 2. Of course we are seeking the very best site location within the market area, requiring minimum site improvement and cost at the best possible price. 3. Since building codes and licensing regulations tend to alter our lot size requirements they somewhat alter our cost requirements. 4. Higher than agreed land costs to be negotiated on an individual basis depending on land market values, and requirements in a specific market area. J. Possible Conversion Our buildings have been designed with convertibility in mind, possibilities include doctor, dentist or similar type office building. Site locations within the market and/or zoning could effect this possibility and must be taken into consideration. MARKET AND SITE SELECTION CRITERIA AND DEMOGRAPHIC RESPONSIBILITIES AND PROCEDURES FOR ALL LA PETITE ACADEMY SITE SELECTORS CONTENTS : I. MARKET AND SITE SELECTION CRITERIA II. MARKET SURVEY AND SITE SELECTION DEMOGRAPHIC REQUIREMENTS III. SAMPLE - SITE AND MARKET APPROVAL PACKET A. SITE STATISTICS FORM B. SAMPLE - IMMEDIATE MARKET MAP DISPLAY C. MAP INDEX FORM MARKET AND SITE SELECTION GENERAL MARKET SURVEY - Determination of prime market areas of concentration. II. IMMEDIATE MARKET SURVEY - Determinations - Market area fits basic criteria, optimum location within the market. Immediate market area or areas may be reviewed by CenCor, Inc. representative prior to actual site selection of the market area or optimum location within the market is questionable or market and site review may be accomplished at the same time. It will be expected that at the time of market or site review each area will be driven thoroughly for the purpose of complete familiarization with the market area under consideration. III. SITE SELECTION - Determination of site or sites that realistically fit our basic criteria and demographics, in all probability may be purchased. It will be expected that an individual Site Approval Packet be prepared in advance, accompanied by any and all appropriate backup data and comprised in a workable fashion for each site presented for review and/or approval. Site Approval Packets may be sent to our CenCor, Inc. representative to be reviewed in advance, 'or shall be presented at the time a specific site is shown for review and/or approval. MARKET SURVEY AND SITE SELECTION DEMOGRAPHIC REQUIREMENTS • i. Market Survey Total market research is essential and should be completed prior to the determination of immediate market areas. When properly completed the market survey should have little or no doubt as to exactly which areas are worthy of further consideration. The General Market Survey shall include all such pertinent information as to readily familiarize a CenCor representative with the total market area. All such information shall be comprised in a workable fashion, in an effort to make the best use of market and site review schedules and to allow a fair evaluation of the general market area and proposed immediate market areas under consideration. Data Collection should include: A. Overall market development map or maps indicating a general break down of the metro area. 1. Approximate boundaries - high income areas versus middle and low income residential areas. 2. New growth areas versus existing and/or older residential areas. 3. Industrial Areas. 4. Major traffic arteries. B. All significant child care competition - Color spotted on a map in such a fashion that competition is easily separated visually. Reference Key shall indicate: 1. map reference number, 2. name of establishment, 3. address, and 4. licensing capacity. It is extremely important that CenCor be aware of all significant competition at this stage, and visually relate their locations to the market areas under consideration. This information will become valuable, also, when considering actual market areas and site locations. 1 Such information can generally be obtained through local Health Dept. or related agencies responsible for licensing of child care centers. In most cases, a master list of all child care centers is available. If not, the Yellow Pages become our next best, but not always accurate, source. C. Employment Availibility 1. Industrial map or major industries and/or industrial parks spotted on general market survey map. (In such a way that industries and industrial areas are easily separated visually) . 2. Data shall include: a. Employment availability present and projected. b. Number and or percentage of females in local work force. c. Major industrial list - number of employees, male/female. d. Hospitals, major shopping centers, universities, etc. Spotted on map as possible female employment institutions; related employee information, where possible. D. Population Statistics 1. Past, present and projected. 