-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SlIqJCqfTwp5Xo6JhT7KIfvDUTuftenkaFJ9sdz+REAdAPaWPSYH832rVzxXo1wA lPBHgKfk9J6pct2CPc+VbQ== 0000950144-95-001801.txt : 199506280000950144-95-001801.hdr.sgml : 19950628 ACCESSION NUMBER: 0000950144-95-001801 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950627 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-04095 FILM NUMBER: 95549561 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-K405 1 THOMAS NELSON, INC. FORM 10-K 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 31, 1995 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 IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) NELSON PLACE AT ELM HILL PIKE, NASHVILLE, TENNESSEE 37214-1000 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 889-9000 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - ------------------- ------------------------ COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE - --------------------------------------- ------------------------ CLASS B COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE - ----------------------------------------------- ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE (TITLE OF CLASS) 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 REQUIREMENT FOR THE PAST 90 DAYS. YES X NO --- --- INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS FORM 10-K. [x] AS OF JUNE 22, 1995, THE REGISTRANT HAD OUTSTANDING 12,369,080 SHARES OF COMMON STOCK AND 1,085,843 SHARES OF CLASS B COMMON STOCK. ON SUCH DATE THE AGGREGATE MARKET VALUE OF SHARES OF COMMON STOCK AND CLASS B COMMON STOCK HELD BY NONAFFILIATES WAS APPROXIMATELY $222.7 MILLION. THE MARKET VALUE CALCULATION WAS DETERMINED USING THE CLOSING SALES PRICE OF THE REGISTRANT'S COMMON STOCK AND CLASS B COMMON STOCK ON JUNE 22, 1995, AS REPORTED ON THE NEW YORK STOCK EXCHANGE, AND ASSUMES THAT ALL SHARES BENEFICIALLY HELD BY EXECUTIVE OFFICERS AND THE BOARD OF DIRECTORS OF THE REGISTRANT ARE SHARES OWNED BY "AFFILIATES", A STATUS WHICH EACH OF SUCH OFFICERS AND DIRECTORS INDIVIDUALLY DISCLAIMS. ================================================================================ 2 DOCUMENTS INCORPORATED BY REFERENCE
Documents from which portions Part of Form 10-K are incorporated by reference - --------------------------------------------------- ------------------------------------------------------ PART II Item 5 - Market for Company's Common Equity and Page 33 of the Annual Report to Related Shareholder Matters Shareholders for year ended March 31, 1995 (market price and dividend information only) Item 6 - Selected Financial Data Page 12 of Annual Report to Shareholders for year ended March 31, 1995 Item 7 - Management's Discussion and Analysis Pages 13 to 16 of Annual Report to of Financial Condition and Results of Shareholders for year ended March 31, 1995 Operations Item 8 - Financial Statements and Supplementary Pages 17 to 32 of Annual Report to Data Shareholders for year ended March 31, 1995 PART III Item 10 - Directors and Executive Officers of To be included in Company's Proxy Statement for the the Company Annual Meeting of Shareholders to be held August 24, 1995, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 11 - Executive Compensation To be included in Company's Proxy Statement for the Annual Meeting of Shareholders to be held August 24, 1995, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 12 - Security Ownership of Certain To be included in Company's Proxy Statement for the Beneficial Owners and Management Annual Meeting of Shareholders to be held August 24, 1995, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. Item 13 - Certain Relationships and Related To be included in Company's Proxy Statement for the Transactions Annual Meeting of Shareholders to be held August 24, 1995, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended.
2 3 PART I ITEM 1. BUSINESS Thomas Nelson, Inc. (the "Company") is a leading publisher, producer and distributor of books and recorded music emphasizing Christian, inspirational and family value themes, and believes it is the largest commercial publisher of the Bible in English language translations. The Company also designs and markets a broad line of gift and stationery products. The Company believes it is the largest publisher of Christian and inspirational books and the largest producer of recorded Christian music in the United States. The following table sets forth the net revenues (in thousands) and the percentage of total net revenues for each of the Company's principal product lines for the periods indicated:
YEAR ENDED MARCH 31, ---------------------------------------------------------- 1995 1994 1993 ---------------- ---------------- ---------------- AMOUNT % AMOUNT % AMOUNT % -------- ----- -------- ----- -------- ----- Publishing: Book.......................... $ 86,894 32.8 $ 76,985 34.0 $ 48,507 33.9 Bible......................... 58,395 22.0 53,073 23.5 47,208 33.0 -------- ----- -------- ----- -------- ----- Total publishing........... 145,289 54.8 130,058 57.5 95,715 66.9 Music........................... 89,676 33.8 72,969 32.2 25,324 17.7 Gifts........................... 25,337 9.6 19,942 8.8 18,599 13.0 Other........................... 4,805 1.8 3,465 1.5 3,434 2.4 -------- ----- -------- ----- -------- ----- $265,107 100.0 $226,434 100.0 $143,072 100.0 ======== ===== ======== ===== ======== =====
PUBLISHING Books The Company's book publishing division publishes and distributes hardcover and trade paperback books emphasizing Christian, inspirational and family value themes. The Company believes it is the largest publisher of Christian and inspirational books in the United States. Books are published by the Company under the "Nelson" and "Word" imprints and consist generally of inspirational and personal experience books, and educational, trade and reference books emphasizing Christian, inspirational and family value themes. The Company distributes books primarily through Christian bookstores, general bookstores, mass merchandisers and directly to consumers. The Company also distributes books published by other companies to complement their marketing and distribution capabilities. In fiscal 1995, approximately 17% of the book division's net revenues related to the distribution of books published by other companies. In each of the last three fiscal years, the Company has published over 300 new titles. The Company publishes some of the most well-known communicators in the Christian and inspirational field, including Chuck Colson, James Dobson, Billy Graham, Benny Hinn, Barbara Johnson, Max Lucado, Frank Peretti, Pat Robertson, Robert Schuller, Gary Smalley, Charles Stanley, Charles Swindoll, and Bodie and Brock Thoene. The Company also publishes books emphasizing positive and inspirational themes by famous athletes and celebrities, such as Bobby Bowden, Hugh Downs, Joe Gibbs, Evander Holyfield, Bill McCartney, Tom 3 4 Osborn, Nolan Ryan and Zig Ziglar. In each of the last three fiscal years, the Company published over 50% of the top ten best selling Christian and inspirational books based on the monthly Bookstore Journal Christian Hardbound Bestsellers' Lists. In addition, the Company maintains a backlist of approximately 1,400 titles which provide a stable base of recurring revenues as many popular titles continue to generate significant sales from year to year. Backlist titles accounted for approximately 60% of the book division's net revenues in fiscal 1995. Authors and titles are supported through the use of radio, television, cooperative advertising, author appearances, in-store promotions, direct mail catalogs, book clubs and other means. The Company's book publishing business is enhanced by the breadth and development of its marketing and distribution channels. In addition to enhancing sales of its products, the Company believes its ability to sign and renew contracts with popular authors is improved because the Company's marketing and distribution capabilities provide exposure for the author's books to a broader audience than its competitors. See "-- Marketing, Distribution and Production." Bibles The Company believes it is the largest commercial publisher of English translations of the Bible. The Bible is based on ancient manuscripts which are the surviving reproductions of the original writings. These manuscripts, written in Hebrew, Aramaic or Greek, have been translated into English and other modern languages by biblical scholars and theologians, generally under the auspices of a major Bible society or translation organization. Each of the many English translations available differs in some degree from the others, primarily because of different translation guidelines and principles used as the basis for each translation. The distinctiveness of each translation is also, in part, a result of the evolution of the meaning and use of words within the English language. Virtually all Bibles and Bible products currently published in the United States are based on one of ten major translations. Of these ten translations, nine are protected by copyright laws which grant the copyright owner the exclusive right, for a limited term, to control the publication of such translation. The Company publishes Bibles and Bible products based on nine of the ten major translations, of which four are exclusive to the Company as a result of copyright ownership or licensing arrangements. See "Copyright and Royalty Agreements." Approximately 60% of the Company's net revenues from Bible publishing in fiscal 1995 were generated through sales of its proprietary Bible products. The following table sets forth the nine major Bible translations currently published by the Company:
DATE FIRST PROPRIETARY TRANSLATION PUBLISHED TO THE COMPANY -------------------------------------------------------------- ---------- -------------- King James Version (KJV)...................................... 1611 No New American Bible (NAB)...................................... 1970 No The Living Bible (TLB)........................................ 1971 No New American Standard Bible (NAS)............................. 1972 No Today's English Version (TEV)................................. 1976 Yes New King James Version (NKJV)................................. 1982 Yes New Century Version (NCV)..................................... 1984 Yes New Revised Standard Version (NRSV)........................... 1990 No Contemporary English Version (CEV)............................ 1995 Yes
The KJV, currently published in its fourth revision, is the best selling of all English translations of the Bible. In 1975, the Company commissioned the fifth revision of the KJV resulting in the publication of the NKJV in 1982. The NKJV and NCV are the third and fourth best selling Bible translations in the United States, respectively. Among the Company's new products is the CEV, translated under the auspices of the American Bible Society, which is designed to be easy to read and understandable at virtually any reading level. The new testament portion of the CEV was first published by the Company in 1991 and the complete CEV Bible was released in June 1995. 4 5 The Company continually seeks to expand its Bible product line by developing or aiding in the development of new translations and editions and seeking new publishing opportunities. The Company also continually makes editorial, design and other changes to its existing line of Bibles and other Bible products in an effort to increase their marketability. The Company currently publishes over 1,200 different biblical reference products such as commentaries, study guides and other popular Bible help texts. Styles range from inexpensive paperbacks to deluxe leather-bound Bibles. Different editions of a particular Bible translation are created by incorporating extra material, such as study helps, concordances, indices and Bible outlines, or artwork, into the biblical text. These editions (which are generally proprietary to the Company regardless of whether or not the Company holds proprietary rights to the underlying Bible translation) are targeted to the general market or positioned for sale to specific market segments. MUSIC The Company believes it is the leading producer, distributor and publisher of Christian and inspirational music in the United States. The Company's music division produces a wide variety of traditional and contemporary Christian and inspirational music, such as gospel, praise and worship, and adult contemporary, as well as pop, country, rock, rhythm and blues, rap and metal with an emphasis on positive, inspirational and family value themes. In addition, the music division produces master recordings of classical music, the Bible on cassette, children's music and video, and other products, and is a leading supplier of value priced Christmas music to mass market, convenience and specialty stores. The Company produces recorded music and related products under seven proprietary recording labels and in fiscal 1995 released 90 new titles. Each label is managed and operated by its own staff within the music division. Over 50 recording artists are currently under contract for future releases. Artists under contract with the Company include Anointed, Helen Baylor, Shirley Caesar, Bryan Duncan, Amy Grant, Sandi Patty, Petra, and Point of Grace. In 1993 and 1994, the Company had under exclusive contract the artists (Cindy Morgan and Point of Grace, respectively) named "New Artist of the Year" by the Gospel Music Association. In 1995, the Company's artists received ten Dove Awards, the Christian music industry's annual awards for outstanding artists and releases sponsored by the Gospel Music Association. As is customary in the recording industry, contractual arrangements with recording artists provide for the artist to receive as a royalty a percentage of the suggested retail price of recorded products sold. Most artists receive advance payments against future royalties earned. The Company enters into exclusive multi-record agreements with its recording artists. During fiscal 1995, the Company renewed recording contracts with all major artists whose contracts expired during the period. The Company also distributes recordings for other companies under their recording labels pursuant to exclusive distribution agreements. Owners of these third party labels contract with the Company for the distribution of products typically on an exclusive basis to Christian markets worldwide. In fiscal 1995, approximately 26% of the music division's net revenues were attributable to products distributed under recording labels owned or controlled by other companies. In addition to producing and distributing recorded music, the Company operates a music publishing business engaged in songwriter development, print music publishing and copyright administration. The Company has approximately 50 songwriters under contract who write for the Company's recording artists and for licensing to independent organizations for print and recording products. Contracts in the music publishing business range from exclusive songwriters' arrangements to co-publishing agreements to copyright administration agreements. The Company prints and distributes church hymnals, choral music, instrumental music, vocal folios and solo tracks for churches and other religious organizations. The copyright administration area oversees the Company's music catalog of approximately 40,000 copyrighted songs which are licensed to independent publishers, record companies, churches and other organizations. 