-----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, PUl3DWdBtFzfCaLSY9FsHleBxE4wMNxbfHIYZjzkay0CBiKZvNue8noFwS2TYGj/ tfGrtVXFxfX6ltGKzcxb9A== 0000071023-00-000011.txt : 20000920 0000071023-00-000011.hdr.sgml : 20000920 ACCESSION NUMBER: 0000071023-00-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 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-K SEC ACT: SEC FILE NUMBER: 001-13788 FILM NUMBER: 665250 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-K 1 0001.txt 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 March 31, 2000 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 identification number) ncorporation or organization) 501 Nelson Place, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (615) 889-9000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------- Common Stock, Par Value $1.00 per share New York Stock Exchange Class B Common Stock, Par Value $1.00 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 requirement for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of June 26, 2000, the Registrant had outstanding 13,144,794 shares of Common stock and 1,085,801 shares of Class B common stock. On such date the aggregate market value of shares of common stock and Class B common stock held by nonaffiliates was approximately $124.2 million. The market value calculation was determined using the closing sale price of the Registrant's common stock and Class B common stock on June 26, 2000, as reported on The New York Stock Exchange, and assumes that all shares beneficially held by executive officers and the directors of the Registrant and shares held in the Thomas Nelson Employee Stock Ownership Plan are shares owned by "affiliates," a status which each of such officers and directors individually disclaims. DOCUMENTS INCORPORATED BY REFERENCE Documents from which portions Part of Form 10-K are incorporated by reference - - - --------------------------------------------------------------------------- PART I Business Page 29 of Annual Report to Shareholders for year ended March 31, 2000 PART II Item 5 - Market for Company's Page 30 of Annual Report to Shareholders Common Equity and Related for year ended March 31, 2000 (market Matters price and dividend information only) Item 6 - Selected Financial Data Page 9 of Annual Report to Shareholders for year ended March 31, 2000 Item 7 - Management's Discussion and Pages 10 to 13 of Annual Report to Analysis of Financial Shareholders for year ended Condition and Results of March 31, 2000 Operations Item 7A- Quantitative and Qualitative Page 13 of Annual Report to Shareholders Disclosures about Market Risk for year ended March 31, 2000 Item 8 - Financial Statements and Pages 14 to 29 of Annual Report to Supplementary Data Shareholders for year ended March 31, 2000 PART III Item 10- Directors and Executive To be included in Company's Proxy Officers of the Company Statement for the Annual Meeting of Shareholders to be held August 17, 2000, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 11- Executive Compensation To be included in Company's Proxy Statement for the Annual Meeting of Shareholders to be held August 17, 2000, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 12-Security Ownership of To be included in Company's Proxy Certain Beneficial Owners Statement for the Annual Meeting of and Management Shareholders to be held August 17, 2000, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 13- Certain Relationships To be included in Company's Proxy and Related Transactions Statement for the Annual Meeting of Shareholders to be held August 17, 2000, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. PART I Item 1. Business Thomas Nelson, Inc. (the "Company") is a leading publisher, producer and distributor of books emphasizing Christian, inspirational and family value themes, and believes it is the largest commercial publisher of the Bible in English language translations. The Company also designs and markets a broad line of gift and stationery products. The Company believes it is the largest publisher of Christian and inspirational books in the United States and is a major supplier of gift and stationery items. During fiscal 2000, the Company completed three business acquisitions. On June 24, 1999, the Company acquired substantially all of the assets of Ceres LLC ("Ceres") for approximately $6.2 million which included the assumption of certain liabilities. Ceres manufactures and markets high quality candles to specialty and department store markets and is headquartered in San Francisco, California. On December 30, 1999, the Company acquired substantially all of the assets of Rutledge Hill Press for approximately $4.5 million including the assumption of certain liabilities. Rutledge Hill Press is a Nashville, Tennessee-based publisher that specializes in cooking, quilting, regional interest and Civil War titles. On January 28, 2000, the Company acquired approximately 70% of the outstanding shares of New Life Treatment Centers ("NLTC") from a group of investors for approximately $15.4 million in cash. NLTC, headquartered in Dallas, Texas, operates two primary businesses. One hosts inspirational conferences for women at venues throughout the United States, and the other operates therapeutic centers in Arizona for women with eating disorders. At the date of acquisition, the Company declared its intent to sell certain assets of NLTC. During fiscal 1999, the Company recorded a restructuring charge, including related asset write-downs of $4.7 million ($3 million or $0.19 per basic share, on an after-tax basis). The restructuring initiatives involved the Company's gift manufacturing operations located in Connecticut and included two plant closings and reduction of certain administrative functions. During fiscal 1999, management decided to cease all manufacturing activities in Connecticut. The restructuring resulted in workforce reductions of approximately 300 employees. The products formerly produced at these manufacturing facilities have continued to be designed and distributed by the Company, but are now being manufactured by outside vendors. The restructuring was essentially completed during fiscal 2000, except for the sale of land and buildings, which is expected to occur by March 31, 2001. The following table sets forth the net revenues (in thousands) and the percentage of total net revenues for each of the Company's principal product segments for the periods indicated:
Years Ended March 31, ----------------------------------------------- 2000 1999 1998 ----------------------------------------------- Amount % Amount % Amount % ----------------------------------------------- Publishing $173,965 66.4 $168,325 64.3 $163,480 64.6 Gift 87,857 33.6 93,320 35.7 89,478 35.4 ------------------------------------------------ $261,822 100.0 $261,645 100.0 $252,958 100.0 ================================================
Additional information regarding the Company's product segments is incorporated by reference to Note S on page 29 of the Annual Report to Shareholders for the year ended March 31, 2000. PUBLISHING The Company's book publishing division publishes and distributes hardcover and trade paperback books emphasizing Christian, inspirational and family value themes. The Company believes it is the largest publisher of Christian and inspirational books in the United States. Books are published by the Company under several imprints including Thomas Nelson, Word, J. Countryman, Tommy Nelson(TM), and Rutledge Hill Press, and consist generally of inspirational, trade, gift, children's and reference books emphasizing Christian and family value themes. The Company distributes books primarily through Christian bookstores, general bookstores, mass merchandisers and direct sales to consumers. Occasionally, the Company also distributes books published by other companies to complement their marketing and distribution capabilities. In fiscal 2000, publishing net revenues realized from the distribution of books published by other companies was immaterial. In fiscal 2000, 1999 and 1998, the Company released over 200 new book titles annually. The Company publishes some of the most well-known communicators in the Christian and inspirational field, including Henry Blackaby, T. Davis Bunn, Larry Burkett, James Dobson, Billy Graham, John Hagee, Barbara Johnson, Tim LaHaye, Ann Graham Lotz, Max Lucado, John MacArthur, John Maxwell, Frank Peretti, Robert Schuller, Gwen Shamblin, Gary Smalley, Charles Stanley and Charles Swindoll. The Company also publishes books emphasizing positive and inspirational themes by famous athletes and celebrities, such as Evander Holyfield, artist Thomas Kinkade, Deion Sanders, Reggie White and Zig Ziglar. In addition, the Company maintains a backlist of approximately 1,100 titles which provide a stable base of recurring revenues as many popular titles continue to generate significant sales from year to year. Backlist titles accounted for approximately 38% of the book division's net revenues in fiscal 2000. Authors and titles are supported through the use of radio, television, cooperative advertising, author appearances, in-store promotions, print advertising and other means. The Company's book publishing business is enhanced by the breadth and development of its marketing and distribution channels. In addition to enhancing sales of its products, the Company believes its ability to sign and renew contracts with popular authors is improved because the Company's marketing and distribution capabilities provide exposure for the authors' books to a broader audience than its competitors. See "Marketing, Distribution and Production." The Company believes it is the largest commercial publisher of English translations of the Bible. The Bible is based on ancient manuscripts, which are the surviving reproductions of the original writings. These manuscripts, written in Hebrew, Aramaic or Greek, have been translated into English and other modern languages by biblical scholars and theologians, generally under the auspices of a major Bible society or translation organization. Each of the many English translations available differs in some degree from the others, primarily because of different translation guidelines and principles used as the basis for each translation. The distinctiveness of each translation is also, in part, a result of the evolution of the meaning and use of words within the English language. Virtually all Bibles and Bible products currently published in the United States are based on one of 13 major translations. Of these 13 translations, 12 are protected by copyright laws, which grant the copyright owner the exclusive right, for a limited term, to control the publication of such translation. The Company publishes Bibles and Bible products based on nine of the 13 major translations, of which three are exclusive to the Company as a result of copyright ownership or licensing arrangements. See "Copyrights and Royalty Agreements." Approximately 71% of the Company's net revenues from Bible publishing in fiscal 2000 were generated through sales of its proprietary Bible products. The following table sets forth the nine major Bible translations currently published by the Company:
Date First Proprietary Translation Published to the Company - - - ------------- ---------- -------------- King James Version (KJV) 1611 No New American Bible (NAB) 1970 No New American Standard Bible (NAS) 1972 No Today's English Version (TEV) 1976 Yes New King James Version (NKJV) 1982 Yes New Century Version (NCV) 1984 Yes New Revised Standard Version (NRSV) 1990 No Contemporary English Version (CEV) 1995 No New Living Translation (NLT) 1996 No The KJV, currently published in its fourth revision, is the most widely distributed of all English translations of the Bible. In 1975, the Company commissioned the fifth revision of the KJV resulting in the publication of the NKJV in 1982. During March 2000, the Company reverted the exclusive rights to the CEV back to the American Bible Society. The Company intends to continue publishing certain CEV titles, under a licensing arrangement with the American Bible Society. Electronic Bibles and biblical reference books are published under the Nelson Electronic Publishing imprint. These products include electronic collections centered on Bible study; electronic libraries featuring well-known authors, such as Jack Hayford, John MacArthur, John Maxwell and Charles Stanley; and software for preparing Bible study lessons. The Company has achieved a leadership position in the industry with its electronic publications, and is aggressively pursuing new digital formats of publication and distribution as they develop, such as the Internet, and emerging portable book technologies. The Company continually seeks to expand its Bible product line by developing or aiding in the development of new translations and editions and seeking new publishing opportunities. The Company also continually makes editorial, design and other changes to its existing line of Bibles and other Bible products in an effort to increase their marketability. The Company currently publishes over 1,100 different Bibles and biblical reference products such as commentaries, study guides and other popular Bible help texts. Styles range from inexpensive paperbacks to deluxe leather-bound Bibles to CD-Rom. Different editions of a particular Bible translation are created by incorporating extra material, such as study helps, concordances, indices and Bible outlines, or artwork, into the biblical text. These editions (which are generally proprietary to the Company regardless of whether or not the Company holds proprietary rights to the underlying Bible translation) are targeted to the general market or positioned for sale to specific market segments. GIFT The Company's Gift Division designs, produces and distributes journals and gift books, photo albums, baby and wedding memory books, scrapbooks, kitchen accessories, stationery and candles. Products are marketed under the C.R. Gibson(R), Ceres(R), Creative Papers(R), C.R. Gibson(R) Kids Kollection(TM), Toccata(R), Tomorrow's Treasures(TM), Stepping Stones(TM) and Inspirations(R) brand names, the latter of which incorporates Christian and inspirational text or themes. Certain product lines are marketed as collections, with each collection including a variety of products featuring a common design or theme. Designs include original artwork designed in-house, as well as artwork licensed from artists or design groups such as Dena, Beatrix Potter, Carter's Infant Apparel, Echo and Warner Brothers. MARKETING, DISTRIBUTION AND PRODUCTION The principal market channels through which the Company markets its products domestically are Christian bookstores, which are primarily independently owned; general bookstores, including national chains such as Barnes & Noble and Borders; specialty gift and department stores, such as SteinMart and May Company; mass merchandisers such as Target, K-Mart, Wal-Mart and Sam's Wholesale Club; and directly to consumers