-----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, RUbx1ug7U3e0Tg9k6yUqHpMUe6hJqywwldJ1Z0Dbn13AEKwKqQaoldOb0J1Mepcz e0u45YXfCKv4LZmNoHINWA== 0000071023-97-000008.txt : 19970815 0000071023-97-000008.hdr.sgml : 19970815 ACCESSION NUMBER: 0000071023-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660383 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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-4095 THOMAS NELSON, INC. (Exact name of Registrant as specified in its charter) Tennessee 62-0679364 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification number) 501 Nelson Place, Nashville, Tennessee 37214-1000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (615)889-9000 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] At August 11, 1997 the Registrant had outstanding 15,997,870 shares of Common Stock and 1,112,071 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, 1997 1997 1996 ----------------------------------- (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 26,178 $ 43,471 $ 1,441 Accounts receivable, less allowances of $5,753, $7,000 and $6,197, respectively 57,704 64,626 64,074 Income tax refunds receivable - - 4,179 Inventories 74,530 71,550 79,925 Prepaid expenses 9,275 9,421 14,067 Deferred tax asset 8,310 8,310 14,970 Net assets of discontinued operations - - 61,198 ----------- ---------- ---------- Total current assets 175,997 197,378 239,854 Property, plant and equipment 32,513 32,843 34,825 Other assets 10,533 10,466 9,889 Deferred charges 2,574 2,785 3,111 Goodwill 57,708 58,099 60,794 ----------- ---------- ---------- TOTAL ASSETS $ 279,325 $ 301,571 $ 348,473 =========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 14,206 $ 18,880 $ 15,671 Accrued expenses 19,934 22,740 19,763 Dividends payable 685 685 685 Income taxes currently payable 5,241 19,974 - Current portion of long-term debt & capital lease obligations 3,256 3,247 2,650 ----------- ---------- ---------- Total current liabilities 43,322 65,526 38,769 Long-term debt 83,128 83,162 184,135 Capital lease obligations 297 377 489 Deferred tax liability 3,640 3,640 3,127 Other liabilities 1,814 2,054 1,661 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 15,997,870, 16,001,178 and 16,007,266 shares, respectively 15,998 16,001 16,007 Class B common stock, $1.00 par value, authorized 5,000,000 shares; issued 1,112,071, 1,112,071 and 1,112,075 shares, respectively 1,112 1,112 1,112 Additional paid-in capital 79,417 79,409 79,019 Retained earnings 50,597 50,290 24,810 Deferred compensation - - ( 656) ----------- ---------- ---------- Total shareholders' equity 147,124 146,812 120,292 ----------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 279,325 $ 301,571 $ 348,473 =========== ========== ========== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Three Months Ended June 30, 1997 1996 ------------ ------------ (Unaudited) (Unaudited) NET REVENUES $ 54,459 $ 55,179 COST AND EXPENSES: Cost of goods sold 29,586 29,145 Selling, general and administrative 21,714 22,959 Amortization of goodwill and non-compete agreements 500 496 ----------- ----------- Total expenses 51,800 52,600 ---------- ----------- OPERATING INCOME 2,659 2,579 Other income (expense) 510 ( 123) Interest expense 1,571 2,104 ---------- ----------- Income from continuing operations before income taxes 1,598 352 Provision for income taxes 607 134 ---------- ----------- Income from continuing operations, net 991 218 Loss from discontinued operations, net - ( 1,613) ---------- ----------- NET INCOME (LOSS) $ 991 ($ 1,395) ========== =========== Weighted average number of shares outstanding: Primary 17,124 17,139 ========== =========== Fully-diluted 20,359 20,374 ========== =========== NET INCOME (LOSS) PER SHARE: Primary-- Income from continuing operations $ 0.06 $ 0.01 Loss from discontinued operations - ( 0.09) ---------- ------------ $ 0.06 ($ 0.08) ========== ============ Fully-diluted-- Income from continuing operations $ 0.06 $ 0.01 Loss from discontinued operations - ( 0.09) ---------- ------------ $ 0.06 ($ 0.08) ========== ============ DIVIDENDS DECLARED PER SHARE $ 0.04 $ 0.04 ========== ============ See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three Months Ended June 30, --------------------------------- 1997 1996 ----------- ------------- (Unaudited) (Unaudited) CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES: Net income $ 991 $ 218 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 1,901 1,764 Deferred compensation - 172 Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net 6,922 7,927 Income