-----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, QMexU5uvQzgYnVUiRbRPV1mSGTp8fanDyTqMgPwFrvfHuiYiqLRb6Sbd8JCbBvuK S4UDV3yFxEIsmoaR8ayNlQ== 0000071023-96-000001.txt : 19960123 0000071023-96-000001.hdr.sgml : 19960123 ACCESSION NUMBER: 0000071023-96-000001 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960119 ITEM INFORMATION: Changes in control of registrant FILED AS OF DATE: 19960122 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-13788 FILM NUMBER: 96505732 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 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDED REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 19, 1996 (November 7, 1995) Thomas Nelson, Inc. - ---------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Tennessee 0-4095 62-0679364 - ---------------------------------------------------------------- (State or other (Commission File (I.R.S. Employer Jurisdiction of Number) Identification No.) Incorporation) Nelson Place at Elm Hill Pike Nashville, Tennessee 37214 - ---------------------------------------------------------------- (Address of Principal (Zip Code) Executive Offices) Registrant's telephone number, including area code: 615/889-9000 1. This Form 8-K/A includes the financial information required to be filed pursuant to Item 7 (Financial Statements and Exhibits) of the Current Report on Form 8-K dated November 21, 1995 set forth under subheadings "(a) Financial Statements" and "(b) Pro Forma Financial Information". (a) Financial Statements: Report of independent auditors Consolidated balance sheets of The C.R. Gibson Company as of December 31, 1994 and 1993. Consolidated statements of operations, cash flows and shareholders' equity of The C.R. Gibson Company for the years ended December 31, 1994 and 1993. Notes to consolidated financial statements. Unaudited condensed consolidated balance sheet of The C.R. Gibson Company as of September 30, 1995. Unaudited condensed consolidated statements of income and cash flows of The C.R. Gibson Company for the nine month period ended September 30, 1995. Notes to unaudited condensed consolidated financial statements. (b) Pro Forma Financial Information: Pro Forma consolidated balance sheet of Thomas Nelson, Inc. as of September 30, 1995 giving effect to the acquisition of The C.R. Gibson Company as of September 30, 1995. Pro Forma consolidated statements of income of Thomas Nelson, Inc. for the twelve months ended March 31, 1995 and for the six month periods ended September 30, 1994 and 1995 giving effect to the acquisition of The C.R. Gibson Company as if such transaction had occurred as of April 1, 1994. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned hereunto duly authorized. THOMAS NELSON, INC. By: /s/ Joe L. Powers ---------------------- Name: Joe L. Powers Title: Executive Vice President & Secretary Date: January 19, 1996 Report of Independent Auditors The Board of Directors and Shareholders The C.R. Gibson Company We have audited the accompanying consolidated balance sheets of The C.R. Gibson Company as of December 31, 1994 and 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended. 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 generally accepted auditing standards. 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 The C.R. Gibson Company at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP Stamford, CT March 14, 1995 THE C.R. GIBSON COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
December 31 1994 1993 ---------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 1,000 $ 794 Accounts receivable, less allowances of $288 and $275, respectively 11,026 10,235 Inventories 18,988 16,692 Prepaid expenses and other current assets 1,729 1,773 Recoverable income taxes 1,540 - ---------- --------- Total Current Assets 34,283 29,494 PROPERTY, PLANT AND EQUIPMENT Land 775 775 Buildings and improvements 10,077 9,643 Machinery and equipment 16,397 13,564 Designs 10,041 8,336 ---------- --------- 37,290 32,318 Less accumulated depreciation and amortization 18,959 16,217 ---------- --------- 18,331 16,101 DEFERRED PROMOTION COSTS 3,113 1,714 INTANGIBLES AND OTHER ASSETS 3,356 5,842 ---------- --------- TOTAL ASSETS $ 59,083 $ 53,151 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 5,307 $ 3,440 Accrued wages and benefits 891 738 Income taxes currently payable 24 120 Short-term borrowings 4,630 2,765 Other current liabilities 2,846 2,783 ---------- --------- Total Current Liabilities 13,698 9,846 LONG-TERM DEBT 12,938 8,417 CAPITAL LEASE OBLIGATIONS 364 325 OTHER LONG-TERM LIABILITIES 380 380 DEFERRED INCOME TAXES 980 1,228 SHAREHOLDERS' EQUITY Preferred stock, $10 par value, authorized 200,000 shares; none issued - - Common stock, $.10 par value, authorized 15,000,000 shares; issued 7,755,216 and 7,751,924 shares, respectively 776 775 Capital contributed in excess of par value 10,900 10,882 Retained earnings 22,232 23,804 Cumulative translation adjustment ( 596) ( 421) ESOP unearned compensation ( 243) ( 528) Treasury Stock, at cost; 313,023 and 216,155 shares of Common Stock ( 2,346) ( 1,557) ---------- --------- Total Shareholders' Equity 30,723 32,955 ---------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 59,083 $ 53,151 ========== ========= See Accompanying Notes /TABLE THE C.R. GIBSON COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Year Ended December 31, 1994 1993 ------------ ----------- NET REVENUES $ 78,208 $ 70,277 COST AND EXPENSES Cost of goods sold 46,949 40,813 Selling, general and administrative 30,202 22,843 ------------ ----------- Total 77,151 63,656 OPERATING INCOME 1,057 6,621 