0000071023-95-000004.txt : 19950824 0000071023-95-000004.hdr.sgml : 19950824 ACCESSION NUMBER: 0000071023-95-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: 2731 IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 95561758 BUSINESS ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 BUSINESS PHONE: 6158899000 MAIL ADDRESS: STREET 1: P O BOX 141000 CITY: NASHVILLE STATE: TN ZIP: 37214-1000 FORMER COMPANY: FORMER CONFORMED NAME: ROYAL PUBLISHERS INC DATE OF NAME CHANGE: 19721019 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-4095 THOMAS NELSON, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-0679364 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (615) 889-9000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ At August 9, 1995, the Registrant had outstanding 15,245,973 shares of Common Stock and 1,085,825 shares of Class B Common Stock. Part I Item 1. Financial Statements THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
June 30, March 31, June 30, 1995 1995 1994 ----------- ---------- ----------- (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 686 $ 779 $ 1,932 Accounts receivable, less allowances of $7,919, $9,029 and $7,606, respectively 79,935 85,100 56,177 Inventories 76,564 69,351 70,052 Prepaid expenses 28,507 20,683 14,076 Deferred tax asset 7,714 7,714 12,673 --------- --------- --------- Total Current Assets 193,406 183,627 154,910 PROPERTY, PLANT AND EQUIPMENT 29,824 28,510 26,550 Less accumulated depreciation ( 13,110) ( 12,284) ( 9,174) --------- --------- --------- 16,714 16,226 17,376 OTHER ASSETS 15,328 14,688 14,927 DEFERRED CHARGES 3,857 4,149 4,009 GOODWILL 31,624 31,179 32,013 --------- --------- --------- TOTAL ASSETS $ 260,929 $ 249,869 $ 223,235 ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 29,943 $ 32,419 $ 19,131 Accrued expenses 15,382 19,558 17,034 Dividends payable 538 537 428 Current portion of long-term debt 892 892 845 Current portion of capital lease obligation 752 780 736 --------- --------- --------- Total Current Liabilities 47,507 54,186 38,174 LONG-TERM DEBT 138,277 120,108 118,884 CAPITAL LEASE OBLIGATION 713 80 671 DEFERRED TAX LIABILITY 1,410 1,410 768 OTHER LIABILITIES 1,201 1,356 2,760 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 12,370,579, 12,362,377 and 9,891,233 shares, respectively 12,371 12,362 9,891 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,085,844, 1,067,094 and 799,933 shares, respectively 1,086 1,067 800 Additional paid-in capital 18,192 18,211 20,982 Retained earnings 39,642 40,538 29,704 Foreign currency translation adjustments 530 551 601 --------- --------- --------- Total Shareholders' Equity 71,821 72,729 61,978 --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 260,929 $ 249,869 $ 223,235 ========= ========= ========= See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Three Months Ended June 30, -------------------------- 1995 1994 ----------- ----------- (Unaudited) (Unaudited) NET REVENUES $ 61,106 $ 49,103 EXPENSES: Cost of goods sold 29,023 25,274 Selling, general and administrative 29,591 22,382 Amortization of goodwill and non-compete agreements 450 440 ----------- ----------- Total 59,064 48,096 ----------- ----------- OPERATING INCOME 2,042 1,007 Other (income) expense 49 ( 46) Interest expense 2,561 1,917 ----------- ----------- Loss before income taxes ( 568) ( 864) Provision (benefit) for income taxes ( 210) ( 320) ----------- ----------- NET LOSS ($ 358) ($ 544) =========== ========== Weighted average number of shares outstanding 13,567 13,364 =========== ========== NET LOSS PER SHARE ($ 0.03) ($ 0.04) =========== ========== DIVIDENDS DECLARED PER SHARE $ 0.040 $ 0.032 =========== ========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three Months Ended June 30, --------------------------- 1995 1994 ------------ ----------- (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net Loss ($ 358) ($ 544) Adjustments to reconcile net loss to net cash provided by (used in) operations: Depreciation and amortization 1,632 1,545 Changes in assets and liabilities, net of acquisitions: Accounts receivable, net 5,166 2,361 Inventories ( 7,214) ( 2,759) Prepaid expenses ( 7,824) ( 2,627) Accounts payable and accrued expenses ( 6,652) ( 3,941) Income taxes currently payable and deferred - ( 4,506) ----------- ----------- Net Cash Used In Operating