through direct mail, telemarketing, inspirational seminars and the Internet. The Company services these market channels through its sales force and through wholesalers or jobbers servicing bookstores, gift stores, other retail outlets and libraries. In addition, the Company sells certain of its products for promotional purposes and sells specially designed or imprinted products to certain customers. The Company's direct marketing operations sell publishing products directly to approximately 100,000 customers consisting of churches, other religious organizations, pastors and other individuals by direct mail and telemarketing. Retail sales also are made during the summer months on a door-to-door, cash sales basis through a student sales organization operated by the Company. As of March 31, 2000, the Company employed a sales force of approximately 223 people and maintained 24-hour-a-day telemarketing capability. These employees service over 44,000 retail accounts and 48,000 church related accounts. Customer orders are usually shipped through a variety of common carriers, as well as by UPS, RPS and parcel post. No single customer accounted for more than 10% of net revenues during fiscal 2000. The Company contracts with a number of foreign publishers to translate the Company's English titles into foreign languages. The Company typically retains ownership rights to the titles translated. The Company distributes its products internationally in South America, Europe, Australia, New Zealand, South Africa, the Far East, Mexico and Canada. In fiscal 2000, the Company's export operations accounted for approximately $19 million, or 6%, of the Company's total net revenues. Substantially all of the Company's products are manufactured by domestic and foreign commercial printers, binders and manufacturers which are selected on the basis of competitive bids. The Company may contract separately for paper and certain other supplies used by its manufacturers. COPYRIGHTS AND ROYALTY AGREEMENTS The Company customarily secures copyrights on its books and Bible editions in order to protect its publishing rights. Almost all of the Company's book products are published under royalty agreements with their respective authors or other copyright proprietors. Many of the Company's gift products incorporate copyrighted artwork, which is licensed directly from the artist or the owning entity under a royalty agreement. COMPETITION The Company believes that it is the largest publisher of Christian and inspirational books, the largest commercial publisher of Bibles in English language translations and a major designer of gift and stationery items. The publishing and gift divisions each compete with numerous other companies that publish and distribute Christian and inspirational books or design and distribute gift products, many of which have significantly longer operating histories and larger revenue bases than the Company and certain of which are tax-exempt organizations. While the Company's prices are comparable to those of its competitors, the Company believes that its breadth of product line, established market channels, established sales forces and customer service give it a competitive advantage. The most important factor with respect to the competitive position of the Company's publishing division is the contractual relationships it establishes and maintains with authors. The Company competes with other book publishing companies, both Christian and secular, for signing top authors. The Company's ability to sign and re-sign popular authors depends on a number of factors, including distribution and marketing capabilities, the Company's management team and the royalty and advance arrangements offered. The Company believes its relationships with its authors, which are based on its reputation in the book publishing industry, its marketing experience and its management expertise give it a competitive advantage in signing and maintaining contracts with top Christian and inspirational authors. The Company's gift division has many competitors with respect to certain of its product lines, but the Company believes there are few competitors who distribute all of the Company's gift product lines. The gift division also competes with numerous religious publishers and suppliers, including tax-exempt church-owned organizations, in connection with the sale of its church supply products, and with numerous large and small companies in the sale of stationery products, gift wrap and paper tableware. EMPLOYEES As of March 31, 2000, the Company employed approximately 850 persons. The Company has not suffered any work stoppages as a result of labor disputes in recent years and considers relations with its employees to be good. EXECUTIVE OFFICERS Officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board of Directors. Following is certain information regarding the executive officers of the Company:
Name Age Position with the Company ---------------------------------------------------------------------- Sam Moore 70 Chairman of the Board, Chief Executive Officer, President and Director S. Joseph Moore 37 Executive Vice President and Director; President, Thomas Nelson Gift Division Joe L. Powers 54 Executive Vice President and Secretary Ray Capp 47 Senior Vice President of the Company; Executive Vice President of the Thomas Nelson Direct Group of Companies Charles Z. Moore 66 Senior Vice President Vance Lawson 41 Senior Vice President, Finance and Operations Group Eric Heyden 46 Vice President and General Counsel
Except as indicated below, each executive officer has been an employee of the Company as his/her principal occupation for more than the past five years. Sam Moore has been Chairman of the Board, Chief Executive Officer, President and a Director of the Company since its founding in 1961. Sam Moore is the father of S. Joseph Moore and the brother of Charles Z. Moore. S. Joseph Moore was appointed Executive Vice President and Director of the Company in 1995 and President of the Thomas Nelson Gift Division in 1996, and prior to such appointments, he served as Divisional Vice President of the Company in various capacities since 1991. S. Joseph Moore is the son of Sam Moore and the nephew of Charles Z. Moore. Joe L. Powers was appointed Executive Vice President of the Company in 1995. Previously, Mr. Powers served as a Vice President of the Company since 1980. Ray Capp was appointed Senior Vice President of the Company in 1995 and was appointed Executive Vice President of the Thomas Nelson Direct Group of Companies in 2000. Prior to joining the Company, Mr. Capp was the President and Chief Operating Officer of Ingram Merchandising Services and Assistant to the Chairman of Ingram Distribution, Inc. since 1992 and Executive Vice President and Chief Operating Officer of Ingram Entertainment from 1987 to 1992. Charles Z. Moore has been a Vice President of the Company since 1983 and was appointed Senior Vice President in 1986. Charles Moore is the brother of Sam Moore and the uncle of S. Joseph Moore. Vance Lawson has been the Vice President, Finance of the Company since 1993 and was appointed Senior Vice President, Finance and Operations Group in 2000. Mr. Lawson was formerly Senior Vice President of Finance and Operations at Word since 1988. Eric Heyden has been the Vice President and General Counsel of the Company since 1998, Vice President and Deputy General Counsel of the Company since 1997 and Assistant General Counsel of the Company since 1995. Mr. Heyden was previously Vice President and General Counsel with Knoedler Publishing, Inc. from 1985 to 1995. Item 2. Properties The Company's executive, editorial, sales and production offices are primarily located at its corporate headquarters at 501 Nelson Place in Nashville, Tennessee. These facilities are housed in a 74,000 square foot building completed in 1981, which is owned by the Company subject to a mortgage securing a debt with an outstanding balance at March 31, 2000 of $1,325,000. The Company's major warehouse facilities for its publishing division are located in a building containing approximately 215,000 square feet adjacent to its corporate headquarters in Nashville, Tennessee. This building, which was completed in fiscal 1978, is owned by the Company. An addition to the warehouse and distribution center of approximately 120,000 square feet was completed during fiscal 1993. This addition was financed by a $5,000,000 construction and term loan secured by a mortgage with an outstanding balance of $1,000,000 at March 31, 2000. The Company maintains offices and other warehousing facilities for its gift division in Beacon Falls, Guilford and Norwalk, Connecticut (of approximately 112,000, 74,000 and 147,000 square feet, respectively) which are owned by the Company. The Company anticipates selling its Norwalk and Guilford facilities during fiscal 2001 due to the restructuring at C.R. Gibson. The Company leases properties as described below:
Square Annual Lease Location Use/Segment Feet Rent Expiration - - - --------------------------------------------------------------------------- Bentonville, AR Display showroom 1,000 $ 12,650 04/2002 Miami, FL Editorial office/publishing 1,400 $ 11,400 08/2000 Atlanta, GA Editorial office/publishing 1,000 $ 7,000 10/2000 Atlanta, GA Display showrooms 4,600 $145,000 04/2002 Carmel, IN Retail store/gift 12,500 $ 88,000 09/2004 Clifton, NJ Manufacturing/gift 11,000 $ 49,500 10/2001 New York, NY Display showroom 2,100 $ 70,000 10/2002 Nashville, TN Creative and sales office/ 47,350 $821,000 11/2001 publishing and gift Nashville, TN Retail store/gift 3,804 $106,000 05/2007 Nashville, TN Creative office/publishing 13,700 $267,000 09/2002 Nashville, TN Warehousing/publishing 84,700 $248,000 11/2002 Nashville, TN Warehousing/publishing 84,700 $278,000 12/2003 Shelton, CT Warehousing/gift 152,000 $645,000 03/2002 Monroe, CT Warehousing/gift 114,000 $404,000 09/2005 San Marcos, TX Retail store/gift 2,777 $ 65,000 05/2010 Ontario (Canada) Warehousing and office/gift 28,900 $175,000 08/2003 San Francisco, CA Manufacturing/offices 18,000 $115,200 04/2002 Hayward, CA Manufacturing/offices 54,600 $358,000 05/2005
All building improvements on the properties are brick veneer, metal or block construction and are considered adequate and suitable by the Company for the purposes for which they are used. The Company's machinery and equipment are located in Nashville, Tennessee and Guilford and Norwalk, Connecticut and consist primarily of computer equipment, warehousing and shipping racks, conveyors and other material handling equipment located at the various warehousing facilities and office equipment. Such machinery and equipment are in good repair and adequate for the Company's present operations. All such equipment, other than a portion of the computer equipment that is leased under capital leases, is owned by the Company. The Company's properties are operated at near capacity. Additional personnel are employed as required. Item 3. Legal Proceedings The Company is subject to various legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders The Company did not submit any matter to a vote of its security holders during the last quarter of its fiscal year ended March 31, 2000. PART II Item 5. Market for the Company's Common Equity and Related Shareholder Matters Incorporated by reference to the Annual Report to Shareholders for the year ended March 31, 2000 (the "Annual Report"). Item 6. Selected Financial Data Incorporated by reference to the Annual Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Incorporated by reference to the Annual Report. Item 7A. Quantitative and Qualitative Disclosures about Market Risk Incorporated by reference to the Annual Report. Item 8. Financial Statements and Supplementary Data Incorporated by reference to the Annual Report. Includes selected unaudited quarterly financial data for the years ended March 31, 2000 and 1999. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Company Information regarding the directors of the Company and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on August 17, 2000 (the "Proxy Statement"), to be filed within 120 days of March 31, 2000 with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A under the Exchange Act. Information regarding the Company's executive officers is contained in Part 1, Item 1 herein. Item 11. Executive Compensation Incorporated by reference to the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management Incorporated by reference to the Proxy Statement. Item 13. Certain Relationships and Related Transactions Incorporated by reference to the Proxy Statement. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) Documents filed as part of Report 1. Financial Statements The following consolidated financial statements of the Company included in the Annual Report are incorporated herein by reference as set forth in Part II, Item 8: Statements of income -- years ended March 31, 2000, 1999 and 1998 Balance sheets -- March 31, 2000 and 1999 Statements of shareholders' equity -- years ended March 31, 2000, 1999 and 1998 Statements of cash flow -- years ended March 31, 2000, 1999 and 1998 Notes to consolidated financial statements Report of Arthur Andersen LLP, Independent Public Accountants 2. Financial Statement Schedules The following consolidated financial statement schedule is included herein:
Page ---- Report of Arthur Andersen LLP, Independent Public Accountants 18 Schedule II -- Valuation and Qualifying Accounts and Reserves 19