Interest expense 1,253 829 ------------ ----------- Income (loss) before income taxes ( 196) 5,792 Provision for income taxes 186 2,168 ------------ ----------- NET INCOME (LOSS) ($ 382) $ 3,624 ============ =========== Weighted average number of shares outstanding 7,455,092 7,537,864 ============ =========== NET INCOME (LOSS) PER SHARE ($ .05) $ .48 ============ =========== See Accompanying Notes /TABLE THE C.R. GIBSON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Year Ended December 31, 1994 1993 ------------ ----------- Cash Flows From Operating Activities: Net Income (loss) ($ 382) $ 3,624 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation 2,754 2,806 Amortization 1,094 844 Write-off of Rytex intangibles 1,868 - Deferred income taxes ( 517) 230 Changes in assets and liabilities, net of acquisition Accounts receivable, net ( 791) ( 440) Inventories ( 2,296) ( 2,592) Prepaid expenses and other current assets 44 ( 312) Recoverable income taxes ( 1,540) - Accounts payable and accrued expenses 2,020 994 Deferred promotion costs, net of charges of $6,192 and $3,077, respectively ( 1,399) ( 966) Other 332 87 ------------ ----------- Net Cash Provided By Operating Activities 1,187 4,275 ------------ ----------- Cash Flows From Investing Activities: Capital expenditures ( 4,756) ( 3,420) Proceeds from the surrender of life insurance policies 485 - Purchase of The Rytex Company - ( 1,502) Other Investing Activities ( 961) ( 1,237) ------------ ----------- Net Cash Used in Investing Activities ( 5,232) ( 6,159) ------------ ----------- Cash Flows From Financing Activities: Repurchase of treasury stock ( 814) ( 636) Principal payments under line of credit, long-term debt and capital lease obligations ( 597) ( 1,772) Dividends paid ( 1,190) ( 1,061) Net proceeds from debt issuance 4,987 - Proceeds from lines of credit 1,865 2,765 ------------ ----------- Net Cash Provided by (Used in) Financing Activities 4,251 ( 704) ------------ ----------- Net Increase (Decrease) in Cash and Cash Equivalents 206 ( 2,588) Cash and Cash Equivalents at Beginning of Year 794 3,382 ------------ ----------- Cash and Cash Equivalents at End of Year $ 1,000 $ 794 ============ =========== Supplemental Cash Flow Information: Capital lease obligations incurred to lease new equipment $ 229 $ - ============ =========== Income Taxes Paid $ 2,399 $ 1,661 ============ =========== Interest Paid $ 966 $ 854 ============ =========== See Accompanying Notes/TABLE THE C.R. GIBSON COMPANY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Dollars in thousands, except per share data)
Common Capital Shares Common in Excess Retained Treasury Outstanding Stock of Par Value Earnings Stock ----------- ------ ------------ --------- -------- Balance at December 31, 1992 7,582,973 $ 769 $ 10,592 $ 21,275 $ 761 Issuance of treasury shares for outside directors' compensation 3,430 ( 30) Common Stock issued and receipt of treasury shares related to the exercise of stock options 40,211 6 290 201 Issuance of treasury shares for sales incentive award program 1,535 ( 11) Repurchase of treasury shares (92,380) 636 Net income 3,624 Cash dividends declared ($.145 per share) ( 1,095) ----------- ------ ------------ --------- -------- Balance at December 31, 1993 7,535,769 775 10,882 23,804 1,557 Issuance of treasury shares for outside directors' compensation 4,219 ( 30) Common Stock issued and receipt of treasury shares related to the exercise of stock options 993 1 18 18 Issuance of treasury shares for sales incentive award program 1,635 ( 13) Repurchase of treasury shares (100,423) 814 Net loss ( 382) Cash dividends declared ($.16 per share) ( 1,190) ----------- ------ ------------ --------- -------- Balance at December 31, 1994 7,442,193 $ 776 $ 10,900 $ 22,232 $ 2,346 =========== ====== ============ ========= ======== Foreign currency translation adjustments were ($175) for 1994 and ($147) for 1993. See Accompanying Notes /TABLE THE C.R. GIBSON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Accounting Policies - ---------------------------- The C.R. Gibson Company (the "Company") operates exclusively in one industry segment (line of business), the manufacturing and publishing of products primarily designed for the retail gift and stationery markets throughout the United States and Canada. The Company's classes of products include memory books, photo albums, gift books, church supplies, stationery, greeting cards, paper tableware, photo frames, playing cards and gift wrap. In addition, The Rytex Company ("Rytex"), a wholly-owned subsidiary of the Company, manufactures personalized stationery products which are marketed through direct mail catalogs. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Certain amounts reflect reclassifications to conform to the current year's presentation. Fair Value of Financial Instruments and Concentration of Credit Risks The carrying amount of the Company's cash and cash equivalents and short and long-term debt reported in the balance sheet approximates fair value. Financial instruments which potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. This risk is limited due to the larger number of entities comprising the Company's customer base. These customers include both large retail department stores and smaller gift store operations which are primarily located throughout the United States and Canada. Cash and Cash Equivalents The Company considers all highly liquid debt instruments with a maturity date at time of purchase of three months or less to be cash equivalents. Inventories Inventories are stated at the lower of cost, generally determined