-----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, MRChb5bnn7nAhWQW2QLZTqa1486AKTNaYYiehjLRl4a2IHS8dUj8twpsn2lRgk4b pTgC3ghgvDlYgX++cym9zQ== 0000071023-97-000010.txt : 19971119 0000071023-97-000010.hdr.sgml : 19971119 ACCESSION NUMBER: 0000071023-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 001-13788 FILM NUMBER: 97716055 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 September 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 November 12, 1997 the Registrant had outstanding 16 ,002,670 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)
September 30, March 31, September 30, 1997 1997 1996 ---------- ----------- ---------- (Unaudited) (Unaudited) ASSETS Current assets Cash and cash equivalents $ 23,103 $ 43,471 $ 1,700 Accounts receivable, less allowances of $6,814, $7,000 and $7,461, respectively 73,440 64,626 74,290 Income tax refunds receivable - - 4,179 Inventories 70,388 71,550 75,406 Prepaid expenses 8,554 9,421 9,904 Deferred tax asset 8,310 8,310 14,970 Net assets of discontinued operations - - 67,457 -------- -------- -------- Total current assets 183,795 197,378 247,906 Property, plant and equipment 32,550 32,843 33,990 Other assets 10,769 10,466 12,525 Deferred charges 2,587 2,785 2,871 Goodwill 57,321 58,099 59,668 -------- -------- -------- TOTAL ASSETS $287,022 $301,571 $356,960 ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 16,366 $ 18,880 $ 18,985 Accrued expenses 22,598 22,740 21,355 Dividends payable 684 685 685 Income taxes currently payable 6,943 19,974 2,197 Current portion of long-term debt & capital lease obligations 3,369 3,247 3,321 -------- -------- -------- Total current liabilities 49,960 65,526 46,543 Long-term debt 80,769 83,162 179,572 Capital lease obligations 109 377 418 Deferred tax liability 3,640 3,640 3,127 Other liabilities 1,860 2,054 2,195 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 16,002,670, 16,001,178 and 16,009,248 shares, respectively 16,003 16,001 16,009 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 79,055 79,409 78,942 Retained earnings 54,514 50,290 29,293 Deferred compensation - - (251) -------- -------- -------- Total shareholders' equity 150,684 146,812 125,105 -------- -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $287,022 $301,571 $356,960 ======== ======== ======== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share data)
Six Months Ended Three Months Ended September 30, September 30, 1997 1996 1997 1996 --------- ---------- ---------- ---------- (Unaudited)(Unaudited) (Unaudited) (Unaudited) NET REVENUES $123,077 $120,385 $ 68,618 $ 65,206 COST AND EXPENSES: Cost of goods sold 67,404 63,378 37,818 34,233 Selling, general and administrative 43,377 45,485 21,666 22,526 Amortization of goodwill and non-compete agreements 996 989 493 493 -------- -------- -------- -------- Total expenses 111,777 109,852 59,977 57,252 -------- -------- -------- -------- OPERATING INCOME 11,300 10,533 8,641 7,954 Other income 808 18 298 141 Interest expense 3,085 4,440 1,514 2,336 -------- -------- -------- -------- Income from continuing operations before income taxes 9,023 6,111 7,425 5,759 Provision for income taxes 3,429 2,322 2,822 2,188 -------- -------- -------- -------- Income from continuing operations, net 5,594 3,789 4,603 3,571 Income (loss) from discon- tinued operations, net - (75) - 1,538 -------- -------- -------- -------- NET INCOME $ 5,594 $ 3,714 $ 4,603 $ 5,109 ======== ======== ======== ======== Weighted average number of shares outstanding: Primary 17,151 17,139 17,182 17,138 ======== ======== ======== ======== Fully-diluted 20,386 20,374 20,417 20,373 ======== ======== ======== ======== NET INCOME PER SHARE: Primary-- Income from continuing operations $ 0.33 $ 0.22 $ 0.27 $ 0.21 Income from discontinued operations - - - 0.09 -------- -------- -------- -------- $ 0.33 $ 0.22 $ 0.27 $ 0.30 ======== ======== ======== ======== Fully-diluted-- Income from continuing operations $ 0.32 $ 0.22 $ 0.25 $ 0.20 Income from discontinued operations - - - 0.08 -------- -------- -------- -------- $ 0.32 $ 0.22 $ 0.25 $ 0.28 ======== ======== ======== ======== DIVIDENDS DECLARED PER SHARE $ 0.08 $ 0.08 $ 0.04 $ 0.04 ======== ======== ======== ======== See Accompanying Notes