Schedules not listed above have been omitted because they are not required, are inapplicable or the required information has been given in the consolidated financial statements or notes thereto. 3. Exhibits The following exhibits are included herein or incorporated by reference as indicated. Exhibit numbers refer to Item 601 of Regulation S-K. Exhibit Number - - - ------- 3.1 -- Thomas Nelson, Inc. Amended and Restated Charter (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference) 3.2 -- Thomas Nelson, Inc. Amended Bylaws (filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended March 31, 1999 and incorporated herein by reference) 4.1 -- Loan Agreement dated May 18, 1990, between the Company and The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.2 -- Promissory Note dated May 18, 1990, of the Company payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.3 -- Deed of Trust and Security Agreement dated May 18, 1990, from the Company to SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference) 4.4 -- Construction and Term Loan Agreement dated March 31, 1992, between the Company and SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.5 -- Promissory Note dated March 31, 1992, of the Company payable to SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.6 -- Deed of Trust and Security Agreement dated March 31, 1992, from the Company to SunTrust Bank, Nashville, N.A. (filed as Exhibit 4.9 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.7 -- Amended and Restated Credit Agreement dated as of December 13, 1995, and as amended January 3, 1996, 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 (filed as Exhibit 4.1 to the Company's Form 10-Q for the quarter ended December 31, 1995 and incorporated herein by reference) 4.8 -- June 1996 Amendment and Waiver with Respect to Amended and Restated Credit Agreement Dated as of December 13, 1995, 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 (filed as Exhibit 4.12 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference) 4.9 -- Second Amendment to Credit Agreement dated as of November 15, 1996, 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 (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated January 6, 1997 and incorporated herein by reference) 4.10 -- Third Amendment to Credit Agreement dated as of January 7, 1997, 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 (filed as Exhibit 4.2 to the Company's Current Report on Form 8-K dated January 6, 1997 and incorporated herein by reference) 4.11 -- Fourth Amendment to Credit Agreement dated as of March 31, 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 (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q dated September 30, 1998 and incorporated herein by reference) 4.12 -- Fifth Amendment to Credit Agreement dated as of November 30, 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 (filed as Exhibit 4.1 to the Company's Form 10-Q dated December 31, 1998 and incorporated herein by reference) 4.13 -- Note Purchase Agreement dated January 3, 1996, among the Company and Metropolitan Life Insurance Company (filed as Exhibit 4.1 to the Company's Form 10-Q for the quarter ended December 31, 1995 and incorporated herein by reference) 4.14 -- Letter Amendment No. 1 dated June 28, 1996, to Note Purchase Agreement dated January 3, 1996, among the Company and Metropolitan Life Insurance Company and related waiver, dated as of March 31, 1996 (filed as Exhibit 4.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference) 4.15 -- Assumption and Amendment Agreement dated as of May 30, 1996, and as amended June 28, 1996, between the Company and Metropolitan Life Insurance Company (filed as Exhibit 4.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference) 4.16 -- Loan Agreement dated as of September 21, 1989 between C.R. Gibson and Metropolitan Life Insurance Company (filed by C.R. Gibson as Exhibit 4(c) to The C.R. Gibson Company's Registration Statement on Form S-2 (No. 33-43644) dated November 4, 1991 and incorporated herein by reference) 4.17 -- Loan Agreement dated as of June 23, 1994 between C.R. Gibson and Metropolitan Life Insurance Company (filed by C.R. Gibson (Commission File No. 0-4855) as Exhibit 4(b) to C.R. Gibson's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the Commission on March 14, 1995 and incorporated herein by reference) 10.1 -- Thomas Nelson, Inc. Amended and Restated 1990 Deferred Compensation Option Plan for Outside Directors (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (No. 33-80086) dated June 13, 1994 and incorporated herein by reference)* 10.2 -- Thomas Nelson, Inc. Amended and Restated 1992 Employee Stock Incentive Plan (filed as Exhibit 4.6 to the Company's Proxy Statement dated July 26, 1995, for the Annual Meeting of Shareholders held on August 24, 1995 and incorporated herein by reference)* 10.3 -- Severance Agreement dated as of May 17, 1991, between the Company and Sam Moore (filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference)* 10.4 -- Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.5 -- Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.6 -- Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers (filed as Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.7 -- Employment Agreement dated as of May 13, 1996, between the Company and Charles Z. Moore (filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended March 31, 1996 and incorporated herein by reference)* 10.8 -- Employment Agreement dated as of December 22, 1994, between the Company and Raymond T. Capp (filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1995 and incorporated herein by reference)* 10.9 -- Employment Agreement dated as of June 23, 1993, between the Company and Vance Lawson (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.10 -- Employment Agreement dated as of July 10, 1995, between the Company and Eric Heyden (filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1998 and incorporated herein by reference)* 10.11 -- Asset Purchase Agreement, dated as of November 21, 1996 by and among the Company, Word, Incorporated and Word Direct Partners, L.P. as Sellers and Gaylord Entertainment Company as Buyer (filed as Exhibit 2.1 to the Company's Form 8-K dated January 6, 1997 and incorporated herein by reference) 10.12 -- Amendment No. 1 to the Asset Purchase Agreement dated as of January 6, 1997, by and among the Company, Word, Incorporated and Word Direct Partners, L.P. as Sellers and Gaylord Entertainment Company as Buyer (filed as Exhibit 2.2 to the Company's Form 8-K dated January 6, 1997 and incorporated herein by reference) 10.13 -- Asset Purchase Agreement dated as of January 6, 1997, by and between Nelson Word Limited and Word Entertainment Limited (filedas Exhibit 2.3 to the Company's Form 8-K dated January 6, 1997 and incorporated herein by reference) 10.14 -- Subsidiary Asset Purchase Agreement executed on January 6, 1997, and dated as of November 21, 1996, between Word Communications, Ltd. and Word Entertainment (Canada), Inc. (filed as Exhibit 2.4 to the Company's Current Report on Form 8-K dated January 6, 1997 and incorporated herein by reference) 10.15 -- Addendum to Employment Agreement dated as of May 13, 1996, between the Company and Sam Moore (executed on June 22, 2000)* 10.16 -- Addendum to Employment Agreement dated as of May 10, 1996, between the Company and S. Joseph Moore (executed on June 22, 2000)* 10.17 -- Addendum to Employment Agreement dated as of May 10, 1996, between the Company and Joe L. Powers (executed on June 22, 2000)* 10.18 -- Thomas Nelson, Inc. 1997 Deferred Compensation Plan for Non-employee Directors (adopted on May 22, 1997)* 11 -- Statement re Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 2000 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 23 -- Consent of Independent Public Accountants 27 -- Financial Data Schedule (for SEC use only) *Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K No reports on Form 8-K were filed during fiscal 2000. 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. By: /s/ Sam Moore --------------------------- Sam Moore, Chief Executive Officer and President Date: June 28, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date ----------- ---------- ---------- /s/ Sam Moore Chairman of the Board of June 28, 2000 ------------------- Directors, Chief Executive Sam Moore Officer and President (Principal Executive Officer) /s/ S. Joseph Moore Executive Vice President June 28, 2000 -------------------- and Director S. Joseph Moore /s/ Joe L. Powers Executive Vice President June 28, 2000 --------------------- Secretary (Principal Joe L. Powers Financial and Accounting Officer) / s / Brownlee O. Currey, Jr. Director June 28, 2000 ---------------------- Brownlee O. Currey, Jr. /s/ W. Lipscomb Davis, Jr. Director June 28, 2000 ---------------------- W. Lipscomb Davis, Jr. /s/ Robert J. Niebel Director June 28, 2000 ----------------------- Robert J. Niebel /s/ Millard V. Oakley Director June 28, 2000 ----------------------- Millard V. Oakley /s/ Andrew Young Director June 28, 2000 ----------------------- Andrew Young REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thomas Nelson, Inc.: We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements included in Thomas Nelson's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated May 19, 2000. Our audit was made for the purpose of forming an opinion on those consolidated statements taken as a whole. The schedule listed in the index is the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. /s/ Arthur Andersen LLP Nashville, Tennessee May 19, 2000
THOMAS NELSON, INC. AND SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AND RESERVES March 31, 2000 March 31, 1900 March 31, 1998 ------------------------------------------------- Reserve for Sales Returns: Balance at beginning of period $4,844,000 $3,934,000 $4,773,000 Additions: 1. Charged to costs and expenses 227,000 910,000 - 2. Charged to other accounts - - - Deductions: charge-offs - - 839,000 ------------------------------------------------ Balance at end of period $5,071,000 $4,844,000 $3,934,000 ================================================ Reserve for Doubtful Accounts: Balance at beginning of period $2,138,000 $2,228,000 $2,227,000 Additions: 1. Charged to costs and expenses 2,369,000 2,027,000 1,778,000 2. Charged to other accounts 336,000 - - Deductions: charge-offs 2,743,000 2,117,000 1,777,000 ----------------------------------------------- Balance at end of period $2,100,000 $2,138,000 $2,228,000 =============================================== Discontinued Operations: Balance at beginning of period $2,705,000 $5,197,000 $9,101,000 Additions: 1. Charged to costs and expenses - - - 2. Charged to other accounts - - - Deductions: charge-offs 281,000 2,492,000 3,904,000 ----------------------------------------------- Balance at end of period $2,424,000 $2,705,000 $5,197,000 =============================================== Restructuring: Balance at beginning of period $3,067,000 $ - $ - Additions: 1. Charged to costs and expenses - 4,666,000 - 2. Charged to other accounts - - - Deductions: charge-offs 3,067,000 1,599,000 - ---------------------------------------------- Balance at end of period $ - $3,067,000 $ - ==============================================
INDEX TO EXHIBITS Exhibit Page Number Number - - - ------- ------ 10.15 -- Addendum to Employment Agreement for Sam Moore 21 10.16 -- Addendum to Employment Agreement for S. Joseph Moore 22 10.17 -- Addendum to Employment Agreement for Joe L. Powers 23 10.18 -- Thomas Nelson, Inc. 1997 Deferred Compensation Plan for Non-employee Directors 24 11 -- Statement re Computation of Per Share Earnings 28 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 2000 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 29 23 -- Consent of Independent Public Accountants 30 27 -- Financial Data Schedule (for SEC purposes only)
EX-11 2 0002.txt
EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (Dollars and Shares in thousands, except per share data) March 31, March 31, March 31, 2000 1999 1998 ----------- --------- -------- BASIC EARNINGS PER SHARE: Weighted average shares outstanding 14,242 15,279 17,113 =========== ========== ======== Net Income $ 9,941 $ 8,855 $12,673 =========== ========== ======== Net income per share $ 0.70 $ 0.58 $ 0.74 =========== ========== ======== DILUTED EARNINGS PER SHARE: Basic weighted average shares outstanding 14,242 15,279 17,113 Convertible notes - 2,598 3,235 Dilutive stock options - based on treasury stock method using the average market 1 52 40 ---------- ---------- -------- Total shares 14,243 17,929 20,388 ========== ========== ======== Net income $ 9,941 $10,620 (1) $14,793 (2) ========== ========== ========= Net income per share $ 0.70 $ 0.58 (1) $ 0.73 (2) ========== ========== ========== (1) Adjusted for interest on convertible debt (2) Anti-dilutive; use basic earnings per share on Consolidated Statements of Income
EX-13 3 0003.txt SELECTED FINANCIAL DATA
YEARS ENDED March 31, 2000 1999 1998 1997 1996(a) (Dollars in thousands, except per share data) - - - ----------------------------------------------------------------------------- OPERATING RESULTS (b): Net revenues $261,822 $261,645 $252,958 $243,436 $219,838 ================================================= Operating income $ 20,667 $ 20,549 $ 24,780 $ 22,954 $ 5,887 ================================================= Income (loss) from continuing operations $ 9,941 $ 8,855 $ 12,673 $ 9,522 ($ 923) Income (loss) from discontinued operations (c,d) -- -- -- 16,555 ( 9,991) ------------------------------------------------- Net income (loss) $ 9,941 $ 8,855 $ 12,673 $ 26,077 ($ 10,914) ================================================= EBITDA from continuing operations $ 28,188 $ 29,573 $ 34,926 $ 31,980 $ 13,745 ================================================= - - - ----------------------------------------------------------------------------- FINANCIAL POSITION: Total assets $298,230 $255,330 $287,442 $301,571 $355,083 Working capital 138,117 118,794 141,342 131,852 197,127 Long-term debt and other non-current liabilities 104,441 85,392 85,217 89,233 185,019 Shareholders' equity 131,732 125,649 156,396 146,812 122,065 Long-term debt to total capitalization 45.0% 40.5% 35.3% 37.8% 60.3% - - - ----------------------------------------------------------------------------- PER SHARE DATA (b): Income (loss) per share from continuing operations $ 0.70 $ 0.58 $ 0.74 $ 0.56 ($0.06) Income (loss) per share from discontinued operations (c,d) -- -- -- 0.96 ( 0.64) ------------------------------------------------- Net income (loss) per share $ 0.70 $ 0.58 $ 0.74 $ 1.52 ($0.70) ================================================= Dividends declared per share $ 0.16 $ 0.16 $ 0.16 $ 0.16 $ 0.16 Book value per share 9.26 8.73 9.14 8.58 7.13 Weighted average number of shares outstanding (in thousands) (e) 14,242 15,279 17,113 17,119 15,580 - - - ----------------------------------------------------------------------------- (a) Includes C.R. Gibson operations subsequent to acquisition on October 31, 1995. (b) For fiscal years 1996 and 1997, operating results and per share data have been restated for discontinued operations and, for fiscal 1999, includes pre-tax restructuring and other related charges of $4.7 million pertaining primarily to severance and reserves for inventory to be liquidated. (c) In fiscal 1996, the Company recorded a loss on disposal and results of operations for its Christianlifestyle magazines and the radio networks of the Royal Media division. (d) On January 6, 1997, the Company consummated a transaction to sell certain assets of the music division, net of certain liabilities assumed, and the gain on disposal and results of operations for this discontinued operation are included herein. (e) Represents basic weighted average number of shares outstanding in accordance with SFAS 128.
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Company's net revenues have grown in recent years as a result of increased sales in existing product lines, through the development of new product lines and through acquisitions in fiscal 2000. In fiscal 1999, the Company decided to phase out manufacturing operations at its C.R. Gibson subsidiary ("Gibson") and recorded a pre-tax charge for restructuring and other related costs of $4.7 million pertaining primarily to severance and reserves for inventory to be liquidated. 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 of such data from the prior fiscal year.