by the first-in, first-out (FIFO) method, or market. Property, Plant and Equipment Property, plant and equipment are stated on the basis of cost. depreciation is computed by the straight-line method based on estimated useful lives ranging from three to forty years. Deferred Promotion Costs The Company defers certain costs related to direct-response advertising of its products. Such costs are amortized over periods that correspond to the estimated revenue stream of the individual advertising activity. Intangibles and Other Assets Intangibles include the excess of cost over the fair value of net assets of acquired businesses (goodwill) and the cost of customer lists. Goodwill is generally amortized over periods of twenty to forty years on a straight-line basis. Customer lists are generally amortized over periods of five to seven years on a straight-line basis. Income Taxes Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes," which requires a change in method of accounting for income taxes from the deferred method to the liability method. The effect of the change on pretax income for 1993 was not material. The cumulative effect of the change at January 1, 1993 was not material. Taxes on Foreign Earnings Federal income taxes have not been provided on the undistributed earnings of the Company's Canadian subsidiary ($46,000 at December 31, 1994) because it is the Company's intention to reinvest all of the undistributed earnings of this subsidiary. Net Income (Loss) Per Common Share Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each year. Note 2 - Purchase of Rytex - -------------------------- On May 7, 1993, The C.R. Gibson Company acquired substantially all of the assets, properties and business of Rytex, exclusive of goodwill, for a purchase price of approximately $1.5 million plus the assumption of certain liabilities and obligations of Rytex aggregating approximately $2.9 million. The acquisition was accounted for as a purchase and the results of operations have been included in the financial statements from the acquisition date. The excess of cost over the fair value of assets acquired (goodwill) was approximately $1.5 million. The pro forma unaudited results of operations for the year ended December 31, 1993, assuming consummation of the purchase at the beginning of the year, is as follows (dollars in thousands except per share data): Year Ended December 31, 1993 ----------------- Net revenues $ 73,562 Net income 3,577 Net income per common share .47 The pro forma information above is not necessarily indicative of results that would have occurred had the transaction taken place at the beginning of the year. Note 3 - Inventories - -------------------- The components of inventories are as follows (in thousands):
December 31 1994 1993 ----------- ----------- Raw materials $ 5,914 $ 5,717 Work-in-process 3,657 3,123 Finished goods 9,417 7,852 ----------- ----------- $ 18,988 $ 16,692 =========== ===========
Note 4 - Intangibles - -------------------- Goodwill at December 31, 1994 and 1993 amounted to $736,000 and $2,212,000, respectively, net of accumulated amortization of $117,000 and $123,000, respectively. Customer lists acquired in connection with the acquisition of Rytex at December 31, 1993, amounted to $883,000, net of accumulated amortization of $106,000. During 1994, Rytex initiated unsuccessful marketing programs that adversely affected its business and impaired the value of these intangibles. Accordingly, the Company wrote-off $1,868,000 of Rytex intangibles considered to be impaired. Note 5 - Other Current Liabilities - ---------------------------------- Other current liabilities consist of the following (in thousands):
December 31 1994 1993 ----------- ----------- Accrued royalties $ 538 $ 557 Dividends payable 298 301 Current portion of long-term debt 422 461 Current portion of deferred income taxes - 151 Accrued property taxes 52 50 Other accrued liabilities 1,536 1,263 ----------- ----------- $ 2,846 $ 2,783 =========== ===========
Note 6 - Short-Term Borrowings - ------------------------------ Under line of credit arrangements for short-term borrowings with several banks, the Company may borrow up to $19,100,000 at interest rates generally below the prime rate. These agreements do not require the Company to maintain compensating balances or to pay a commitment fee on any unused facility. At December 31, 1994, there was $4,630,000 outstanding under these lines of credit. The Company had average outstanding borrowings of $6,002,000 during 1994 and $3,880,000 during 1993 at a weighted average interest rate of 5.0% for 1994 and 3.6% for 1993. The maximum amount outstanding was $9,205,000 during 1994 and $8,560,000 during 1993. Note 7 - Long-Term Debt - ----------------------- In September of 1989, the Company entered into a $10,000,000 long-term loan agreement with the Metropolitan Life Insurance Company. The loan (senior notes), which has a term of ten years, provides for a fixed rate of interest of 9 1/2 on the outstanding balance. During the first quarter of 1992, the Company entered into an agreement with Metropolitan to prepay without penalty $3 million of the outstanding long-term indebtedness. In June 1994, the Company also entered into a $5,000,000 long-term loan agreement with the Metropolitan Life Insurance Company. This loan (senior notes) has a term of ten years and a fixed rate of interest of 8.31%. Both loans contain various provisions as to the incurrence of additional debt and the maintenance of certain minimum net worth requirements. As of December 31, 1994, net worth, as defined, was approximately $14,268,000 greater than the required minimum. Additionally, the agreements restrict the amount of future dividends which the Company may declare to $1,500,000 plus 50% of net income as defined ($1,754,000 at December 31, 1994). Borrowings under the aforementioned loans, as well as other long-term debt of the Company, consist of the following (in thousands):
