-----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, W1ZGXEqcvyOrAuLOnd3OqkW+uyfpGqnSWGlbXrdbC5l98QMc4evpRWoGbmxzQ75M LFbjkG6RiimjLLbBp5pzrQ== 0000071023-95-000005.txt : 19951119 0000071023-95-000005.hdr.sgml : 19951119 ACCESSION NUMBER: 0000071023-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NELSON THOMAS INC CENTRAL INDEX KEY: 0000071023 STANDARD INDUSTRIAL CLASSIFICATION: BOOKS: PUBLISHING OR PUBLISHING AND PRINTING [2731] IRS NUMBER: 620679364 STATE OF INCORPORATION: TN FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 95593040 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 September 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 November 9, 1995, the Registrant had outstanding 15,305,019 shares of Common Stock and 1,109,993 shares of Class B Common Stock. Part I Item 1. Financial Statements THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, March 31, September 30, 1995 1995 1994 ------------- ---------- ------------- (Unaudited) (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 771 $ 779 $ 1,165 Accounts receivable, less allowances of $10,289, $9,029 and $8,987, respectively 103,142 85,100 76,722 Inventories 80,573 69,351 67,041 Prepaid expenses 25,610 20,683 17,812 Deferred tax asset 7,714 7,714 12,673 ------------- ---------- ------------- Total Current Assets 217,810 183,627 175,413 PROPERTY, PLANT AND EQUIPMENT 16,638 16,226 17,166 OTHER ASSETS 16,600 14,688 13,934 GOODWILL 31,402 31,179 31,819 DEFERRED CHARGES 4,840 4,149 4,662 ------------- ---------- ------------- TOTAL ASSETS $ 287,290 $ 249,869 $ 242,994 ============= ========== ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 34,193 $ 32,419 $ 24,520 Accrued expenses 16,786 19,558 20,402 Dividends payable 654 537 428 Income taxes currently payable -0- -0- 3,314 Current portion of long-term debt and capital lease obligation 1,466 1,672 1,638 ------------- ---------- ------------- Total Current Liabilities 53,099 54,186 50,302 LONG-TERM DEBT 101,898 120,108 122,773 CAPITAL LEASE OBLIGATION 651 80 478 DEFERRED TAX LIABILITY AND OTHER LIABILITIES 2,636 2,766 2,254 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 15,256,641, 12,362,377 and 9,893,233 shares, respectively 15,257 12,362 9,893 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,085,825, 1,067,094 and 799,933 shares, respectively 1,086 1,067 800 Additional paid-in capital 69,787 18,211 20,990 Retained earnings 42,315 40,538 34,874 Foreign currency translation adjustments 561 551 630 ------------- ---------- ------------- Total Shareholders' Equity 129,006 72,729 67,187 ------------- ---------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 287,290 $ 249,869 $ 242,994 ============= ========== ============= See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands, except per share data)
Six Months Ended Three Months Ended September 30, September 30, ---------------------- ---------------------- 1995 1994 1995 1994 ---------- ---------- ----------- ---------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) NET REVENUES $ 142,572 $ 119,615 $ 81,466 $ 70,512 COST AND EXPENSES: Cost of goods sold 72,320 60,621 43,297 35,347 Selling, general and administrative 60,014 46,143 30,423 23,761 Amortization of goodwill and non-compete agreements 901 877 451 437 ---------- ---------- ----------- ---------- Total 133,235 107,641 74,171 59,545 ---------- ---------- ----------- ---------- OPERATING INCOME 9,337 11,974 7,295 10,967 Other income (expense) 238 98 287 52 Interest expense 4,680 4,030 2,119 2,113 ---------- ---------- ----------- ---------- Income before income taxes 4,895 8,042 5,463 8,906 Provision for income taxes 1,811 2,963 2,021 3,283 ---------- ---------- ----------- ---------- NET INCOME $ 3,084 $ 5,079 $ 3,442 $ 5,623 ========== ========== =========== ========== Weighted average number of shares outstanding: Primary 14,658 13,364 15,715 13,364 ========== ========== =========== ========== Fully-diluted 17,941 16,599 18,998 16,599 ========== ========== =========== ========== NET INCOME PER SHARE: Primary $ 0.21 $ 0.38 $ 0.22 $ 0.42 ========== ========== =========== ========== Fully-Diluted $ 0.21 $ 0.37 $ 0.21 $ 0.37 ========== ========== =========== ========== DIVIDENDS