Fiscal Year-to-Year Years Ended March 31, Increase (Decrease) --------------------------------------------------- 2000 1999 1998 1999 to 2000 1998 to 1999 --------------------------------------------------- (%) (%) (%) (%) (%) Net revenues: Publishing 66.4 64.3 64.6 3.4 3.0 Gift 33.6 35.7 35.4 (5.9) 4.3 ------------------------ Total net revenues 100.0 100.0 100.0 0.1 3.4 Expenses: Cost of goods sold 56.6 55.1 54.7 2.7 4.2 Selling, general and administrative expenses 34.9 35.7 34.8 (2.1) 6.2 Restructuring charges -- 0.7 -- -- -- Amortization of goodwill and non-compete agreements 0.6 0.6 0.7 (0.3) (12.2) ----------------------- Total expenses 92.1 92.1 90.2 -- 5.7 ----------------------- Operating income 7.9 7.9 9.8 0.6 (17.1) ======================= Net income 3.8 3.4 5.0 12.3 (30.1) =======================
The Company's net revenues fluctuate seasonally, with revenues in the first quarter historically being less than the remaining quarters of the year. The typical seasonality is the result of increased consumer purchases of the Company's products during the traditional calendar year-end holidays. Due to this seasonality, the Company has historically incurred a loss or recognized only a small profit during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. In fiscal 2000 and 1999, timing of new product releases and acquisitions caused an atypical pattern of revenue results by quarter, which is not expected to be repeated in the foreseeable future. See Note P of Notes to Consolidated Financial Statements. The following discussion includes certain forward-looking statements. Actual results could differ materially from those in the forward-looking statements and a number of factors may affect future results, liquidity and capital resources. These factors include, but are not limited to, softness in the general retail environment, the timing of products being introduced to the market, the level of returns experienced by the 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 2001 fiscal year. The Company disclaims any intent or obligation to update forward-looking statements. RESULTS OF OPERATIONS Fiscal 2000 compared to Fiscal 1999. Net revenues in fiscal 2000 were essentially flat as compared to fiscal 1999. Net revenues from publishing products increased from fiscal 1999 to fiscal 2000 by $5.6 million, or 3.4%, primarily due to favorable acceptance of new product offerings and the effect of current year acquisitions, offset partially by an increase in product returns. Net revenues from gift products decreased by $5.5 million, or 5.9%, primarily due to the restructuring of the division, offset partially by the addition of the Ceres candle business. See Notes B and C of Notes to Consolidated Financial Statements. Price increases did not have amaterial effect on net revenues. The Company's cost of goods sold for fiscal 2000 increased $3.9 million, or 2.7%, and, as a percentage of net revenues, increased from 55.1% to 56.6%. The increase in cost of goods sold as a percentage of net revenues resulted primarily from an aggressive attempt to sell overstock books that resulted from increased return levels, increased competitive activity in certain markets, as well as additional one-time costs relating to the outsourcing of gift product manufacturing. Selling, general and administrative expenses for fiscal 2000 decreased $2.0 million over the comparable period in fiscal 1999. These expenses, expressed as a percentage of net revenues, decreased from 35.7% for fiscal 1999 to 34.9% for fiscal 2000, primarily as a result of the gift division restructuring. Interest expense decreased by $0.5 million, or 7.2%, for fiscal 2000. The reduction in interest expense compared to the prior year was primarily related to the Company incurring approximately $0.3 million in premium charges in the prior fiscal year relating to the redemption of $39.9 million of Convertible Subordinated Notes. The Company's effective tax rate in fiscal 2000 was 32.5% compared to 36.5% for fiscal 1999. This decrease is due to a tax benefit received in the fourth quarter relating to the closure of a foreign subsidiary. See Note O of Notes to Consolidated Financial Statements. The Company earned net income $9.9 million for fiscal 2000. Fiscal 1999 compared to Fiscal 1998. Net revenues for fiscal 1999 increased $8.7 million, or 3.4%, over fiscal 1998. Net revenues from publishing products increased for fiscal 1999 from fiscal 1998 by $4.9 million, or 3.0%, primarily due to favorable acceptance of new product offerings. Publishing results would have been more favorable were it not for absence of revenues from certain agreements which had expired April 1, 1998, 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. Net revenues from gift products increased by $3.8 million, or 4.3%, primarily due to the increased sales of a special selection of products, including scrapbooks, to mass merchandisers. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for fiscal 1999 increased $5.8 million, or 4.2%, and, as a percentage of net revenues, increased from 54.7% to 55.1%. The increase in cost of goods sold, as a percentage of net revenues, resulted primarily from the portion of the fiscal 1999 one-time restructuring charge related to reserves in the gift division for inventory to be liquidated in the amount of $2.8 million, or 1.1% of net revenues. The absence of revenues from the above mentioned publishing distribution agreements, which carry a higher cost of sales percentage, somewhat offset other increases in the cost of sales percentage. Selling, general and administrative expenses for fiscal 1999 increased $5.4 million over the comparable period in fiscal 1998. These expenses, expressed as a percentage of net revenues, increased from 34.8% for fiscal 1998 to 35.7% for fiscal 1999 primarily as a result of increased marketing costs in the Company's direct-to-consumer market. In addition, the increase is due 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 were discontinued as of December 31, 1998. The operating expenses restructuring charge for fiscal 1999 was $1.9 million. This charge relates to costs for discontinuation of manufacturing and certain administrative functions at Gibson. The costs primarily include employee severance benefits reduced by a gain on the sale of the manufacturing equipment. Interest expense increased by $0.6 million, or 9.6%, for fiscal 1999. The Company's effective tax rate in fiscal 1999 was 36.5% compared to 37.5% for fiscal 1998. See Note O of Notes to Consolidated Financial Statements. The Company earned net income of $8.9 million for fiscal 1999. LIQUIDITY AND CAPITAL RESOURCES At March 31, 2000, the Company had $0.8 million in cash and cash equivalents, primarily cash generated from operations. 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 March 31, 2000, the Company had working capital of $138.1 million. Under its two bank credit facilities, at March 31, 2000, the Company had $84.5 million of borrowings outstanding, and $25.5 million available for borrowing. Net cash provided by operating activities was $8.1 million, $1.6 million and $7.0 million in fiscal 2000, 1999 and 1998, respectively. The cash provided by operations during fiscal 2000 was principally attributable to net income with an offsetting increase in inventory. The $9.0 million increase in inventory is attributable to approximately $5.0 million from current year acquisitions and approximately $4.0 million in the Gift Division. The Gift Division increased its inventory levels to allow for longer manufacturing lead times resulting from outsourcing the manufacturing operations. During fiscal 2000, capital expenditures totaled approximately $3.6 million. The capital expenditures were primarily for computer, warehousing and manufacturing equipment. In fiscal 2001, the Company anticipates capital expenditures of approximately $4.0 million, consisting primarily of additional computer and warehousing equipment. The Company acquired three businesses during fiscal 2000. See Note B of Notes to Consolidated Financial Statements. The Company paid approximately $23.8 million in cash, primarily funded from existing credit agreements, and assumed certain liabilities in relation to these acquisitions. 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, the London Interbank Offered Rate ("LIBOR") plus a percentage, subject to adjustment based on certain financial ratios. The $100 million 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. The $10 million credit facility bears interest at LIBOR plus a percentage, subject to adjustment based on certain financial ratios, and matures on July 31, 2001. 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 $17.4 million of senior notes ("Senior Notes") which are unsecured. The Senior Notes bear interest at rates from 6.68% to 9.50% and are due through fiscal 2006. Under the terms of the Credit Agreements and 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 March 31, 2000, the Company was in compliance with all covenants of these debt agreements. The Company expects to be in compliance with all of its covenants for each quarter of fiscal 2001, although no assurance can be given that such compliance will be maintained. Management believes cash generated by operations and borrowings available under the Credit Agreements will be sufficient to fund anticipated working capital and capital expenditure requirements for existing operations through fiscal 2001. 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. At March 31, 2000, the Company had repurchased approximately 2.9 million shares of common stock at an aggregate cost to the Company of $39.2 million. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to market risk from exposure to changes in interest rates based on its financing, investing and cash management activities. The exposure relates primarily to the credit agreements, which expire in fiscal 2006. In the event that interest rates associated with these credit agreements were to increase 100 basis points, the impact on the future cash flows would be approximately $0.8 million, assuming current debt levels are maintained. YEAR 2000 ISSUES The Company did not experience any significant problems with its information and other systems relating to the Year 2000. The Company expensed approximately $15,000 in costs during fiscal 2000, primarily for staff coordination related to being year 2000 compliant. The Company's expenditures have been consistent with expectations, and the Company does not anticipate that it will incur significant additional costs in connection with its information or other systems and their ability to process dates in the year 2000 or thereafter. Also, the Company does not believe issues relating to the Year 2000 will have a material effect on the Company's results of operations, liquidity or financial condition. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Years ended March 31, ------------------------------- 2000 1999 1998 ------------------------------- Net revenues $261,822 $261,645 $252,958 Cost of goods sold 148,147 144,221 138,389 -------------------------------- Gross profit 113,675 117,424 114,569 Selling, general and administrative 91,398 93,394 87,950 Restructuring charge - 1,866 - Amortization of goodwill and non-compete agreements 1,610 1,615 1,839 -------------------------------- Operating income 20,667 20,549 24,780 Other income 230 59 1,569 Interest expense 6,171 6,653 6,073 -------------------------------- Income before income taxes 14,726 13,955 20,276 Provision for income taxes 4,785 5,100 7,603 -------------------------------- NET INCOME $ 9,941 $ 8,855 $ 12,673 ================================ Weighted average number of shares outstanding 14,242 15,279 17,113 ================================ NET INCOME PER SHARE: Basic-- Net income per share $ 0.70 $ 0.58 $ 0.74 ================================ Diluted-- Net income per share $ 0.70 $ 0.58 $ 0.73 ================================ See Notes to Consolidated Financial Statements
CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) (CAPTION> March 31, ------------------- 2000 1999 ------------------- ASSETS Current assets: Cash and cash equivalents $ 814 $ 609 Accounts receivable, less allowances of $7,171 and $6,982, respectively 79,052 77,298 Inventories 74,809 65,805 Prepaid expenses 13,652 12,656 Assets held for sale 22,168 - Deferred tax assets 9,679 6,715 -------------------- Total current assets 200,174 163,083 Property, plant and equipment, net 17,423 25,557 Other assets 9,904 10,260 Deferred charges 959 1,421 Goodwill, less accumulated amortization of $7,971 and $6,361, respectively 69,770 55,009 -------------------- TOTAL ASSETS $298,230 $255,330 ===================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 27,350 $ 16,355 Accrued expenses 22,695 19,720 Dividends payable 569 576 Income taxes payable 3,851 2,793 Current portion of long-term debt 7,592 4,765 Current portion of capital lease obligations - 80 -------------------- Total current liabilities 62,057 44,289 Long-term debt 100,359 79,542 Deferred tax liabilities 2,606 4,432 Other liabilities 1,476 1,418 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 13,144,776 and 13,286,860 shares, respectively 13,145 13,287 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,085,819 and 1,103,524 shares, respectively 1,086 1,104 Additional paid-in capital 43,126 44,537 Retained earnings 74,375 66,721 -------------------- Total shareholders' equity 131,732 125,649 -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $298,230 $255,330 ==================== See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except per share data)
