-----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, SMEzgK8ae8PwHxc3Q5Z/Tfg8XnwytY8P693OgyZXFX36tT28F704fJa3hP6s1EOc GfVmJOZ2kFL6xJlJQmV/4A== 0000071023-99-000004.txt : 19990217 0000071023-99-000004.hdr.sgml : 19990217 ACCESSION NUMBER: 0000071023-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13788 FILM NUMBER: 99542504 BUSINESS ADDRESS: STREET 1: 501 NELSON PLACE 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 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 [ ] 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 February 10, 1999, the Registrant had outstanding 13,585,590 shares of Common Stock and 1,106,324 shares of Class B Common Stock. Part I Item 1. Financial Statements THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
December 31, March 31, December 31, 1998 1998 1997 ------------ ----------- ----------- (Unaudited) (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 2,432 $ 39,713 $ 41,023 Accounts receivable, less allowances of $9,617, $6,162 and $8,101 respectively 74,273 65,415 61,337 Inventories 74,017 70,590 66,219 Prepaid expenses 12,607 8,177 7,437 Deferred tax assets 3,276 3,276 8,310 ---------- ---------- ---------- Total current assets 166,605 187,171 184,326 Property, plant and equipment 25,200 32,103 32,740 Other assets 9,450 9,843 10,062 Deferred charges 1,790 1,789 1,990 Goodwill 55,394 56,536 56,929 ---------- ---------- ---------- TOTAL ASSETS $ 258,439 $ 287,442 $ 286,047 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 15,372 $ 16,701 $ 11,366 Accrued expenses 16,399 20,182 21,111 Dividends payable 588 685 685 Income taxes currently payable 4,371 4,286 8,023 Current portion of long- term debt & capital lease obligations 4,914 3,975 3,257 ---------- ---------- ---------- Total current liabilities 41,644 45,829 44,442 Long-term debt 80,630 79,476 80,725 Capital lease obligations - 84 156 Deferred tax liabilities 3,364 3,364 3,640 Other liabilities 1,953 2,293 2,663 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 13,585,590, 16,002,817 and 16,002,817 shares, respectively 13,585 16,003 16,003 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,106,324, 1,111,924 and 1,111,924 shares, respectively 1,106 1,112 1,112 Additional paid-in capital 47,920 79,057 79,057 Retained earnings 68,237 60,224 58,249 ---------- ---------- ---------- Total shareholders' equity 130,848 156,396 154,421 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 258,439 $ 287,442 $ 286,047 ========== ========== ========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Nine Months Ended Three Months Ended December 31, December 31, 1998 1997 1998 1997 ---------- --------- ---------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) NET REVENUES $ 193,023 $ 187,735 $ 66,584 $ 64,658 COST AND EXPENSES: Cost of goods sold 103,074 103,258 35,590 35,427 Selling, general and administrative 68,783 63,447 22,353 20,497 Amortization of goodwill and non-compete agreements 1,234 1,433 417 437 --------- --------- --------- --------- Total expenses 173,091 168,138 58,360 56,361 --------- --------- --------- --------- OPERATING INCOME 19,932 19,597 8,224 8,297 Other income 369 1,085 47 277 Interest expense 4,752 4,568 1,672 1,483 --------- --------- --------- --------- Income before income taxes 15,549 16,114 6,599 7,091 Provision for income taxes 5,753 6,103 2,442 2,674 --------- --------- --------- --------- NET INCOME $ 9,796 $ 10,011 $ 4,157 $ 4,417 ========= ========= ========= ========= Weighted average number of shares outstanding: Basic 15,497 17,112 14,725 17,112 ========= ========= ========= ========= Diluted 18,515 20,384 17,223 20,392 ========= ========= ========= ========= NET INCOME PER SHARE: Basic $ 0.63 $ 0.59 $ 0.28 $ 0.26 ========= ========= ========= ========= Diluted $ 0.61 $ 0.57 $ 0.27 $ 0.24 ========= ========= ========= ========= DIVIDENDS DECLARED PER SHARE $ 0.12 $ 0.12 $ 0.04 $ 0.04 ========= ========= ========= ========= See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Nine Months Ended December 31, --------------------------------- 1998 1997 ------------ -------------- (Unaudited) (Unaudited) CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES: Income from continuing operations $ 9,796 $ 10,011 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 6,944 6,213 Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net ( 8,858) 3,289 Inventories ( 3,427) 5,331 Prepaid expenses ( 4,430) 1,984 Accounts payable and accrued expenses ( 3,166) ( 7,184) Income taxes currently payable and deferred 85 ( 11,951) --------- ---------- Net cash provided by (used in) continuing operations ( 3,056) 7,693 --------- ---------- Discontinued operations: Changes in discontinued assets ( 1,946) ( 1,959) --------- ---------- Net cash used in discontinued operations ( 1,946) ( 1,959) --------- ---------- Net cash provided by (used in) operating activities ( 5,002) 5,734 --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 1,619) ( 2,938) Proceeds from sale of business and discontinued assets 5,598 - Changes in other assets and deferred charges ( 2,486) ( 803) --------- ---------- Net cash provided by (used in) investing activities 1,493 ( 3,741) --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit 20,500 - Payments under capital lease obligation ( 189) ( 256) Payments on long-term debt ( 18,302) ( 2,392) Dividends paid ( 1,880) ( 2,052) Proceeds from issuance of common stock 93 14 Common stock retired ( 33,676) ( 4) Other financing activities ( 318) 249 --------- ---------- Net cash used in financing activities ( 33,772) ( 4,441) --------- ---------- Net decrease in cash and cash equivalents ( 37,281) ( 2,448) Cash and cash equivalents at beginning of period 39,713 43,471 --------- ---------- Cash and cash equivalents at end of period $ 2,432 $ 41,023 ========= ========== Supplemental disclosures of non-cash investing and financing activities: Dividends accrued and unpaid $ 588 $ 685