5 6 GIFTS The Company established a gift division in fiscal 1989 to develop and market gift and stationery items and other products for social expression. In fiscal 1994, the gift division was expanded through the Company's combination with PPC, Inc. Current product lines offered by the Company include 80 collections and over 800 separate items, such as journals and blank books, diaries, address books, photo albums, gift bags, calendar and desk sets, baby gifts, kitchen accessories, and stationery. Products are marketed under the Markings(TM), Pretty Paper(R) and Markings Inspirations(TM) brand names, the latter of which incorporates Christian and inspirational text or themes. Certain product lines are marketed as collections, with each collection including a variety of products featuring a common design or theme. Designs include original art work licensed from artists such as Sam Butcher, Carol Endres, Larry Stephenson and Susan Wheeler and classic oriental, tapestry and country print fabric designs. The Company believes the gift division has significant opportunities for growth as a result of the range of complementary gift categories not offered currently and the breadth of the Company's existing and potential distribution channels. The Company sells its gift products through its primary market channels, including Christian bookstores, general bookstores and mass merchandisers, as well as through independent and chain gift and specialty stores, such as Hallmark stores. ROYAL MEDIA In fiscal 1995, the Company formed the Royal Media division to evaluate and implement new initiatives in the use of alternative forms of media and new distribution technologies to further capitalize on the commercial potential of the Company's intellectual properties. The Royal Media division includes the existing operations of the Royal Magazine Group and the Morningstar Radio Network. To date, revenues from the Royal Media division have not been significant to the Company's operations. The Company complements its publishing, music and gift operations with the publication of four periodicals under the Royal Magazine Group tradename. Aspire, the Company's first newsstand-distributed magazine, covers a broad range of Christian lifestyle issues and features celebrities such as Kathie Lee Gifford, John Tesh and Amy Grant. A Better Tomorrow, a magazine designed for mature readers, received the 1994 Award of Excellence from the Evangelical Press Association. The Company also publishes two controlled circulation journals: Release, which features Christian recording artists and targets the Christian music industry; and Release Ink, which features Christian authors and targets the Christian book industry. These four periodicals, marketed by the Company's sales force directly to consumers and to Christian and general bookstores, achieved combined bi-monthly circulation in excess of 400,000 copies in fiscal 1995. The Royal Media division also operates the Morningstar Radio Network, a 24-hour satellite delivered, digital network featuring adult contemporary Christian music and "High Country" programming formats. At the end of fiscal 1995, the Morningstar Radio Network was broadcast on 138 affiliate stations in 130 cities nationwide. This network generates revenues through the sale of commercial airtime to advertisers and through affiliate fees and also provides significant exposure for the Company's products, artists and authors. The Company also is actively exploring the use of emerging digital, interactive and multimedia technologies, including on-line services, CD-ROM multimedia and electronic products, as well as television and video production and broadcasting, through strategic partnerships and creative alliances to further capitalize on the commercial potential of its proprietary content. There can be no assurance, however, that the Company will successfully develop or commercialize products for these mediums. MARKETING, DISTRIBUTION AND PRODUCTION The principal market channels through which the Company markets its products domestically are Christian bookstores, which are primarily independently owned; general bookstores, including national chains such as B. Dalton Booksellers and Waldenbooks; mass merchandisers such as Target, K-Mart, WalMart and Sam's Wholesale Club; and directly to consumers through direct mail, telemarketing and book and record clubs. The Company also markets its products through other market channels, such as gift, specialty retail and convenience stores. The Company services these market channels through its sales force, and through wholesalers or jobbers servicing bookstores, gift stores, convenience stores, other retail outlets and libraries. 6 7 Certain recorded music products are also distributed to the secular markets pursuant to a domestic distribution agreement with a major record distribution company. In addition, the Company sells certain of its products for promotional purposes and sells specially designed or imprinted products to certain customers. The Company's direct marketing operations sell religious and inspirational products directly to consumers through a variety of direct marketing methods, including direct mail, continuity programs (selling a series of products over time) and the Company's book and record clubs. The Company's book and record clubs include the Word Family Record and Tape Club, which has approximately 300,000 members and features contemporary, traditional and gospel music, and its Book Club, Children's Record Club, Children's Book Club and Continuity Programs, which have a combined membership of approximately 200,000 members. The Company also sells products directly to churches and religious organizations by direct mail and telemarketing. The Company markets academic and contemporary books, hymnals, choral music, trade books and recorded music to approximately 90,000 churches, other religious organizations and pastors. Retail sales also are made during the summer months on a door-to-door, cash sales basis through a student sales organization operated by the Company. As of March 31, 1995, the Company employed a sales force of approximately 160 people. In addition, the Company contracts with approximately 120 independent sales representatives, who work on a commission basis, and maintains a 24-hour-a-day telemarketing capability to serve these accounts. These employees and sales representatives service over 50,000 retail accounts and 90,000 church and other religious organization accounts. Customer orders are usually shipped through a variety of common carriers, as well as by UPS, RPS and parcel post. No single customer accounted for more than 10% of net revenues during fiscal 1995. The Company contracts with a number of foreign publishers to translate the Company's English titles to foreign languages. The Company typically retains ownership rights to the titles translated. Over 200 of the titles released by the Company in fiscal 1995 were translated into foreign languages. The Company distributes its products internationally in South America, Europe, Australia, New Zealand, South Africa, the Far East, Mexico and Canada. In fiscal 1995, the Company's international and export operations accounted for approximately 9% of the Company's total net revenues. Substantially all of the Company's Bible, book and gift products are manufactured by domestic and foreign commercial printers, binders and manufacturers which are selected on the basis of competitive bids. The Company normally solicits bids from three or more domestic and foreign companies for each order and, to date, has had no difficulty in fulfilling such orders. Such work is presently concentrated among five major domestic and foreign firms, although the Company conducts business with several other printers, manufacturers and binders. The Company may contract separately for paper and certain other supplies used by its manufacturers. As is customary in the publishing industry, the Company maintains significant inventories of printed but unbound sheet stock, as well as finished products, in order to meet customer delivery requirements. The Company has had no difficulty in the past securing the required paper, printing and binding supplies. The music division contracts with several independent firms for the manufacture of compact discs, cassettes and printed music. 7 8 Copyrights and Royalty Agreements The Company customarily secures copyrights on its books, Bible editions and music in order to protect its publishing rights. Almost all of the Company's books and music products are published under royalty agreements with their respective authors or other copyright proprietors. Many of the Company's gift products incorporate copyrighted art work, which is licensed directly from the artist under a royalty agreement. COMPETITION The Company believes that it is the largest publisher of Christian and inspirational books, the largest commercial publisher of Bibles in English language translations and the leading producer, distributor and publisher of Christian and inspirational music in the United States. The publishing and music divisions each compete with numerous other companies that publish and distribute Christian and inspirational books and/or music, many of which have significantly longer operating histories and larger revenue bases than the Company and certain of which are tax-exempt organizations. While the Company's prices are comparable to those of its competitors, the Company believes that its breadth of product line, established market channels, established sales forces and customer service, give it a competitive advantage. The most important factor with respect to the Company's competitive position is the contractual relationships it establishes and maintains with authors and recording artists. The Company competes with other book publishing, record and music publishing companies, both Christian and secular, for signing top authors, artists and songwriters, and for discovering new talent. The Company's ability to sign and re-sign popular authors, recording artists and successful songwriters depends on a number of factors, including distribution and marketing capabilities, the Company's management team and the royalty and advance arrangements offered. The Company believes its relationships with its authors, artists and songwriters, which are based on its reputation in the book publishing, recording and music publishing industries, its marketing experience and its management expertise give it a competitive advantage in signing and maintaining contracts with top Christian and inspirational authors, artists and songwriters. In the gift product line, the Company competes with numerous other companies, many of which have significantly longer operating histories and larger revenue bases. Employees As of March 31, 1995, the Company employed approximately 1,130 persons. The Company has not suffered any work stoppages as a result of labor disputes in recent years and considers relations with its employees to be good. Executive Officers of the Company Officers of the Company are elected by the Board of Directors and serve at the pleasure of the Board of Directors. Following is certain information regarding the executive officers of the Company: 8 9
Name Age Position with the Company ------------------- --- -------------------------------------------------- Sam Moore 64 Chairman of the Board, Chief Executive Officer, President and Director S. Joseph Moore 32 Executive Vice President Joe L. Powers 49 Executive Vice President and Secretary Charles Z. Moore 61 Senior Vice President, International Ray Capp 42 Senior Vice President, Operations Roland Lundy 45 President, Word Records and Music Division Byron O. Williamson 49 President, Word Publishing Division Vance Lawson 36 Vice President, Finance Stuart A. Heaton 39 Vice President and General Counsel Phyllis E. Williams 47 Treasurer