DECLARED PER SHARE $ 0.080 $ 0.064 $ 0.040 $ 0.032 ========== ========== =========== ========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended September 30, ------------------------------ 1995 1994 ------------ ----------- (Unaudited) (Unaudited) Cash Flows From Operating Activities: Net Income $ 3,084 $ 5,079 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 3,419 3,085 Loss (gain) on sale of fixed assets ( 141) -0- Changes in assets and liabilities, net of acquisitions: Accounts receivable, net ( 18,042) ( 18,184) Inventories ( 11,222) 252 Prepaid expenses ( 4,927) ( 6,363) Accounts payable and accrued expenses ( 998) 4,781 Income taxes currently payable and deferred -0- ( 1,157) ------------ ----------- Net Cash Used In Operating Activities ( 28,827) ( 12,507) ------------ ----------- Cash Flows From Investing Activities: Capital expenditures ( 1,442) ( 1,000) Proceeds from sale of property, plant and equipment, excluding effects of disposition 494 ( 2) Purchase of net assets of acquired companies - net of cash -0- ( 187) Changes in other assets and deferred charges ( 4,746) ( 3,603) ------------ ----------- Net Cash Used in Investing Activities ( 5,694) ( 4,792) ------------ ----------- Cash Flows From Financing Activities: Net borrowings under line of credit ( 18,210) 20,155 Payments under capital lease obligation ( 454) ( 355) Dividends paid ( 1,191) ( 855) Changes in other liabilities ( 130) ( 1,508) Proceeds from issuance of common stock 54,597 10 Common stock retired ( 109) -0- ------------ ----------- Net Cash Provided by Financing Activities 34,503 17,447 ------------ ----------- Effect of Translation Rate Changes 10 229 ------------ ----------- Net Increase in Cash and Cash Equivalents ( 8) 377 Cash and Cash Equivalents at Beginning of Period 779 788 ------------ ----------- Cash and Cash Equivalents at End of Period $ 771 $ 1,165 ============ =========== Supplemental Disclosures of Non-cash Investing and Financing Activities: Capital lease obligations incurred to lease new equipment $ 830 $ -0- ============ =========== Dividends accrued and unpaid $ 654 $ 428 ============ =========== 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. Certain reclassifications have been made to conform presentation of the fiscal 1995 Financial Statements with reclassifications made in fiscal 1996. Note B - Inventories Components of inventories consisted of the following (in thousands):
September 30, March 31, September 30, 1995 1995 1994 ------------- ----------- ------------- Finished goods $ 70,325 $ 59,116 $ 58,667 Raw materials and work in process 10,248 10,235 8,374 ------------- ----------- ------------- $ 80,573 $ 69,351 $ 67,041 ============= =========== =============
Note C - Cash Dividend On May 24, 1995, the Company's directors declared a cash dividend of $.04 per share. The dividend was paid August 14, 1995, to shareholders of record on July 31, 1995. On August 24, 1995, the Company's directors declared a cash dividend of $.04 per share. The dividend is payable November 20, 1995, to shareholders of record on November 6, 1995. Note D - Sale of Stock 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 were used to repay amounts outstanding under the Company's bank credit facilities and for working capital requirements. Note E - Subsequent Event On October 31, 1995, the Company completed its $9.00 per share all cash tender offer for the outstanding shares of common stock of The C.R. Gibson Company for approximately $67 million. The acquisition was financed primarily by a bridge loan for $60 million from senior bank creditors. The C.R. Gibson Company, headquartered in Norwalk, Connecticut manufactures and markets a wide range of paper, gift and stationery products, primarily under the C.R. Gibson , Creative Papers and Clinton Prints brand names. Products include baby and wedding memory books, stationery, giftwrap, greeting cards, and paper tableware. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The following table sets forth certain selected statements of income data expressed as a percentage of net revenues and the percentage change in dollars in such data from the prior fiscal year.