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, 1998. The balance sheet and related information in these notes as of March 31, 1998 have been taken from the audited consolidated financial statements as of that date. Certain reclassifications have been made to conform presentation of the fiscal 1998 financial statements with fiscal 1999 presentation. Note B - New Pronouncements Reporting on the Costs of Start-Up Activities: In April 1998, the Accounting Standards Executive Committee ("AcSEC") of the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP 98-5 requires the costs of start-up activities and organization costs, as defined, to be expensed as incurred. SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The Company will adopt the pronouncement during the first quarter of fiscal 2000. The Company does not expect the adoption to have a material impact on the Company's results of operations, financial condition or cash flows. Segment Reporting: In June 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 requires public companies to report financial and descriptive information about its reportable operating segments in annual financial statements and in interim financial reports issued to shareholders. The Company will start reporting under SFAS 131 beginning with its annual financial statements for fiscal year ending March 31, 1999. Note C - Inventories Components of inventories consisted of the following (in thousands):
December 31, March 31, December 31, 1998 1998 1997 ----------- --------- ----------- Finished goods $ 62,376 $ 54,503 $ 54,031 Raw materials and work in process 11,641 16,087 12,188 ----------- --------- ----------- $ 74,017 $ 70,590 $ 66,219 =========== ========= ===========
Note D - Cash Dividend On May 21, 1998, the Company's board of directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend was paid August 17, 1998, to shareholders of record on August 3, 1998. On August 21, 1998, the Company's board of directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend was paid November 16, 1998, to shareholders of record on November 2, 1998. On November 19, 1998, the Company's board of directors declared a cash dividend of $0.04 per share of Common and Class B Common Stock. The dividend is payable February 15, 1999, to shareholders of record on February 1, 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW 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.
Nine Months Ended Fiscal December 31, Year-to-Year ----------------- Increase 1998 1997 (Decrease) ------- ------- -------- (%) (%) (%) Net revenues: Publishing 63.8 65.6 - Gift 36.2 34.4 8.1 ------ ------ Total net revenues 100.0 100.0 2.8 ------ ------ Expenses: Cost of goods sold 53.4 55.0 (0.2) Selling, general and administrative 35.6 33.8 8.4 Amortization of goodwill and non-compete agreements 0.7 0.8 (13.9) ------ ------ Total expenses 89.7 89.6 - ------ ------ Operating income 10.3 10.4 1.7 ====== ====== Net income 5.1 5.3 ( 2.1) ====== ======
The Company's net revenues fluctuate seasonally, with net revenues in the first fiscal quarter historically being lower than those for the remainder of the year. This seasonality is the result of increased consumer purchases of the Company's products during the traditional holiday periods. 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 into 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 1999. The Company disclaims any intent or obligation to update forward- looking statements. Results of Operations Net revenues for the first nine months of fiscal 1999 increased $5.3 million, or 2.8%, and for the third quarter increased $1.9 million, or 3.0%, over the same periods in fiscal 1998. The publishing product net revenues for the first nine months were flat, and for the third quarter increased $1.8 million, or 3.7%, compared to the prior year. Both periods were affected by the absence of revenues from certain agreements which have expired, whereby the Company acted as a distributor of publishing products. The Company does not plan to enter into any material distribution agreements in the near future. The increase for the third quarter was primarily due to new product introductions. Net revenues from gift products for the first nine months increased $5.3 million, or 8.1%, and for the third quarter $0.1 million, or 0.8%. The increase for the nine months was primarily due to increased sales of a special selection of products, including scrapbooks, to mass merchandisers. The third quarter for gift product revenues has historically been lower than the remainder of the year. Price increases did not have a material effect on net revenues. The Company's cost of goods sold decreased for the first nine months of fiscal 1999 by $0.2 million, or 0.2%, and increased for the third quarter by $0.2 million, or 0.5%, over the same periods in fiscal 1998 and, as a percentage of net revenues, decreased to 53.4% for the first nine months of fiscal 1999 from 55.0% and for the third quarter to 53.5% from 54.8% in the comparable periods in fiscal 1998. The decrease in cost of goods sold, as a percentage of net revenues, for both periods resulted primarily from the expiration of certain