tax refunds receivable - 261 Inventories ( 2,980) ( 617) Prepaid expenses 146 ( 2,846) Accounts payable and accrued expenses ( 7,687) ( 8,451) Income taxes currently payable and deferred ( 14,733) - ---------- ---------- Net cash used in continuing operations ( 15,440) ( 1,572) ---------- ---------- Discontinued operations: Loss from discontinued operations - ( 1,613) Changes in discontinued assets 310 ( 104) Cash provided by (used in) discontinued operations ( 103) 672 ---------- ---------- Net cash provided by (used in) discontinued operations 207 ( 1,045) ---------- ---------- Net cash used in operating activities ( 15,233) ( 2,617) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 634) ( 219) Purchase of net assets of acquired companies - net of cash received - ( 87) Changes in other assets and deferred charges ( 402) ( 85) ---------- ---------- Net cash used in investing activities ( 1,036) ( 391) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit - 4,646 Payments under capital lease obligation ( 80) ( 112) Payments on long-term debt ( 25) - Dividends paid ( 684) ( 685) Changes in other liabilities ( 240) ( 269) Proceeds from issuance of common stock 9 197 Common stock retired ( 4) - ---------- ---------- Net cash provided by (used in) financing activities ( 1,024) 3,777 ---------- ---------- Net increase (decrease) in cash and cash equivalents ( 17,293) 769 Cash and cash equivalents at beginning of period 43,471 672 ---------- ---------- Cash and cash equivalents at end of period $ 26,178 $ 1,441 ========== ========== Supplemental disclosures of non-cash investing and financing activities: Dividends accrued and unpaid $ 685 $ 685 Capital lease obligations incurred to lease new equipment $ - $ 50
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, 1997. The balance sheet and related information in these notes as of March 31, 1997, have been taken from the audited consolidated financial statements as of that date. Certain reclassifications have been made to conform presentation of the fiscal 1997 Financial Statements with fiscal 1998 presentation. Note B - New Pronouncements Computation of Net Income Per Share: 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, which includes the additional dilution related to stock options. The fully diluted per share computation reflects the effect of 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. Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") has been issued effective for interim and annual fiscal periods ending after December 15, 1997. SFAS 128 establishes standards for computing and presenting earnings per share. The Company is required to adopt the provisions of SFAS 128 in the third quarter of fiscal 1998. Management does not believe that adoption of SFAS 128 will have a material effect on the Company's financial statements, taken as a whole. Disclosure of Information about Capital Structure: In February 1997, the FASB issued Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS 129"). SFAS 129 establishes standards for disclosing information about an entity's capital structure. The Company will be required to adopt SFAS 129 in the third quarter of fiscal 1998. Management does not expect the adoption to have a material impact on the Company's financial position, results of operation or cash flows. Note C - Inventories Components of inventories consisted of the following (in thousands):
June 30, March 31, June 30, 1997 1997 1996 ----------- ----------- ----------- Finished goods $ 56,740 $ 53,634 $ 59,779 Raw materials and work in process 17,790 17,916 20,146 ----------- ----------- ----------- $ 74,530 $ 71,550 $ 79,925 =========== =========== ===========
Note D - Cash Dividend On May 23, 1997, the Company's directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend is payable August 18, 1997, to shareholders of record on August 4, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW In October 1995, the Company acquired The C. R. Gibson Company ("Gibson") for approximately $67 million in cash, which expanded its gift product lines and distribution network. On January 6, 1997, the Company sold the assets, subject to certain liabilities, of the music division ("Music Business"). The operating results of the Music Business for the three months ended June 30, 1996, are reported as loss from discontinued operations. The following table sets forth for the periods indicated certain selected statements of operations data of the Company expressed as a percentage of net revenues and the percentage change in dollars in such data from the prior fiscal year.