Class B Additional Common Common Paid-In Retained Stock Stock Capital Earnings Total ---------------------------------------------------- Balance at April 1, 1997 $16,001 $ 1,112 $ 79,409 $50,290 $146,812 Net income 12,673 12,673 Common stock issued: Retirement of stock awards -- 3,888 common shares (4) 4 - Stock offering adjustment (360) (360) Dividends declared - $0.16 per share (2,739) (2,739) Incentive plan stock awards -- 5,380 common shares 6 4 10 ----------------------------------------------------- Balance at March 31, 1998 $16,003 $ 1,112 $ 79,057 $60,224 $156,396 ===================================================== Net income 8,855 8,855 Class B stock converted to common 8 (8) - Common stock issued: Option plans -- 14,449 common shares 15 239 254 Convertible notes converted -- 1,470 common shares 1 24 25 Common stock repurchased -- 2,741,911 common shares (2,742) (34,803) (37,545) Dividends declared - $0.16 per share (2,358) (2,358) Incentive plan stock awards -- 1,635 common shares 2 20 22 ----------------------------------------------------- Balance at March 31, 1999 $13,287 $ 1,104 $44,537 $66,721 $125,649 ===================================================== Net income 9,941 9,941 Class B stock converted to common 18 (18) - Common stock issued: Option plans -- 3,132 common shares 3 57 60 Common stock repurchased -- 165,400 common shares (165) (1,483) (1,648) Dividends declared - $0.16 per share (2,287) (2,287) Incentive plan stock awards -- 1,635 common shares 2 15 17 ----------------------------------------------------- Balance at March 31, 2000 $13,145 $ 1,086 $43,126 $74,375 $131,732 ===================================================== See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Years ended March 31, -------------------------- 2000 1999 1998 -------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 9,941 $ 8,855 $12,673 Adjustments to reconcile income to net cash provided by operating activities: Depreciation and amortization 7,291 8,695 8,577 Deferred income taxes (1,803) (2,371) 4,758 Gain on sale of fixed assets (240) - - Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net 1,138 (11,883) (789) Inventories (4,062) 4,785 960 Prepaid expenses (490) (4,479) 1,244 Accounts payable and accrued expenses (4,416) 1,684 (3,034) Income taxes payable 1,058 (1,493) (15,688) --------------------------- Net cash provided by continuing operations 8,417 4,063 8,701 --------------------------- Discontinued operations: Changes in discontinued net assets (281) (2,492) 488 Cash used in discontinued operations - - (2,191) --------------------------- Net cash used in discontinued operations (281) (2,492) (1,703) --------------------------- Net cash provided by operating activities 8,136 1,571 6,998 ---------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,641) (4,173) (4,815) Proceeds from sales of property, plant and equipment 1,857 5,346 - Purchase of net assets of acquired companies - net of cash received (23,842) - - Changes in other assets and deferred charges (2,062) (2,114) 160 ---------------------------- Net cash used in investing activities (27,688) (941) (4,655) ---------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit, net 33,084 59,800 - Payments under capital lease obligations (80) (246) (308) Payments on long-term debt (9,440) (58,702) (2,975) Dividends paid (2,279) (2,467) (2,739) Changes in other liabilities 43 (853) (89) Proceeds from issuance of common stock 77 279 14 Common stock retired (1,648) (37,545) (4) ---------------------------- Net cash provided by (used in) financing activities 19,757 (39,734) (6,101) ---------------------------- Net increase (decrease) in cash and cash equivalents 205 (39,104) (3,758) Cash and cash equivalents at beginning of year 609 39,713 43,471 ---------------------------- Cash and cash equivalents at end of year $ 814 $ 609 $39,713 ============================ Supplemental disclosures of noncash investing and financing activities: Dividends accrued and unpaid $ 569 $ 576 $ 685 See Notes to Consolidated Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS: Thomas Nelson, Inc. (a Tennessee corporation) and subsidiaries (the "Company"), is a publisher, producer and distributor of Bibles and books emphasizing Christian, inspirational and family value themes, as well as a host of inspirational seminars for women. The Company also designs and markets a broad line of gift and stationery products. The principal markets for the Company's products are Christian bookstores, general bookstores, mass merchandisers, gift stores and direct marketing to consumers in English-speaking countries. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements consist of the accounts of the Company including its subsidiaries, Worthy, Incorporated (formerly Word, Incorporated), The C.R. Gibson Company ("Gibson") and New Life Treatment Centers, Inc. ("NLTC"). All intercompany transactions and balances have been eliminated. NLTC has minority shareholders that own approximately 30% of the outstanding equity shares of NLTC. Minority interest will be presented as a reduction of net income on the consolidated statements of income and as a separate caption between liabilities and shareholders' equity on the consolidated balance sheets. At the time of acquisition, NLTC had a net deficit in shareholders' equity, and postacquisition operations were approximately breakeven for fiscal 2000. REVENUE RECOGNITION: Revenue from publishing and gift product sales is recognized upon shipment to the customer. Provision is made for the estimated effect of sales returns where right-of-return privileges exist. Returns of products from customers are accepted in accordance with standard industry practice. The full amount of the returns allowance (estimated returns to be received net of inventory and royalty costs) is shown, along with the allowance for doubtful accounts, as a reduction of accounts receivable in the accompanying consolidated financial statements. Revenue for seminars is recognized as the seminars take place. Deferred revenue relating to cash received in advance of seminars is included in the accompanying consolidated financial statements as accrued expenses. INVENTORIES: Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) valuation method. Costs of the production and publication of products are included in inventory and charged to operations when sold or when otherwise disposed. Costs of abandoned publishing projects and appropriate provisions for inventory obsolescence and decreases in market value are charged to operations on a current basis. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation and amortization are provided for, principally on the straight-line method over the estimated useful lives of the individual assets. GOODWILL: Goodwill is being amortized on a straight-line basis over periods ranging from 25 to 40 years. Subsequent to acquisitions, the Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. In the evaluation of possible impairment, the Company uses the most appropriate method of evaluation given the circumstances surrounding the particular acquisition, which has generally been an estimate of the related business unit's undiscounted cash flows from operations before interest and taxes over the expected remaining life of the goodwill. PREPAID EXPENSES: Prepaid expenses consist primarily of royalty advances. These costs are expensed over the expected benefit periods. DEFERRED CHARGES: Deferred charges consist primarily of loan issuance costs which are being amortized over the average life of the related debt and publication costs that are expected to be of significant benefit to future periods and other deferred charges, all of which are amortized over periods not to exceed 60 months. OTHER ASSETS: Other assets consist primarily of prepaid royalty costs for works and projects which are not expected to be released within the next fiscal year. STOCK-BASED COMPENSATION: Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" , encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for employee stock-based compensation using the intrinsic value method as prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB Opinion No. 25"), and related Interpretations. Under APB Opinion No. 25, no compensation cost related to employee stock options has been recognized because all options are issued with exercise prices equal to or greater than the fair market value at the date of grant. See Note L for further discussion. INCOME TAXES: Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes". Deferred income taxes are provided for temporary differences between the financial statement and income tax bases of assets and liabilities. COMPUTATION OF NET INCOME PER SHARE: Basic net income per share is computed by dividing net income by the weighted average number of common and Class B common shares outstanding during the year. Diluted earnings per share reflects the dilutive effect of stock options outstanding during the period and common shares contingently issuable upon conversion of convertible debt securities in periods in which such exercise would cause dilution and the effect on net income of converting the debt securities. These convertible debt securities were fully redeemed by March 1, 1999, and are excluded from all calculations from that date forward. STATEMENT OF CASH FLOWS: For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments with an original maturity of three months or less as cash equivalents. ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NEWLY ISSUED ACCOUNTING STANDARD: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", effective, as amended, for fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires all derivatives to be recognized in the statement of financial position and to be measured at fair value. The Company anticipates adopting the provisions of SFAS No. 133 effective April 1, 2001 and is continuing to determine the effects of SFAS No. 133 on the Company's financial statements. RECLASSIFICATIONS: Certain reclassifications of prior period amounts have been made to conform to the current year's presentation. NOTE B - ACQUISITIONS On June 24, 1999, the Company acquired substantially all of the assets of Ceres LLC ("Ceres") for approximately $6.2 million which included the assumption of certain liabilities. Ceres manufactures and markets high quality candles to specialty and department store markets and is headquartered in San Francisco, California. The purchase price was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of approximately $1 million. The excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $6.3 million and is being amortized on a straight-line basis over 40 years. Trademarks and customer lists are being amortized over 5 years. On December 30, 1999, the Company acquired substantially all of the assets of Rutledge Hill Press for approximately $4.5 million including the assumption of certain liabilities. Rutledge Hill Press is a Nashville, Tennessee-based publisher that specializes in cooking, quilting, regional interest and Civil War titles. The purchase price was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of approximately $0.1 million. The excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $0.5 million and is being amortized on a straight line basis over 40 years. Trademarks and customer lists are being amortized over 5 years. On January 28, 2000, the Company acquired approximately 70% of the outstanding shares of NLTC from a group of investors for approximately $15.4 million in cash. NLTC, headquartered in Dallas, Texas, operates two primary businesses. One hosts inspirational conferences for women at venues throughout the United States, and the other operates therapeutic centers in Arizona for women with eating disorders. At the date of acquisition, the Company declared its intent to sell certain healthcare related assets of NLTC. Accordingly, the accompanying consolidated financial statements reflect these assets as held for sale (see Note F) in accordance with Emerging Issue Task Force Issue 87-11, "Allocation of Purchase Price to Assets to Be Sold," ("EITF 87-11"). The purchase price for NLTC was allocated to the net assets acquired based on their estimated fair values, including identified intangible assets related to trademarks and customer lists in the amount of $1 million. The excess of the purchase price over the fair value of the net assets acquired (goodwill) was approximately $9.6 million and is being amortized on a straight-line basis over 25 years. Trademarks and customer lists are being amortized over 5 years. The accompanying consolidated financial statements reflect the preliminary allocation of purchase price for these acquisitions. The allocations have not been finalized due to the pending sale of assets held for sale and certain pre-acquisition contingencies identified by the Company relating to impairment of assets and contingent liabilities. Accordingly, in fiscal 2001, goodwill associated with these acquisitions may change. The fiscal 2000 acquisitions described above were accounted for by the purchase method of accounting for business combinations. Accordingly, the accompanying consolidated statements of operations do not include any revenues or expenses related to these acquisitions prior to the respective closing dates. The cash portions of these acquisitions were financed through borrowings from the Company's line of credit. Following are the Company's unaudited pro forma results for fiscal years 2000 and 1999, assuming the acquisitions occurred on April 1, 1998 (in thousands):
2000 1999 ------------------- Net Revenues $294,270 $304,670 Net Income 10,473 9,419 Earnings Per Share 0.74 0.62
These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which would have actually resulted had the combinations been in effect on April 1, 1998, or of future results of operations. NOTE C - RESTRUCTURING CHARGE During fiscal 1999, the Company recorded a restructuring charge, including related asset write-downs of $4.7 million ($3 million or $0.19 per basic share, after-tax). The restructuring initiatives involved the Company's gift manufacturing operations located in Connecticut and included two plant closings and reduction of certain administrative functions. During fiscal 1999, management decided to cease all manufacturing activities in Connecticut. The restructuring resulted in workforce reductions of approximately 300 employees. The products formerly produced at these manufacturing facilities have continued to be designed and distributed by the Company, but are now being manufactured by outside vendors. This restructuring charge was recorded in the accompanying 1999 consolidated statements of income as cost of goods sold ($2.8 million) and operating expenses ($1.9 million). The remaining liability as of March 31, 1999 ($3.1 million) was recorded in the accompanying consolidated balance sheets as accrued expenses. The restructuring liability was fully utilized during fiscal 2000, and the restructuring is now complete. The restructuring charge and its utilization are summarized as follows (in thousands):
1999 1999 Utilized 2000 Original ------------- Balance at Utilized Balance at Accrual Cash Noncash Mar. 31, 1999 Cash Mar. 31, 2000 ------------------------------------------------------------- Employee severance and termination $2,777 $ 727 $ -- $2,050 ($2,050) $ -- Gain on sale of long-lived assets (1,928) (1,928) -- -- -- -- Other facility shutdown costs 1,017 -- -- 1,017 (1,017) -- ------------------------------------------------------------ Operating expenses 1,866 (1,201) -- 3,067 (3,067) Inventory write-down 2,800 -- 2,800 -- -- -- ------------------------------------------------------------ Total charge $4,666 ($1,201) $2,800 $3,067 ($3,067) $ -- ============================================================
For plants and buildings that were closed, the tangible assets have been recorded at the lesser of their net book value or their estimated fair value, less cost of disposal. The remaining assets relating to the restructuring are expected to be sold during fiscal 2001 and are reflected as assets held for sale in the accompanying consolidated balance sheets (see Note F). NOTE D - INVENTORIES Inventories consisted of the following at March 31 (in thousands):
2000 1999 ----------------------- Finished goods $66,261 $56,610 Work in process and raw materials 8,548 9,195 ----------------------- $74,809 $65,805 =======================
NOTE E - PREPAID EXPENSES Prepaid expenses consisted of the following at March 31 (in thousands):