distribution agreements referenced above. The cost to the Company for distributed products was greater than the cost for owned products. This decrease was also attributed to fewer sales of lower margin Bible-type publishing products and an increase in higher margin book-type products revenues. Selling, general and administrative expenses for the first nine months of fiscal 1999 increased by $5.3 million, or 8.4%, and for the third quarter increased $1.9 million, or 9.1%, from the same periods in fiscal 1998. These expenses, expressed as a percentage of net revenues, increased to 35.6% for the first nine months of fiscal 1999 versus 33.8% and for the third quarter to 33.6% from 31.7% in the same periods in fiscal 1998. These increases for both periods were primarily attributable to a decline in fees charged for operations services provided to the purchaser of the Company's music business, which was sold in January 1997. The fees for these services were credited to selling, general and administrative expenses and have declined as certain services were discontinued. All services have been discontinued as of December 31, 1998. In addition, to a lesser extent, the increases for the nine months and third fiscal quarter were due to increased marketing costs in the Company's direct-to-consumer market. Interest expense for the first nine months of fiscal 1999 increased by $0.2 million, or 4.0%, over the same period in fiscal 1998 due to increases in indebtedness incurred for repurchases of shares of common stock. Liquidity and Capital Resources At December 31, 1998, the Company had $2.4 million in cash and cash equivalents. 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 December 31, 1998, the Company had working capital of $125.0 million. On June 10, 1998, the Company announced its intention to repurchase up to three million shares of common stock and/or Class B common stock from time to time in the open market or through privately negotiated transactions. As of December 31, 1998, the Company had repurchased approximately 2.4 million shares of common stock in the open market at an aggregate cost to the Company of $33.5 million. Net cash provided by (used in) operating activities was ($5.0) million and $5.7 million for the first nine months of fiscal 1999 and 1998, respectively. Cash used in operations during the first nine months of fiscal 1999 was principally attributable to an increase in accounts receivable, prepaid expenses and inven- tories. The increase in accounts receivable resulted primarily from revenues occurring later in this year's third quarter, as well as, a shift from selling directly to one major mass market account to a distributor with longer payment terms. The prepaid expenses increased due to an increase in the number or size of author advances. Inventory increased to improve stock levels of Bible-type products under a new availability policy and to provide sufficient stock of certain gift products during the transition from manufacturing to outsourcing these products after the Company's sale of manufacturing operations supporting the gift business. Cash provided by operations during the first nine months of fiscal 1998 was principally attributable to income from continuing operations. During the first nine months of fiscal 1999, capital expenditures totaled approximately $1.6 million. During the remainder of fiscal 1999, the Company anticipates capital expenditures of approximately $1.0 million primarily consisting of computer equipment and warehousing equipment. The Company's bank credit facilities are unsecured and consist of a $100 million credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The $100 million credit facility bears interest at either the prime rate or, at the Company's option, LIBOR plus a percentage, subject to quarterly adjustments based on certain financial ratios. This credit facility was amended on November 30, 1998, to increase the aggregate amount available for borrowing from $75 million to $100 million and to extend the maturity from December 13, 2002 to December 13, 2005. (See Exhibit 4.1 filed herewith.) The $10 million credit facility bears interest at the prime rate and matures on July 31, 2000. At December 31, 1998, the Company had $20.5 million outstanding under the Credit Agreements, and $89.5 million available for borrowing. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. At December 31, 1998, the Company had outstanding approximately $21.3 million of unsecured senior notes ("Senior Notes"). The Senior Notes bear interest at rates from 6.68% to 9.50% due through fiscal 2006. 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-total-capital ratios which are similarly calculated for each debt agreement. At December 31, 1998, the Company was in compliance with all covenants of these debt agreements, as amended. At December 31, 1998, the Company had outstanding $39.9 million of 5.75% convertible subordinated notes ("Convertible Subordinated Notes") due November 30, 1999. During the first nine months of fiscal 1999, the Company purchased $15.1 million in principal amount of the Convertible Subordinated Notes. On January 7, 1999, the Company announced that it will redeem on March 1, 1999, all outstanding Convertible Subordinated Notes at a redemption price of $1,008.20 per $1,000 principal amount, together with accrued and unpaid interest. The Convertible Subordinated Notes presently are convertible at the option of the holder into approximately 58 shares of the Company's common stock per $1,000 principal amount at the conversion