2. Breakdowns by areas indicating growing areas versus stagnate or decreasing population areas. 3. Ethnic composition of population. 4. Age breakdowns. 5. Male/female breakdowns. 6. Income level breakdowns. E. Horsing Statistics 1. Residential building - number of residential building permits issued - breakdowns by area. 2. Migration patterns. 3. City/county urban development, growth patterns, projected housing, industrial parks, elementary schools, highways and/or improvements that could alter major traffic patterns. II. Immediate Market Area Survey, Area Map, and Map Index Information A. Elementary schools within 2.5 - 3 mile radius of site - spotted on area map and referenced to map index form. 1. Name of school. 2. Address. 3. Grades included. 4. Enrollment history - 3 years back, present, 3 years projected. 5. School expansions or projected new schools. B. Evidence of housing growth 1. New subdivisions, apartments, condo's spotted on area map and referenced to map index form. a. Name of development. b. Existing units c. Anticipated units d. Time period to phase out. C. Utility Availability Water and sewage to support anticipated area growth. We must be aware of sewer moratoriums, etc. D. Traffic flow patterns 1. Employment traffic flow patterns. 2. Traffic counts where applicable. 3. Proposed highways construction and/or improvements that could alter employment traffic patterns. E. Day Care Centers 1. All day care centers within a 2.5 - 3 mile radius spotted on area map and referenced to map index. 2. Name of center. 3. Address. 4. Licensing capacity. 5. Present enrollment. 6. Age groups. 7. 5-full day rate. F. Retail Shopping Centers 1. Significant shopping centers within 2.5 - 3 mile radius spotted on area map and referenced to map index form. G. Major Employment Local industries, industrial parks, hospitals, universities or others spotted on area map and referenced to map index form. G. Continued 1. Number of employees 2. Male/female breakdowns 3. Anticipated industries and/or industrial areas etc. H. Any data or information pertaining to the immediate market area in general that could possibly dictate plus or minus effects presently or in the future. III. Site Statistics A. Any and all information necessary to complete site statistics form. B. Early warning of any title binders, deed restrictions and/or probable causes that would delay or prevent purchase of site. C. Any additional information pertaining to price, zoning, utilities, etc. that could possibly delay or hinder site purchase. D. Awareness of visible site improvement and estimated costs involved. E. Provide site configuration. F. If zoning is not correct for child care, we must be made aware of necessary variences, estimated cost and time period involved. G. If water, sewer, electricity, and gas are not on premises we must be aware of availability to site, estimated cost and time period involved to provide. H. 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Since 1970,La Petite Academy has grown in size and market position to become one of America's most professional and respected total child care chains. One of the greatest needs in the 1980's is,and will remain,the care of children whose parents work And the efficient operation of day care centers will prove to be one of the most promising consumer markets of this decade. La Petite anticipated this need and the continued growth of facilities and professional services are designed to meet the ever increasing demands of the new American family's lifestyle. La Petite's growth and stability is largely due to the motivation of our highly professional employees and their dedication to the common purposes of La Petite Academy. The La Petite concept of quality child care is based on the knowledge that the young child is a natural learner,with natural curiosity.And that curiosity is encouraged by providing the stimulation of an educational atmosphere for growth intellectually,physically and socially. The need for high quality,professional child care facilities will be a constant,and La Petite Academy,with it's farsighted approach,will be there to meet that need. La Petite will maintain and expand its market share and position in its ever growing industry. # b'X X14Aft" e R t 4A 9.^4d�. 4'A re III ,... 3. at y yy Qi rt$ i & tor ey)Jn p999lit • is $ 4 ..^ t �` �� A mow 1, ..r 43 .., ..ii ; r ,t,z,.,7 4.410" 1 i.5 • FYI - i 1 ,rst i` '. . �. . �-,. . . BUILDING FOR THE FUTURE, TODAY . . . LA f E//IFi 11Q19 121.Y Between daylight and dusk, our only concern is care for your child. y rs,• 9P kb rar )k �` : I }t a.`h'..ftj�, , z ` sx r 19 1 ° ' 1 ; S �0 LAPEA effeioe9y 1 ' LA/ta c.{tea& .