2000 1999 ----------------------- Royalties $10,040 $10,124 Prepaid production costs 1,382 248 Other 2,230 2,284 ----------------------- $13,652 $12,656 =======================
NOTE F - ASSETS HELD FOR SALE Assets held for sale at March 31, 2000 include land and buildings previously used in the Gift Division manufacturing operations (see Note C) and certain assets of NLTC (see Note B), which the Company expects to sell by March 31, 2001. In accordance with EITF 87-11, the expected net proceeds from the sale, the expected cash flows from operations during the period from acquisition to disposal and an interest expense allocation were allocated to the NLTC assets held for sale. Any difference between the actual and expected sales price will result in an adjustment to goodwill, unless the adjustment results from a post-acquisition event. NOTE G - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at March 31 (in thousands):
2000 1999 ---------------------- Land $ 1,358 $ 3,798 Buildings 12,154 18,170 Machinery and equipment 20,332 23,216 Furniture and fixtures 6,142 3,604 Other 1,356 616 ---------------------- 41,342 49,404 Less allowance for depreciation and amortization ( 23,919) ( 23,847) ---------------------- $17,423 $25,557 ======================
NOTE H - OTHER ASSETS Other assets consisted of the following at March 31 (in thousands):
2000 1999 ---------------------- Prepaid royalties $3,313 $ 5,740 Cash surrender value of life insurance policies 1,429 1,030 Intangible assets, net 1,975 115 Other 3,187 3,375 ---------------------- $9,904 $10,260 ======================
NOTE I - ACCRUED EXPENSES Accrued expenses consisted of the following at March 31 (in thousands):
2000 1999 ----------------------- Accrued royalties $ 4,013 $ 5,210 Accrued payroll 3,911 5,623 Deferred revenue 6,553 263 Accrued commissions 937 1,031 Accrued interest 1,070 700 Accrued sales tax 234 25 Net liability of discontinued operations 2,424 2,705 Restructuring reserve - 3,067 Accrued group insurance 912 735 Other 2,641 361 ----------------------- $22,695 $19,720 =======================
Cash payments for interest were $6.2 million in 2000, $7.5 million in 1999 and $6.1 million in 1998. NOTE J - LONG-TERM DEBT Long-term debt consisted of the following at March 31 (in thousands):
2000 1999 ------------------------ Credit Agreements $ 84,500 $ 59,800 Industrial Revenue Bonds 1,325 1,525 Loan Agreement 1,000 1,667 Senior Notes 17,422 21,285 Other 3,704 30 ----------------------- 107,951 84,307 Less current portion ( 7,592) ( 4,765) ----------------------- $100,359 $ 79,542 =======================
The Company has Credit Agreements with borrowing limits totaling $110 million as of March 31, 2000. On November 30, 1998, the primary credit facility ("Credit Facility") was amended 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. The Credit Facility bears interest at either the lender's prime rate or, at the Company's option, the LIBOR plus a percentage, based on certain financial ratios. The average interest rate for the Credit Facility was approximately 6.81% at March 31, 2000. The Credit Facility is guaranteed by all of the Company's material subsidiaries and the Company has agreed, among other things, to limit the payment of cumulative cash dividends and to maintain certain interest coverage and debt-to total-capital ratios. The maximum dividends which the Company may pay for fiscal 2001 are $21.4 million. Additionally, the Company has a $10 million credit facility which matures July 31, 2001, and bears interest at LIBOR plus a percentage, for a total rate of 7.26% at March 31, 2000. At March 31, 2000, the Company was in compliance with all covenants of the Credit Agreements. At March 31, 2000, the Company had $25.5 million available for borrowing under its Credit Agreements. The Company has outstanding Industrial Revenue Bonds, which bear interest at rates from 7.35% to 7.60% and are due through 2005. At March 31, 2000, the Industrial Revenue Bonds were secured by property, plant and equipment with a net book value of approximately $1.4 million. The Company has outstanding indebtedness of $1.0 million under a loan agreement which is secured by property, plant and equipment related to the Company's Nashville warehouse and distribution center expansion completed in June 1992. Interest payable monthly is at LIBOR plus 1.25% per annum, for a total rate of 7.38% at March 31, 2000. Semi-annual principal payments are due through March 2002. The Company has outstanding $17.4 million of Senior Notes, which bear interest at rates from 6.68% to 9.50% and are due through fiscal 2006. Under the terms of the Senior Notes, the Company has agreed, among other things, to limit the payment of cash dividends and to maintain certain interest coverage and debt-to-total-capital ratios. The maximum dividends which the Company may pay for fiscal 2001 are $21.4 million. At March 31, 2000, the Company was in compliance with all covenants of the Senior Notes. On March 1, 1999, the Company redeemed the remaining outstanding $39.9 million of 5.75% Convertible Subordinated Notes due November 30, 1999. The Convertible Subordinated Notes were redeemed at $1,008.20 per $1,000 principal amount, together with accrued and unpaid interest. During the first nine months of fiscal 1999, the Company purchased $15.1 million in principal amount of the Convertible Subordinated Notes. Maturities of long-term debt for the years ending March 31 are as follows (in thousands):
2001 $ 7,592 2002 3,585 2003 3,322 2004 3,322 2005 3,322 2006 and thereafter 86,808 ------- $107,951 ======= NOTE K - LEASES Total rental expense for all operating leases, including short-term leases of less than a year, amounted to approximately $5.0 million in 2000, $4.3 million in 1999 and $4.0 million in 1998. Generally, the leases provide that, among other things, the Company shall pay for utilities, insurance, maintenance and property taxes in excess of base year amounts. Minimum rental commitments under non-cancelable leases for the years ending March 31 are as follows (in thousands):
Operating Leases --------- 2001 $ 4,117 2002 3,707 2003 2,037 2004 1,522 2005 1,255 2006 and thereafter 200 --------- Total minimum lease payments $12,838 ====== NOTE L - STOCK PLANS 1992 EMPLOYEE STOCK INCENTIVE PLAN: The Company has adopted the 1992 Amended and Restated Employee Stock Incentive Plan (the "Stock Incentive Plan"), which is administered by the Company's Compensation Committee. Stock options, stock appreciation rights, restricted stock, deferred stock, stock purchase rights and other stock-based awards may be granted to employees under this plan. In addition, 140,000 shares of common stock have been authorized for issuance under this plan for annual stock option grants to each of the Company's outside directors for the purchase of 2,000 shares of common stock. Stock options have been granted under this plan as indicated in the table below. The options in the Stock Incentive Plan vest over one to three year periods beginning on the first or fourth anniversary date of the option grant, and at March 31, 2000, there were options to purchase 336,169 shares of common stock and 1,240,000 shares of Class B common stock exercisable. The weighted average life of the options outstanding in the Stock Incentive Plan at March 31, 2000, was four years.
Remaining Weighted Weighted Shares Outstanding Optioned Shares Average Average Reserved Common Class B Exercise Fair For Grant Stock Stock Price Value --------------------------------------------------------- April 1, 1997 1,301,976 307,500 450,000 $17.91 Options canceled 80,000 ( 70,000) ( 10,000) 14.00 Options granted (1,319,000) 319,000 1,000,000 14.60 $4.64 Stock incentive issued( 580) -- -- ------------------------------------ March 31, 1998 62,396 556,500 1,440,000 15.88 Options canceled 151,500 ( 91,500) ( 60,000) 15.55 Options granted ( 74,000) 49,000 25,000 14.29 $6.01 Options exercised -- ( 7,000) -- 11.25 Stock incentive reversed 2,395 -- -- ------------------------------------- March 31, 1999 142,29 507,000 1,405,000 15.86 Options canceled 68,000 ( 63,000) ( 5,000) 12.16 Options granted ( 12,000) 12,000 -- 10.00 $4.82 ------------------------------------- March 31, 2000 198,291 456,000 1,400,000 15.89 =====================================
1989 NLTC STOCK INCENTIVE PLAN: NLTC has a stock option plan that provides for granting to officers and key employees non qualified options to purchase its common stock. Options shall not be priced at less than 85% of the fair value at the date of grant or be granted for terms of greater than ten years. Options outstanding generally vest after four years of employment, or at 25% per year. At March 31, 2000, there were options to purchase approximately 1.4 million shares outstanding under this plan, of which approximately 0.9 million were exercisable. The weighted average exercise price on outstanding options and exercisable options was approximately $0.69 per share and $0.77 per share, respectively, and the weighted average life was six years. STOCK-BASED COMPENSATION PLANS: The Company accounts for options issued to employees and directors under APB Opinion No. 25. All options are granted with exercise prices equal to or greater than market value of the Company's common stock on the date of grant. As a result, no compensation cost has been recognized. SFAS No. 123 established new financial accounting and reporting standards for stock-based compensation plans. The Company has adopted the disclosure-only provision of SFAS No. 123. As a result, no compensation cost has been recognized for the Company's employee stock option plans. Had compensation cost for the employee stock option plans been determined based on the fair value at the grant date for awards in fiscal 2000, 1999 and 1998 consistent with the provisions of SFAS No. 123, the Company's net income and net income per share would have been reduced to the following pro forma amounts for the 2000, 1999 and 1998 fiscal years:
2000 1999 1998 -------------------------------- Net income: As reported $9,941 $8,855 $12,673 ================================ Pro forma $9,750 $6,445 $10,967 ================================ Net income per share: Basic -- As reported $ 0.70 $ 0.58 $ 0.74 ================================ Pro forma $ 0.68 $ 0.42 $ 0.64 ================================ Diluted -- As reported $ 0.70 $ 0.58 $ 0.73 ================================ Pro forma $ 0.68 $ 0.42 $ 0.64 ================================
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to April 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. The fair value of each option on its date of grant has been estimated for pro forma purposes using the Black-Scholes option pricing model using the following weighted average assumptions:
2000 1999 1998 ------------------------------- Expected dividend payment $ 0.16 $ 0.16 $ 0.16 Expected stock price volatility 11.83% 33.17% 53.69% Risk free interest rate 5.45% 5.43% 6.29% Expected life of options 4 years 5 years 6 years
1997 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS: The Company adopted the 1997 Deferred Compensation Plan for Non Employee Directors (the "Deferred Compensation Plan"), which is administered by the Compensation Committee. The Deferred Compensation Plan is a non-qualified plan that allows eligible nonemployee members of the Company's Board of Directors to elect to defer receipt of all or any portion of annual base fees payable to them for services rendered to the Company as Directors. The participating Directors are awarded performance units of the Company's Common Stock at fair market value on the deferral dates and dividend payment dates. Distributions at age 65 or 70 are paid in cash, based on the value of the performance units at the time of distribution, payable in a lump sum or in installments. Compensation expense is recognized on deferral dates, dividend payment dates, and based on changes in the quoted price of the Company's Common Stock. During fiscal years 2000, 1999 and 1998 compensation expense, in relation to the Deferred Compensation Plan, was recorded in the amounts of approximately $0.1 million, $0.1 million and $0.2 million, respectively. 1990 DEFERRED COMPENSATION OPTION PLAN FOR OUTSIDE DIRECTORS: The Company adopted the 1990 Deferred Compensation Option Plan for Outside Directors (the "Outside Directors Plan"), which is administered by the Company's Compensation Committee. Options were awarded, on or prior to the annual meeting of shareholders or on initial election to the Board of Directors ("Board"), to each Director of the Company who filed with the Company an irrevocable election to receive options in lieu of not less than fifty percent (50%) of the retainer fees to be earned during each fiscal year. The option price was $1.00 per share with the number of shares being determined by dividing the amount of the annual retainer fee by the fair market value ("FMV") of the shares on the option date less $1.00 per share. The amount of annual retainer fee for options was expensed by the Company as earned. The options in the Outside Directors Plan vest on the first anniversary date of the option grant and, at March 31, 2000 there were 2,424 shares of common stock exercisable. The Outside Directors Plan terminated in August 1995 and options outstanding remain in effect until exercised or their expiration in August of 2001. Options granted and outstanding under this plan are as follows:
Common Stock Weighted Outstanding Average Optioned Exercise Shares Price --------------------------------- April 1, 1997 17,852 $0.76 Exercised ( 4,802) 0.53 --------- March 31, 1998 13,050 0.85 Exercised ( 6,450) 0.82 --------- March 31, 1999 6,600 0.87 Exercised (4 ,176) 0.80 --------- March 31, 2000 2,424 1.00 =========