Three Months Ended Fiscal June 30, Year-to-Year ------------------ Increase 1997 1996 (Decrease) ------- ------- ------------ (%) (%) (%) Net revenues Publishing 59.9 59.0 0.1 Gift 40.1 41.0 ( 3.4) ------- ------- Total net revenues 100.0 100.0 ( 1.3) ------- ------- Expenses Cost of goods sold 54.3 52.8 1.5 Selling, general and administrative 39.9 41.6 ( 5.4) Amortization of goodwill and non-compete agreements 0.9 0.9 0.8 ------- ------- Total expenses 95.1 95.3 ( 1.5) ------- ------- Operating income 4.9 4.7 3.1 ======= ======= Income from continuing operations 1.8 0.4 354.8 Loss from discontinued operations, net of taxes -- ( 2.9) -- ------- ------- Net income (loss) 1.8 ( 2.5) -- ======= =======
The Company's net revenues fluctuate seasonally, with net revenues in the first fiscal quarter historically being lower than those for the remainder of the year. This seasonality is the result of increased consumer purchases of the Company's products during the traditional holiday periods. 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. The following discussion includes certain forward-looking statements. Actual results could differ materially from those reflected by the forward-looking statements and a number of factors may affect future results, liquidity and capital resources. These factors include softness in the general retail environment, the timing of products being introduced to the market, the level of returns experienced by operating divisions, the level of margins achievable in the marketplace and the ability to minimize operating expenses. Although the Company believes it has the business strategy and resources needed for improved operations, future revenue and margin trends cannot be reliably predicted and may cause the Company to adjust its business strategy during the remainder of fiscal 1998. Results of Operations Net revenues for the first three months of fiscal 1998 decreased $0.7 million, or 1.3%, over the same period in fiscal 1997. The publishing product net revenues were flat compared to the prior year primarily due to product returns. Net revenues from gift products decreased $0.7 million, or 3.4%, primarily due to reduced marketing of the deeply discounted stationery category to mass merchandisers in order to focus the Company's efforts on the specialty stores. 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 1998 increased by $0.4 million, or 1.5%, over the same period in fiscal 1997 and, as a percentage of net revenues, increased to 54.3% for the first three months of fiscal 1998 from 52.8% in the comparable period in fiscal 1997. The increase in cost of goods sold, as a percentage of net revenues, for the first three months resulted primarily from a decrease in royalty advance recoveries associated with publishing product returns. Selling, general and administrative expenses for the first three months of fiscal 1998 decreased by $1.2 million, or 5.4%, from the same period in fiscal 1997. These expenses, expressed as a percentage of net revenues, decreased to 39.9% for the first three months of fiscal 1998 from 41.6% in the same period in fiscal 1997 primarily due to reductions in staff and general expenditures. The Company's selling, general and administrative expenses are relatively fixed during the fiscal year and do not materially increase with revenue increases. Revenues for the remainder of the 1998 fiscal year are expected to be greater than the revenues for the first quarter; therefore, selling, general and administrative expenses should decrease as a percentage of revenues. Interest expense for the first three months of fiscal 1998 decreased by $0.5 million, or 25.3%, over the same period in fiscal 1997 due to decreased borrowings as a result of the use of a portion of the proceeds from the sale of the Music Business to repay indebtedness. Liquidity and Capital Resources At June 30, 1997, the Company had $26.2 million in cash and cash equivalents primarily from the sale of its Music Business in January 1997. 