December 31 1994 1993 ---------- ---------- 5% interest rate loans secured by cash surrender value of insurance, no specific repayment date $ 517 $ 576 Mortgage loan secured by land and building, payable in installments, including interest at 70% of prime, through December 1998 552 690 ESOP loan secured by Company shares held by the ESOP, payable in equal quarterly installments through December 1995, with interest of 8.375% 243 528 8.31% senior notes due June 23, 2004, interest payable semi-annually in June and December with principal payments beginning in 1998 5,000 - 9 1/2% senior notes due September 23, 1999, interest payable semi-annually in March and September with principal payments beginning in 1996 7,000 7,000 Other long-term debt 48 84 ---------- ---------- 13,360 8,878 Less current maturities ( 422) ( 461) ---------- ---------- $ 12,938 $ 8,417 ========== ==========
Maturities of long-term debt obligations, excluding the life insurance loans which have no scheduled maturity date are as follows (in thousands): 1996 $ 1,145 1997 2,138 1998 2,852 1999 2,714 Thereafter 3,572 -------- Total $ 12,421 ======== Interest incurred on the ESOP loan was $30,000 and $54,000 in 1994 and 1993, respectively. Note 8 - Shareholders' Equity - ----------------------------- In 1992, the Company announced that it intended to repurchase up to $2,000,000 of its Common Stock. The total number of shares repurchased by the Company since the announcement is 230,453 shares at a cost of $1,723,000. During 1988, the Company entered into a mirror loan transaction with The Connecticut Bank and Trust Company and the C.R. Gibson Employee Stock Ownership Plan (ESOP) whereby proceeds of the loan of $1,957,000 were used by the ESOP to purchase 417,489 common shares from certain shareholders. In addition, the Company also makes contributions for the purchase of additional shares of Common Stock to be allocated in accordance with the ESOP (see Note 10). All shares held by the ESOP are considered outstanding for purposes of computing net income per common share. Dividends paid on ESOP shares are charged to retained earnings. The Company has guaranteed the ESOP loan and has reported the unpaid balance as a liability of the Company with unearned compensation reported as a reduction in shareholders' equity. Note 9 - Stock Plans - -------------------- As of December 31, 1994 and 1993, under the Company's Stock Option Plan, 363,198 and 366,490 shares of Common Stock, respectively, were reserved for purchase by eligible employees. All options have been granted under the Plan at 100% of the market value on the date of such grant. At December 31, 1994, there were options outstanding under the Plan for the purchase of 334,074 shares of Common Stock (188,088 vested), at prices ranging from $5.70 to $8.75, such options expiring on various dates from September 1996 to December 2004. At December 31, 1993, there were options outstanding under the Plan for the purchase of 355,645 shares of Common Stock (145,597 vested), at prices ranging from $5.70 to $8.75, such options expiring on various dates from September 1996 to December 2003. Options for 25,000 and 92,000 shares of Common Stock were granted during 1994 and 1993, respectively. In 1994, options to purchase 3,292 shares of Common Stock at $5.70 per share were exercised. Options to purchase 62,322 shares of Common Stock were exercised in 1993 at prices ranging from $4.69 to $5.70 per share. During 1994 and 1993, options to purchase 43,279 and 20,890 shares of Common Stock, respectively, were cancelled. In addition, during 1993, 10,000 options at $6.625 (all of which are outstanding at December 31, 1994) were granted to employees who are not included in the Plan. Note 10 - Employee Benefit Plans - -------------------------------- Employee benefit plan expense was $1,216,000 in 1994 and $1,195,000 in 1993. These amounts include contributions made by the Company to a 401(k) defined contribution plan. Under the terms of this plan, eligible employees may contribute up to 10% of their gross compensation to the plan up to certain defined limits. The Company, at its discretion, contributes an amount equal to 25% of the employee contribution to the plan on behalf of participating employees. Total benefit plan expense also includes contributions to the Employee Stock Ownership Plan. Under the terms of the Plan, contributions are made to the Plan in an amount equal to 6% of the wages of eligible employees with at least twelve months of service. Contributions are used to repay the ESOP loan and to acquire additional shares of the Company's Common Stock. The shares acquired by the ESOP are released and allocated to the participants as the ESOP loan is paid by the Company's contributions. As of December 31, 1994, the ESOP has allocated shares of 844,030 and unallocated shares of 41,760. Contributions to the Plan charged to pension expense amounted to $894,000 and $881,000 in 1994 and 1993, respectively. Dividends received by the Plan related to unallocated shares, approximated $11,000 in 1994 and $17,000 in 1993, and have been used to pay expenses of the Plan. Dividends received by the Plan on allocated shares approximated $130,000 in 1994 and $111,000 in 1993, and have been allocated to