price of $17.00 per share. Management believes cash generated by operations and borrowings available under the Credit Agreements will be sufficient to fund anticipated working capital requirements for existing operations through the remainder of fiscal 1999. Year 2000 Conversion The Company has established a task force to coordinate the assessment and implementation of changes to computer systems and applications necessary to become year 2000 compliant. These actions are necessary to ensure that the systems and applications will recognize and process the year 2000 and beyond with no material adverse effect on customers or disruption to business operations. The task force has also evaluated non-systems issues, e.g. security, elevators, timekeeping, etc., relative to the year 2000. In addition, the task force has been actively communicating with third parties concerning the status of their year 2000 readiness. These third parties include the Company's financial institutions, as well as selected customers, vendors, landlords and suppliers of telecommunication services and other utilities. As part of the process of evaluating its options and attempting to mitigate third party risks, the task force is collecting and analyzing information from these third parties. As of December 31, 1998, the Company has completed all programming revisions to its computer systems and has completed initial testing of its systems for receipt of electronic orders, customer invoicing and other processes for transactions dated in year 2000. The Company anticipates that further compliance tests will include electronic and other communications with appropriate customers. The Company has also engaged consultants to certify that specific systems are year 2000 compliant. The effect of year 2000 non-compliance on the business of the Company is difficult to predict. The Company believes that possible risks if compliance is not accomplished could include delays in receiving and/or shipping of products and in invoicing to and/or receiving payments from customers in the days immediately after January 1, 2000. At this time, the Company does not believe these risks will have a material adverse effect on the Company's results of operations, liquidity or financial condition. The Company expensed approximately $346,000 in costs during the first nine months of fiscal 1999, primarily for programmer costs and software upgrades related to becoming year 2000 compliant, and expects to incur additional costs of $200,000 and $400,000 for the remainder of fiscal 1999 and for fiscal 2000, respectively. These costs include internal programmer costs for modification of software programs, costs for a testing site, software purchases and consulting fees and will be expensed as they are incurred. The task force is currently developing a contingency plan that is expected to address financial and operational problems that might arise on and around January 1, 2000. This contingency plan will include identifying alternate vendors and back-up processes that do not rely on computers, whenever possible. The Company expects to have the contingency plan completed during the fourth quarter of fiscal 1999 and to reevaluate this plan on a quarterly basis. PART II Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits required by Item 601 of Regulation S-K Exhibit Number ------- 4.1 - Fifth Amendment to Credit Agreement dated as of December 17, 1998, among the Company, SunTrust Bank, Nashville, N.A., National City Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt Corporate Finance, Inc. (formerly Creditanstalt-Bankverein) in New York. 11 - Statement re Computation of Per Share Earnings 27 - Financial Data Schedule (b) No Form 8-K was filed by the Company during the quarter ended December 31, 1998. SIGNATURES Pursuant to the requirements 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) February 12, 1999 BY /s/ Joe L. Powers - ----------------------------- ---------------------- Joe L. Powers Executive Vice President (Principal Financial and Accounting Officer) INDEX TO EXHIBITS Exhibit Number - ------ 4.1 - Fifth Amendment to Credit Agreement dated as of December 17, 1998, among the Company, SunTrust Bank, Nashville, N.A., National City Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt Corporate Finance, Inc. (formerly Creditanstalt-Bankverein) in New York. 11 - Statement re Computation of Per Share Earnings 27 - Financial Data Schedule (for SEC purposes only) EX-27 2
5 This schedule contains summary financial information extracted from the Company's 10-Q for the period ended December 31, 1998, and is qualified in its entirety by reference to such financial statements and the notes thereto. 1,000 9-MOS MAR-31-1999 APR-01-1998 DEC-31-1998 2,432 0 83,890 9,617 74,017 166,605 48,643 23,443 258,439 41,644 80,630 0 0 14,691 116,157 258,439 191,205 193,023 103,074 171,857 1,234 1,663 4,752 15,549 5,753 9,796 0 0 0 9,796 0.63 0.61
EX-11 3 EXHIBIT 11 STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS (Dollars in thousands, except per share data)
Nine Months Ended Three Months Ended December 31, December 31, 1998 1997 1998 1997 --------- --------- --------- --------- (Unaudited)(Unaudited)(Unaudited)(Unaudited) BASIC EARNINGS PER SHARE: Weighted average shares outstanding 15,497 17,112 14,725 17,112 ======== ======== ======= ======= Net income $ 9,796 $ 10,011 $ 4,157 $ 4,417 ======== ======== ======= ======= Net income per share $ 0.63 $ 0.59 $ 0.28 $ 0.26 ======== ======== ======= ======= DILUTED EARNINGS PER SHARE: Weighted average shares outstanding 15,497 17,149 14,725 17,157 Dilutive effect of common stock options 73 -- 58 -- Convertible notes 2,945 3,235 2,440 3,235 -------- -------- ------- ------- Total shares 18,515 20,384 17,223 20,392 ======== ======== ======= ======= Net income $ 11,280 $ 11,542 $ 4,574 $ 4,925 ======== ======== ======= ======= Net income per share $ 0.61 $ 0.57 $ 0.27 $ 0.24 ======== ======== ======= ======= Adjusted for interest on convertible debt