Except as indicated below, each executive officer has been an employee of the Company as his/her principal occupation for more than the past five years. Sam Moore has been the Chairman of the Board, Chief Executive Officer, President and a Director of the Company since its founding in 1961. S. Joseph Moore was appointed Executive Vice President of the Company in 1995, and, prior to such appointment, he served as Divisional Vice President of the Company in various capacities since 1991. S. Joseph Moore is the son of Sam Moore. Joe L. Powers was appointed Executive Vice President of the Company in 1995 and has been the Secretary of the Company since 1990. Previously, Mr. Powers served as a Vice President of the Company since 1980. Charles Z. Moore has been a Vice President of the Company since 1983 and was appointed Senior Vice President, International in 1986. Charles Moore is the brother of Sam Moore. Ray Capp was appointed Senior Vice President, Operations of the Company in 1995. Prior to joining the Company, Mr. Capp was the President and Chief Operating Officer of Ingram Merchandising Services and Assistant to the Chairman of Ingram Distribution, Inc. since 1992 and Executive Vice President and Chief Operating Officer of Ingram Entertainment from 1987 to 1992. Roland Lundy has been the President of the Company's Word Records and Music Division since 1993. Mr. Lundy was formerly President of Word, Incorporated since 1989. Byron O. Williamson has been the President of the Company's Word Publishing Division since 1993. Mr. Williamson was formerly Executive Vice President of Word Publishing since 1988. Vance Lawson has been the Vice President, Finance of the Company since 1993. Mr. Lawson was formerly Vice President of Finance and Operations at Word since 1988. Stuart A. Heaton has been Vice President and General Counsel of the Company since 1991. Previous to that time, Mr. Heaton served as the Company's corporate counsel since 1989. Phyllis E. Williams has been the Treasurer of the Company since 1992. Mrs. Williams was previously Controller for the Company since 1988. ITEM 2. PROPERTIES The Company's executive, editorial, sales and production offices are located at its corporate headquarters at Nelson Place at Elm Hill Pike in Nashville, Tennessee. These facilities are housed in a 74,000 square foot building completed in 1981, which is owned by the Company subject to a mortgage securing a debt with an outstanding balance at March 31, 1995 of $2,225,000. 9 10 The Company's major warehouse facilities are located in a building containing approximately 215,000 square feet adjacent to its corporate headquarters in Nashville, Tennessee. This building which was completed in fiscal 1978, is owned subject to a mortgage securing debt with an outstanding balance at March 31, 1995 of $475,000. An addition to the warehouse and distribution center, of approximately 120,000 square feet, was completed during fiscal 1993. This addition was financed by a $5,000,000 construction and term loan secured by a mortgage with an outstanding balance of $4,333,333 at March 31, 1995. The Company maintains other offices and warehouse facilities in three locations in Waco, Texas (of approximately 30,000, 30,000 and 100,000 square feet each) which are owned by the Company. The Company leases properties as described below:
Square Annual Lease Location Use Feet Rent Expiration - ----------------------- ------------------------------ ------------- ------------- ------------- Miami, FL Editorial and sales office 3,600 $ 51,000 9/95 Atlanta, GA Editorial office 800 $ 10,800 10/95 Cherryville, NC Administrative 77,000 $ 78,000 4/98 Colorado Springs, CO Plaza at the Rockies 1,800 $ 18,400 9/95 Dallas, TX Editorial and sales office 22,100 $242,000 1/99 Nashville, TN Creation and sales office 31,300 $362,700 11/98 Nashville, TN Creation and sales office 31,600 $498,900 6/01 Nashville, TN Warehousing 85,000 $165,600 12/96 Waco, TX Warehousing 56,000 $108,000 12/96 Richmond, British Sales office and warehousing 17,000 $ 84,200 6/99 Columbia (Canada) Milton Keyes, Editorial and sales office 25,000 $214,500 6/11 United Kingdom
All building improvements on the properties are brick veneer, metal or block construction and are considered adequate and suitable by the Company for the purpose for which they are used. The Company's machinery and equipment consists primarily of computer equipment located in Nashville and Waco; warehousing and shipping racks, conveyors and other material handling equipment located at the various warehouses; and office equipment. Such machinery and equipment are in good repair and adequate for the Company's present operations. All such equipment, other than a portion of the computer equipment which is leased under capital leases, is owned by the Company. The Company's physical properties are operated at approximate capacity. Additional personnel are employed as required. 10 11 ITEM 3. LEGAL PROCEEDINGS The Company is subject to various legal proceedings, claims and liabilities which arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS The Company did not submit any matter to a vote of its security holders during the last quarter of its fiscal year ended March 31, 1995. ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Common Stock and Class B Common Stock are traded on the New York Stock Exchange under the symbols TNM and TNM.B, respectively. Cash dividends were declared on the Company's Common Stock and Class B Common Stock in every year from 1976 through fiscal 1985 and in fiscal 1990 through 1995. Under the Company's long-term debt agreements, the Company has agreed to obtain the consent of the lenders before declaring or paying dividends, other than stock dividends, in excess of $1.6 million, plus 30% of the Company's cumulative consolidated net income earned after March 31, 1992. At March 31, 1995, approximately $4.2 million could be paid without obtaining the consent of the lenders. The number of holders of record of Common Stock and Class B Common Stock were approximately 1,149 and 862, respectively, as of June 22, 1995. Market price and dividend information is incorporated by reference to the Annual Report to Shareholders for the year ended March 31, 1995 (the "Annual Report"). ITEM 6. SELECTED FINANCIAL DATA Incorporated by reference to the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference to the Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference to the Annual Report. Includes selected quarterly financial data for the years ended March 31, 1995 and 1994. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 11 12 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Information regarding the directors of the Company and compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") is incorporated by reference to the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on August 24, 1995 (the "Annual Meeting"), to be filed with the Securities and Exchange Commission (the "Commission") pursuant to Regulation 14A under the Exchange Act. Information regarding the Company's executive officers is contained in Part 1 herein. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to the Company's Proxy Statement for the Annual Meeting to be filed with the Commission pursuant to Regulation 14A under the Exchange Act. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to the Company's Proxy Statement for the Annual Meeting to be filed with the Commission pursuant to Regulation 14A under the Exchange Act. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated by reference to the Company's Proxy Statement for the Annual Meeting to be filed with the Commission pursuant to Regulation 14A under the Exchange Act. 12 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements The following consolidated financial statements of the Company, included in the Annual Report are incorporated by reference as set forth in Part II, Item 8: Consolidated statements of income -- years ended March 31, 1995, 1994 and 1993 Consolidated balance sheets -- March 31, 1995 and 1994 Consolidated statements of shareholders' equity -- years ended March 31, 1995, 1994 and 1993 Consolidated statements of cash flow -- years ended March 31, 1995, 1994 and 1993 Notes to consolidated financial statements Report of Arthur Andersen LLP, Independent Public Accountants (a) 2. Financial Statement Schedules The following consolidated financial statement schedules are included herein: Page ---- Report of Arthur Andersen LLP, Independent Public Accountants . . . 18 Schedule VIII -- Valuation and Qualifying Accounts and Reserves . . 19 Schedules not listed above have been omitted because they are not required, inapplicable or the required information has been given in the financial statements or notes thereto. (a) 3. Exhibits The following exhibits are included herein or incorporated by reference as indicated. Exhibit numbers refer to Item 601 of Regulation S-K.
Exhibit Number - ------- 3.1 -- Thomas Nelson, Inc. Amended and Restated Charter (filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference) 3.2 -- Thomas Nelson, Inc. Amended Bylaws (filed as Exhibit 3(b) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.1 -- Loan Agreement dated December 1, 1976, between the Company and The Industrial Development Board of Metropolitan Government of Nashville and Davidson County (filed as Exhibit 3 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference)
13 14
Exhibit Number - ------ 4.2 -- Promissory Note dated December 1, 1976, of the Company payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference) 4.3 -- Deed of Trust and Security Agreement dated December 1, 1976, from the Company to Third National Bank in Nashville (filed as Exhibit 5 to the Company's Annual Report on Form 10-K for the year ended March 31, 1977 and incorporated herein by reference) 4.4 -- Loan Agreement dated May 18, 1990, between the Company and The Industrial Development Board of The Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.5 -- Promissory Note dated May 18, 1990, of the Company payable to The Industrial Development Board of the Metropolitan Government of Nashville and Davidson County (filed as Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year ended March 31, 1990 and incorporated herein by reference) 4.6 -- Deed of Trust and Security Agreement dated May 18, 1990, from the Company to Third National Bank in Nashville (filed as Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference) 4.7 -- Construction and Term Loan Agreement dated March 31, 1992, between the Company and Third National Bank in Nashville (filed as Exhibit 4.7 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.8 -- Promissory Note dated March 31, 1992, of the Company payable to Third National Bank in Nashville (filed as Exhibit 4.8 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.9 -- Deed of Trust and Security Agreement dated March 31, 1992, from the Company to Third National Bank in Nashville (filed as Exhibit 4.9 to Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference) 4.10 -- Credit Agreement dated as of November 30, 1992, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, Nationsbank of Texas, N.A. in Dallas, and Creditanstalt-Bankverein in New York (filed as Exhibit 28 to the Company's Form 8-K dated December 11, 1992 and incorporated herein by reference). 4.11 -- First Amendment to Credit Agreement dated as of February 26, 1993, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York. 4.12 -- Second Amendment to Credit Agreement dated as of September 19, 1994, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National
14 15
Exhibit Number - ------ Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York. 4.13 -- Third Amendment to Credit Agreement dated as of December 23, 1994, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York. 4.14 -- Fourth Amendment to Credit Agreement and First Amendment to Revolving Credit Notes dated as of March 13, 1995, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York. 4.15 -- Indenture dated as of November 30, 1992, by and between Thomas Nelson, Inc. and Boatman's Trust Company (filed as Exhibit 4 to the Company's Form 8-K dated December 11, 1992 and incorporated herein by reference) 10.1 -- Stock Purchase Agreement dated as of September 28, 1992, by and between Thomas Nelson, Inc. and ABC Holding Company, Inc. (filed as Exhibit 2 to the Company's Form 8-K dated December 11, 1992 and incorporated herein by reference) 10.2 -- Agreement and Plan of Merger among the Company, PPC, Inc., Nelson Subsidiary Company, and the shareholders of PPC, Inc. (filed as Exhibit 10 to the Company's Quarterly Report of Form 10-Q for the quarter ended September 30, 1994 and incorporated herein by reference) 10.3 -- Thomas Nelson, Inc. Amended and Restated 1986 Stock Incentive Plan (filed as Exhibit 4.4 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.4 -- Thomas Nelson, Inc. Amended and Restated 1986 Executive Stock Purchase Plan (filed as Exhibit 4.3 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.5 -- Thomas Nelson, Inc. Amended and Restated 1990 Deferred Compensation Option Plan for Outside Directors (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.6 -- Severance Agreement dated as of May 17, 1991 between the Company and Sam Moore (filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference)* 10.7 -- Employment Agreement dated as of July 12, 1979 and as amended June 13, 1990, between the Company and Joe L. Powers (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended March 31, 1991 and incorporated herein by reference)* 10.8 -- Employment Agreement dated as of August 28, 1983 and as amended July 3, 1991, between the Company and Charles Z. Moore (filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference)*
15 16
Exhibit Number - ------ 10.9 -- Employment Agreement dated as of January 14, 1988 and as amended July 17, 1991, between the Company and Stuart A. Heaton (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended March 31, 1992 and incorporated herein by reference)* 10.10 -- Thomas Nelson, Inc. Amended and Restated 1992 Employee Stock Incentive Plan (filed as Exhibit 4.6 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.11 -- Thomas Nelson, Inc. Sales Managers' Stock Plan for the Varsity Company (filed as Exhibit 4.7 to the Company's Registration Statement on Form S-8 (No. 33-80086) and incorporated herein by reference)* 10.12 -- Employment Agreement dated as of June 23, 1993, between the Company and Vance Lawson (filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.13 -- Employment Agreement dated as of May 17, 1993, between the Company and Roland Lundy (Filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.14 -- Employment Agreement dated as of December 7, 1993, between the Company and Byron Williamson (Filed as Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended March 31, 1994 and incorporated herein by reference)* 10.15 -- Employment Agreement dated as of December 22, 1994, between the Company and Raymond T. Capp* 11 -- Statement Re Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 1995 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company 23 -- Consent of independent auditors 27 -- Financial Data Schedule (for SEC use only) (b) No reports on Form 8-K were filed during the Company's fiscal year ended March 31, 1995. (c) Exhibits - The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules - The response to this portion of Item 14 is submitted as a separate section of this report.