THOMAS NELSON, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended September 30, 1997 1996 ---------- ---------- (Unaudited) (Unaudited) CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES: Income from continuing operations $ 5,594 $ 3,789 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 3,825 4,348 Loss on sale of fixed assets - 7 Deferred compensation - 577 Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net ( 8,814) ( 2,289) Income tax refunds receivable - 261 Inventories 1,162 3,902 Prepaid expenses 867 1,317 Accounts payable and accrued expenses ( 1,896) ( 4,349) Income taxes currently payable and deferred ( 13,031) 2,197 --------- --------- Net cash provided by (used in) continuing operations ( 12,293) 9,760 --------- --------- Discontinued operations: Income (loss) from discontinued operations - ( 75) Changes in discontinued assets 524 ( 1,359) Cash used in discontinued operations ( 1,284) ( 3,338) --------- --------- Net cash used in discontinued operations ( 760) ( 4,772) --------- --------- Net cash provided by (used in) operating activities ( 13,053) 4,988 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ( 1,649) ( 527) Proceeds from sale of business and discontinued assets - ( 120) Purchase of net assets of acquired companies - net of cash received - 123 Changes in other assets and deferred charges ( 1,210) ( 3,077) --------- --------- Net cash used in investing activities ( 2,859) ( 3,601) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under line of credit - 753 Payments under capital lease obligation ( 268) ( 129) Payments on long-term debt ( 2,271) - Dividends paid ( 1,371) ( 1,370) Proceeds from issuance of common stock 12 203 Common stock retired ( 4) ( 81) Other financing activities ( 554) 265 --------- --------- Net cash used in financing activities ( 4,456) ( 359) --------- --------- Net increase (decrease) in cash and cash equivalents ( 20,368) 1,028 Cash and cash equivalents at beginning of period 43,471 672 --------- --------- Cash and cash equivalents at end of period $ 23,103 $ 1,700 ========= ========= Supplemental disclosures of non-cash investing and financing activities: Dividends accrued and unpaid $ 685 $ 685 Capital lease obligations incurred to lease new equipment $ - $ 46
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):
September 30, March 31, September 30, 1997 1997 1996 ------------ ----------- ------------- Finished goods $ 55,485 $ 53,634 $ 56,554 Raw materials and work in process 14,903 17,916 18,852 ---------- ----------- ----------- $ 70,388 $ 71,550 $ 75,406 ========== =========== ===========
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 was paid on August 18, 1997, to shareholders of record on August 4, 1997. On August 21, 1997, the Company's directors declared a cash dividend of $.04 per share of Common and Class B Common Stock. The dividend is payable on November 17, 1997, to shareholders of record on November 3, 1997. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW 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 and six month periods ended September 30, 1996, are reported as income (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.
Six Months Ended Fiscal Year-to-Year September 30, Increase ------------------ 1997 1996 (Decrease) -------- -------- ------------ (%) (%) (%) Net revenues Publishing 61.2 60.2 4.0 Gift 38.8 39.8 (0.5) ------- ------- Total net revenues 100.0 100.0 2.2 ------- ------- Expenses Cost of goods sold 54.8 52.7 6.4 Selling, general and administrative 35.2 37.8 (4.6) Amortization of goodwill and non-compete agreements 0.8 0.8 0.7 ------- ------- Total expenses 90.8 91.3 1.8 ------- ------- Operating income 9.2 8.7 7.3 ======= ======= Income from continuing operations 4.5 3.1 47.6 Income (loss) from discon- tinued operations, net of taxes - (0.1) - ------- ------- Net income 4.5 3.1 50.6 ======= =======
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. 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 six months of fiscal 1998 increased by $2.7 million or 2.2%, over the same period in fiscal 1997. The publishing product net revenues increased $2.9 million, or 4.0%, primarily due to reductions in product returns. Net revenues from gift products decreased $0.2 million, or 0.5%, compared to the prior year primarily due to reduced marketing of the deeply discounted stationery category to mass merchandisers in order to focus the Company's efforts on specialty stores. Net revenues for the second quarter of fiscal 1998 increased $3.4 million, or 5.2%, over the same period in fiscal 1997. The publishing product net revenues increased $2.9 million, or 7.2%, compared to the prior year primarily due to reductions in product returns as a result of improved product sell-through and the effect of customers adopting just-in-time inventory purchasing practices. Net revenues from gift products increased $0.5 million, or 2.1%, primarily due to new product introductions. Price increases did not have a material effect on net revenues. The Company's cost of goods sold for the first six months of fiscal 1998 increased by $4.0 million, or 6.4%, over the same period in fiscal 1997 and, as a percentage of net revenues, increased to 54.8% from 52.7% in the comparable period of fiscal 1997. Cost of goods sold for the second quarter of fiscal 1998 increased by $3.6 million, or 10.5%, over the same period in fiscal 1997 and, as a percentage of net revenues, increased to 55.1% from 52.5% in the comparable period in fiscal 1997. The increase in cost of goods sold, as a percentage of net revenues, for the first six months and second quarter resulted primarily from changes in product mix and the prior year's licensing revenue, respectively. Within