EX-4.1 4 FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (the "Fifth Amendment") is entered into on November 30, 1998, but to be effective as of June 10, 1998 (the "Effective Date"), by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), SUNTRUST BANK, NASHVILLE, N.A., a national banking association ("SunTrust"), the other banks and lending institutions listed on the signature pages hereof and any assignees of SunTrust or such other banks and lending institutions that become "Lenders" (SunTrust and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders"), and SUNTRUST BANK, NASHVILLE, N.A., in its capacity as agent for the Lenders (the "Agent"). R E C I T A L S: WHEREAS, Lenders, Agent and Nelson entered into an Amended and Restated Credit Agreement dated as of December 13, 1995, as amended by that certain First Amendment to Amended and Restated Credit Agreement dated as of January 3, 1996, as further amended by that certain Second Amendment to Amended and Restated Credit Agreement dated as of November 15, 1996, as further amended by that certain Third Amendment to Amended and Restated Credit Agreement dated as of January 7, 1997, and as further amended by that certain Fourth Amendment to Amended and Restated Credit Agreement dated as of March 31, 1998 (the "Fourth Amendment") (as amended or otherwise modified from time to time, the "Credit Agreement"), wherein Lenders agreed to extend certain financial accommodations to Nelson; and WHEREAS, Nelson has requested that Lenders consent to Nelson's repurchasing of a portion of its outstanding common stock and certain convertible subordinated notes and to use proceeds of the Credit Agreement for such purpose, and Lenders are willing to consent to such repurchasing and such use of proceeds, and to modify the application of certain provisions of the Credit Agreement with respect to such repurchasing and such use of proceeds, upon the terms contained herein; and WHEREAS, Nelson has requested that Lenders consent to an extension of the Initial Reduction Date, and Lenders are willing to consent to such request, upon the terms contained herein; and WHEREAS, Nelson has requested that Lenders consent to a change in the calculation with respect to adjustments concerning certain pricing with respect to the Credit Agreement, and Lenders are willing to consent to such request, upon the terms contained herein; and WHEREAS, Nelson has requested that Lenders consent to an increase in the Revolving Loan Commitment, and Lenders are willing to consent to such request, upon the terms contained herein; and WHEREAS, Nelson has requested that Lenders consent to certain other changes in the Credit Agreement, as set forth herein; NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which are mutually acknowledged, the parties hereby agree as follows: 1. Defined Terms. All defined terms used and not otherwise defined herein shall have the meaning ascribed to such terms in the Credit Agreement. 2. Stock Repurchase. Nelson may from time to time purchase up to 3,000,000 shares (the "Maximum Number of Shares") of the outstanding common stock of Nelson (the "Stock Repurchase"). Nelson's common stock to be acquired pursuant to the Stock Repurchase shall be referred to as the "Repurchased Shares." Nelson shall accomplish the Stock Repurchase by any of the following (a) purchasing the Repurchased Shares on the open market ("Open Market Acquisitions"), or (b) in privately negotiated transactions ("Private Acquisitions"), or (c) pursuant to a tender offer in accordance with Rule 13a-4 promulgated under the Securities Exchange Act of 1934 ("Self- Tender"). The Stock Repurchase shall be completed in accordance with one of the following schedules, as applicable (the "Completion Date"): (i) on or before one (1) year from the Effective Date in the event Nelson utilizes a Private Acquisition or Open Market Acquisitions to accomplish the Stock Repurchase, or (ii) on or before ninety (90) days from the date Nelson initiates the Self-Tender (the "Initiation Date") in the event Nelson utilizes a Self- Tender to accomplish the Stock Repurchase. The Initiation Date may not occur more than one year after the Effective Date. In the event Nelson elects to accomplish the Stock Repurchase pursuant to a Self-Tender, Nelson shall give the Agent written notice of the Initiation Date and the anticipated Completion Date at least five (5) days prior to the Initiation Date. Subject to the terms and provisions of Section 2 and Section 3 hereof, Nelson proposes to fund the acquisition of the Repurchased Shares by utilizing a combination of (a) its working capital and available cash, and (b) borrowings under the Revolving Loan Commitments. 