participants in accordance with the Plan. At December 31, 1994, there were no unfunded vested benefits or past service costs under any of the Company's plans. Note 11 - Income Taxes - ---------------------- Effective January 1, 1993, the Company adopted FASB Statement No. 109, "Accounting for Income Taxes." Under Statement 109, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Prior to the adoption of Statement 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the difference originated. As permitted by Statement 109, the Company has elected not to restate the financial statements of any prior years. The effect of the change on net income for 1993 was not material. The cumulative effect of the change at January 1, 1993 was not material. Significant components of the Company's deferred tax liabilities and assets are as follows (in thousands):
December 31 1994 1993 ----------- ----------- Deferred tax liabilities: Tax over book depreciation $ 946 $ 795 Deferred costs 979 615 Conversion from LIFO to FIFO 97 192 Other 20 26 ----------- ----------- Total deferred tax liabilities 2,042 1,628 ----------- ----------- Deferred tax assets: Accrued vacations 183 116 Bad debt 117 98 Allowance for obsolete inventory 93 - Contribution deduction carryforward 117 - Intangibles impairment 635 - Other 35 35 ----------- ----------- Total deferred tax assets 1,180 249 ----------- ----------- Net deferred tax liabilities $ 862 $ 1,379 =========== ===========
The provision (benefit) for income taxes consists of the following (in thousands):
1994 1993 ----------- ----------- Current: Federal $ 370 $ 1,632 State 309 305 Foreign 24 1 ----------- ----------- Total current 703 1,938 Deferred: Federal ( 552) 194 State 35 36 ----------- ----------- Total deferred ( 517) 230 ----------- ----------- Provision for income taxes $ 186 $ 2,168 =========== ===========
The foreign current provision is based upon pretax foreign income (loss) of $40,000 and ($31,000) for 1994 and 1993, respectively. A reconciliation of the federal statutory income tax rate to the Company's effective income tax rate is as follows:
1994 1993 ----------- ----------- Federal statutory income tax rate ( 34.0%) 34.0% State income taxes, net of federal income tax benefit 115.8 3.9 Charitable contributions ( 18.7) ( .9) Other 31.8 .4 ----------- ----------- Effective income tax rate 94.9% 37.4% =========== ===========
State income taxes in 1994 reflect no state tax benefit for losses incurred at Rytex. Note 12 - Operating Leases - -------------------------- The Company leases three manufacturing plants and all of its showrooms under renewable operating leases expiring through 2001. Future minimum annual lease payments under these and other operating leases, which have initial or remaining noncancelable lease terms in excess of one year at December 31, 1994 are $783,000, $713,000, $683,000, $488,000 and $285,000 in 1995, 1996, 1997, 1998 and 1999, respectively, and $416,000 thereafter. Rental expense was $1,454,000 in 1994 and $1,421,000 in 1993. Note 13 - Capital Leases - ------------------------ The Company leases a warehouse facility from the Connecticut Development Authority. The warehouse lease, which expires in October 1999, contains an option to purchase the warehouse for one dollar upon maturity of the lease. Lease payments are equal to the principal and interest payments required to be made by the Connecticut Development Authority under the terms of the industrial development bonds issued to finance the purchase of the warehouse facility. In addition, the Company has guaranteed payment to the bondholder of all principal and interest due. The Company also has capital lease agreements for various office furniture and equipment with terms which expire through January 1998. Property, plant and equipment includes the following assets held under capital leases (in thousands):
December 31 1994 1993 ----------- ----------- Land $ 23 $ 23 Buildings 627 627 Machinery and equipment 442 193 ----------- ----------- 1,092 843 Less: accumulated depreciation ( 365) ( 290) ----------- ----------- $ 727 $ 553 =========== ===========
Future minimum annual lease payments as of December 31, 1994 are as follows (in thousands): Future minimum annual lease payments (1995 through 1999) $ 597 Less amount representing interest ( 93) ----------- Present value of minimum lease payments 504 Less current maturities ( 140) ----------- $ 364 =========== Future minimum annual lease payments under these capital leases are $178,000, $140,000, $113,000, $108,000 and $58,000 in 1995, 1996, 1997, 1998 and 1999, respectively. Note 14 - Quarterly Data (unaudited) - ------------------------------------ A summary of the Company's quarterly results follows (in thousands except per share data):
Year ended December 31, 1994 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- (Restated) (Restated) (Restated) Net revenues $ 19,573 $ 18,042 $ 22,736 $ 17,857 Gross profit $ 7,960 $ 7,288 $ 9,181 $ 6,830 Net income (loss) $ 106 $ 362 $ 898 ($ 1,748) Net income (loss) per common share $ .01 $ .05 $ .12 ($ .23)
Year ended December 31, 1994 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------- ----------- ----------- ----------- Net revenues $ 15,731 $ 15,921 $ 21,435 $ 17,190 Gross profit $ 6,195 $ 6,691 $ 9,163 $ 7,415 Net income $ 806 $ 751 $ 1,501 $ 566 Net income per common share $ .11 $ .10 $ .20 $ .07
