-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rtl20G0C+23Paym5ZIEUZKo15VPX8z4VpNQIHC4o8n5KLTRU9UclF3WrfDiuhvok J+eK+gEGw5dOSB9Sm0BpUw== 0000071023-96-000008.txt : 19960927 0000071023-96-000008.hdr.sgml : 19960927 ACCESSION NUMBER: 0000071023-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: 2731 IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 96611064 BUSINESS ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 BUSINESS PHONE: 6158899000 MAIL ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 FORMER COMPANY: FORMER CONFORMED NAME: ROYAL PUBLISHERS INC DATE OF NAME CHANGE: 19721019 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-4095 THOMAS NELSON, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-0679364 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 501 Nelson Place, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (615)889-9000 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 At August 12, 1996, the Registrant had outstanding 16,011,228 shares of Common Stock and 1,112,075 shares of Class B Common Stock. Part I Item 1. Financial Statements THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, March 31, June 30, 1996 1996 1995 ---------- ----------- ----------- (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,441 $ 672 $ 663 Accounts receivable, less allowances of $10,472, $10,959 and $7,833 respectively 89,748 99,221 79,288 Income tax refunds receivable 4,179 4,440 1,869 Inventories 98,575 97,496 76,564 Prepaid expenses 20,545 18,045 21,675 Deferred tax asset 17,120 17,120 7,714 ---------- ----------- ----------- Total Current Assets 231,608 236,994 187,773 PROPERTY, PLANT AND EQUIPMENT 35,844 36,634 16,303 OTHER ASSETS 19,649 19,347 20,491 DEFERRED CHARGES 3,461 3,658 3,857 GOODWILL 76,533 76,963 31,624 ---------- ----------- ----------- TOTAL ASSETS $ 367,095 $ 373,596 $ 260,048 ========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 21,771 $ 30,158 $ 29,705 Accrued expenses 28,392 28,858 14,988 Dividends payable 685 685 538 Current portion of long-term debt 2,376 2,376 892 Current portion of capital lease obligation 274 249 752 Net liability of discontinued operations 2,663 3,251 - ---------- ----------- ----------- Total Current Liabilities 56,161 65,577 46,875 LONG-TERM DEBT 184,135 179,489 138,277 CAPITAL LEASE OBLIGATION 489 527 464 DEFERRED TAX LIABILITY 3,127 3,127 1,410 OTHER LIABILITIES 2,529 2,506 1,201 SHAREHOLDERS' EQUITY Preferred stock, $1.00 par value, authorized 1,000,000 shares; none issued - - - Common stock, $1.00 par value, authorized 20,000,000 shares; issued 16,007,266, 16,004,368 and 12,370,579 shares, respectively 16,007 16,004 12,371 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,112,075, 1,112,075 and 1,085,844 shares, respectively 1,112 1,112 1,086 Additional paid-in capital 79,019 78,825 18,192 Retained earnings 24,810 26,952 39,642 Deferred compensation ( 656) ( 828) -- Foreign currency translation adjustments 362 305 530 ---------- ----------- ----------- Total Shareholders' Equity 120,654 122,370 71,821 ---------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 367,095 $ 373,596 $ 260,048 ========== =========== =========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Three Months Ended June 30, 1996 1995 --------------- -------------- (Unaudited) (Unaudited) Net revenues $ 72,458 $ 60,299 Expenses: Cost of goods sold 38,776 28,578 Selling, general and administrative 32,203 28,864 Amortization of goodwill and non-compete agreements 740 450 ------------- ------------- Total expenses 71,719 57,892 ------------- ------------- Operating income 739 2,407 Other income (expense) 67 ( 49) Interest expense 3,058 2,495 ------------- ------------- Loss from continuing operations before income taxes ( 2,252) ( 137) Provision (benefit) for income taxes ( 856) ( 51) ------------- ------------- Loss from continuing operations ( 1,396) ( 86) Loss from discontinued operations, net of tax benefits of $159 - ( 272) ------------- ------------- NET LOSS ($ 1,396) ($ 358) ============= ============= Weighted average number of shares outstanding 17,139 13,567 ============= ============= NET LOSS PER SHARE: Loss from continuing operations ($ 0.08) ($ 0.01) Loss from discontinued operations - ( 0.02) ------------- ------------- NET LOSS PER SHARE ($ 0.08) ($ 0.03) ============= ============= DIVIDENDS DECLARED PER SHARE $ 0.04 $ 0.04 ============= ============= See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three Months Ended June 30, --------------------------- 1996 1995 --------- ---------- (Unaudited) (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ($ 