3. Lender's Consent. Nelson has requested that Lenders consent to the Stock Repurchase as described in this Fifth Amendment, and that, with respect to the Stock Repurchase only, Lenders consent to modify certain terms and provisions of the Credit Agreement to permit the use of funds by Nelson as set forth in this Fifth Amendment to consummate the Stock Repurchase. Lenders hereby consent to Nelson's request with respect to the Stock Repurchase as described herein. Lenders further consent to borrowings by Nelson under the Revolving Loan Commitments to wholly or partially fund the Stock Repurchase. Nelson shall be entitled to use borrowings under the Revolving Loan Commitments for the Stock Repurchase through the Completion Date; it shall make no additional borrowings thereafter for the Stock Repurchase. After the Completion Date, Nelson shall not be permitted to borrow under the Revolving Loan Commitments for the purpose of the Stock Repurchase. 4. Terms of Stock Repurchase. Nelson hereby covenants with Lenders that in connection with the Stock Repurchase (a) Nelson shall purchase no more than the Maximum Number of Shares, (b) the Stock Repurchase shall be completed on or before the Completion Date, and (c) the price to be paid for each Repurchased Share shall not exceed $18 per share excluding ordinary and customary trading commissions and fees. 5. Section 2.02 of the Credit Agreement. Lenders hereby agree that Section 2.02 of the Credit Agreement is hereby modified to permit the use by Nelson of funds available under the Revolving Loans to fund the Stock Repurchase. Any borrowing of such funds shall be made in accordance with the Credit Agreement as amended by this Fifth Amendment, including without limitation, Article III and Article IV of the Credit Agreement. 6. Section 11.04 of the Credit Agreement. Lenders hereby agree that the provisions of Section 11.04 of the Credit Agreement restricting the purchase of subordinated debt or capital stock shall not apply to the Stock Repurchase. 7. Debenture Repurchase. Nelson anticipates purchasing up to $55,000,000 of its outstanding 5 3/4% Convertible Subordinated Notes due November 30, 1999 in the total principal amount of $55,000,000 and dated November 30, 1992 (the "Debenture Repurchase"). Nelson and Lender agree that at any time prior to November 30, 1999 Nelson may fund the Debenture Repurchase by borrowings under the Revolving Loan Commitment. Any borrowing of such funds shall be made in accordance with the Credit Agreement, as amended, including without limitation Articles III and IV of the Credit Agreement. 8. Consent of Third Parties. Nelson represents and warrants that any and all consents required to be obtained by Nelson in connection with the Stock Repurchase and the funding of same have been obtained and delivered to Agent. 9. Fee to Lender. Lenders and Nelson hereby agree that simultaneously with the execution of this Fifth Amendment, Nelson shall pay to Lenders a fee in the amount of Sixty- Eight Thousand Seven Hundred Fifty and No/100 Dollars ($68,750.00) in consideration of Lenders' execution of this Fifth Amendment and the agreements set forth herein. 10. Future Transactions. Nelson and Lenders hereby agree that the waivers and modifications set forth herein shall apply only to the Stock Repurchase and the Debenture Repurchase, shall terminate with respect to the Stock Repurchase on June 10, 1999, shall terminate with respect to the Debenture Repurchase on November 30, 1999 and shall not extend to any future stock acquisitions or uses of proceeds that may be contemplated by Nelson without the express written consent of Lenders. 11. Extension of Initial Reduction Date. Nelson has requested, and Lenders hereby agree, that the Initial Reduction Date shall mean December 13, 2001, pursuant to the provisions of Section 2.08 of the Credit Agreement. 12. Change in Definitions. Nelson and Lenders hereby agree that the definitions of "Applicable LIBOR Rate Margin" and "Commitment Percentage" shall be deleted in their entirety and the following language shall be substituted in lieu of such definitions: "Commitment Percentage" shall mean the relevant percentage indicated below based upon the percentages indicated for Nelson's Interest Coverage Ratio and Senior Funded Debt to Total Capital as determined on a quarterly basis, within sixty (60) days after the end of each fiscal quarter of Nelson and on that date which is ninety (90) days after the end of the fiscal year of Nelson, based upon unaudited financial statements for the quarters ending June 30, September 30 and December 31 and based upon audited financial statements for the fiscal year ending March 31, with such Commitment Percentage to become effective on the first business day of the quarter immediately succeeding such date of determination with respect to all outstanding amounts under the Revolving Loans:
INTEREST COVERAGE | PERCENTAGE OF SENIOR RATIO | FUNDED DEBT | TO TOTAL CAPITAL | >45% 35%-45% <35% |--------------------------------- | <2.5:1:0 | .375% .30% .25% 2.5:1.0 - 3.0:1.0 | .25% .25% .20% >3.0:1.0 - 5.0:1.0 | .25% .20% .15% >5.0:1.0 | .20% .15% .125%