Activities ( 15,250) ( 10,471) ----------- ----------- Cash Flows From Investing Activities: Capital expenditures ( 493) ( 488) Purchase of net assets of acquired companies - net of cash - ( 187) Changes in other assets and deferred charges ( 1,633) ( 3,333) ----------- ----------- Net Cash Used in Investing Activities ( 2,126) ( 4,008) ----------- ----------- Cash Flows From Financing Activities: Borrowings under line of credit 18,169 16,266 Payments under capital lease obligation ( 225) ( 176) Dividends paid ( 537) ( 428) Changes in other liabilities ( 155) ( 239) Proceeds from issuance of common stock 135 - Common stock retired ( 125) - ----------- ----------- Net Cash Provided by Financing Activities 17,262 15,423 ----------- ----------- Effect of Translation Rate Changes on Cash 21 200 ----------- ----------- Net Increase (Decrease) in Cash and Cash Equivalents ( 93) 1,144 Cash and Cash Equivalents at Beginning of Period 779 788 ----------- ----------- Cash and Cash Equivalents at End of Period $ 686 $ 1,932 ========== ========== Supplemental Disclosures of Non-cash Investing and Financing Activities: Dividends accrued and unpaid $ 538 $ 428 Capital lease obligations incurred to lease new equipment $ 830 $ - See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Basis of Presentation The accompanying unaudited consolidated financial statements reflect all adjustments (which are of a normal recurring nature) that are,in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to SEC rules and regulations. The statements should be read in conjunction with the Summary of Significant Accounting Policies and notes to the consolidated financial statements included in the Company's annual report for the year ended March 31, 1995. The balance sheet and related information in these notes as of March 31, 1995, have been taken from the audited consolidated financial statements as of that date. Note B - Inventories Inventories consisted of the following (in thousands):
June 30, March 31, June 30, 1995 1995 1994 -------- --------- -------- Finished goods $ 67,852 $ 59,116 $ 61,899 Raw materials and work in process 8,712 10,235 8,153 ---------- --------- ---------- $ 76,564 $ 69,351 $ 70,052 ========== ========= ==========
Note C - Prepaid Expenses Prepaid expenses consisted of the following (in thousands):
June 30, March 31, June 30, 1995 1995 1994 -------- --------- -------- Direct marketing costs $ 4,289 $ 4,562 $ 2,648 Prepaid advertising 1,948 1,423 580 Royalty and production costs 17,120 11,516 9,428 Other 5,150 3,182 1,420 ---------- --------- ---------- $ 28,507 $ 20,683 $ 14,076 ========== ========= ==========
Note D - Other Assets Other assets consisted of the following (in thousands):
June 30, March 31, June 30, 1995 1995 1994 -------- --------- -------- Prepaid royalties $ 9,820 $ 9,050 $ 9,152 Copyright production masters, net of accumulated amortization of $1,420, $1,267 and $880, respectively 2,268 2,089 1,279 Non-compete agreements, net of accumulated amortization of $2,349, $2,121, and $1,437, respectively 2,448 2,682 3,266 Other 792 867 1,230 ---------- --------- ---------- $ 15,328 $ 14,688 $ 14,927 ========== ========= ==========
Note E - Accrued Expenses Accrued expenses consisted of the following (in thousands):
June 30, March 31, June 30, 1995 1995 1994 -------- --------- -------- Accrued interest $ 390 $ 1,247 $ 197 Accrued royalties 9,756 10,992 9,883 Accrued payroll 2,249 4,369 1,518 Other 2,987 2,950 5,436 ---------- --------- ---------- $ 15,382 $ 19,558 $ 17,034 ========== ========= ==========
Note F - Cash Dividend On May 24, 1995, the Company's directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend is payable on August 14, 1995, to shareholders of record on July 31, 1995. Note G - Subsequent Event On July 24, 1995 the Company sold 2,875,000 shares of Common Stock at $20.00 per share to a group of underwriters in a registered public offering. The net proceeds to the Company of approximately $54.6 million will be used to repay amounts outstanding under the Company's bank credit facilities. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The table below sets forth for the periods indicated certain selected income statement data of the Company expressed as a percentage of net revenues and the percentage change in dollars in such data from the prior fiscal year.