____________________________ * Management contract or compensatory plan or arrangement 16 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THOMAS NELSON, INC. By: /s/ Sam Moore ------------------------------------------------ Sam Moore, Chief Executive Officer and President Date: June 27, 1995 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Sam Moore Chairman of the Board of June 27, 1995 - ------------------------------------- Directors, Chief Executive Sam Moore Officer and President (Principal Executive Officer) /s/ Joe L. Powers Executive Vice President and June 27, 1995 - ------------------------------------- Secretary (Principal Financial Joe L. Powers and Accounting Officer) /s/ Brownlee O. Currey, Jr. Director June 27, 1995 - ------------------------------------- Brownlee O. Currey, Jr. /s/ W. Lipscomb Davis, Jr. Director June 27, 1995 - ------------------------------------- W. Lipscomb Davis, Jr. /s/ Robert J. Niebel, Sr. Director June 27, 1995 - ------------------------------------- Robert J. Niebel, Sr. /s/ Millard V. Oakley Director June 27, 1995 - ------------------------------------- Millard V. Oakley /s/ Joe M. Rodgers Director June 27, 1995 - ------------------------------------- Joe M. Rodgers /s/ Cal Turner, Jr. Director June 27, 1995 - ------------------------------------- Cal Turner, Jr. /s/ Andrew Young Director June 27, 1995 - ------------------------------------- Andrew Young
17 18 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Thomas Nelson, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Thomas Nelson's annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated May 19, 1995. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Anderson LLP ------------------- Arthur Anderson LLP Nashville, Tennessee May 19, 1995 18 19 THOMAS NELSON, INC. SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ALLOWANCES FOR TRADE ACCOUNTS RECEIVABLE ------------------------------------------------------------ March 31, 1995 March 31, 1994 March 31, 1993 ------------------------------------------------------------ Reserve for Sales Returns ------------------------------------------------------------ Balance at beginning of period $5,220,000 $6,054,000 $ 2,457,000 Additions: 1. Charged to costs and expenses 545,000 (834,000) (1,429,618) 2. Charged to other accounts(1) - 5,026,618 Deductions - charge-offs - - ---------- ---------- ----------- Balance at end of period $5,765,000 $5,220,000 $ 6,054,000 ========== ========== ===========
Reserve for Doubtful Accounts ------------------------------------------------------------ March 31, 1995 March 31, 1994 March 31, 1993 ------------------------------------------------------------ Balance at beginning of period $3,696,000 $4,381,000 $1,007,000 Additions: 1. Charged to costs and expenses 4,446,000 1,904,644 1,207,651 2. Charged to other accounts(1) (503,804) 4,594,887 Deductions - charge-offs 4,878,000 2,085,840 2,428,538 ---------- ---------- ---------- Balance at end of period $3,264,000 $3,696,000 $4,381,000 ========== ========== ==========
(1) Reserves acquired in connection with acquisitions - Word in 1993. 19 20 INDEX TO EXHIBITS
Exhibit Number - ------ 4.11 -- First Amendment to Credit Agreement dated as of February 26, 1993, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York 4.12 -- Second Amendment to Credit Agreement dated as of September 19, 1994, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York 4.13 -- Third Amendment to Credit Agreement dated as of December 23, 1994, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York 4.14 -- Fourth Amendment to Credit Agreement and First Amendment to Revolving Credit Notes dated as of March 13, 1995, among the Company, Third National Bank in Nashville, First National Bank of Louisville, First American National Bank in Nashville, NationsBank of Texas, N.A. in Dallas, and Creditanstalt - Bankverein in New York 10.15 -- Employment Agreement dated as of December 22, 1994, between the Company and Raymond T. Capp. 11 -- Statement Re Computation of Per Share Earnings 13 -- Thomas Nelson, Inc. Annual Report to Shareholders for the year ended March 31, 1995 (to the extent of portions specifically incorporated by reference) 21 -- Subsidiaries of the Company. 23 -- Consent of Independent Auditors. 27 -- Financial Data Schedule (for SEC purposes only)
EX-4.11 2 FIRST AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.11 FIRST AMENDMENT TO CREDIT AGREEMENT This First Amendment to Credit Agreement (this "First Amendment") is made as of the 26th day of February, 1993 by and between THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), THIRD NATIONAL BANK IN NASHVILLE, a national banking association ("TNB"), the other banks and lending institutions listed on the signature pages hereof and any assignees of TNB or such other banks and lending institutions that become "Lenders" as provided herein (TNB, and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders") , and THIRD NATIONAL BANK IN NASHVILLE, in its capacity as agent (the "Agent") for the Lenders and each successor agent for such Lenders as may be appointed from time to time pursuant to Article X of the Credit Agreement dated as of November 30, 1992 by and between Nelson, Lenders and Agent (as it may be amended from time to time, the "Credit Agreement"). W I T N E S S E T H: WHEREAS, Nelson, Lenders and Agent entered into the Credit Agreement to evidence the extension of certain credit facilities to Nelson as more particularly described in the Credit Agreement; and WHEREAS, Nelson has represented to Lenders and Agent that Nelson Acquisition Corp. ("Nelson Acquisition") is a shell corporation that was formed for the sole and exclusive purpose of the acquisition and subsequent spin-off of Dodd-Mead, Inc. and has been used for no other purpose since that transaction; and WHEREAS, Nelson has further represented to Lenders and Agent that Nelson Acquisition has no employees, conducts no business of any kind, and that no Nelson funds of any nature pass through any accounts of Nelson Acquisition; and WHEREAS, Nelson has further represented to Lenders and Agent that the status of Nelson Acquisition will remain the same and that no Nelson assets or funds of any nature will be diverted into Nelson Acquisition without the prior written consent of Agent; and WHEREAS, based upon these representations of Nelson, Lenders, Nelson and Agent have agreed to amend the Credit Agreement to add Nelson Acquisition as a party to Schedule 7A.01, thereby excluding it from certain provisions of the Credit Agreement. NOW, THEREFORE, for and in consideration of the foregoing premises and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agree as follows: 1. Schedule 7A.01 of the Credit Agreement is hereby amended to add Nelson Acquisition as a Subsidiary under Triunity, Inc., and to reflect Nelson Acquisition's Range of Net Worth as Zero. 2 2. This First Amendment may be executed in multiple counterparts, and all such executed counterparts shall constitute the same agreement. It shall be necessary to account for only one such counterpart in proving the existence or terms of this First Amendment. 3. Except as hereby amended, the Credit Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their duly authorized officers as of the day and year first above written. Address for Notices: THOMAS NELSON, INC. - ------------------- P.O. Box 141000 By: /s/ Joe L. Powers Nashville, Tennessee 37214 -------------------------------- Attention: Vice President Title: and Chief Financial ----------------------------- Officer Address for Notices: THIRD NATIONAL BANK IN - ------------------- NASHVILLE, AS AGENT P.O. Box 305110 By: /s/ J. Fred Turner Nashville, TN 37230-5110 -------------------------------- Attention: Fred Turner Title: ----------------------------- Address for Notices: THIRD NATIONAL BANK IN NASHVILLE - ------------------- P.O. Box 305110 By: /s/ J. Fred Turner Nashville, TN 37230-5110 -------------------------------- Attention: Fred Turner Title: ----------------------------- Address for Notices: FIRST NATIONAL BANK OF - ------------------- LOUISVILLE 101 South Fifth St. By: /s/ Debbie M. Myers 7th Floor -------------------------------- Louisville, KY 40202 Title: Attention: Debbie M. Myers ----------------------------- 3 Address for Notices: FIRST AMERICAN NATIONAL BANK - ------------------- National Division By: /s/ Scott M. Bane Nashville, TN 37237-0310 -------------------------------- Attention: Scott M. Bane Title: Vice President ----------------------------- Address for Notices: NATIONSBANK OF TEXAS, N.A. - ------------------- 901 Main Street, 67th Floor By: /s/ Jay S. Tweed Dallas, TX 75283 -------------------------------- Title: ----------------------------- or P.O. Box 831000 Dallas, TX 75283 Attention: Jay Tweed Address for Notices: CREDITANSTALT - BANKVEREIN - ------------------- 245 Park Avenue, 27th Floor By: /s/ Robert M. Biringer New York, New York 10167-0096 -------------------------------- Attention: Donato R. Giuseppi Title: ----------------------------- With a copy to: By: /s/ Dennis C. O'Dowd - -------------- -------------------------------- Two Ravinia Drive Title: Suite 1680 ------------------------------ Atlanta, Georgia 30346 Attention: Joseph P. Longosz EX-4.12 3 SECOND AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.12 SECOND AMENDMENT TO CREDIT AGREEMENT THIS SECOND AMENDMENT TO CREDIT AGREEMENT (the "Second Amendment") dated this 19th day of September, 1994, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), THIRD NATIONAL BANK IN NASHVILLE, a national banking association ("TNB"), the other banks and lending institutions listed on the signature pages hereof and any assignees of TNB or such other banks and lending institutions that become "lenders" as provided herein (TNB and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders") and THIRD NATIONAL BANK IN NASHVILLE (the "Agent") in its capacity as Agent for the Lenders and each successor agent for such Lenders as may be appointed from time to time pursuant to Article X of the Credit Agreement (as hereinafter defined). W I T N E S S E T H : WHEREAS, Nelson, Lenders and Agent entered into a Credit Agreement dated as of November 30, 1992 (the "Credit Agreement") governing the terms of certain credit facilities more particularly described in the Credit Agreement; and WHEREAS, Nelson has requested certain revisions to the Credit Agreement, and Lenders and Agent have agreed to the revisions subject to the terms and conditions of this Second Amendment; NOW, THEREFORE, for and in consideration of the foregoing premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Section 7A.08(c) of the Credit Agreement is deleted in its entirety and the following is substituted in lieu thereof: (c) Funded Debt to Total Capital. i) Maintain as of the last day of each fiscal quarter, a maximum ratio of Funded Debt to Total Capital, calculated quarterly, as shown below for each fiscal quarter ending during the fiscal quarters indicated: Fiscal Ouarter Maximum Ratio -------------- ------------- June 30, 1994 and thereafter .70:1.0 (ii) Maintain as of the last day of each fiscal year, a maximum ratio of Funded Debt to Total Capital, calculated annually, as below for each fiscal year ending during the fiscal years indicated: 2 Fiscal Year Maximum Ratio ----------- ------------- March 31, 1995 and thereafter .65:1.0 2. Except as herein modified and amended, the terms and conditions of the Credit Agreement shall remain in full force and effect. 3. This Second Amendment shall be governed by and construed in accordance with the laws of the State of Tennessee. 4. This Second Amendment is executed on the date set forth above, but is to be effective as of June 29, 1994. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as of the date first written above. THOMAS NELSON, INC. By: /s/ Joe L. Powers -------------------------------------- Title: ------------------------------------ THIRD NATIONAL BANK IN NASHVILLE, AS AGENT By: /s/ J. Fred Turner -------------------------------------- Title: ------------------------------------ THIRD NATIONAL BANK IN NASHVILLE By: /s/ J. Fred Turner -------------------------------------- Title: ------------------------------------ NATIONAL CITY BANK, KENTUCKY By: /s/ C.C. Tate -------------------------------------- Title: ------------------------------------ FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane -------------------------------------- Title: ------------------------------------ 3 NATIONSBANK OF TEXAS, N.A. By: /s/ Jay S. Tweed -------------------------------------- Title: ------------------------------------ CREDITANSTALT-BANKVEREIN By: /s/ Robert M. Biringer -------------------------------------- Title: ------------------------------------ By: /s/ Joseph P. Longosz -------------------------------------- Title: ------------------------------------ EX-4.13 4 THIRD AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.13 THIRD AMENDMENT TO CREDIT AGREEMENT This Third Amendment to Credit Agreement (this "Amendment") dated this 23rd day of December, 1994, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), THIRD NATIONAL BANK IN NASHVILLE, a national banking association ("TNB") , the other banks and lending institutions listed on the signature pages hereof and any assignees of TNB or such other banks and lending institutions that become "Lenders" as provided herein (TNB, and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders"), and THIRD NATIONAL BANK IN NASHVILLE (the "Agent") in its capacity as agent for the Lenders and each successor agent for such Lenders as may be appointed from time to time pursuant to Article X of the Credit Agreement (as hereinafter defined). W I T N E S S E T H: WHEREAS, Nelson, Lenders and Agent entered into a Credit Agreement dated as of November 30, 1992 (the "Credit Agreement") governing the terms of certain credit facilities more particularly described in the Credit Agreement; and WHEREAS, Nelson has requested certain revisions to the Credit Agreement, and Lenders and Agent have agreed to the revisions subject to the terms and conditions of this Amendment. NOW, THEREFORE, for and in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. The definition of "Applicable Base Rate Margin" is hereby deleted from pages 2 and 3 of the Credit Agreement and the following definition is substituted in lieu thereof, effective as of December 23, 1994: "Applicable Base Rate Margin" shall mean, with respect to all outstanding Borrowings consisting of Base Rate Advances through March 31, 1994, one percent (1.00%) per annum, and with respect to all outstanding Borrowings consisting of Base Rate Advances thereafter, the higher relevant percentage indicated below based on the percentages indicated for Nelson's Interest Coverage Ratio and Leverage Ratio as determined on the date that is ninety (90) days after the end of each fiscal year of Nelson based upon the audited financial statements for the immediately preceding fiscal year, with such Applicable Base Rate Margin to be immediately effective as of such date with respect to all outstanding amounts under the Revolving Loans or Term Loans, as the case may be: 2