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, 1997, the Company had working capital of $132.7 million. Net cash used in operating activities was $15.2 million and $2.6 million for the first three months of fiscal 1998 and 1997, respectively. Cash used in operations during the first three months of fiscal 1998 was principally attributable to the decrease in income taxes currently payable. Cash used in operations during the first three months of fiscal 1997 was principally attributable to the decrease in accounts payable and accrued expenses. During the first three months of fiscal 1998, capital expenditures totaled approximately $0.6 million, which was used primarily to purchase computer equipment and warehousing and manufacturing equipment. During the remainder of fiscal 1998, the Company anticipates capital expenditures of approximately $4.4 million primarily consisting of additional computer equipment and warehousing and manufacturing equipment. The Company's bank credit facilities are unsecured and consist of a $75 million credit facility and a $10 million credit facility (collectively, the "Credit Agreements"). The $75 million credit facility bears interest at either the prime rate or, at the Company's option, LIBOR plus a percentage, subject to adjustment based on certain financial ratios and matures on December 13, 2002. The $10 million credit facility bears interest at the prime rate and matures on July 31, 1998. At June 30, 1997, the Company had no borrowings outstanding under the Credit Agreements, and $85 million available for borrowing. Due to the seasonality of the Company's business, borrowings under the Credit Agreements typically peak during the third quarter of the fiscal year. At June 30, 1997, the Company had outstanding $26 million of unsecured senior notes ("Senior Notes"). The Senior Notes bear interest at rates from 6.68% to 9.50% due through fiscal 2008. Under the terms of the Credit Agreements and the Senior Notes, the Company has agreed to limit the payment of dividends and to maintain certain interest coverage and debt-to-total-capital ratios which are similarly calculated for each debt agreement. At June 30, 1997, the Company was in compliance with all covenants of these debt agreements, as amended. The Company also has outstanding $55 million of 5.75% convertible subordinated notes ("Convertible Subordinated Notes") due November 30, 1999. The Convertible Subordinated Notes presently are convertible into common stock at $17.00 per share and are redeemable at the Company's option after November 30, 1995, at 103.29% of the principal amount, declining annually thereafter to 100% on November 30, 1999. Management believes cash generated by operations and borrowings available under the Credit Agreements will be sufficient to fund anticipated working capital requirements for existing operations through the remainder of fiscal 1998. PART II Item 6. Exhibits and Reports on Form 8-K (a) Exhibits required by Item 601 of Regulation S-K Exhibit 11 - Statement of Re-Computation of Per Share Earnings Exhibit 27- Financial Data Schedule (b) No Form 8-K was filed by the Company during the quarter ended June 30, 1997. 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) August 13, 1997 BY /s/ Joe L. Powers - ------------------------ --------------------------- Joe L. Powers Executive Vice President (Principal Financial and 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, 1997, and is qualified in its entirety by reference to such financial statements and the notes thereto. 3-MOS MAR-31-1998 APR-01-1997 JUN-30-1997 26,178 0 63,457 5,753 74,530 175,997 59,294 26,781 279,325 43,322 83,425 0 0 17,110 130,014 279,325 54,043 54,459 29,586 51,300 500 426 1,571 1,598 607 991 0 0 0 991 0.06 0.06
EX-11 3 EXHIBIT 11 STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS (Dollars in thousands, except per share data)
Three Months Ended June 30, 1997 1996 ----------- ------------ (Unaudited) (Unaudited) PRIMARY EARNINGS PER SHARE: Weighted average shares outstanding 17,124 17,139 ========= ========= Income from continuing operations $ 991 $ 218 Loss from discontinued operations - ( 1,613) --------- --------- Net income (loss) $ 991 ($ 1,395) ========= ========= Income per share from continuing operations $ 0.06 $ 0.01 Loss per share from discontinued operations - ( 0.09) --------- --------- Net income (loss) per share $ 0.06 ($ 0.08) ========= ========= FULLY-DILUTED EARNINGS PER SHARE: Weighted average shares outstanding 17,124 17,139 Convertible notes 3,235 3,235 --------- --------- Total shares 20,359 20,374 ========= ========= Income from continuing operations $ 1,505 $ 746 Loss from discontinued operations - ( 1,613) --------- --------- Net income (loss) $ 1,505 ($ 867) ========= ========= Income per share from continuing operations $ 0.06 $ 0.01 Loss per share from discontinued operations - ( 0.09) --------- --------- Net income (loss) per share $ 0.06 ($ 0.08) Adjusted for interest on convertible debt Anti-dilutive; use primary earnings per share
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