1,396) ($ 86) Adjustments to reconcile net loss to net cash provided by (used in) operations: Depreciation and amortization 2,408 1,513 Effect of exchange rate changes on cash 6 2 Deferred compensation 172 -- Changes in assets and liabilities, net of disposals: Accounts receivable, net 9,473 5,438 Income tax refunds receivable 261 -- Inventories ( 1,079) ( 7,214) Prepaid expenses ( 2,500) ( 7,972) Accounts payable and accrued expenses ( 8,853) ( 6,833) --------- ---------- Net cash used in continuing operations ( 1,508) ( 15,152) --------- ---------- Discontinued operations: Loss from discontinued operations -- ( 272) Cash used for discontinued operations ( 588) ( 215) --------- ---------- Net cash used in discontinued operations ( 588) ( 487) --------- ---------- Net cash used in operating activities ( 2,096) ( 15,639) --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 219) ( 126) Purchase of net assets of acquired companies - net of cash received ( 87) -- Changes in other assets and deferred charges ( 949) ( 1,620) --------- ---------- Net Cash Used in Investing Activities ( 1,255) ( 1,746) --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit 4,646 18,169 Payments under capital lease obligation ( 112) ( 225) Dividends paid ( 685) ( 537) Changes in other liabilities 23 ( 155) Proceeds from issuance of common stock 197 135 Common stock retired -- ( 125) --------- ---------- Net cash provided by financing activities 4,069 17,262 --------- ---------- EFFECT OF TRANSLATION RATE CHANGES ON CASH 51 19 --------- ---------- Net increase (decrease) in cash and cash equivalents 769 ( 104) Cash and cash equivalents at beginning of period 672 767 --------- ---------- Cash and cash equivalents at end of period $ 1,441 $ 663 ========= ========== Supplemental disclosures of non-cash investing and financing activities: Dividends accrued and unpaid $ 685 $ 538 Capital lease obligations incurred to lease new equipment $ 50 $ 830 See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Basis of Presentation The accompanying unaudited consolidated financial statements reflect all adjustments (which are of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations. The statements should be read in conjunction with the Summary of Significant Accounting Policies and notes to the consolidated financial statements included in the Company's annual report for the year ended March 31, 1996. The balance sheet and related information in these notes as of March 31, 1996, have been taken from the audited consolidated financial statements as of that date. Certain reclassifications have been made to conform presentation of the fiscal 1996 Financial Statements with fiscal 1997 presentation. Note B - Inventories Inventories consisted of the following (in thousands):
June 30, March 31, June 30, 1996 1996 1995 ---------- ---------- ---------- Finished goods $ 78,429 $ 77,318 $ 67,852 Raw materials and work in process 20,146 20,178 8,712 ---------- ---------- ---------- $ 98,575 $ 97,496 $ 76,564 ========== ========== ==========
Note C - Cash Dividend On May 23, 1996, the Company's directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend is payable on August 19, 1996, to shareholders of record on August 5, 1996. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company's net revenues have grown significantly in recent years as a result of increased sales of the existing product lines and through the development and acquisition of new product lines. In October 1995, the Company acquired The C.R. Gibson Company ("Gibson") for approximately $67 million in cash which expanded its gift product lines and distribution network. As a result, the Company's gift division has grown significantly for the first quarter of fiscal 1997 as compared to the same period in the prior year. As a result of operating trends and the softness of the retail markets for the Company's products which began to adversely affect fiscal 1996 operating results in the second quarter of fiscal 1996, the Company decided during the fourth quarter of fiscal 1996 to discontinue the operations of its Royal Media division, a division which published magazines and operated radio networks directed toward the Christian markets. The operating results of the Royal Media division for the three months ended June 30, 1995, are reported as a loss from discontinued operations. The following table sets forth for the periods indicated certain selected statements of operations data of the Company expressed as a percentage of net revenues and the percentage change in dollars in such data from the prior fiscal year.