the publishing products division for the first six months of fiscal 1998, the Company experienced a greater percentage of revenues from Bible-type products which have higher costs of goods sold than other publishing products. In the second quarter of fiscal 1997 the Company had higher licensing revenues which have minimal associated cost of goods sold. The Company periodically receives licensing revenues from companies that request permission to reprint our publishing products and market them through a channel that might not currently be served. Selling, general and administrative expenses for the first six months of fiscal 1998 decreased $2.1 million, or 4.6%, and for the second quarter decreased by $0.9 million, or 3.8%, from the same periods in fiscal 1997. These expenses, expressed as a percentage of net revenues, decreased to 35.2% for the first six months of fiscal 1998 from 37.8% and to 31.6% for the second quarter from 34.5% 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 two quarters; therefore, selling, general and administrative expenses should decrease slightly as a percentage of revenues. Interest expense for the first six months of fiscal 1998 decreased by $1.4 million, or 30.5%, and decreased for the second quarter by $0.8 million, or 35.2%, 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 and decreased working capital assets. Liquidity and Capital Resources At September 30, 1997, the Company had $23.1 million in cash and cash equivalents. 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, 1997, the Company had working capital of $133.8 million. Net cash provided by (used in) operating activities was ($13.1) million and $5.0 million for the first six months of fiscal 1998 and 1997, respectively. Cash used in operations during the first six months of fiscal 1998 was principally attributable to the payment of income taxes and an increase in accounts receivable. Cash provided by operations during the first six months of fiscal 1997 was principally attributable to the decrease in inventories and income from continuing operations. During the first six months of fiscal 1998, capital expenditures totaled approximately $1.6 million, which was used primarily to purchase computer, warehousing and manufacturing equipment. During the remainder of fiscal 1998, the Company anticipates capital expenditures of approximately $3.0 million primarily consisting of additional computer, 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, 1999. At September 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 September 30, 1997, the Company had outstanding $24 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 September 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 September 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) November 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 September 30, 1997, and is qualified in its entirety by reference to such financial statements and the notes thereto. 1,000 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 23,103 0 80,254 6,814 70,388 183,795 60,308 27,758 287,022 49,960 80,878 0 0 17,115 133,569 287,022 121,153 123,077 67,404 110,781 996 1,017 3,085 9,023 3,429 5,594 0 0 0 5,594 0.33 0.32
EX-11 3 EXHIBIT 11 STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS (Dollars in thousands, except per share data)
Six Months Ended Three Months Ended September 30, September 30, 1997 1996 1997 1996 --------- --------- --------- --------- (Unaudited)(Unaudited)(Unaudited)(Unaudited) PRIMARY EARNINGS PER SHARE: Weighted average shares outstanding 17,151 17,139 17,182 17,138 ======== ======== ======= ======= Income from continuing operations $ 5,594 $ 3,789 $ 4,603 $ 3,571 Income (loss) from discontinued operations - (75) - 1,538 -------- -------- ------- ------- Net income $ 5,594 $ 3,714 $ 4,603 $ 5,109 ======== ======== ======= ======= Income per share from continuing operations $ 0.33 $ 0.22 $ 0.27 $ 0.21 Income (loss) per share from discontinued operations - - - 0.09 -------- -------- ------- ------- Net income per share $ 0.33 $ 0.22 $ 0.27 $ 0.30 ======== ======== ======= ======= FULLY-DILUTED EARNINGS PER SHARE: Weighted average shares outstanding 17,151 17,139 17,182 17,138 Convertible notes 3,235 3,235 3,235 3,235 -------- -------- ------- ------- Total shares 20,386 20,374 20,417 20,373 ======== ======== ======= ======= Income from continuing operations $ 6,616 $ 4,807 $ 5,111 $ 4,080 Income (loss) from discontinued operations - (75) - 1,538 -------- -------- ------- ------- Net income $ 6,616 $ 4,732 $ 5,111 $ 5,618 ======== ======== ======= ======= Income per share from continuing operations $ 0.32 $ 0.22 $ 0.25 $ 0.20 Income (loss) per share from discontinued operations - - - 0.08 -------- -------- ------- ------- Net income per share $ 0.32 $ 0.22$ 0.25 $ 0.28 ======== ======== ======= ======= Adjusted for interest on convertible debt Anti-dilutive; use primary earnings per share
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