- t Your child's future can be child's life, with individualized unlimited. But to take advantage learning programs for every of all good things life has to offer, stage of his personal your child needs to mature into a development happy, well-adjusted individual. In this complex, ever-changing Asa parent, this total world, La Petite Academy can development is entrusted too you. give your pre-school child a head start. A recent study revealed During those that the IQ can be raised an hours when its average of 20 points during the important for pre-school period. - xr you to be away Petite can keep your from your child, , ., school-ager safe, happy, you must be certain his and involved before and positive after school until he can development be home again with continues p. You. and that he Through the years, receives your parents have depended kind of loving ` on La Petite Academy care. You can be to prepare their certain of both when a _ children for your child is enrolled at , I school and for La Petite Academy. life. La Petite Academy offers total child care for the a ~� first12 years of your The La Petite concept is based on knowledge the young child is n a natural learner with a natural y 1 curiosity. We encourage this _ curiosity by providing the ;► stimulation of an educational1 atmosphere. Your child's development is individual and personal. At La Petite Academy, young minds are encouraged in meaningful directions, something a "sitter" cannot offer. Through concrete and abstract approaches, your youngster is Each instructor is trained to able to absorb and understand understand your child and at an accelerated rate, easing the provide learning programs transition into elementary having maximum impact on his school. personal needs and ultimate 0Ur program encourages the potential. By highlighting your use of all the senses, utilizing child's own interests, fun and learning become inseparable. techniques of exploration, creativity, and achievement. La Petite Academy is managed La Petite children reflect the like a big household. Everyone happy, healthy, wholesome helps. From the toddler who environment of the Academy. puts his toys away to the sixth-grader selected for safety Drop-in visitors are always guard, each individual feels a welcome! sense of personal worth. Only professionally trained Hot, nourishing meals are teachers guide your child. served every day. Mid-morning ia 8: w . �`x\ * y AT— x' ra. S dal3 \i ? tit \4 x ' 1.1+ < , / lx 1 and mid-afternoon snacks, too. Your child's nutrition is as carefully monitored as his personalized. La Petite is bright classroom study and airy inside, with fresh All equipment Is child-sized, greenery and walls of creative including toilets, lavatories, artwork that reflect the child's drinking fountains,tables, chairs, imagination. Outside, a large, lockers, and play yard apparatus. shady play yard features sturdy There Is a classroom area for climb, hang, and swing each age group and classes are playthings, plus basketball, small so they can be closely tetherball, and trike-riding pads. i 1 I are tailored to hisindividual needs and rate of personal vid development. in addition to stimulating the intellectual growth of your child, we also emphasize table • manners, personalsocial hygiene, and positive In the summer monthsbehaviors., the emphasis Is on community study and i organized fun such .' tb‘afp%4To 44 1` 4 v J itt ) � le it 1•4 , ) c v c ; OSA rr s , O aA d Q A' Rp y kl3i X V Qtr) • ) )3)'$3 a>\a) ) ?' V ,7. • a r • 00 .0 .` Af F - +\`n,. q . v. as field trips, bowling, The La Petite van is used for gardening, kite-flying, all field trips within the swimming, and picnics. community and to transport children to and from nearby For the school-age child, schools. Bring your child to La there's "fete's Gang," a special club within the Academy for Petite in the morning on your young people who are with us way to work and when it's time to go to school, we will take before and after elementary school. Complete with club him in the van. When school we'll be there ends for the da t-shirts and carry-all bags, y, "fete's Gang" constructively with the van to supervise his satisfies every school-ager's safe return to La Petite and to you. natural urge to belong to a special peer group. When it's important for you to be away from your child, let La 4 tot Petite Academy share your responsibility for your child's ilr `i future. rr Between daylight and dusk, our only concern is care for your child. A concern we express through love and ' positive learning programs. - ° "` Let us concern ourselves IIIN 1) with your child. � p ' WW 1 ' "to , , :. �e ,, ,, , ,ha .....� vv.`s*w� v,.tarsi, d 110-7: -17-latilb i A � TI ) 49 0I � a. 4 tae pa a.