Six Months Ended Fiscal Year-to-Year September 30, Increase 1995 1994 (Decrease) ----------- ---------- ----------- (%) (%) (%) Net revenues: Publishing Book 33.7 34.1 17.6 Bible 21.8 22.1 17.4 ----------- ---------- Total Publishing 55.5 56.2 17.5 Music 34.3 34.7 17.9 Gift 8.2 8.0 23.0 Other 2.0 1.1 121.2 ----------- ---------- Total Revenues 100.0 100.0 19.2 ----------- ---------- Expenses: Cost of goods sold 50.7 50.7 19.3 Selling, general and administrative 42.1 38.6 30.1 Amortization of goodwill and non-compete agreements 0.6 0.7 2.7 ----------- ---------- Total Expenses 93.4 90.0 23.8 ----------- ---------- Operating income 6.6 10.0 -22.0 Income before income taxes 3.4 6.7 -39.1 Net Income 2.2 4.2 -39.3
The Company's net revenues fluctuate seasonally, with net revenues in the second and third fiscal quarters historically being greater than those in the first and fourth fiscal quarters. This seasonality is the result of increased consumer purchases of the Company's products during the traditional year-end holidays. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to the seasonality of new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. Results of Operations - --------------------- Net revenues for the first six months of fiscal 1996 increased by $23.0 million or 19.2% over fiscal 1995 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines. Net revenues increased for the first six months of fiscal 1996 over fiscal 1995 as follows: music products increased by $7.4 million or 17.9%; book products increased by $7.2 million or 17.6%; Bible products increased by $4.6 million or 17.4%; and gift products increased by $2.2 million or 23.0%. Net revenues for the second quarter of fiscal 1996 increased by $11.0 million or 15.5% over the same period in fiscal 1995 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines. Net revenues increased for the second quarter of fiscal 1996 over fiscal 1995 as follows: music products increased by $4.1 million or 15.8%; book products increased by $3.0 million or 12.7%; Bible products increased by $1.4 million or 9.8%; and gift products increased by $1.6 million or 28.5%. Price increases did not have a material effect on net revenues for either period. The Company's cost of goods sold for the first six months of fiscal 1996 increased by $11.7 million or 19.3% over the same period in fiscal 1995 and, as a percentage of net revenues, remained unchanged at 50.7%. Cost of goods sold for the second fiscal quarter increased by $8.0 million or 22.5% over the same period in fiscal 1995 and, as a percentage of net revenues, increased from 50.1% to 53.1%. The increase of cost of goods sold, as a percentage of net revenues, was primarily the result of a shift in the mix of sales revenues within the Company's Music Division from proprietary music products to non-proprietary (distributed) music products. Distributed music products have lower gross margins for the Company because the producer of the product bears all development and marketing costs. This distributed product revenue increase resulted from the timing and popularity of distributed product releases. Selling, general and administrative expenses for the first six months of fiscal 1996 increased by $13.9 million or 30.1% and for the quarter by $6.7 million or 28.0%. These expenses, expressed as a percentage of net revenues, increased to 42.1% for the first six months of fiscal 1996 from 38.6% for the same period in fiscal 1995, and increased to 37.3% for the second quarter from 33.7% for the same period in fiscal 1995. These increases resulted from higher than anticipated sales and marketing program costs within the Music Division incurred to increase sales of proprietary product and the delay in marketing of product of one of the Company's artists. In addition, the expansion of certain direct marketing programs beyond the Company's capacity for fulfillment combined with a more competitive direct marketing sales environment resulted in increased advertising, bad debt and freight costs as a percentage of revenues. Costs incurred in connection with the development of alternative media products and channels in the Royal Media Division also adversely impacted selling, general and administrative expenses as a percentage of net revenues. The Company has implemented several initiatives to improve operating margins, including reducing salaries and benefits, suspending the developmental components of the Royal Media Division and limiting the Company's testing of new product offerings and sale of existing product offerings through direct marketing. Interest expense increased 16.1% and 0.3% for the first six months and second quarter, respectively, over the same period in fiscal 1995 due to increased average borrowings for the first three months of the fiscal year and increased average interest rates. 