The quarterly results of operations for 1994 presented above have been restated principally to properly account for the amortization of deferred promotion costs, inventories, accounts receivable and sales returns at Rytex. The restatements had the effect of decreasing previously reported first, second and third quarter amounts as follows: sales by $261,000, $185,000 and $322,000, respectively; gross profit by $438,000, $478,000 and $563,000, respectively; net income by $818,000, $557,000 and $622,000, respectively; and net income per common share by $.11, $.07 and $.08, respectively. The 1994 fourth quarter net loss includes $1,233,000 ($.17 per common share) relating to the write-off of Rytex intangibles. Note 15 - Subsequent Events - --------------------------- In January, 1995, the ESOP (see Notes 8 and 10) purchased 150,000 shares of the Company's Common Stock at a cost of $1,050,000. On March 14, 1995, the Board of Directors of the Company decided to seek a buyer for the Rytex subsidiary. The 1994 net sales and net loss of Rytex were $11,046,000 and $3,586,000, respectively. THE C.R. GIBSON COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1995 THE C.R. GIBSON COMPANY UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) September 30, 1995 ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 47 Accounts receivable, less allowance of $346 17,633 Inventories 17,418 Prepaid expenses and other current assets 2,162 ------------- Total Current Assets 37,260 PROPERTY, PLANT AND EQUIPMENT Land 775 Buildings and improvements 9,846 Machinery and equipment 14,564 Designs 11,266 ------------- 36,451 Less accumulated depreciation and amortization 19,984 ------------- 16,467 INTANGIBLES AND OTHER ASSETS 3,350 ------------- TOTAL ASSETS $ 57,077 ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 2,438 Accrued wages and benefits 868 Income Taxes currently payable 24 Short-term borrowings 6,885 Other current liabilities 2,280 ------------- Total Current Liabilities 12,495 LONG-TERM DEBT 12,828 CAPITAL LEASE OBLIGATIONS 146 OTHER LONG-TERM LIABILITIES 383 DEFERRED INCOME TAX 980 SHAREHOLDERS' EQUITY Preferred stock, $10 par value, authorized 200,000 shares; none issued - Common stock, $.10 par value, authorized 15,000,000 shares; issued 7,774,113 777 Additional paid-in capital 11,031 Retained earnings 22,543 Foreign currency translation adjustments ( 547) ESOP unearned compensation ( 1,078) Treasury Stock, at cost; 330,074 shares of Common Stock ( 2,481) ------------- Total Shareholders' Equity 30,245 ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 57,077 ============= See Accompanying Notes THE C.R. GIBSON COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME (Dollars in thousands, except per share data) Nine Months Ended September 30, 1995 ------------- NET REVENUES $ 57,558 COST AND EXPENSES Cost of goods sold 34,359 Selling, general and administrative 18,842 ------------- Total 53,201 ------------- OPERATING INCOME 4,357 Other income (expense) ( 1,118) Interest expense 1,152 ------------- Income before income taxes 2,087 Provision for income taxes 883 ------------- NET INCOME $ 1,204 ============= Weighted average number of shares outstanding 7,289,667 ============= NET INCOME PER SHARE $ .17 ============= See Accompanying Notes THE C.R. GIBSON COMPANY UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in thousands) Nine Months Ended September 30, 1995 ------------- Cash Flows From Operating Activities: Net Income $ 1,204 Adjustments to reconcile net income to net cash used in operations: Depreciation 2,370 Amortization 861 Increase in cash surrender value of life insurance ( 3) Changes in assets and liabilities, net of disposition: Accounts receivable, net ( 6,607) Inventories 601 Prepaid and other current assets 2,157 Accounts payable and accrued expenses ( 3,178) Deferred promotion costs, net of charges of $769 ( 15) Other 48 ------------- Net Cash Used In Operating Activities ( 2,562) ------------- Cash Flows From Investing Activities: Capital expenditures ( 1,881) Retirement of fixed assets 74 Other investing activities 1,104 Loan to ESOP ( 1,050) ------------- Net Cash Used in Investing Activities ( 1,753) ------------- Cash Flows From Financing Activities: Repurchase of treasury stock ( 135) Principal payments under line of credit, long-term debt and capital lease obligations ( 345) Dividends paid ( 893) Proceeds from sale of The Rytex Company 2,055 Proceeds from lines of credit 2,255 Proceeds from repayment of ESOP Loan 214 Other 211 ------------- Net Cash Provided by (Used in) Financing Activities 3,362 ------------- Net (Decrease) in Cash and Cash Equivalents ( 953) Cash and Cash Equivalents at Beginning of Period 1,000 ------------- Cash and Cash Equivalents at End of Period $ 47 ============= Supplemental Cash Flow Information: Income taxes paid $ 806 Interest paid $ 1,289 See Accompanying Notes THE C.R. GIBSON COMPANY NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 Note A - Basis of Presentation - ------------------------------ The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto incorporated into the Company's Annual Report on Form 10-K for the year ended December 31, 1994. Note B - Inventories - -------------------- The components of inventory are as follows (in thousands):
September 30, December 31, 1995 1994 ------------- ------------ Raw materials $ 4,441 $ 5,914 Work-in-process 2,902 3,657 Finished goods 10,075 9,417 ------------- ------------ $ 17,418 $ 18,988 ============= ============