„�;� w S ;. I e_ +^ A F ' ' n la jI+ s k k II �e \a ILI (II ai i li,ikti,i \ t I it f q. a. . 14 .C ', fir: ., .. ZILi e / Xi' N ., Ii F Y44 9 r 1`e' qv, 4 r •1 I I 1 I I I I O 9 O 9 O ' O ' O , O 7 O , O BUILDING FOR THE FUTURE, TODAY . . . LA p i&. MARKET Working women now outnumber housewives for the first time in history.An ever growing number of mothers with children under 6 work outside the home. Women today are determined to have both jobs and children. But day care is scarce and already the shortage is being called "critical." Waiting lists for professional child care centers are longer than enrollment lists. GROWTH The best projections forsee 14 million working mothers with young children by 1990—more than double the number in 1980.The birth rate is again rising, so that the under5 age group will be the fastest growing segment of the population during the next decade. La Petite Academy is already the second largest day care company and will add approximately 50 new centers annually. POTENTIAL Earnings have increased dramatically each year since 1970. The market is as stable and certain as any can be. Children will be born, mothers will work outside the home, and parents will not be satisfied with "suffers" when professional child care and educational centers are available. La Petite Academy can only expand its already large share of what HEW predicts will soon be a $35 billion industry. _ 2 !E 1E !E !E II IE 111 0 0 0 0 0 0 O O 9 9 9 9 g 9 7 9 BUILDING FOR THE FUTURE,TODAY . . . L1I1t Cl14ir FACILITIES Academies are new,free-standing buildings designed to accommodate 100 to 125 children each.The buildings have a standard design and uniform exteriors and are constructed on land owned by the company. Interiors are spaciously divided into areas where different learning activities are conducted. Each Academy is well supplied with books, games, aquariums, audio-visual equipment and a variety of other educational materials. STUDENTS Specialized programs are offered for children in all age groups. These are Toddlers(18 months to 2 years), Pre-School (3 years), Pre-Kindergarten (4 years), Kindergarten (5 years), and School Age(6-12 years). PERSONNEL All Academy personnel are professionally trained in child development. All are specially trained as well in the unique La Petite approach.These professionals are motivated by having autonomy over decor, lesson plans, staff schedules and the opportunity for advancement at all levels. Academy directors earn a percentage of profits as well.The usual ratio of staff to children is 1 to 10. SERVICES A variety of learning programs is offered for all age groups. These include basic instruction in all fundamental areas, group activities, individual exploration, sports, and field trips. Full-day and half-day programs are offered to suit the parents' needs, as well as activities before and after school hours for school age children, including transportation. Hot lunch -- and morning and afternoon snacks and a rest period are provided daily. Centers are open from 6:30 a.m. until 6:30 p.m. and some open earlier or later to accommodate the needs of parents. 11 111 D D D O D 9 9 D 9 D D BUILDING FOR THE FUTURE, TODAY . . . Mitt eibarfific PROGRAMS The programs in the La Petite curriculum all reflect our basic belief that a child is a natural learner with a natural curiosity. Research shows that I.Q. can be raised 20 points in the preschool years.A progressive educational approach to child care insures that each child will be encouraged to achieve his own potential. "Learning For Living."The La Petite Exclusive.This practical education program is designed to advance the child's awareness of the world around him and his relationship to it and is based on Montessori techniques. Music Appreciation,Learning Programs in Math and Reading Readiness are fundamental in the La Petite curriculum. Each activity is conducted in a different part of the facility with appropriate education aids located in each. "Alpha Time:'Offers learning adventures in the alphabet. "Pete's Gang."This program for school-age children up to 12 years of age is a special peer group. Students have club t-shirts and carry-all bags which identify them as members of the"gang." II I I II II I II I -= -= �;-=( ��= vi=rte ' '4 ' '4 BUILDING FOR THE FUTURE, TODAY . . . LA/01 Mc 4 u y J ' LA PETITE ACADEMIES ARKANSAS(4) FLORIDA(31) Harvey MISSISSIPPI (2) SOUTH CAROLINA(14) TEXAS(85) Ft.Smith Brandon(2) Joliet Horn Lake Anderson(2) Alvin (2) Little Rock(3) Clearwater Mattoon Southhaven Charleston(4) Arlington (4) Ft. Lauderdale(2) Moline MISSOURI (18) Greenville(2) Baytown BirminALABgham MA(4) Carrollton Birmingham(2) Ft. Meyer(2) Peoria Kansas City(7) Rock Hill(2) Dallas(7) Decatur