Notwithstanding the foregoing, in the event Nelson does not deliver the audited financial statements for the immediately preceding fiscal year, or unaudited financial statements for the immediately preceding fiscal quarter, as applicable, in a manner that permits the determinations required in the definition of the Commitment Percentage within ninety (90) days of the end of Nelson's fiscal year or within sixty (60) days of the end of each fiscal quarter, as applicable, commencing at the end of such ninety (90) day or sixty (60) day period, as applicable, and continuing until such audited or unaudited financial statements, as applicable, are made available, the Commitment Percentage shall be the highest percentage set forth in the preceding chart. At such time as Agent changes the Commitment Percentage as set forth in the preceding sentence, it agrees to give written notice of such change to Nelson and to reduce the Commitment Percentage to its appropriate rate at such time as Nelson delivers the financial statements as set forth herein. "Applicable LIBOR Rate Margin" shall mean, with respect to all outstanding Borrowings consisting of LIBOR Advances hereunder, the relevant percentage indicated below based upon the percentages indicated for Nelson's Interest Coverage Ratio and Senior Funded Debt to Total Capital as determined on the date that is sixty (60) days after the end of each fiscal quarter and on the date that is ninety (90) days after the end of each fiscal year of Nelson; based, in the case of the end of any quarter, upon unaudited financial statements for the immediately preceding fiscal quarter, and based, in the case of the fiscal year end, upon audited financial statements for the immediately preceding fiscal year, with such Applicable LIBOR Rate Margin to become effective on the first business day of the quarter immediately succeeding such date of determination with respect to all outstanding amounts under the Revolving Loans:
INTEREST COVERAGE | PERCENTAGE OF RATIO | SENIOR FUNDED DEBT | TO TOTAL CAPITAL | >45% 35%-45% <35% |--------------------------------- | <2.5:1:10 | 1.00% .875% .75% 2.5:1.0 - 3.0:1.0 | .875% .75% .625% >3.0:1.0 - 5.0:1.0 | .75% .625% .50% >5.0:1.0 | .625% .50% .375%
Notwithstanding the foregoing, in the event Nelson does not deliver the audited or unaudited financial statements for the immediately preceding fiscal year or fiscal quarter, as applicable, in a manner that permits the determinations required in the definition of Applicable LIBOR Rate Margin within ninety (90) days of the end of Nelson's fiscal year and within sixty (60) days of the end of each fiscal quarter, as applicable, commencing at the end of such ninety (90) day or sixty (60) day period, as applicable, and continuing until such audited or unaudited financial statements, as applicable, are made available, the Applicable LIBOR Rate Margin shall be the highest rate set forth in the preceding chart. At such time as the Agent changes the interest rate as set forth in the preceding sentence, it agrees to give written notice of such change to Nelson and to reduce the Commitment Percentage to its appropriate rate at such time as Nelson delivers the financial statements as set forth herein. The table below shall reflect the effective date(s) with respect to the quarterly determination(s) required by the definitions of the "Applicable LIBOR Rate Margin" and "Commitment Percentage":
DATE OF DELIVERY OF FINANCIAL EFFECTIVE PERIOD STATEMENTS DATE ------------------------------------------------------------ Fiscal Year Within 90 days Effective the first ending March 31 (audited financial business day after statements June 30 Quarter ending Within 60 days Effective the first June 30 (unaudited financial business day after statements) September 30 Quarter ending Within 60 days Effective the first September 30 (unaudited financial business day after statements) December 31 Quarter ending Within 60 days Effective the first December 31 (unaudited financial business day after statements) March 31
13. Revolving Loan Commitment. The aggregate amount of Revolving Loan Commitments of the Lenders shall be One Hundred Million Dollars ($100,000,000) principal amount, and the pro rata portions of each Lender shall be as set forth in Exhibit A attached hereto. Nelson shall execute new Revolving Credit Notes in the amounts set forth in Exhibit A and shall promptly execute and deliver such Notes to Agent. 14. Final Maturity Date. The parties hereto agree that the phrase "December 13, 2002" set forth in the definition of "Final Maturity Date" in the Credit Agreement shall be deleted and be replaced with "December 13, 2005". 15. Sale of Assets. Lenders consent to the sale of assets by Nelson of C.R. Gibson Company and hereby waive the requirements of Section 2.06 of the Credit Agreement with respect to such asset sales; provided, however, that the only assets which may be sold pursuant to this section are those listed on Exhibit B attached hereto, and further provided that the total amount of proceeds resulting from such asset sales shall not exceed $14,000,000 in the aggregate. Lenders acknowledge that Nelson shall not be required to use proceeds of such asset sales to reduce amounts outstanding under the Revolving Credit Notes. 16. Effective Date. Although the parties hereto agree that the effective date of this Fifth Amendment is as of June 10, 1998, the quarterly determinations required by the definitions of "Applicable LIBOR Rate Margin" and "Commitment Percentage" shall be effective commencing with the quarter ending September 30, 1998. 17. Governing Law. This Fifth Amendment shall be governed by and construed in accordance with the laws of the State of Tennessee. 18. Full Force and Effect. Except as specifically amended by this Fifth Amendment, all other terms and provisions of the Credit Agreement shall remain in full force and effect. 