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 September 30, 1995, the Company had $41 million outstanding, and $64 million available for borrowing under its credit facilities. Seasonality has a major impact on the Company's revenues which in turn have a direct bearing on the level of borrowings. On July 18, 1995, the Company consummated the sale of 2,875,000 shares of its Common Stock with net proceeds to the Company of approximately $54.6 million. The net proceeds were used to repay a portion of the borrowings under the credit facilities. During the six months ended September 30, 1995, capital expenditures totaled approximately $2.2 million. The Company has no plans that will require significant capital expenditures for the remainder of fiscal 1996 in excess of the $3 million planned expenditures for the year. On October 31, 1995, the Company, through a wholly owned subsidiary, Nelson Acquisition Corp., completed its $9.00 per share cash tender offer (the "Offer") for all of the outstanding shares of common stock of The C.R. Gibson Company. The aggregate consideration paid of approximately $67 million was financed pursuant to the Company's bank credit facilities and a bridge loan with the Company's senior lenders in the aggregate principal amount of $60 million. Borrowings under the bridge loan mature on December 31, 1995. As a result of the Gibson stock purchase and expanding working capital needs, during November 1995, the Company intends to amend its bank credit facilities to provide for aggregate facilities of $185 million. The Company intends to repay the $60 million bridge loan with proceeds from the amended bank credit facilities. PART II Item 4. Submission of Matters to a Vote of Security Holders at the Company's Annual Meeting of Shareholders, which was held on August 24, 1995, the following proposal was approved: (a) The election of three directors in Class One to serve for a term of three years and one director in Class Two to serve for a term of two years expiring at the Annual Meeting of Shareholders to be held in 1998 and 1997, respectively, or until their successors are duly elected and qualified. The persons nominated for election to the Board of Directors received the number of total votes (Common and Class B) shown opposite their respective names:
For Against Withheld ------------ ------------ ----------- Sam Moore 16,893,717 23,530 106,366 Andrew Young 16,893,717 25,135 44,948 Cal Turner, Jr. 16,893,717 23,530 23,803 S. Joseph Moore 16,893,717 23,530 108,175
(b) An amendment to the Company's Amended and Restated 1992 Employee Stock Incentive Plan to (i) increase the number of shares issuable thereunder, (ii) to limit the amount of stock-based awards that may be granted to any single officer or key employee during any consecutive three year period, (iii) to provide for the issuance of annual stock option grants to the Company's outside directors and (iv) to extend the term during which awards may be made under the Stock Incentive Plan. The amendment received the following number of total votes (Common and Class B).
For Against Withheld ------------ ------------ ----------- Amendment 10,939,859 1,165,088 3,213,083
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 September 30, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Thomas Nelson, Inc. (Registrant) November 14, 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 SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO. 1,000 6-MOS MAR-31-1996 APR-01-1995 SEP-30-1995 771 0 113,431 10,289 80,573 217,810 27,879 11,241 287,290 53,099 102,549 16,343 0 0 112,663 287,290 140,710 142,572 72,320 132,334 901 2,194 4,680 4,895 1,811 3,084 0 0 0 3,084 0.21 0.21
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