Jacksonville(8) Springfield Manchester Spartanburg(4) Fort Worth(6) Huntsville Lakeland INDIANA(9) Overland TENNESSEE(29) Garland(6) COLORADO(6) Orlando(10 Elkhart Springfield Athens Grand Prairie(2) Tampa(5) Indianapolis(6) St. Charles Chattanooga(3) Arvada Houston(30) Aurora ILLINOIS(11) Mishawaka St. Louis(6) Cleveland Irving(2) Denver Aurora Shelbyville St. Peters Gallatin Kingwood Lakewood Bloomington IOWA(3) NORTH CAROLINA(9) Kingsport League City Littleton Champaign Des Moines(3) Charlotte(5) Knoxville 5 (2) Lewisville Decatoronra Lebanon ) Northglenn Elgin KANSAS(4) Hendersonville McMinnville Odessa Merriam Memphis(7) Plano Olathe OKLAHOMA(11) Murfreesboro Overland Park Broken Arrow Nashville(6) Richardson Roeland Park Oklahoma City(4) Union City San Angelo San Antonio(12) Tulsa(6) Texas City Tyler Watauga WA ✓ '''''''''Ajr\ ,4 ILLINOIS INDIANA s 'es� t 5 r COLORADO 'cl::;:;,.. KANSAS MISSOURI - 4 -- w N.CAR INA ii 11,!, �IENNES5EE `^">J{ r S CAROLINA OKLAHOMA { H 4 , , e, , MISS gIABAMA ; }, ., stitH TEXAS \\\ t • CENCOR, INC. FINANCIAL ANALYSIS I. NATURE OF BUSINESS CenCor was incorporated in Delaware in 1968 for the purpose of acquiring the common stock of Century Acceptance Corporation through an exchange offer. The exchange was accomplished in 1968. Subsequently, the company has become involved, through acquisitions, in preschool education and day care, tax preparation, temporary help services, and paramedical education. Until 1978, CenCor acted as a holding company. All subsidiaries, with the exception of Century Acceptance, have now been merged into the parent and are operating as divisions. The company's first stock offering was in 1968. The stock is traded OTC. Approx- imately 60% of the stock is publicly held, with the balance owned directly or indirectly by the officers and directors. Management is as follows : Robert F. Brozman* (60) Chairman and President J. W. Banks* (66) Vice President Jack L. Brozman* Vice President Molly McCarthy Vice President Robert L. Swan Vice President Gordon L. Wells (44) Treasurer Michael W. Sagan Secretary *Directors. The directors also include Charles E. James, B. A. Karbank, and Daniel Millman. II. FINANCIAL STATEMENTS Consolidated statements for the years ended 12/31/77, 12/31/78, 12/31/79, and 12/31/80 were audited and presented by Arthur Andersen and Company. An unqualified opinion was issued each year. III. RETAINED EARNINGS RECONCILIATION (000's) 1978 1979 1980 Beginning Balance $5,294 $6,304 $7, 155 Net Income 1 ,002 987 1 ,274 Adjustment 7* - (13)** Rounding Difference 1 - - Preferred Stock Dividends - (136) (136) Ending Balance $6,304 $7, 155 $8,280 *Issuance of stock for minority interest in subsidiary. **Premium on retirement of preferred stock of subsidiary. IV. FINANCIAL ANALYSIS A. Balance Sheet Items 1) Advances and notes receivable due from affiliates were reclassified as -2-- non-current assets. 2) Prepaid expenses and supplies were reclassified as non-current assets. 3) Cost in excess of net tangible assets of companies acquired and unamort- ized debt expense were classified as intangible assets. 4) The portion of "other assets" that represented advances and notes receivable from CenCor, Inc. , an affiliate of CenCor, Inc. , was combined with other advances and notes receivable due from affiliates and was classified as such. 5) The cash surrender value of officer's life insurance was reclassified as a current asset at 12/31/77, 12/31/78, and 12/31/79. The 12/31/80 balance sheet did not show CVLI. B. OPERATIONS Total revenues increased by 70% during the period reviewed. In 1980, revenues were $46,774,000, which represented a 22% increase over the prior year. The pre— school day care services (La Petite Academies) and the consumer finance (Century Acceptance) segments constituted the greater part of total revenues during the period under review, and represented 50% and 27% of revenues in 1980, respectively. Until 1976, Century Acceptance had accounted for the major share of earnings. The proportionate increase in revenues from La Petite Academies and the proportionate reduction in the Century Acceptance contribution during recent years was a part of management's plan to diversify into areas not directly affected by money costs. The number of daycare centers rose from 135 in 1978 to 234 at 12/31/80. Management intends to continue the La Petite expansion in 1981 , due to the market potential for growth and profits. The number of consumer finance offices has been gradually decreasing. However, consumer finance revenues were not adversely affected. The company realized increases in revenues from the paramedical educational services and the temporary employment services in 1980 in comparison with previous