Interest Revolving Term Coverage Leverage Loans Loans Ratio Ratio --------- ----- -------- -------- 0.75% 1.0 % less than greater than 2.1:1.0 0.45:1.0 0.0 % 0.25% greater than less than or or equal to equal to 2.0:1.0 and 0.45:1.0 and less than greater than 3.2:1.0 0.35:1.0 0.0 % 0.0 % greater than less than or or equal to equal to 3.2:1.0 0.35:1.0
Notwithstanding the foregoing, in the event Nelson does not deliver the audited financial statements for the immediately preceding fiscal year in a manner that permits the determinations required in the definition of Applicable Base Rate Margin within ninety (90) days of the end of Nelson's fiscal year, commencing at the end of such ninety (90) day period and continuing until such audited financial statements are made available, the Applicable Base Rate Margin shall be the highest rates applicable to Revolving Loans and Terms Loans, as the case may be, as set forth in the preceding chart. 2. The definition of "Applicable LIBOR Rate Margin" is hereby deleted from page 3 of the Credit Agreement and the following definition is substituted in lieu thereof, effective as of December 23, 1994: "Applicable LIBOR Rate Margin" shall mean, with respect to all outstanding Borrowings consisting of LIBOR Advances through March 31, 1994, two and three quarters percent (2.75%) per annum, and with respect to all outstanding Borrowings consisting of LIBOR Advances thereafter, the higher relevant percentage indicated below based upon the percentages indicated for Nelson's Interest Coverage Ratio and Leverage Ratio as determined on the date that is ninety (90) days after the end of each fiscal year of Nelson based upon the audited financial statements for the immediately preceding fiscal year, with such Applicable LIBOR Rate Margin to be immediately effective as of such date with respect to all outstanding amounts under the Revolving Loans or Term Loans, as the case may be: 3
Interest Revolving Term Coverage Leverage Loans Loans Ratio Ratio --------- ----- -------- -------- 2.50% 2.75% less than greater than 2.0:1.0 0.45:1.0 1.50% 1.75% greater than less than or or equal to equal to 2.0:1.0 and 0.45:1.0 and less than greater than 3.2:1.0 0.35:1.0 1.0 % 1.25% greater than less than or or equal to equal to 3.2:1.0 0.35:1.0
Notwithstanding the foregoing, in the event Nelson does not deliver the audited financial statements for the immediately preceding fiscal year in a manner that permits the determinations required in the definition of Applicable LIBOR Rate Margin within ninety (90) days of the end of Nelson' s fiscal year, commencing at the end of such ninety (90) day period and continuing until such audited financial statements are made available, the Applicable LIBOR Rate Margin shall be the highest rates applicable to Revolving Loans and Terms Loans, as the case may be, as set forth in the preceding chart. 3. The definition of "Conversion Date" is hereby amended to delete the date "April 30, 1996" on the second line of the definition and to substitute in lieu thereof the date "April 30, 1997." 4. The definition of "Final Maturity Date" is hereby amended to delete the date "November 30, 1999" on the second line of the definition and to substitute in lieu thereof the date "April 30, 2001." 5. Section 2.09 (c) of the Credit Agreement is hereby revised to delete the phrase "Notice of Conversion" in the fourth line of this subparagraph and to insert in lieu thereof the phrase "Notice of Extension." 6. Nelson shall pay to the Agent, for the account of and distribution of the respective Pro Rata Share (as defined in the Credit Agreement) to each Lender, a one-time fee (the "Revision Fee") of $93,750.00, representing one-eighth of one percent (.125%) of the original principal amount of the Facilities (as defined in the Credit Agreement). One-half of the Revision Fee shall be paid upon the execution of this Amendment, and the remaining one-half shall be paid on January 3, 1995. 4 7. Except as herein modified and amended, the terms and conditions of the Credit Agreement shall remain in full force and effect. 8. This Amendment shall be governed by and construed in accordance with the laws of the State of Tennessee. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. THOMAS NELSON, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- THIRD NATIONAL BANK IN NASHVILLE, AS AGENT By: /s/ J. Fred Turner ------------------------------ Title: ---------------------------- THIRD NATIONAL BANK IN NASHVILLE By: /s/ J. Fred Turner ------------------------------ Title: ---------------------------- NATIONAL CITY BANK By: /s/ C.C. Tate ------------------------------ Title: ---------------------------- FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane ------------------------------ Title: ---------------------------- 5 NATIONSBANK OF TEXAS, N.A. By: /s/ David James ------------------------------ Title: ---------------------------- CREDITANSTALT - BANKVEREIN By: /s/ Robert M. Biringer ------------------------------ Title: ---------------------------- By: ------------------------------- Title: ---------------------------- EX-4.14 5 FOURTH AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 4.14 FOURTH AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO REVOLVING CREDIT NOTES This Fourth Amendment to Credit Agreement and First Amendment to Revolving Credit Notes (this "Amendment") dated as of the 31st day of March 1995, by and among THOMAS NELSON, INC., a Tennessee corporation ("Nelson"), THIRD NATIONAL BANK IN NASHVILLE, a national banking association ("TNB"), the other banks and lending institutions listed on the signature pages hereof and any assignees of TNB or such other banks and lending institutions that become "Lenders" as provided herein (TNB, and such other banks, lending institutions and assignees are referred to collectively herein as the "Lenders"), and THIRD NATIONAL BANK IN NASHVILLE (the "Agent") in its capacity as agent for the Lenders and each successor agent for such Lenders as may be appointed from time to time pursuant to Article X of the Credit Agreement (as hereinafter defined). W I T N E S S E T H: WHEREAS, Nelson, Lenders and Agent entered into a Credit Agreement dated as of November 30, 1992 (as amended, the "Credit Agreement") governing the terms of the Loans (terms defined therein and not otherwise defined herein are being used herein as therein defined); and WHEREAS, Nelson has requested that Lenders extend additional credit to Nelson in the amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00), and Lenders and Agent have agreed to the extension of additional funds subject to the terms and conditions of this Amendment. NOW, THEREFORE, for and in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. All references to the amount of "$19,500,000.00" in the Revolving Credit Note dated November 30, 1992 executed by Nelson to the order of TNB are hereby deleted and the amount of "$26,000,000.00" is hereby substituted in lieu thereof. 2. All references to the amount of "$16,500,000.00" in the Revolving Credit Note dated November 30, 1992 executed by Nelson to the order of National City Bank, Kentucky (formerly known as First National Bank of Louisville) are hereby deleted and the amount of "$22,000,000.00" is hereby substituted in lieu thereof. 3. All references to the amount of "$15,000,000.00" in the Revolving Credit Note dated November 30, 1992 executed by Nelson to the order of First American National Bank are hereby deleted and the amount of "$20,000,000.00" is hereby substituted in lieu thereof. 2 4. All references to the amount of "$12,750,000.00" in the Revolving Credit Note dated November 30, 1992 executed by Nelson to the order of NationsBank of Texas, N.A. are hereby deleted and the amount of "$17,000,000.00" is hereby substituted in lieu thereof. 5. All references to the amount of "$11,250,000.00" in the Revolving Credit Note dated November 30, 1992 executed by Nelson to the order of Creditanstalt - Bankverein are hereby deleted and the amount of "$15,000,000.00" is hereby substituted in lieu thereof. 6. The amount of "$19,500,000" shown as TNB's portion of the Revolving Loan Commitment next to its signature block in the Credit Agreement is hereby deleted and the amount of "$26,000,000" is hereby substituted in lieu thereof. 7. The amount of "$16,500,000" shown as National City Bank, Kentucky's (formerly known as First National Bank of Louisville) portion of the Revolving Loan Commitment next to its signature block in of the Credit Agreement is hereby deleted and the amount of "$22,000,000" is hereby substituted in lieu thereof. 8. The amount of "$15,000,000" shown as First American National Bank's portion of the Revolving Loan Commitment next to its signature block in the Credit Agreement is hereby deleted and the amount of "$20,000,000" is hereby substituted in lieu thereof. 9. The amount of "$12,750,000" shown as NationsBank of Texas, N.A.'s portion of the Revolving Loan Commitment next to its signature block in the Credit Agreement is hereby deleted and the amount of "$17,000,000" is hereby substituted in lieu thereof. 10. The amount of "$11,250,000" shown as Creditanstalt-Bankverein's portion of the Revolving Loan Commitment next to its signature block in the Credit Agreement is hereby deleted and the amount of "$15,000,000" is hereby substituted in lieu thereof. 11. Nelson shall pay a fee of $31,250 to the Agent as a fee for the extension of additional credit to Nelson in the principal amount of $25,000,000. Such fee shall be shared pro rata among the Lenders. 12. The definition of "Credit Documents" in the Credit Agreement is hereby amended to add the following phrase to the end of such definition: ", as they may be amended and/or restated from time to time." 13. The definition of "Final Maturity Date" in the Credit Agreement is hereby amended to delete the date "April 30, 2001, and to substitute in lieu thereof the date "February 28, 2001." 14. The definition of "Revolving Credit Notes" in the Credit Agreement is hereby amended to add the following phrase to the end 2 3 of such definition: ", as they may be amended and/or restated from time to time." 15. The definition of "Term Notes" in the Credit Agreement is hereby amended to add the following phrase to the end of such definition: ", as they may be amended and/or restated from time to time." 16. The word "fifteen (15)" in Section 3.02 of the Credit Agreement is hereby deleted and the word "sixteen (16)" is hereby substituted in lieu thereof. Also in Section 3.02 of the Credit Agreement, the date "May 31, 1996" is hereby deleted and the date "May 31, 1997" is hereby substituted in lieu thereof. 17. Section 2.02(b) of the Credit Agreement is amended by deleting the figure "$5,000,000" in the fifth line thereof and replacing such figure with the figure "$2,000,000." 18. The following sentence, which is the last sentence of Section 2.02(b), is hereby deleted: "At no time shall the number of Borrowings outstanding under this Article II of LIBOR Advances exceed eight (8)." 19. Except as herein modified and amended, the terms and conditions of the Credit Agreement shall remain in full force and effect. 20. This Amendment shall be governed by and construed in accordance with the laws of the State of Tennessee. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. THOMAS NELSON, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- THIRD NATIONAL BANK IN NASHVILLE, AS AGENT By: /s/ J. Fred Turner ------------------------------ Title: ---------------------------- 3 4 THIRD NATIONAL BANK IN NASHVILLE /s/ J. Fred Turner ---------------------------------- NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) By: /s/ John Simms ------------------------------ Title: ---------------------------- FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane ------------------------------ Title: ---------------------------- NATIONSBANK OF TEXAS, N.A. By: /s/ Gregory Meador ------------------------------ Title: ---------------------------- CREDITANSTALT - BANKVEREIN By: /s/ Robert M. Biringer ------------------------------ Title: ---------------------------- The undersigned join in the execution of this Amendment in order to acknowledge their consent to the terms and provisions of this Amendment and to confirm that the execution of this Amendment by the parties hereto in no way affects the undersigneds' respective obligations under the Guaranty Agreement executed as of November 30, 1992 by Word, Incorporated, a corporation organized and existing under the laws of the State of Delaware, Editorial Caribe, Inc., a corporation organized and existing under the laws of the State of Florida, ____________________, a corporation 4 5 organized and existing under the laws of the State of Tennessee, Nelson Media, Inc., a corporation organized and existing under the laws of the State of Tennessee, Nelson Communications, Inc., a corporation organized and existing under the laws of the State of Tennessee, Dominion Publishers, Inc., a corporation organized and existing under the laws of the State of Tennessee, Royal Publishers, Inc., a corporation organized and existing under the laws of the State of Tennessee, Word, Communications Ltd., a corporation organized and existing under the laws of British Columbia, Canada, Word Direct Marketing Services, Inc., a corporation organized and existing under the laws of the State of Texas, TNI Cassette Corp., a corporation organized and existing under the laws of the State of Texas, and Word (UK) Limited, a corporation organized and existing under the laws of the United Kingdom, in favor of Third National Bank in Nashville, a national banking association, in its capacity as agent for banks and other lending institutions parties to the Credit Agreement and each assignee thereof becoming a "Lender" as provided therein. Each person executing this Amendment on behalf of each of the undersigned is duly authorized to so execute and deliver this Amendment on behalf of each of the undersigned entities. WORD, INCORPORATED By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- EDITORIAL CARIBE, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- NELSON MEDIA, INC By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- 5 6 NELSON COMMUNICATIONS, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- DOMINION PUBLISHERS, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- ROYAL PUBLISHERS, INC. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- WORD, COMMUNICATIONS LTD. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- WORD DIRECT MARKETING SERVICES, INC. By: /s/ Joe L. Powers ------------------------------- Title: ----------------------------- TNI CASSETTE CORP. By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- 6 7 WORD (UK) LIMITED By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- THIRD NATIONAL BANK IN NASHVILLE, AS AGENT By: /s/ J. Fred Turner ------------------------------ Title: ---------------------------- THIRD NATIONAL BANK IN NASHVILLE By: /s/ J. Fred Turner ------------------------------ Title: ---------------------------- NATIONAL CITY BANK, KENTUCKY (formerly known as First National Bank of Louisville) By: /s/ John P. Simms ------------------------------ Title: ---------------------------- FIRST AMERICAN NATIONAL BANK By: /s/ Scott M. Bane ------------------------------ Title: ---------------------------- NATIONSBANK OF TEXAS, N.A. By: /s/ Gregory Meador ------------------------------ Title: ---------------------------- 7 8 CREDITANSTALT - BANKVEREIN By: /s/ Robert M. Biringer ------------------------------ Title: ---------------------------- By: /s/ Joseph P. Longosz ------------------------------ Title: ---------------------------- The undersigned join in the execution of this Amendment in order to acknowledge their consent to the terms and provisions of this Amendment and to confirm that the execution of this Amendment by the parties hereto in no way affects the undersigneds' respective obligations under the Guaranty Agreement executed as of November 30, 1992 by Word, Incorporated, a corporation organized and existing under the laws of the State of Delaware, Editorial Caribe, Inc., a corporation organized and existing under the laws of the State of Florida, PrintPlus Publications, Inc., a corporation organized and existing under the laws of the State of Tennessee, Nelson Media, Inc., a corporation organized and existing under the laws of the State of Tennessee, Nelson Communications, Inc., a corporation organized and existing under the laws of the State of Tennessee, Dominion Publishers, Inc., a corporation organized and existing under the laws of the State of Tennessee, Royal Publishers, Inc., a corporation organized and existing under the laws of the State of Tennessee, Word, Communications Ltd., a corporation organized and existing under the laws of British Columbia, Canada, Word Direct Marketing Services, Inc., a corporation organized and existing under the laws of the State of Texas, International Cassette Corp., a corporation organized and existing under the laws of the State of Texas, and Word (UK) Limited, a corporation organized and existing under the laws of the United Kingdom, in favor of Third National Bank in Nashville, a national banking association, in its capacity as agent for banks and other lending institutions parties to the Credit Agreement and each assignee thereof becoming a "Lender" as provided therein. Each person executing this Amendment on behalf of each of the undersigned is duly authorized to so execute and deliver this Amendment on behalf of each of the undersigned entities. WORD, INCORPORATED By: /s/ Joe L. Powers ------------------------------ Title: ---------------------------- 8 EX-10.15 6 EMPLOYMENT AGREEMENT-RAYMOND T. CAPP 1 EXHIBIT 10.15 EMPLOYMENT AGREEMENT This contract of employment is made and entered into by and between Thomas Nelson, Inc., a Tennessee corporation, hereinafter referred to as "Employer", and Raymond T. Capp, hereinafter referred to as "Employee". Employer desires to employ Employee in the capacity of Senior Vice President, Distribution and Systems, with all principal powers, duties and responsibilities attendant thereto, and such other duties as shall be requested of Employee by the Company, and Employee desires to be so employed by Employer. In consideration therefore, the parties mutually agree as follows: A. TERM OF AGREEMENT The term of this contract shall be for a period of one (1) year from the date of execution unless sooner terminated as provided for herein and shall automatically renew for additional thirty (30) day periods unless 1) cancelled upon thirty (30) days written notice by either party or 2) superseded by a new employment agreement. B. EMPLOYEE COMPENSATION Employee's remuneration shall be as set forth in Schedule A attached to this Agreement and incorporated herein. C. EMPLOYEE CONDUCT As Senior Vice President, Distribution and Systems, Employee recognizes and understands his fiduciary relationship with and responsibilities to Employer and Employee therefore promises to act always in good faith and in the best interests of Employer in the discharge of his duties and obligations. Further, Employee agrees to devote his full time and efforts to his employment with Employer. Should Employee during the term of this Agreement fail to so devote his full working time and efforts to the benefit of Employer for any reason other than illness or disability, or should he engage in any activity or enterprise competing or conflicting with the business or activities of Employer, its subsidiaries, partners, or agents, or should he engage in any illegal or criminal conduct or acts of insubordination or moral turpitude (such as fornication, adultery, theft, embezzlement and/or fraud), or should he violate any of the terms and provisions of Paragraph D hereunder, then Employer at its sole discretion, may terminate the employment of Employee immediately and all Employee's rights hereunder shall end upon such termination by Employer, and Employee's only rights hereunder in such event shall be to receive all salary accrued through the date of termination. 2 D. CONFIDENTIAL CLAUSES AND NON-COMPETITION AGREEMENT Employee further agrees as follows: (1) During Employment by Employer: Confidential Information Employee recognizes and acknowledges that there are certain trade secrets related to Employer's Bible, book, gift, music and audio/video businesses including, but not limited to, the names, royalties, account information and/or business relationships pertaining to Employer's artists, authors, writers, customers, and manufacturers, as well as certain information related to manufacturing schedules and procedures, new products, future plans, marketing practices, sales volumes of various products, and other items of Employer's businesses not specifically mentioned herein. Employee recognizes and understands that he holds a position of fiduciary privilege, and except as authorized in writing by Employer, he agrees during the term of this Agreement and thereafter to refrain from disclosing to any person, firm, corporation, partnership, association or other business entity, or to use for his own benefit, any trade secrets, unique business information, plans, products, manufacturing data, customer lists, author and artist lists, or any other confidential information relating to any and all ongoing business activities of Employer, or its parent company, or its subsidiaries, the disclosure of which he knows, or in the exercise of reasonable care should have reason to know, may, can, or will be damaging or harmful to Employer's business activities or those of its parent company, subsidiaries, or which disclosure shall serve to direct or divert corporate opportunities, product sales, and/or profits away from Employer, its parent company, its subsidiaries, partners, or agents, to the person, firm, corporation, partnership, association, or the given entity to whom or to which such disclosure is made. (2) Subsequent to Termination of Employment: Non-Competition It is understood and agreed that upon Employee's termination, Employee may seek employment with a company engaged in distribution of goods which activity shall not be considered as competitive with Employer's business. Notwithstanding the foregoing, Employee agrees that for a period extending two (2) years from the date of 2 3 Employee's termination with Employer for any reason: (i) He will not negotiate or enter into any contract with any songwriter, recording artist author, writer, editor, designer, packager other person who, at the time of termination, is under contract to Employer, or its subsidiaries, or with whom Employer or its subsidiaries is negotiating at such time, or with whom Employer or any of its subsidiaries enters into any contract or agreement during the non-compete period hereunder. Employee further agrees not to negotiate or enter into contract with any of the above persons for a period of two (2) years following the expiration of any such person's contract with Thomas Nelson or any of its subsidiaries. (ii) He will not attempt to procure, nor encourage others to procure the employment of any employees of Employer or its subsidiaries who are employed at the time of execution hereof or such employees as may become employed by Employer or any of its subsidiaries during the non-compete period hereunder. (iii) He will not engage in publishing, producing or distributing Bibles, religious books, religious music, religious audio/video product, or religious or secular gift and stationery products, nor divert to other companies any recording artists, songwriters, authors, writers, editors, designers, packagers, or any other person under contract with Employer or its subsidiaries or with whom Employer is negotiating at the time of termination, in any geographical region in which Employer or any of its subsidiaries conduct such business or sell such Products both as of the time of execution hereof and throughout the noncompete period hereunder. (iv) He agrees never to make, utter, write, nor otherwise publish derogatory or defamatory statements which can, may, or do cause harm, whether intended or not, to the relationship between Employer or its parent and any of its customers, personnel, producers, artists, authors, or writers. E. REMEDIES Employee acknowledges that he will receive privileged information from Employer during his employment and that he 3 4 will have substantial access to Employer's trade secrets, business information and personnel data. In consideration of his employment and the privilege of access to Employer's trade secrets, information, business methods and personnel data, Employee acknowledges that the restrictions contained within Paragraph D are reasonable and necessary in order to preserve Employer's legitimate interests and that any violation thereof would result in irreparable injury to Employer for which monetary damages would be an inadequate remedy. Therefore, Employee acknowledges and agrees that in the event of any violations thereof, Employer may seek from any court of competent jurisdiction preliminary and permanent injunctive relief as well as an equitable accounting of all Employee's profits or benefits arising out of such violation, which rights shall be cumulative and in addition to any other action or remedies to which Employer may be entitled. In the event that any Non-Competition provision of this Agreement shall be held by a court of competent jurisdiction to be, in any respect, an unreasonable restriction of Employee, then the court so holding may reduce the territory to which it pertains and/or the period of time to which it operates or affect any other change to the extent necessary to render the Non-Competition provisions and the Non-Disclosure of Information provisions of this Contract enforceable by the said court. F. WAIVERABILITY OF PROVISIONS In case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected nor impaired thereby and such provisions shall be enforced to the fullest extent possible in accordance with the mutual intent of the parties hereto. G. NON-WAIVER AGREEMENT No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and is signed by the Employee and an executive officer of Employer. No waiver by either party hereto of the other party's compliance with, or breach of, any condition or provision herein to be performed by said party shall constitute a simultaneous waiver of any other terms, provisions or conditions herein nor shall such waiver by either party constitute a continuing waiver of said pertinent term, provision, or condition subsequent thereto unless such continuation of waiver is agreed to in writing by the parties pursuant to the terms of this paragraph. 4 5 H. WARRANTIES AND REPRESENTATION This Agreement, including attachments, contains the entire agreement between the parties hereto and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. I. APPLICABLE LAW The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee. Agreement is made and entered into this 22nd day of December, 1994. ACCEPTED BY: THOMAS NELSON, INC. /s/ Raymond T. Capp By: /s/ Sam Moore - ---------------------------------- ------------------------------- Name: Sam Moore ----------------------------- Title: CEO ---------------------------- 5 EX-11 7 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS
March 31, 1995 March 31, 1994 March 31, 1993 -------------- -------------- -------------- Primary Earnings Per Share: Weighted average shares outstanding 13,374,301 13,355,416 13,268,564 =========== =========== =========== Net Income $11,710,000(1) $ 9,081,134 $ 6,281,773 =========== =========== =========== Earnings Per Share (2) $ .88 $ .68 $ .47 =========== =========== =========== Fully Diluted Earnings Per Share: Weighted average shares outstanding 13,374,301 13,355,416(3) 13,268,564(3) Convertible notes 3,235,000 Dilutive stock options - based on treasury stock method using the year-end market price, if higher than the average market price 111,320 118,014 110,812 ----------- ----------- ----------- Total Shares 16,720,621 13,473,430 13,379,376 =========== =========== =========== Net Income $11,710,000 $ 9,081,134 $ 6,281,773 =========== =========== =========== Earnings Per Share $ .83 $ .67 $ .47 =========== =========== ===========
(1) Adjusted for interest expense on 5 3/4% Convertible Subordinated Notes (the "Notes"). (2) Does not include dilutive effects of stock options due to immaterially. (3) Assumed conversion of the Notes is antidilutive and thus not considered for the years ended March 31, 1994 and March 31, 1993. EX-13 8 THOMAS NELSON, INC. ANNUAL REPORT 1
EXHIBIT 13 SELECTED FINANCIAL DATA YEARS ENDED March 31, 1995 1994 1993(a) 1992 1991 (Dollars in thousands, except per share data) - -------------------------------------------------------------------------------------------------------------- OPERATING RESULTS(b) Net revenues $ 265,107 $ 226,434 $ 143,072 $ 98,582 $ 80,481 Operating income 26,037 19,968 12,186 9,514 7,873 Net income 11,710 9,081 6,282 5,824 4,406 - -------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION(b) Total assets $ 249,869 $ 216,325 $ 194,850 $ 79,726 $ 61,246 Working capital 129,441 104,539 82,711 44,582 33,145 Long-term debt and other non-current liabilities 122,954 107,684 100,070 11,074 15,292 Shareholders' equity 72,729 62,725 55,292 49,043 27,017 Current ratio 3.4 3.3 3.1 3.3 2.8 Long-term debt to total capitalization 62.8% 63.1% 64.4% 18.4% 36.1% - -------------------------------------------------------------------------------------------------------------- PER SHARE DATA(b,c) Net income per share $ .88 $ .68 $ .47 $ .47 $ .42 Dividends declared per share .136 .128 .117 .085 .085 Book value per share 5.42 4.70 4.14 3.70 2.47 Weighted average number of shares outstanding 13,374,000 13,355,000 13,268,000 12,500,000 10,565,000 - --------------------------------------------------------------------------------------------------------------