Three Months Ended June 30, ---------------------- 1995 1994 Increase -------- ------- -------- Net revenues: Publishing Book 35.5% 37.2% 18.9% Bible 24.1% 22.3% 34.7% -------- ------- -------- Total Publishing 59.6% 59.5% 24.8% Music 30.4% 30.7% 23.1% Gift 7.9% 8.4% 15.9% Other 2.1% 1.4% 89.5% -------- ------- -------- Total Revenues 100.0% 100.0% 24.4% -------- ------- -------- Expenses: Cost of goods sold 47.5 51.5 14.8% Selling, general and administrative 48.4 45.5 32.2% Amortization of goodwill and non-compete agreements 0.8 0.9 2.3% -------- ------- -------- Total Expenses 96.7 97.9 22.8% -------- ------- -------- Operating income 3.3 2.1 102.8% Loss before income taxes (0.9) (1.8) - Net Loss (0.6) (1.1) -
The Company's net revenues fluctuate seasonally, with net revenues in the second and third fiscal quarters historically being greater than those in the first and fourth quarters. This seasonality is the result of increased consumer purchases of the Company's products during the traditional year- end holidays. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. Results of Operations Net revenues for the first three months of fiscal 1996 increased by $12.0 million or 24.4% over the same period in fiscal 1995. The increase was primarily due to volume increases arising from the sales of previously released Bible products and the introduction of new book and music products. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for the first three months of fiscal 1996 increased by $3.7 million or 14.8% over the same period in fiscal 1995 and, as a percentage of net revenues, decreased to 47.5% for the first three months of fiscal 1996 from 51.5% in the comparable period in fiscal 1995. The decrease in cost of goods sold, as a percentage of net revenues, resulted from a change in the mix of product types and distribution channels. During the first three months of fiscal 1996, the Company derived a greater percentage of its net revenues from direct marketing which typically have higher gross margins than sales through other distribution channels, and higher sales of proprietary publishing and music products as a percentage of total sales which also have greater gross margins than other product types. In addition, the Company realized a current period benefit in gross margins as a result of price increases, though immaterial to net revenues, in anticipation of increasing component costs while still selling from existing inventory. Selling, general and administrative expenses for the first three months of fiscal 1996 increased by $7.2 million or 32.2% over the same period in fiscal 1995. These expenses, expressed as a percentage of net revenues, increased to 48.4% for the first three months of fiscal 1996 from 45.5% in the same period in fiscal 1995 primarily due to the increases in salaries and benefits and selling and marketing costs. These selling and marketing costs are related to the direct marketing sales and sales of proprietary products referred to above which have relatively higher selling and marketing costs than sales of other distribution channels and product types. Interest expense for the first three months of fiscal 1996 increased by $0.6 million or 33.6% over the same period in fiscal 1995 due to increased borrowings. Liquidity and Capital Resources The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations and borrowings available under bank credit facilities. At June 30, 1995, the Company had $77 million outstanding, and $28 million available for borrowing under its credit facilities. As previously addressed, seasonality has a major impact on the Company's revenues which in turn have a direct bearing on the level of borrowings. Subsequent to June 30, 1995, a substantial portion of the borrowings under the credit facilities were paid with the $54.6 million of net proceeds from a stock offering referred to in Note G - Subsequent Event. During the first three months of fiscal 1996, capital expenditures totaled approximately $1.3 million. During the remainder of fiscal 1996, the Company anticipates capital expenditures of approximately $2 million primarily consisting of warehouse improvements and computer equipment. The Company believes cash generated by operations and borrowings available through its bank credit facilities will be sufficient to fund anticipated working capital requirements for existing operations through the remainder of fiscal 1996. PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K Exhibit 27 - Financial Data Schedule (b) No Form 8-K was filed by the Company during the quarter ended June 30, 1995. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Thomas Nelson, Inc. (Registrant) August 11, 1995 BY s/ Joe L. Powers - ---------------------- --------------------------- Joe L. Powers Executive Vice President (Chief Accounting Officer) EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S 10-Q FOR THE PERIOD ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO. 1,000 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 686 0 87,854 7,919 76,564 193,406 29,824 13,110 260,929 47,507 138,990 13,457 0 0 58,364 260,929 60,182 61,106 29,023 58,614 450 860 2,561 (568) (210) (358) 0 0 0 (358) (0.03) (0.03)