Note C - Net Income (Loss) Per Common Share - ------------------------------------------- Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each period. There were 150,000 shares purchased by the Employee Stock Ownership Plan in January, 1995, currently held in suspense, which are not considered outstanding and therefore not included in the computation of net income (loss) per common share in 1995. Note D - Sale of The Rytex Company - ---------------------------------- On May 15, 1995, The C.R. Gibson Company sold substantially all of the assets and business of its subsidiary, The Rytex Company ("Rytex"). The sale to a wholly-owned subsidiary of The American Stationery Company, Inc. was for a purchase price of approximately $3,100,000 in cash and notes, and resulted in a net loss of $739,000. Note E - Subsequent Event - ------------------------- On September 13, 1995, the Company and Thomas Nelson, Inc. announced a definitive agreement had been signed whereby Thomas Nelson, Inc. would acquire all of the outstanding shares of the Company in a cash transaction valued at approximately $67,000,000. Thomas Nelson has made a cash tender offer of $9.00 per share, pursuant to the agreement that has been unanimously approved by the Company's Board of Directors. The tender offer, originally scheduled to expire on October 17, 1995, was extended to October 30, 1995. The offer was extended to allow the dissemination of additional information concerning the tender offer to the Company's shareholders. As of the date of this filing, the Company is now a subsidiary of Thomas Nelson, Inc. Thomas Nelson, Inc. is a leading publisher, producer and distributor of books and recorded music emphasizing Christian, inspirational and family value themes. Thomas Nelson, Inc. also designs and markets a broad line of gift and stationery products. SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION On November 7, 1995, Thomas Nelson, Inc. ("Nelson") consummated the acquisition of all of the issued and outstanding capital stock of The C.R. Gibson Company. An unaudited pro forma consolidated balance sheet prepared as if the business combination occurred September 30, 1995 (most recent interim date for which a balance sheet is required) has been included, along with the unaudited pro forma consolidated statements of income for the six months ended September 30, 1994 and 1995 and for the twelve months ended March 31, 1995 prepared as if the acquisition had occurred on April 1, 1994. For purposes of presenting pro forma results, no changes in revenues and expenses have been made to reflect the results of any modification to operations that might have been made had the acquisition been consummated on the assumed effective dates, other than the exclusion of The Rytex Company ("Rytex") operations. The C.R. Gibson Company sold substantially all the assets and business of its subsidiary, Rytex, in May, 1995. The pro forma expenses include the recurring and nonrecurring costs that are directly attributable to the acquisition such as interest expense and the related tax effects and amortization of goodwill. The pro forma financial information does not purport to be indicative of the results that would actually have been obtained had the acquisition been completed for the periods presented or that may be obtained in the future. SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1994 AND 1995 UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED MARCH 31, 1995 THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET September 30, 1995 (Dollars in thousands)
Pro Forma Historical C.R. Gibson Adjustments Pro Forma ---------- ----------- ----------- ----------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 771 $ 47 $ 818 Accounts Receivable, less allowances of $10,289 (Historical) and $346 C.R. Gibson) 103,142 17,633 120,775 Inventories 80,573 17,418 97,991 Prepaid expenses 25,610 2,162 27,772 Deferred tax asset 7,714 - 7,714 ---------- ----------- ----------- ----------- Total Current Assets 217,810 37,260 255,070 PROPERTY, PLANT AND EQUIPMENT 16,638 16,467 33,105 OTHER ASSETS 16,600 2,745 19,345 GOODWILL 31,402 605 $ 42,677 A 74,684 DEFERRED CHARGES 4,840 - 4,840 ---------- ----------- ----------- ----------- TOTAL ASSETS 287,290 57,077 42,677 387,044 ========== =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable 34,193 2,438 36,631 Accrued Expenses 16,786 3,148 19,934 Dividends Payable 654 - 654 Income taxes currently payable - 24 901 B 925 Current portion of long- term debt and capital lease obligation 1,466 6,885 8,351 ---------- ----------- ----------- ----------- Total Current Liabilities 53,099 12,495 901 66,495 LONG-TERM DEBT 101,898 12,828 74,000 A 188,726 CAPITAL LEASE OBLIGATION 651 146 797 DEFERRED TAX LIABILITY AND OTHER LIABILITIES 2,636 1,363 3,999 SHAREHOLDERS' EQUITY: Preferred stock, $1.00 par value, authorized 1,000,000 shares; none issued (Historical) - - - Common stock, $1.00 par value, authorized 20,000,000 shares; issued 15,256,641 (Historical) and $.10 par value, authorized 15,000,000 shares; issued 7,774,113 (C.R. Gibson) 15,257 777 ( 777) A 15,257 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,085,825 (Historical) 1,086 - 1,086 Treasury stock, at cost - 330,074 shares of common stock (C.R. Gibson) - ( 2,481) 2,481 A - ESOP unearned compensation (C.R. Gibson) - ( 1,078) ( 1,078) Additional paid-in capital 69,787 11,031 ( 11,031)A 69,787 Retained earnings 42,315 22,543 ( 22,543)A 41,414 ( 901)B Foreign currency translation adjustments 561 ( 547) 547 A 561 ---------- ----------- ----------- ----------- Total Shareholders' Equity 129,006 30,245 ( 32,224) 127,027 ---------- ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $ 287,290 $ 57,077 $ 42,677 $ 387,044 ========== =========== =========== =========== A - Record estimated debt increase and goodwill after investment elimination. B - Exclude balances related to The Rytex Company which was sold in May 1995.
THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME For the Six Months Ended September 30, 1995 (Dollars in thousands, except per share data)
Pro Forma Historical C.R. Gibson Adjustments Pro Forma ---------- ----------- ----------- ----------- NET REVENUES $ 142,572 $ 36,065 ( 547)C $ 178,090 COST AND EXPENSES Cost of goods sold 72,320 21,619 ( 347)C 93,592 Selling, general and administrative 60,014 11,228 ( 868)C 70,374 Amortization of goodwill and non-compete agreements 901 9 533 A 1,443 ---------- ----------- ----------- ----------- Total 133,235 32,856 ( 682) 165,409 ---------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 9,337 3,209 135 12,681 Other income (expense) 238 132 ( 132)C 238 Interest expense 4,680 765 2,775 B 8,186 ( 34)C ---------- ----------- ----------- ----------- Income (loss) before income taxes 4,895 2,576 ( 2,738) 4,733 Provision (benefit) for income taxes 1,811 973 ( 1,013) 1,771 ---------- ----------- ----------- ----------- NET INCOME (LOSS) $ 3,084 $ 1,603 ($ 1,725) $ 2,962 ========== =========== =========== =========== Weighted average number of shares outstanding: 14,658 14,658 ========== =========== NET INCOME (LOSS) PER SHARE: $ .21 $ .20 ========== =========== A - Amortize estimated goodwill of $42,677 over forty years. B - Incremental interest expense on estimated $74,000 debt increase at 7.5% per annum. C - Exclude results of operations related to The Rytex Company which was sold in May 1995.
THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME For the Six Months Ended September 30, 1994 (Dollars in thousands, except per share data)
Pro Forma Historical C.R. Gibson Adjustments Pro Forma ---------- ----------- ----------- ----------- NET REVENUES $ 119,615 $ 40,778 ( 4,666)C $ 155,727 COST AND EXPENSES Cost of goods sold 60,621 24,309 ( 2,912)C 82,018 Selling, general and administrative 46,143 13,665 ( 3,250)C 56,558 Amortization of goodwill and non-compete agreements 877 76 533 A 1,419 ( 67)C ---------- ----------- ----------- ----------- Total 107,641 38,050 ( 5,696) 139,995 ---------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 11,974 2,728 1,030 15,732 Other income (expense) 98 - 98 Interest expense 4,030 627 2,590 B 7,127 ( 120)C ---------- ----------- ----------- ----------- Income (loss) before income taxes 8,042 2,101 ( 1,440) 8,703 Provision (benefit) for income taxes 2,963 841 ( 533) 3,271 ---------- ----------- ----------- ----------- NET INCOME (LOSS) $ 5,079 $ 1,260 ($ 907) $ 5,432 ========== =========== =========== =========== Weighted average number of shares outstanding 13,364 13,364 ========== ========== NET INCOME (LOSS) PER SHARE: $ .38 $ .41 ========== ========== A - Amortize estimated goodwill of $42,677 over forty years. B - Incremental interest expense on estimated $74,000 debt increase at 7.0% per annum. C - Exclude results of operation related to The Rytex Company which was sold in May 1995.
THOMAS NELSON, INC. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME For the Twelve Months Ended March 31, 1995 (Dollars in thousands, except per share data)
Pro Forma Historical C.R. Gibson Adjustments Pro Forma ---------- ----------- ----------- ----------- NET REVENUES $ 265,107 $ 80,128 ($ 10,770)C $ 334,465 COST AND EXPENSES Cost of goods sold 133,650 48,076 ( 6,046)C 175,680 Selling, general and administrative 103,614 28,869 ( 9,527)C 122,956 Amortization of goodwill and non-compete agreements 1,806 1,432 1,067 A 4,199 ( 106)C ---------- ----------- ----------- ----------- Total 239,070 78,377 ( 14,612) 302,835 ---------- ----------- ----------- ----------- OPERATING INCOME (LOSS) 26,037 1,751 3,842 31,630 Other income (expense) 897 ( 1,250) 1,250 C 897 Interest expense 8,585 1,402 5,402 B 15,092 ( 297)C ---------- ----------- ----------- ----------- Income (loss) before income taxes 18,349 ( 901) ( 13) 17,435 Provision (benefit) for income taxes 6,639 ( 14) ( 5) 6,620 ---------- ----------- ----------- ----------- NET INCOME (LOSS) $ 11,710 ($ 887) ($ 8) $ 10,815 ========== =========== =========== =========== Weighted average number of shares outstanding 13,374 13,374 ========== ========== NET INCOME (LOSS) PER SHARE: $ .88 $ .81 ========== ========== A - Amortize estimated goodwill of $42,677 over forty years. B - Incremental interest expense on estimated $74,000 debt increase at 7.3% per annum. C - Exclude results of operations related to The Rytex Company which was sold in May 1995.
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