19. No Other Waiver. Except as expressly stated herein, no other waiver of any term or provision of the Credit Agreement shall be inferred or implied. IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to be duly executed as of the Effective Date. THOMAS NELSON, INC. By: /s/ Joe L. Powers ------------------------------- Title: Executive Vice President ------------------------------- ACCEPTED AND AGREED TO: SUNTRUST BANK, NASHVILLE, N.A., as Agent By: /s/ Allen K. Oakley ---------------------------------- Title: Senior Vice President ------------------------------- Acceptance Date: November 30, 1998 --------------------- SUNTRUST BANK, NASHVILLE, N.A. (Revolving Credit Amount: $26,000,000) By: /s/ Allen K. Oakley ---------------------------------- Title: Senior Vice President ------------------------------- Acceptance Date: November 30, 1998 --------------------- NATIONSBANK, N.A. (Revolving Credit Amount: $20,000,000) By: /s/ Fred K. Wyatt, Jr. ---------------------------------- Title: Senior Vice President ------------------------------- Acceptance Date: November 30, 1998 --------------------- CREDITANSTALT CORPORATE FINANCE, INC. (Revolving Credit Amount: $17,000,000) By: /s/ John G. Taylor ---------------------------------- Title: Senior Associate ------------------------------- By: /s/ William E. McCollum ---------------------------------- Title: Senior Associate ------------------------------- Acceptance Date: November 30, 1998 --------------------- NATIONAL CITY BANK, KENTUCKY (Revolving Credit Amount: $17,000,000) By: /s/ Kevin L. Anderson ---------------------------------- Title: Vice President ------------------------------- Acceptance Date: November 30, 1998 --------------------- FIRST AMERICAN NATIONAL BANK (Revolving Credit Amount: $20,000,000) By: /s/ Scott Bane ---------------------------------- Title: Senior Vice President ------------------------------- Acceptance Date: November 30, 1998 --------------------- The undersigned join in the execution of this Fifth Amendment in order to acknowledge their consent to the terms and provisions of this Fifth Amendment and to confirm that the execution of this Fifth Amendment by the parties hereto in no way affects the undersigneds' respective obligations under the Amended and Restated Guaranty Agreement executed as of December 13, 1995 by Word, Incorporated, a corporation organized and existing under the laws of the State of Delaware, PPC, Inc., a corporation organized and existing under the laws of the State of North Carolina, Editorial Caribe, Inc., a corporation organized and existing under the laws of the State of Florida, Morningstar Radio Network, Inc., a corporation organized and existing under the laws of the State of Texas, Nelson Word Ltd., a corporation organized and existing under the laws of the United Kingdom, Word Communications, Ltd., a corporation organized and existing under the laws of British Columbia, Canada, Word Direct, Inc., a corporation organized and existing under the laws of the State of Texas, Word Direct Partners, L.P., a limited partnership organized and existing under the laws of the State of Texas, The C.R. Gibson Company, a corporation organized and existing under the laws of the State of Delaware, 855673 Ontario Limited, a corporation organized and existing under the laws of Ontario, Canada, in favor of SunTrust Bank, Nashville, N.A., a national banking association, in its capacity as agent for banks and other lending institutions parties to the Credit Agreement and each assignee thereof becoming a "Lender" as provided therein. Each person executing this Amendment on behalf of each of the undersigned is duly authorized to so execute and deliver this Amendment on behalf of each of the undersigned entities. WORTHY, INCORPORATED (f/k/a WORD, INCORPORATED) By: /s/ Joe L. Powers ------------------------------- Title: ----------------------------- EDITORIAL CARIBE, INC. By: /s/ Joe L. Powers ------------------------------- Title: ----------------------------- C.R. GIBSON (UK) LIMITED (f/k/a NELSON MEDIA (UK) LTD. By: /s/ Joe L. Powers ------------------------------- Title: ----------------------------- NELSON MEDIA (CANADA) LTD. (f/k/a WORD COMMUNICATIONS, LTD.) By: /s/ Joe L. Powers ------------------------------- Title: President ----------------------------- NELSON DIRECT, INC. (f/k/a WORD DIRECT, INC.) By: /s/ Joe L. Powers ------------------------------- Title: Treasurer and Secretary ----------------------------- NELSON DIRECT MARKETING SERVICES, INC. By: /s/ Joe L. Powers ------------------------------- Title: Treasurer and Secretary ----------------------------- NELSON DIRECT PARTNERS, L.P. (f/k/a WORD DIRECT PARTNERS, L.P.) By: /s/ Joe L. Powers ------------------------------- Title: Treasurer and Secretary ----------------------------- THE C.R. GIBSON COMPANY By: /s/ Joe L. Powers ------------------------------- Title: Treasurer and Secretary ----------------------------- CRG ACQUISITION, INC. By: /s/ Joe L. Powers ------------------------------- Title: Treasurer and Secretary ----------------------------- 855763 ONTARIO LIMITED (d/b/a DAWN DISTRIBUTORS) By: /s/ Joe L. Powers ------------------------------- Title: Secretary ----------------------------- EXHIBIT A REVOLVING LOAN COMMITMENTS SunTrust Bank, Nashville, N.A. $ 26,000,000 First American National Bank 20,000,000 NationsBank, N.A. 20,000,000 National City Bank, Kentucky 17,000,000 Creditanstalt Corporate Finance, Inc. 17,000,000 ---------------- TOTAL $ 100,000,000 EXHIBIT B
ADDRESS DESCRIPTION LOCATION ------- ----------- -------- 32 Knight Street Manufacturing, Norwalk, CT warehousing, shipping and office space 39 Knight Street Factory Outlet Store Norwalk, CT 41 Knight Street .38 acre lot w/unoccupied Norwalk, CT apartment house 22 North Avenue 1.24 acre empty lot Norwalk, CT 17 North Avenue Corporate Office Norwalk, CT
Including land and buildings, equipment, work in process and raw materials included in or located at the locations described above. -----END PRIVACY-ENHANCED MESSAGE-----