Three Months Ended June 30, -------------------- Increase 1996 1995 (Decrease) -------- -------- ---------- (%) (%) (%) Net revenues: Publishing Book 24.9 35.3 ( 15.3) Bible 19.0 24.4 ( 6.2) -------- -------- ---------- Total Publishing 43.9 59.7 ( 11.6) Music 23.9 30.8 ( 7.2) Gift 31.2 8.0 371.2 Other 1.0 1.5 ( 18.2) -------- -------- ---------- Total Revenues 100.0 100.0 20.2 -------- -------- ---------- Expenses: Cost of goods sold 53.5 47.4 35.7 Selling, general and administrative 44.5 47.9 11.6 Amortization of goodwill and non-compete agreements 1.0 0.7 64.4 -------- -------- ---------- Total Expenses 99.0 96.0 23.9 -------- -------- ---------- Operating income 1.0 4.0 ( 69.6) Loss from continuing operations before income taxes ( 3.1) ( 0.2) - Loss from discontinued operations - ( 0.5) - Net loss ( 1.9) ( 0.6) 289.9
The Company's net revenues fluctuate seasonally, with net revenues in the second and third fiscal quarters historically being greater than those in the first and fourth fiscal quarters. This seasonality is the result of increased consumer purchases of the Company's products during the traditional year-end holidays. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to the seasonality of new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward-looking statements and a number of factors may affect future results, liquidity and capital resources. These factors include softness in the general retail environment, the timing of products being introduced to the market, the level of returns experienced by operating divisions, the level of margins achievable in the marketplace and the ability to minimize operating expenses. Although the Company believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its business strategy during the remainder of fiscal 1997. Results of Operations Net revenues for the first three months of fiscal 1997 increased by $12.2 million or 20.2% over the same period in fiscal 1996. The increase in net revenues was attributable to the increase in revenues in the gift products division due to the acquisition of Gibson, which was consummated on October 31, 1995, and to a lesser extent the introduction of new gift products. Net revenues, excluding gift revenues, decreased for the first three months of fiscal 1997 over the same period of fiscal 1996 by 11.1% and decreased in each of the Company's product lines, except gift, as follows: Bible products decreased by $0.9 million or 6.2%; music products decreased by $1.3 million or 7.2%; and book products decreased by $3.2 million or 15.3%. Net revenues from gift products, including Gibson, increased by $17.8 million or 371.2%. Price increases did not have a material effect on net revenues. The trend of higher returns and reduced sales in the publishing and music divisions and the direct marketing division, first experienced during the fourth quarter of fiscal 1996, continued and were the primary reasons for the decline in publishing and music revenues. The Company's cost of goods sold for the first three months of fiscal 1997 increased by $10.2 million or 35.7% over the same period in fiscal 1996 and, as a percentage of net revenues, increased to 53.5% for the first three months of fiscal 1997 from 47.4% in the comparable period in fiscal 1996. The increase in cost of goods sold, as a percentage of net revenues, resulted from higher royalty costs due to a change in the product sales mix and lower recoveries of royalty and production advances attributable to lower sales within the publishing and music divisions, as well as a change in the mix of product types and distribution channels. Sales through the gift market channels more than tripled from the prior year as a result of the Gibson acquisition, while sales through the direct market channels decreased as a percentage of total sales. Sales made through the direct marketing to consumers channel approximate retail prices, while sales through the gift market channel are at wholesale prices. Therefore, as gift market channel sales increased and direct marketing sales decreased as a percentage of the total Company's revenues, cost of sales as a percentage of revenues increased for the first three months of fiscal 1997 over the same period in fiscal 1996, and this trend is expected to continue for the remainder of fiscal 1997. Additionally, in the prior year, the Company achieved a favorable period benefit in gross margins through price increases in anticipation of increasing paper costs while still selling from existing inventory. Selling, general and administrative expenses for the first three months of fiscal 1997 increased by $3.3 million or 11.6% over the same period in fiscal 1996. These expenses, expressed as a percentage of net revenues, decreased to 44.5% for the