1986 STOCK INCENTIVE PLAN: The Company adopted the 1986 Stock Incentive Plan (the "1986 Plan"), which was administered by the Company's Compensation Committee. Stock options were granted under the 1986 Plan at a price not less than the FMV of the stock on the option grant date and must be exercised not later than five years after the date of grant. Stock options issued to a person then owning more than 10% of the voting power in all classes of the Company's outstanding stock were granted at a purchase price of not less than 110% of the FMV and must be exercised within five years from the date of grant. The options vested 1/4 each year for four years beginning on the first anniversary date of the option grant. The 1986 Plan terminated in March 1996 and all options outstanding expired during fiscal 2000 with a weighted average exercise price of $14.64. There were no options granted or exercised under this plan during the last three fiscal years. NOTE M - RETIREMENT PLANS The Company has adopted the Thomas Nelson, Inc. Employee Stock Ownership Plan ("Company ESOP"), which includes a 401(k) salary deferral feature. In addition, Gibson maintains The C.R. Gibson Company Employee Stock Ownership Plan ("Gibson ESOP") and The C.R. Gibson Company Savings and Investment Plan ("Gibson 401(k) Plan"). The Company ESOP covers all eligible officers and employees other than those employed by Gibson. The Company, at its discretion, matches each employee's 401(k) contribution annually and, in addition, may make retirement contributions to the ESOP at its discretion. The Gibson ESOP and Gibson 401(k) Plan benefit all eligible Gibson employees. Gibson matches, at its discretion, each Gibson employee's 401(k) contributions annually and contributes 4% of the first $6,600 of a participant's compensation in the Gibson 401(k) Plan. The Company's contributions to these retirement plans, including matching contributions, totaled $2.4 million, $2.7 million and $2.9 million in 2000, 1999 and 1998, respectively. NLTC has adopted a profit sharing plan which is qualified under section 401 of the Internal Revenue Code. Eligible employees over 21 years of age may participate in the plan after one year of credited service with NLTC. NLTC's contribution to the plan for any year is discretionary. During fiscal 2000, NLTC matched 20% of all employee contributions. A proposal to merge the Gibson ESOP and Gibson 401(k) plans into the Company ESOP has been approved by the Board of Directors. The surviving plan will continue to allow employer discretionary contributions to a stock bonus feature and will continue to have a 401(k) feature. The surviving plan will allow all eligible employees to elect deferral contributions of between 1% and 15% of their eligible compensation. The Company will match 100% of each participant's salary deferral contributions up to 3% of eligible compensation and 50% of the next 2% of eligible compensation. The transfer of assets is planned for August 1, 2000, with full conversion expected to be completed by September 15, 2000. The new 401(k) matching schedule will be retroactive to January 1, 2000, in order for the surviving plan to qualify as a "safe harbor" 401(k) plan under applicable Internal Revenue Code Sections. NOTE N - COMMON STOCK 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 March 31, 2000, the Company has repurchased approximately 2.9 million shares of common stock at an aggregate cost to the Company of $39.2 million. NOTE O - INCOME TAXES The income tax provision is comprised of the following at March 31 (in thousands):
2000 1999 1998 ------------------------ Current: U.S. federal $5,331 $6,018 $2,126 State 1,107 1,278 544 Foreign 150 175 175 ------------------------- Total current 6,588 7,471 2,845 Deferred ( 1,803) ( 2,371) 4,758 ------------------------- Total tax provision $4,785 $5,100 $7,603 =========================
SFAS No. 109 permits the recognition of a deferred tax asset if it is more likely than not that the future tax benefit will be realized. The Company believes that, based on its history of profitable operations, the net deferred tax asset will be realized on future tax returns, primarily from the generation of future taxable income. During fiscal 2000, the Company acquired approximately $3.0 million of net deferred tax assets in connection with the NLTC business combination. The net deferred tax asset is comprised of the following at March 31 (in thousands):
2000 1999 ------------------- Accelerated depreciation ($1,898) ($3,728) Deferred charges ( 779) ( 1,021) Contributions 3,075 3,944 Inventory obsolescence reserve 2,963 3,138 Bad debt and returns reserves 1,795 1,308 Inventory-unicap tax adjustment 1,158 1,138 Advances and prepaid expenses 92 278 Accrued liabilities 4,507 3,074 Valuation allowance ( 3,840) ( 5,848) ------------------- Net deferred tax asset $7,073 $2,283 ===================
Reconciliation of income taxes computed at the U.S. federal statutory tax rate to the Company's effective tax rate is as follows at March 31:
2000 1999 1998 -------------------------- U.S. federal statutory tax rate provision 34.0% 34.0% 34.0% State taxes on income, net of federal 2.5% 2.5% 3.5% Tax benefit of foreign translation adjustment charge-off ( 4.0%) -- -- ------------------------- Effective tax rate 32.5% 36.5% 37.5% =========================
During the fourth quarter of fiscal year 2000, the Company closed a foreign subsidiary in the United Kingdom. This subsidiary distributed Gift products throughout Europe. The Company will continue to sell Gift products in Europe through third-party distributor arrangements. This closure is not expected to have a material impact on the Company's financial statements. While this foreign subsidiary produced only nominal revenues and operating income over the last several years, it did generate a substantial cumulative foreign currency translation loss over the course of its existence. Upon the closure of this foreign subsidiary, the Company realized a permanent tax benefit of approximately $0.6 million, related to the cumulative foreign currency translation loss. Cash payments for income taxes were $6.7 million, $2.8 million and $20.0 million in 2000, 1999 and 1998, respectively. NOTE P - QUARTERLY RESULTS (UNAUDITED) Summarized results for each quarter in the fiscal years ended March 31, 2000 and 1999 are as follows (dollars in thousands, except per share data):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter -------------------------------------------------------- 2000 - - - ---- Net revenues $59,116 $70,110 $62,224 $70,372 Gross profit 25,833 31,755 26,164 29,923 Net income 1,380 4,252 2,814 1,495 Net income per share 0.10 0.30 0.20 0.11 1999 - - - ---- Net revenues $55,994 $70,445 $66,584 $68,622 Gross profit 25,660 33,295 30,394 28,075 Net income (loss) 1,256 4,383 4,157 ( 941) Net income (loss) per share 0.08 0.29 0.28 ( 0.06)
NOTE Q - COMMITMENTS AND CONTINGENCIES The Company has commitments to provide advances to certain authors in connection with products being developed for the Company. These commitments totaled approximately $11.9 million at March 31, 2000. The timing of payments will be dependent upon the performance by the authors of conditions provided in the applicable contracts. It is anticipated that a substantial portion of the commitments will be completed within the next five years. The Company is subject to various other legal proceedings, claims and liabilities, which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. NOTE R - FINANCIAL INSTRUMENTS The following disclosure of estimated fair value of financial instruments as of March 31, 2000 is made in accordance with SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The estimated fair value amounts have been determined by the Company using available market information as of March 31, 2000 and 1999, respectively. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market transaction (in thousands):
2000 1999 ------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ------------------------------------------- CASH AND CASH EQUIVALENTS $ 814 $ 814 $ 609 $ 609 LONG-TERM DEBT: Credit Agreements $84,500 $84,500 $59,800 $59,800 Industrial Revenue Bonds 1,325 1,325 1,525 1,525 Capital Lease Obligations - - 80 80 Loan Agreement 1,000 1,000 1,667 1,667 Senior Notes 17,422 16,832 21,285 21,799
The carrying values of the cash and cash equivalents approximated the fair value based on the short-term nature of the investment instruments. The fair values of the Senior Notes are based on the quoted prices from financial institutions. The carrying value of the Company's Credit Agreements and Loan Agreement approximate the fair value. Due to the variable rate nature of the instruments, the interest rate paid by the Company approximates the current market rate demanded by investors; therefore, the instruments are valued at par. The carrying value of the Industrial Revenue Bonds and the Capital Lease Obligations approximates the fair value. Outstanding letters of credit totaled $2.0 million and $1.0 million as of March 31, 2000 and 1999, respectively. The letters of credit guarantee performance to third parties of various trade activities. Fair value estimated on the basis of fees paid to obtain the obligations is not material at March 31, 2000 and 1999. Financial instruments which potentially subject the Company to credit risk consist primarily of trade receivables. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company's customer base. NOTE S - OPERATING SEGMENTS The Company adopted SFAS No. 131, "Disclosure About Segments of an Enterprise and Related Information," at March 31, 1999, which directs the way the Company reports information about its operating segments. The Company is organized and managed based upon its products. The Company has two reportable business segments, identified as publishing and gift. The publishing segment primarily creates and markets Bibles, inspirational books, videos and hosts inspirational seminars for women. The gift segment primarily designs and markets gift products, including stationery items, albums, journals, candles, etc. Summarized financial information concerning the Company's reportable segments is shown in the following table. The "Other" column includes corporate related items not allocated to reportable segments (in thousands).
Publishing Gift(a) Other Total -------------------------------------------------- 2000 - - - ---- Revenues $173,965 $87,857 $ -- $261,822 Operating income 20,253 414 -- 20,667 Identifiable assets 148,088 71,900 78,242 298,230 Capital expenditures 876 2,765 -- 3,641 Depreciation and amortization expense 3,329 3,962 -- 7,291 1999 - - - ---- Revenues $168,325 $93,320 $ -- $261,645 Operating income 18,823 1,726 -- 20,549 Identifiable assets 126,620 66,986 61,724 255,330 Capital expenditures 2,139 2,034 -- 4,173 Depreciation and amortization expense 2,889 6,076 -- 8,965 1998 - - - ---- Revenues $163,480 $89,478 $ -- $252,958 Operating income 19,732 5,048 -- 24,780 Identifiable assets 119,072 70,024 98,346 287,442 Capital expenditures 2,285 2,530 -- 4,815 Depreciation and amortization expense 2,964 5,613 -- 8,577 (a) For fiscal 1999, reflects pre-tax restructuring and other related charges of $4.7 million pertaining primarily to severance and reserves for inventory to be liquidated.
Additional information regarding the Company's revenue sources follow. No single customer accounted for as much as 10% of consolidated revenues in fiscal 2000, 1999 or 1998. Foreign revenues accounted for less than 10% of consolidated revenues in fiscal 2000, 1999 and 1998. Report of Independent Public Accountants To the Board of Directors of Thomas Nelson, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Thomas Nelson, Inc. (a Tennessee corporation) and Subsidiaries as of March 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Thomas Nelson, Inc. and Subsidiaries as of March 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ Arthur Andersen LLP Nashville, Tennessee May 19, 2000 - - - ------------------------------------------------------------------------------ Other Financial Information (Unaudited) The common stock and the Class B common stock are traded on the NYSE under the symbols "TNM" and "TNM.B," respectively. The following table sets forth, for the periods indicated, the high and low closing sales prices as reported on the NYSE composite tape:
Common Class B Stock Common Stock ------------------------------------ Dividends Paid High Low High Low Per Share ------------------------------------ Fiscal 2000 - - - ----------- First Quarter $11.2500 $ 9.6875 $11.2500 $ 9.2500 $.04 Second Quarter 11.6250 9.6875 11.2500 9.7500 .04 Third Quarter 10.3750 8.3750 10.0000 9.0000 .04 Fourth Quarter 9.5000 7.5625 9.5625 8.2500 .04 ---- $.16 ==== Fiscal 1999 - - - ----------- First Quarter $14.5000 $11.8750 $16.0000 $13.1875 $.04 Second Quarter 15.6875 11.5000 15.3750 12.5000 .04 Third Quarter 14.0000 12.0000 14.0000 12.1250 .04 Fourth Quarter 13.5000 10.0000 13.5000 9.2500 .04 ---- $.16 ====
As of June 19, 2000, there were 952 record holders of the common stock and 613 record holders of the Class B common stock. Declaration of dividends is within the discretion of the Board of Directors of the Company. The Board considers the payment of dividends on a quarterly basis, taking into account the Company's earnings and capital requirements, as well as financial and other conditions existing at the time. Certain covenants of the Company's Credit Agreements and Senior Notes limit the amount of cash dividends payable based on the Company's cumulative consolidated net income. See Note J of Notes to Consolidated Financial Statements. On May 25, 2000, the Company declared a cash dividend of $0.04 per share on its common stock and Class B common stock to be paid on August 21, 2000 to shareholders of record on August 7, 2000. EX-15 4 0004.txt EXHIBIT 10.15 ADDENDUM TO EMPLOYMENT AGREEMENT FOR SAM MOORE Addendum to employment Agreement dated May 13, 1996 between Thomas Nelson, Inc. and Sam Moore is hereby amended to change: A. Term of Agreement 1.) Original Term. This agreement shall be effective as of the date set forth above ("the effective date"). The Company shall employ Executive as President of the Company for a term ("the employment period") commencing on the effective date and continuing until March 31, 2003 unless sooner terminated pursuant to Section F or H hereof. All dates referenced in the Employment Agreement as March 31, 2001 are changed to March 31, 2003. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. / s / Sam Moore / s / Joe L. Powers - - - ------------------- ---------------------- Sam Moore Name President Executive Vice President ------------------------ Title June 22, 2000 June 22, 2000 - - - -------------------- ------------------------- Date Date EX-16 5 0005.txt EXHIBIT 10.16 ADDENDUM TO EMPLOYMENT AGREEMENT FOR S. JOSEPH MOORE Addendum to employment Agreement dated May 10, 1996 between Thomas Nelson, Inc. and S. Joseph Moore is hereby amended to change: A. Term of Agreement 1.) Original Term. This agreement shall be effective as of the date set forth above ("the effective date"). The Company shall employ Executive as Executive Vice President of the Company for a term ("the employment period") commencing on the effective date and continuing until March 31, 2003 unless sooner terminated pursuant to Section F or H hereof. All dates referenced in the Employment Agreement as March 31, 2001 are changed to March 31, 2003. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. / s / S. Joseph Moore / s / Sam Moore - - - ------------------------- --------------------------- S. Joseph Moore Name Executive Vice President President --------------------------- Title June 22, 2000 June 22, 2000 - - - ------------------------- --------------------------- Date Date EX-17 6 0006.txt EXHIBIT 10.17 ADDENDUM TO EMPLOYMENT AGREEMENT FOR JOE L. POWERS Addendum to employment Agreement dated May 10, 1996 between Thomas Nelson, Inc. and Joe L. Powers is hereby amended to change: A. Term of Agreement 1.) Original Term. This agreement shall be effective as of the date set forth above ("the effective date"). The Company shall employ Executive as Executive Vice President of the Company for a term ("the employment period") commencing on the effective date and continuing until March 31, 2003 unless sooner terminated pursuant to Section F or H hereof. All dates referenced in the Employment Agreement as March 31, 1999 are changed to March 31, 2003. IN WITNESS WHEREOF, Executive and the Company have executed this Agreement as of the day and year first written above. ACCEPTED BY: THOMAS NELSON, INC. / s / Joe L. Powers / s / Sam Moore - - - ------------------------- ----------------------- Joe L. Powers Name Executive Vice President President ----------------------- Title June 22, 2000 June 22, 2000 - - - -------------------------- ----------------------- Date Date EX-18 7 0007.txt EXHIBIT 10.18 THOMAS NELSON, INC. 1997 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS Thomas Nelson, Inc. (the "Corporation") hereby adopts this 1997 Deferred Compensation Plan for Non-Employee Directors (the "Plan") pursuant to which eligible members of its Board of Directors may elect to defer receipt of all or any portion of certain compensation payable to them for services rendered to the Corporation as Directors. 