years, due to increases in the volume of business. The tax preparation revenues declined slightly during 1980 from 1979, as a result of a decrease in the number of returns prepared. Total operating expenses increased dollarwise in 1980 compared to 1979, but declined from 77% of revenues to 75%. A 12% decline in bad debt expense was noted. Operating income increased from $8,930,000 for the year ended 12/31/79 to $11 ,498,000 for the year ended 12/31/80. Interest expense increased by 32% during 1980 compared to 1979, due to rising interest rates on short term borrowings. The company realized a net income of $1,274,000 in 1980, which represented a 29% increase over the preceding year. C. LIQUIDITY The current assest coverage of current liabilities has been on an unfavorable trend. At 12/31/80, current assets were sufficient to cover 137% of current liabilities compared to 159% the prior year. The decline in coverage was primarily due to the increases in commercial paper, current maturities of long term debt, and unearned income. The majority of current assets were concentrated in installment notes receivable. A break down of these receivables is shown on th'e following page: (000's) -3- 1979 % 1980 Discount-basis cash loans $46, 197 72% $43,730 67% Interest-bearing cash loans 3, 162 5 3,893 6 Sales contracts 15,035 23 17,668 27 Total installment receivables $64,394 100% $65,291 100% Less: Unearned discount 9,696 9,548 Reserve for credit losses 1 ,927 1,965 Net installment receivables $52,771 $53,778 The maximum term of installment notes receivable was 96 months in 1980 and 1979. However, the maturities are generally restricted to 37 months. Contractual maturities at 12/31/80 were estimated to be as follows: 1984 and Total 1981 1982 1983 Thereafter Discount-basis and interest-bearing cash loans 100% 50% 34% 14% 2% Sales contracts 100% 71% 25% 4% - A substantial portion of the notes will be renewed prior to contractual maturity dates. During 1979 and 1980, cash collections on installment notes receivable were $48,680,000 and $46,669,000 respectively, and the ratio of collections to average receivable balances was 78.3% and 74.6%, respectively. Loans which have received no payment during a period of 180 days and which are con- sidered uncollectible by management are charged off against the reserve for credit losses. The reserve for credit losses was 3.01% of total installment receivables at 12/31/80 compared to 2.95% for the average consumer finance company. The company sells commercial paper with maturities from 5 to 270 days to institutions and individuals. Commercial paper borrowings were up at 12/31/80 for the purpose of funding buildings and property used in the expansion of the day care centers. CenCor was borrowing $19,831 ,000 under available lines of credit amounting to $47,903,000 at 12/31/80. Available bank lines of credit covered 339% of commercial _ paper outstandings at 12/31/80. D. LEVERAGE As with most institutions involved in consumer finance, CenCor is highly leveraged at 17. 18: 1. However, the trend in the debt to worth ratio is favorable. In addition, a major portion of long term debt is subordinated, resulting in a relatively low capital funds ratio. Non-subordinated long term debt consisted of various senior notes payable, real estate notes and mortgages totaling $23,585,000. Subordinated debt consisted of varoius junior and senior subordinated notes and debentures which amounted to $19,248,000. Deferred income taxes of $1 ,012,000 were also included in long term liabilities. / 7— -4- Upon the death or physical inability of the chief executive officer to exercise the full authority of that office, the holders of substantially all of Century Acceptance's long term debt may give notice accelerating the maturity of the debt to not less than 270 days after notice. Upon termination of the chief executive officer for other than death or physical ability, maturity could be accelerated to not less than 60 days. One of the real estate note agreements provides that $250,000 of the principal shall become due upon the failure of CenCor's president to be the chief executive officer of CenCor and own or control at least 25% of the regular common stock. At 12/31/80, the company had commitments in the form of operating leases through 1991 and thereafter, which amounted to $24, 117,000. Rental expense was $2,652,000 and $3,258,000 in 1979 and 1980, respectively. In addition, the company has contracted for and is in the process of negotiating contracts for the construction of additional day-care buildings. The total estimated cost of these buildings under contract and contract negotiation at 12/31/80, excluding interest that will be capitalized, was $1,806,000. Hello