first three months of fiscal 1997 from 47.9% in the same period in fiscal 1996 primarily due to the decreases in selling and marketing costs, related to reductions in direct marketing sales promotions, as well as reductions in staff and general expenditures. Interest expense for the first three months of fiscal 1997 increased by $0.6 million or 22.6% over the same period in fiscal 1996 due to increased borrowings for working capital and the acquisition of Gibson. The net loss for the first three months of fiscal 1997 increased by $1.0 million or 289.9% over the same period in fiscal 1996. Returns at higher levels and reduced sales in its publishing and music divisions and its direct marketing division were the primary factors which resulted in this increased loss. Liquidity and Capital Resources The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations and borrowings available under bank credit facilities. At June 30, 1996, the Company had working capital of $175.4 million. At June 30, 1996, the Company had $62.5 million outstanding, and $72.5 million available for borrowing under its two credit facilities. As previously addressed, seasonality has a major impact on the Company's revenues which in turn have a direct bearing on the level of borrowings. Net cash used in operating activities was $2.1 million and $15.6 million for the first three months of fiscal 1997 and 1996, respectively. Cash used in operations during the first three months of fiscal 1997 was principally attributable to the payment of accounts payable and accrued expenses of $8.9 million. Cash used in operations during the first three months of fiscal 1996 was principally attributable to the increase in inventories and prepaid expenses and the decrease in accounts payable and accrued expenses. During the first three months of fiscal 1997, capital expenditures totaled approximately $0.2 million, which was used primarily to purchase computer equipment. During the remainder of fiscal 1997, the Company anticipates capital expenditures of approximately $3.6 million primarily consisting of computer equipment, warehousing and manufacturing equipment and building improvements. The Company's bank credit facilities are unsecured and consist of a $125 million credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The $125 million credit facility bears interest at either the prime rate or, at the Company's option, LIBOR plus a percentage, subject to adjustment based on certain financial ratios and matures on December 13, 2002. The $10 million credit facility bears interest at the prime rate and matures on July 30, 1997. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. The Company has outstanding $62 million of senior notes ("Senior Notes") which are unsecured. The Senior Notes bear interest at rates from 6.93% to 9.5% due through fiscal 2008. Under the terms of the Credit Agreements and the Senior Notes, the Company has agreed to limit the payment of dividends and to maintain certain interest coverage and debt-to-capital ratios which are similarly calculated for each debt agreement. At June 30, 1996, the Company was in compliance with all covenants of these debt agreements, as amended. The Company also has outstanding $55 million of 5.75% convertible subordinated notes ("Convertible Subordinated Notes") due November 30, 1999. The Convertible Subordinated Notes presently are convertible into common stock at $17.00 per share and are redeemable at the Company's option after November 30, 1995, at 103.29% of the principal amount, declining annually thereafter to 100% on November 30, 1999. Management believes cash generated by operations and borrowings available through its Credit Agreements will be sufficient to fund anticipated working capital requirements for existing operations through the remainder of fiscal 1997. PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K Exhibit 27 - Financial Data Schedule (b) No Form 8-K was filed by the Company during the quarter ended June 30, 1996. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Thomas Nelson, Inc. (Registrant) August 13, 1996 BY /s/ Joe L. Powers ----------------------------- ---------------------------- Joe L. Powers Executive Vice President (Principal Financial and Accounting Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Company's 10-Q for the period ended June 30, 1996, and is qualified in its entirety by reference to such financial statements and the notes thereto. 1,000 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 1,441 0 100,220 10,472 98,575 231,608 49,521 13,677 367,095 56,161 184,624 17,119 0 0 103,535 367,095 70,818 72,458 38,776 70,979 740 1,142 3,058 (2,252) (856) (1,396) 0 0 0 (1,396) (0.08) (0.08)
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