(a) Includes Word, Incorporated operations subsequent to acquisition on November 30, 1992. (b) All financial information has been restated to reflect the pooling of interests with PPC, Inc. (c) Per share data has been restated for stock dividends. 12 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- OVERVIEW During the last three fiscal years, the Company's net revenues have grown at a compound annual rate of approximately 39%. This growth in net revenues has resulted from increased sales of the existing product lines and through the development and acquisition of new product lines. In November 1992, the Company acquired Word, Incorporated ("Word") for approximately $72 million in cash, and in March 1994 acquired all the outstanding shares of PPC, Inc. ("Pretty Paper") in exchange for the issuance of 115,551 shares of the Company's Common Stock. The acquisition of Word was accounted for using the purchase method of accounting with the excess of the purchase price over the fair value of the net assets acquired allocated to goodwill of approximately $31 million. The combination with Pretty Paper was accounted for as a pooling of interests. See Note B of Notes to Consolidated Financial Statements. As a result of the acquisition of Word and the further development of the combined product lines, there has been a shift in the Company's product revenue mix with each of music and book products contributing a larger percentage of the Company's net revenues than Bible products. The broader mix of products has also enabled the Company to expand its distribution channels from bookstores to mass market accounts, direct marketing programs, gift stores and specialty retail stores. The acquisition of Pretty Paper expanded the Company's gift product lines and distribution network, which enabled the gift division to grow significantly in fiscal 1995. This shift in sales mix and distribution channels has positively impacted the Company's gross profit, as a percentage of net revenues, in each of fiscal 1994 and fiscal 1995. In particular, the increase in music and book products has enabled the Company to increase sales through direct marketing. Sales through direct marketing typically produce a higher gross margin than sales through other distribution channels. The increase in the Company's gross margins resulting from these factors has been partially offset by increased sales to mass merchandisers. These customers typically earn volume discounts due to the significantly larger quantities purchased as compared to the typical bookstore, however, sales to mass merchandisers have relatively lower selling and marketing costs than sales through other distribution channels. The following table sets forth for the periods indicated certain selected income statement data of the Company expressed as a percentage of net revenues and the percentage change in dollars of such data from the prior fiscal year. 13 3 RESULTS OF OPERATIONS 1995 COMPARED TO 1994. Net revenues for fiscal 1995 increased by $38.7 million or 17.1% over fiscal 1994 primarily due to volume increases arising from the introduction of new products in each of the Company's product lines. Net revenues increased for fiscal 1995 over fiscal 1994 in each of the Company's product lines as follows: music products increased by $16.7 million or 22.9%; book products increased by $9.9 million or 12.9%; Bible products increased by $5.3 million or 10.0%; and gift products increased by $5.4 million or 27.1%. Price increases did not have a material effect on net revenues. The Company's cost of goods sold in fiscal 1995 increased by $18.4 million or 16.0% over fiscal 1994 and, as a percentage of net revenues, decreased slightly to 50.4% in fiscal 1995 from 50.9% in fiscal 1994. The slight decrease in cost of goods sold, as a percentage of net revenues, resulted from a change in the mix of product types and distribution channels. During fiscal 1995, the Company derived a greater percentage of its net revenues from direct marketing which typically have higher gross margins than sales through other distribution channels, and higher music sales as a percentage of total sales, which also have greater gross margins than other product types. Selling, general and administrative expenses for fiscal 1995 increased by $14.0 million or 15.6% over fiscal 1994. These expenses, expressed as a percentage of net revenues, decreased slightly to 39.1% in fiscal 1995 from 39.6% in fiscal 1994 primarily as a result of volume increases and from cost savings resulting from the consolidation of certain operational departments. This improvement was partially offset by increased sales through direct marketing programs, which have relatively higher selling and marketing costs than sales through other distribution channels. Other income for fiscal 1995 increased $0.7 million over fiscal 1994 due to a gain on the sale of substantially all of the assets of a bindery plant in Camden, New Jersey. See Note B of Notes to Consolidated Financial Statements. Interest expense for fiscal 1995 increased $1.7 million or 24.4% over fiscal 1994 due to increased borrowings and an increase in interest rates. The Company's effective tax rate in fiscal 1995 was 36.2% as compared to 34.2% for fiscal 1994. This increase resulted from an increase in the statutory federal tax rate and proportionately more income in states and foreign countries with higher effective tax rates. See Note M of Notes to Consolidated Financial Statements. 1994 COMPARED TO 1993. Net revenues for fiscal 1994 increased $83.4 million or 58.3% over fiscal 1993. This increase was due to volume increases associated with the acquisition of Word, whose results of operations were included in all of fiscal 1994 as compared to four months in fiscal 1993, as well as the introduction of new products and distribution channels. Net revenues increased for fiscal 1994 over 1993 in each of the Company's product lines as follows: music products increased by $47.7 million or 188.1%; book products increased by $28.5 million or 58.7%; Bible products increased by $5.9 million or 12.4%; and gift products increased by $1.3 million or 7.2%. Price increases did not have a material effect on net revenues. The Company's cost of goods sold in fiscal 1994 increased by $40.2 million or 53.7% over fiscal 1993 and, as a percentage of net revenues, decreased to 50.9% in fiscal 1994 from 52.4% in fiscal 1993. The decrease in cost of goods sold, as a percentage of net revenues, resulted from changes in the mix of products and distribution channels as well as improved purchasing power as a result of the combined operations of the Company and Word. Selling, general and administrative expenses for fiscal 1994 increased by $34.5 million or 62.4% over fiscal 1993. These expenses, expressed as a percentage of net revenues, increased to 39.6% in fiscal 1994 from 38.6% in fiscal 1993. These increases were primarily due to changes in the mix of prod- 14 4 ucts and distribution channels from the prior year and Word's higher selling, general and administration expenses as a percentage of net revenues. Amortization of goodwill and non-compete agreements in fiscal 1994 increased by $0.9 million over fiscal 1993 due to the acquisition of Word. Interest expense in fiscal 1994 increased by $3.9 million over fiscal 1993 due to increased borrowings used for working capital needs and a full year of borrowings incurred in connection with the acquisition of Word, compared to four months in fiscal 1993. The Company's effective tax rate in fiscal 1994 was 34.2% as compared to 32.7% in fiscal 1993. This increase resulted from an increase in the statutory federal tax rate, proportionately more income in states and foreign countries with higher effective tax rates, and additional non-deductible goodwill amortization as a result of the acquisition of Word. See Note M of Notes to Consolidated Financial Statements.
Fiscal Year to Year Year Ended March 31, Increase ----------------------------------------- -------------------------- 1995 1994 1993 1994 to 1995 1993 to 1994 ------------ ------------ ----------- ------------ ------------ (%) (%) (%) (%) (%) Net revenues Publishing: Book 32.8 34.0 33.9 12.9 58.7 Bible 22.0 23.5 33.0 10.0 12.4 ------------ ------------ ----------- Total publishing 54.8 57.5 66.9 11.7 35.9 Music 33.8 32.2 17.7 22.9 188.1 Gift 9.6 8.8 13.0 27.1 7.2 Other 1.8 1.5 2.4 38.7 0.9 ------------ ------------ ----------- Total net revenues 100.0 100.0 100.0 17.1 58.3 Expenses: Cost of goods sold 50.4 50.9 52.4 16.0 53.7 Selling, general and administrative expenses 39.1 39.6 38.6 15.6 62.4 Amortization of goodwill and non-compete agreements 0.7 0.7 0.5 11.8 125.1 ------------ ------------ ----------- Total expenses 90.2 91.2 91.5 15.8 57.7 ------------ ------------ ----------- Operating income 9.8 8.8 8.5 30.4 63.9 Income before income taxes 6.9 5.9 6.5 38.0 42.4 Income before cumulative effect of accounting change 4.4 3.9 4.4 33.9 39.2 Net income 4.4 4.0 4.4 28.9 44.6
The Company's net revenues fluctuate seasonally, with net revenues in the second and third fiscal quarters historically being greater than those in the first and fourth fiscal quarters. This seasonality is the result of increased consumer purchases of the Company's products during the traditional year-end holidays. Due to this seasonality, the Company has historically incurred a loss during the first quarter of each fiscal year. In addition, the Company's quarterly operating results may fluctuate significantly due to the seasonality of new product introductions, the timing of selling and marketing expenses and changes in sales and product mixes. See Note N of Notes to Consolidated Financial Statements. 15 5 LIQUIDITY AND CAPITAL RESOURCES The primary sources of liquidity to meet the Company's future obligations and working capital needs are cash generated from operations and borrowings available under bank credit facilities. At March 31, 1995, the Company had working capital of $129.4 million. At March 31, 1995, the Company had $58.8 million outstanding, and $46.2 million available for borrowing, under its credit facilities. Net cash used in operating activities was $9.0 million, $0.3 million and $1.3 million in fiscal 1995, 1994 and 1993, respectively. The increase in cash used in operations during fiscal 1995 was principally attributable to the increase in accounts receivable and prepaid expenses. Net accounts receivable increased by $27.1 million primarily as a result of a 31.7% increase in net revenues in the fourth quarter of fiscal 1995 as compared to the prior year period and increased sales through those distribution channels which typically have slightly longer payment periods for receivables. Prepaid expenses increased by $9.3 million principally because of increased royalty advances and advance production costs related to the signing and re-signing of certain key authors and artists during the year and an increase in direct marketing sales, which resulted in an increase in prepaid direct marketing costs in connection with the addition of new club members. As a result of the Company's focus on inventory management, inventories increased by only $2.4 million in fiscal 1995, which did not materially impact the Company's working capital requirements. During fiscal 1995, capital expenditures totaled approximately $2.2 million. The majority of this amount related to capital expenditures for computer equipment and leasehold improvements. In fiscal 1996, the Company anticipates capital expenditures of approximately $3 million, consisting of warehouse improvements and purchases of in-store promotional fixtures and computer equipment. The credit facilities are unsecured and consist of a $100 million facility and a $5 million facility. Balances outstanding under the $100 million credit facility at May 31, 1997 will be converted into a four-year term loan payable in equal quarterly principal installments thereafter. The $100 million credit facility bears interest at either the prime rate or, at the Company's option, LIBOR plus 1.50%, subject to adjustment based on certain financial ratios. The $5 million credit facility, bears interest at the prime rate and matures on July 31, 1996. Under the terms of the credit facilities, the Company has agreed to limit the payment of dividends and to maintain certain interest coverage, fixed charge coverage and debt-to-total capital ratios. Due to the seasonality of the Company's business, borrowings under the credit facilities typically peak during the third quarter of the fiscal year. The Company also has outstanding $55 million of 5 3/4% Convertible Subordinated Notes due November 30, 1999. The notes presently are convertible into Common Stock at $17.00 per share and are redeemable at the Company's option on or 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 facilities will be sufficient to fund anticipated working capital requirements for existing operations through fiscal 1996. The Company, however, may seek to raise additional equity capital through a public or private offering in order to build its equity base in anticipation of expected growth and development opportunities over the next several years. 16 6 CONSOLIDATED STATEMENTS OF INCOME - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries
(In thousands, except per share data) Years Ended March 31, -------------------------------------------------------- 1995 1994 1993 ----------------- ---------------- ---------------- Net revenues $ 265,107 $ 226,434 $ 143,072 Cost of goods sold 133,650 115,201 74,975 ----------------- ---------------- ---------------- Gross profit 131,457 111,233 68,097 Selling, general and administrative expenses 103,614 89,649 55,193 Amortization of goodwill and non-compete agreements 1,806 1,616 718 ----------------- ---------------- ---------------- Operating income 26,037 19,968 12,186 Other income 897 227 178 Interest expense 8,585 6,903 3,027 ----------------- ---------------- ---------------- Income before income taxes 18,349 13,292 9,337 Provision for income taxes 6,639 4,547 3,055 ----------------- ---------------- ---------------- Income before cumulative effect of change in accounting principle 11,710 8,745 6,282 Cumulative effect of change in accounting principle for income taxes -- 336 -- ----------------- ---------------- ---------------- NET INCOME $ 11,710 $ 9,081 $ 6,282 ================= ================ ================ Weighted average number of shares outstanding 13,374 13,355 13,268 ================= ================ ================ NET INCOME PER SHARE: Income before cumulative effect of change in accounting principle $ .88 $ .65 $ .47 Cumulative effect of change in accounting principle -- .03 -- ----------------- ---------------- ---------------- Net income $ .88 $ .68 $ .47 ================= ================ ================ Fully Diluted-- Income before cumulative effect of change in accounting principle $ .83 $ .65 $ .47 Cumulative effect of change in accounting principle -- .02 -- ----------------- ---------------- ---------------- Net income $ .83 $ .67 $ .47 ================= ================ ================