1. Eligible Directors. The Directors of the Corporation eligible to make deferral elections under this Plan shall be those Directors who are not actively employed officers or employees of the Corporation or of any of its subsidiaries or affiliates (hereinafter referred to individually as a "Non- Employee Director" and collectively as the "Non-Employee Directors"). 2. Deferrable Compensation. A Non-Employee Director may elect to defer receipt of all, any part or none of the compensation payable by the Corporation for the annual base retainer for services rendered as a Director (the "Director's Fees"). 3. Election to Defer. A Non-Employee Director who desires to defer receipt of all or a portion of his Director's Fees in any calendar year from August to July shall so notify the Corporation's Compensation Committee in writing on or before July 1 of the prior calendar year, specifying on a form supplied by the Committee (a) the dollar amount or percentage of the Director's Fees to be deferred, (b) the deferral period, and (c) the form of payment. Elections to take effect with respect to the initial year of this Plan may be made by Non-Employee Directors until the first Board of Directors meeting after August 1, 1997. A newly-appointed Non-Employee Director shall be eligible to defer payment of future Director's Fees by so notifying the Compensation Committee on the appropriate form at any time within 30 days of his appointment to the Board of Directors. The elections made pursuant to this Paragraph shall be irrevocable with respect to those Director's Fees to which such elections pertain and shall also apply to Director's Fees payable in subsequent calendar years unless the Non-Employee Director notifies the Compensation Committee in writing, on or before July 1, that different elections shall apply with respect to Director's Fees payable during the following calendar year. Such new elections shall likewise continue in effect and apply to subsequent calendar years until similarly changed. 4. Non-Deferred Compensation. Any Director's Fees not deferred under this Plan shall be paid in accordance with normal Corporation policy. 5. Deferred Compensation Accounts. (a) Investment: At the time a Non-Employee Director elects to defer the receipt of compensation pursuant to Paragraph 3 above, the Corporation shall, on the business day the Director's Fees would have been paid absent the deferral election, credit a Nelson Stock Account established in his name with units (including fractions), the number of which shall be obtained by dividing the amount of the deferred Director's Fees to be so invested by the Fair Market Value of the Corporation's common stock. These units, thus calculated, are hereinafter referred to as "Stock Equivalents." For purposes of the Plan, Fair Market Value of a share of the Corporation's common stock on any date shall be equal to the mean between the high and low prices at which such shares were traded on the New York Stock Exchange ("NYSE") on such date, or, if no sales were quoted on such date, on the most recent preceding date on which sales were quoted. In the event of any change in the common stock of the Corporation by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination or exchange of shares, or a rights offering to purchase common stock at a price substantially below Fair Market Value, or of any similar change affecting the common stock, the value and attributes of each Stock Equivalent shall be appropriately adjusted consistent with such change to the same extent as if such Stock Equivalents were issued and outstanding shares of common stock of the Corporation. (b) Earnings: As of each quarterly dividend payment date, the Corporation shall credit as earnings to each Nelson Stock Account an amount equal to the cash dividends payable on such date with respect to that number of shares (including fractional shares) of its common stock equal to the number of Stock Equivalents credited to the Nelson Stock Account on the relevant dividend record date. The amount so credited shall then be converted into additional Stock Equivalents in the manner described earlier using the dividend payment date as the valuation date. 6. Deferral Period. At the time a Non-Employee Director elects to defer the receipt of compensation pursuant to Paragraph 3 above, he shall indicate the deferral period applicable to such deferred compensation by specifying the year starting on September 1 of any year (the "Payment Year") in which the deferred amounts are to be paid in a lump sum or in which installment payments shall commence; provided that the Payment Year shall be either of the years in which the Non-Employee Director will attain age 65 or 70. 7. Form of Payment of Deferred Compensation. Initial payments made under the Plan shall be based upon the aggregate balance in a Non-Employee Director's account determined on the first business day of the Payment Year. The balance in the Non-Employee Director's Nelson Stock Account shall be the dollar amount determined by multiplying the Stock Equivalents credited to such account on the first business day of the Payment Year by the Fair Market Value of a share of common stock of the Corporation on such date. The aggregate balance as thus determined shall be paid to him in cash either in a lump sum within 30 days following the first business day of the Payment Year or in ten (10) annual installments commencing with the Payment Year as specified in the election to defer made pursuant to Paragraph 3 above. If an election to receive installment payments is made, the Non-Employee Director shall receive the first installment within 30 days following the first business day of the Payment Year in an amount equal to the aggregate balance in his account(s) divided by the number of years in the installment payment period. Subsequent installments shall be computed and paid in similar fashion; provided, however, that pending distributions in the second through final years of the installment payment period, the aggregate balance in the Non-Employee Director's account shall be deemed to be invested in a Nelson Stock Account, and increased by earnings accordingly. 8. Change in Control. (a) In the event of a "Change in Control" of the Corporation followed by a Non-Employee Director's cessation of service to the Corporation as a Director, all amounts credited to the account(s) of the Non-Employee Director under the Plan shall be immediately due and payable to the Non-Employee Director in a single lump sum notwithstanding the deferral period and form of payment specified pursuant to Paragraph 3 above. (b) For purposes of the Plan, a "Change in Control" shall have occurred if: (i) Stock Acquisition. Any "person" (as such term is used in Section 13(d) and 14(d) (2) of the Exchange Act), other than the Corporation or a corporation a majority of whose outstanding stock entitled to vote is owned, directly or indirectly, by the Corporation, is or becomes, other than by purchase from the Corporation or such a corporation, the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding voting securities. Such a Change in Control shall be deemed to have occurred on the first to occur of the business day immediately preceding the date securities are first purchased by a tender or exchange offer, or the date on which the Corporation first learns of the acquisition of 20% of such securities, or the earlier of the business day immediately preceding the effective date of an agreement for the merger, consolidation or other reorganization of the Corporation or the date of approval thereof by the stockholders of the Corporation, as the case may be. (ii) Change in Board. During any period of two consecutive years, individuals who at the beginning of such period were members of the Board of Directors, and any new director whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors. Such a Change in Control shall be deemed to have occurred on the date upon which the requisite majority of directors fails to be elected by the stockholders of the Corporation. (iii) Other Events. There occurs a change in control of the Corporation of a nature that would be required to be reported as such in response to Item l(a) of the Current Report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act, or any successor provision to such Item relating to a "change in control," or in any other filing under the Exchange Act. 9. Designation of Beneficiary. If a Non-Employee Director dies prior to receiving the entire balance of his accounts under the Plan, any balance remaining in his account shall be paid in a lump sum as soon as practicable to the Non-Employee Director's designated beneficiary or, if the Non-Employee Director has not designated a beneficiary or the designated beneficiary is dead, then to his estate. Any designation of a beneficiary may be revoked or modified at any time by the Non-Employee Director, except that no designation shall be recognized as valid unless properly filed with the Compensation Committee during the lifetime of the Non-Employee Director while he is legally competent. 10. Withholding of Taxes. The rights of a Non-Employee Director to payments or credits under this Plan shall be subject to the Corporation's obligations, if any, to withhold income or other taxes from such payments. 11. Status of Plan. This Plan is a non-qualified deferred compensation plan covering no employees of the Corporation. As such, the Plan is exempt from the requirements of the Employee Retirement Income Security Act of 1974, as mended. The Corporation intends that the Plan shall at all times be maintained on an unfunded basis for federal income tax purposes. Hence, all payments from this Plan shall be made from the general assets of the Corporation. This Plan shall not require the Corporation to set aside, segregate, earmark, pay into a trust or special account or otherwise restrict the use of its assets in the operation of its business. A Non-Employee Director (or, if applicable, his designated beneficiary) shall have no greater right or status than as an unsecured general creditor of the Corporation with respect to any amounts owed hereunder. 12. Rights Nonassignable. All payments to persons entitled to benefits hereunder shall be made to such persons and shall not be grantable, transferable or otherwise assignable in anticipation of payment thereof, in whole or in part, by the voluntary or involuntary acts of any such persons or by operation of law subject to garnishment, execution, attachment or any other similar legal process of creditors of such persons. 13. Administration. Full power and authority to construe, interpret and administer this Plan shall be vested in the Corporation's Compensation Committee. The Compensation Committee shall have full power and authority to make each determination provided for in this Plan. All determinations made by the Compensation Committee shall be conclusive and binding upon the Company and any other party claiming rights hereunder. 14. Termination. The Board of Directors may, in its discretion, terminate this Plan at any time. Upon termination of the Plan, benefits shall be paid in accordance with the deferral elections made by the Non-Employee Director; provided, however, that the Compensation Committee shall have the right to determine thetotal amount payable to each Non-Employee Director (or, if applicable, his beneficiary) and to cause the amount so determined to be paid in lump sum, thereby discharging the Corporation from any further liability or obligation under this Plan. 15. Amendment. The Board of Directors may, in its discretion, amend this Plan from time to time. In addition, the Compensation Committee may from time to time amend this Plan to make such administrative changes as it may deem necessary or desirable. No such amendment shall divest any Non-Employee Director (or person claiming through him) of any rights to amounts previously credited to his accounts hereunder. 16. Incompetency. If the person to receive payment hereunder is deemed by the Compensation Committee or is adjudged to be legally incompetent, the payments shall be made to the duly appointed guardian of such incompetent, or they may be made to such person or persons who the Compensation Committee believes are caring for or supporting such incompetent; and the receipt thereof by such person or persons shall constitute complete satisfaction of the Company's obligations under this Plan. 17. Expenses. The expenses of administering this Plan shall be borne by the Corporation. 18. Gender. The masculine pronoun shall be deemed to include the feminine, and the singular to include the plural, unless a different meaning is plainly required by context. 19. Governing Law. This Plan shall be construed, administered and enforced according to the laws of the State of Tennessee. 20. Effective Date. The effective date of this Plan is September 1, 1997 and shall apply with respect to Director's Fees payable by the Corporation in respect of services performed on or after such date. Adopted this 22nd day of May, 1997. EX-21 8 0008.txt
EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Percentage Jurisdiction of Ownership of Subsidiary Incorporation Capital Stock - - - ----------------------------------------------------------------------------- Worthy, Incorporated Delaware 100% The C.R. Gibson Company Delaware 100% New Life Treatment Centers, Inc. Delaware 70%
EX-23 9 0009.txt EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our reports dated May 19, 2000 included in Thomas Nelson, Inc.'s annual report to its shareholders. In addition, we hereby consent to the incorporation of our reports incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (File No. 33-80086 and File No. 333-4503). /s/ Arthur Andersen LLP Nashville, Tennessee June 28, 2000 EX-27 10 0010.txt
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THOMAS NELSON, INC. FOR FISCAL YEAR ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAR-31-2000 APR-01-1999 MAR-31-2000 814 0 86,223 7,171 74,809 200,174 41,343 23,920 298,230 62,057 100,359 0 0 14,231 117,501 298,230 259,331 261,822 148,147 239,545 1,610 1,644 6,171 14,726 4,785 9,941 0 0 0 9,941 0.70 0.70
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