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17 7 CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries
(Dollars in thousands, except per share data) March 31, ------------------------------------ 1995 1994 ---------------- ---------------- ASSETS Current assets Cash and cash equivalents $ 779 $ 788 Accounts receivable, less allowances of $9,029 and $8,916, respectively 85,100 58,038 Inventories 69,351 66,994 Prepaid expenses 20,683 11,400 Deferred tax asset 7,714 13,235 ---------------- ---------------- Total current assets 183,627 150,455 Other assets 14,688 12,054 Property, plant and equipment, net 16,226 17,359 Deferred charges 4,149 4,179 Goodwill, less accumulated amortization of $2,046 and $1,087, respectively 31,179 32,278 ---------------- ---------------- TOTAL ASSETS $ 249,869 $ 216,325 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 32,419 $ 20,798 Accrued expenses 19,558 18,618 Dividends payable 537 428 Income taxes currently payable -- 4,471 Current portion of long-term debt 892 878 Current portion of capital lease obligations 780 723 ---------------- ---------------- Total current liabilities 54,186 45,916 Long-term debt 120,108 102,618 Capital lease obligations 80 861 Deferred tax liability 1,410 1,330 Other liabilities 1,356 2,875 Commitments and contingencies Shareholders' equity Preferred stock, $l.00 par value, authorized l,000,000 shares; none issued -- -- Common stock, $1.00 par value, authorized 20,000,000 shares; issued 12,362,377 and 9,891,233, respectively 12,362 9,891 Class B common stock, $l.00 par value, authorized 5,000,000 shares; issued 1,067,094 and 799,933, respectively 1,067 800 Additional paid-in capital 18,211 20,982 Retained earnings 40,538 30,651 Foreign currency translation adjustments 551 401 ---------------- ---------------- Total shareholders' equity 72,729 62,725 ---------------- ---------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 249,869 $ 216,325 ================ ================
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18 8 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries
(Dollars in thousands, except per share data) Foreign Class B Additional Currency Common Common Paid-in Retained Translation Deferred Stock Stock Capital Earnings Adjustments Compensation ------------ ------------ ------------ ------------ ------------- ------------ BALANCE AT MARCH 31, 1992 $ 6,565 $ 490 $ 23,349 $ 18,759 $ -- ($ 120) Net income 6,282 Common stock issued: Executive Stock Purchase Plan - 30,733 shares 30 554 Option plans - 29,519 common and 80,038 Class B common shares 30 80 260 Stock dividend - 50% 3,243 244 ( 3,496) Dividends declared - $0.117 ( 1,548) PPC, Inc. common stock dividends declared ( 30) Contributions to ESOP 120 Foreign currency translation adjustments 480 Class B common stock con- verted to common stock 9 ( 9) ----------- ----------- ----------- --------- ----------- ------------ BALANCE AT MARCH 31, 1993 9,877 805 20,667 23,463 480 -- Net income 9,081 Common stock issued: Option plans - 9,000 common 9 36 Dividends declared - $0.128 ( 1,696) PPC, Inc. common stock: Dividends declared ( 197) Net issued 279 Foreign currency translation adjustments ( 79) Class B common stock con- verted to common stock 5 ( 5) ----------- ----------- ----------- --------- ----------- ------------ BALANCE AT MARCH 31, 1994 9,891 800 20,982 30,651 401 -- Net Income 11,710 Common stock issued: Option plans - 10,500 common and 60,000 Class B common shares 11 60 306 Retirement for option payments 15,038 common and 180 Class B common shares (15) (348) Dividends declared - $0.136 (1,823) Executive Stock Purchase Plan Retired 2,255 shares of common (2) (26) Foreign currency translation adjustments 150 Stock dividend - 25% 2,471 213 (2,703) Class B common stock converted to common stock 6 (6) ----------- ----------- ----------- --------- ----------- ------------ BALANCE AT MARCH 31, 1995 $ 12,362 $ 1,067 $ 18,211 $ 40,538 $ 551 $ -- =========== =========== =========== ========= =========== ============
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19 9 CONSOLIDATED STATEMENTS OF CASH FLOWS - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries
(Dollars in thousands) Years Ended March 31, --------------------------------------------- 1995 1994 1993 -------------- ------------- ------------- Cash flows from operating activities: Net income $ 11,710 $ 9,081 $ 6,282 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 5,870 5,362 3,829 Deferred income taxes 5,601 ( 1,062) ( 273) Cumulative effect of change in accounting principle ( -- ) ( 336) ( -- ) Loss (gain) on sale of property, plant and equipment ( 702) 61 ( 6) Changes in assets and liabilities, net of acquisitions and disposals: Accounts receivable, net ( 27,011) ( 8,327) 3,930 Inventories ( 2,713) ( 13,025) ( 10,869) Prepaid expenses ( 9,234) ( 801) ( 3,734) Accounts payable and accrued expenses 11,945 3,516 1,295 Income taxes currently payable and deferred ( 4,471) 5,244 ( 1,734) -------------- ------------- ------------- Net cash used in operating activities ( 9,005) ( 287) ( 1,280) -------------- ------------- ------------- Cash flows from investing activities: Capital expenditures ( 2,245) ( 2,400) ( 4,952) Proceeds from sale of property, plant and equipment 23 34 20 Proceeds from sale of business assets 2,823 4,155 -- Purchase of net assets of acquired companies - net of cash received ( 187) -- ( 67,260) Changes in other assets and deferred charges ( 4,880) ( 5,867) ( 11,281) -------------- ------------- ------------- Net cash used in investing activities ( 4,466) ( 4,078) ( 83,473) -------------- ------------- ------------- Cash flows from financing activities: Borrowings under line of credit 18,300 9,298 25,741 Borrowings (payments) under construction and term loan ( 667) -- 3,123 Proceeds from issuance of long-term debt -- -- 55,000 Payments under industrial revenue bonds ( 225) ( 195) ( 190) Payments under capital lease obligations ( 723) ( 566) ( 372) Changes in other liabilities ( 1,646) ( 2,542) 1,592 Dividends paid ( 1,713) ( 1,888) ( 1,433) Proceeds from issuance of common stock 377 433 944 Common stock retired ( 391) ( 108) -- -------------- ------------- ------------- Net cash provided by financing activities 13,312 4,432 84,405 -------------- ------------- ------------- Effect of translation rate changes 150 ( 79) 480 -------------- ------------- ------------- Net increase (decrease) in cash and cash equivalents ( 9) ( 12) 132 Cash and cash equivalents at beginning of year 788 800 668 -------------- ------------- ------------- Cash and cash equivalents at end of year $ 779 $ 788 $ 800 ============== ============= ============= Supplemental disclosures of noncash investing and financing activities: Non-compete agreements $ -- $ 300 $ -- Capital lease obligations incurred to lease new equipment $ -- $ 764 $ 214 Contribution to ESOP using previously funded advances $ -- $ -- $ 120 Dividends accrued and unpaid $ 537 $ 428 $ 423
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 20 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries NOTE A-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The consolidated financial statements consist of the accounts of Thomas Nelson, Inc. and subsidiary companies (the "Company"). All intercompany transactions and balances have been eliminated. As discussed further in Note B, the Company acquired PPC, Inc. ("Pretty Paper Company") in a pooling-of-interests transaction in March 1994 and acquired Word, Incorporated ("Word") through a purchase effective November 30, 1992. All financial data presented in the consolidated financial statements and notes thereto have been restated for all periods shown to include the accounts of PPC, Inc. under the pooling-of- interests method of accounting. The consolidated statement of income for the year ended March 31, 1993, includes Word operations for the four months ended March 31, 1993. SALES RETURNS: Provision is made for the estimated effect of sales returns where right-of-return privileges exist. Returns of products from customers are accepted in accordance with standard industry practice. The full amount of the returns allowance (estimated returns to be received net of inventory and royalty costs) is shown, along with the allowance for doubtful accounts, as a reduction of accounts receivable in the accompanying financial statements. INVENTORIES: Inventories are stated at the lower of cost or market using the first-in, first-out (FIFO) valuation method. Costs of the production and publication of products are included in inventory and charged to operations when sold or when otherwise disposed. Costs of abandoned publishing projects and appropriate provisions for inventory obsolescence and decreases in market value are charged to operations on a current basis. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at cost. Depreciation and amortization are provided for principally on the straight-line method over the estimated useful lives of the individual assets. GOODWILL: Goodwill is being amortized on a straight-line basis over forty years. Subsequent to acquisitions, the Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of goodwill may warrant revision or that the remaining balance of goodwill may not be recoverable. In the evaluation of possible impairment, the Company uses the most appropriate method of evaluation given the circumstances surrounding the particular acquisition, which has generally been an estimate of the related business unit's undiscounted operating income before interest and taxes over the remaining life of the goodwill. PREPAID EXPENSES: Prepaid expenses consist primarily of royalty advances, certain production costs of music products, direct marketing costs, and production and distribution costs relating to marketing programs that are expected to benefit future periods. These costs are expensed over the expected benefit periods. 21 11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries DEFERRED CHARGES: Deferred charges consist primarily of loan issuance costs which are being amortized over the average life of the related debt. Also included are publication costs that are expected to be of significant benefit to future periods and other deferred charges, all of which are amortized over periods not to exceed 60 months. OTHER ASSETS: Other assets consist primarily of costs of copyright production masters which are amortized over periods not to exceed 60 months, a non-compete agreement related to the Word acquisition which is being amortized over 60 months (the term of the agreement) and prepaid royalty and production advances for works and projects which are not expected to be released within the next fiscal year. INCOME TAXES: Effective April 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred income taxes are provided for temporary differences in bases between financial statement and income tax assets and liabilities. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign subsidiaries are translated at year-end rates of exchange and revenues and expenses are translated at the average rate of exchange for the year. Gains and losses resulting from translation are accumulated in a separate component of shareholders' equity. Gains and losses resulting from foreign currency transactions are not material. 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. 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. Fully diluted earnings per share also reflect additional dilution related to stock options using the market price at the end of the period, when higher than the average price for the period. STATEMENT OF CASH FLOWS: For purposes of the statement of cash flows, the Company considers as cash equivalents all highly liquid debt instruments with a maturity of three months or less. RECLASSIFICATIONS: Certain reclassifications of prior period amounts have been made to conform to the current year's presentation. NOTE B-ACQUISITIONS AND DISPOSITIONS In March 1994, Pretty Paper Company became a wholly-owned subsidiary of the Company, and 115,551 shares of the Company's common stock were issued in exchange for all of the outstanding common stock of Pretty Paper Company. The combination was accounted for as a pooling of interests, and accordingly, the accompanying financial statements have been restated to include the accounts and operations of Pretty Paper Company for all periods prior to the combination. Pretty Paper Company had net revenues of $8.0 million and $5.6 million, and net income (loss) of $342,000 and ($74,000), for the fiscal years 1994 and 1993, respectively. Costs and expenses incurred in connection with this transaction were immaterial and have been charged to expenses in March 1994. In addition, certain shareholders of Pretty Paper Company entered into agreements not to compete with the Company for a period of five years from the date of the pooling in consideration of an aggregate of $300,000. 22 12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries Effective November 30, 1992, the Company consummated the acquisition of all of the issued and outstanding capital stock of Word. Word produces and distributes Christian recorded and printed music products, and also publishes Christian and inspirational books and Bibles. The purchase price of the capital stock was $68.4 million. The purchase price was funded by the Company's issuance of $55 million of 5 3/4% Convertible Subordinated Notes due in 1999 and by borrowings under the Company's credit facilities. The acquisition has been accounted for as a purchase, and Word's results of operations are included in the Company's consolidated financial statements since the date of acquisition. The total acquisition cost was allocated to the net assets acquired and adjusted in fiscal year 1994, primarily for the recognition of approximately $8 million in a deferred tax asset. There may be additional tax assets available in future years, however, at this time, the Company has not recorded these assets. Any related tax assets recorded in the future will result in an adjustment to goodwill. In addition, the seller entered into an agreement not to compete with the Company for a period of five years from the date of the acquisition for a payment of $3.6 million. Effective September 27, 1993, the Company sold certain assets of a subsidiary of Word for approximately $4.2 million, which was approximately book value. No gain or loss was recorded in connection therewith. On a combined basis, the Company and Word would have had unaudited pro forma net revenues of $223.2 million for fiscal 1993. In March, 1995 the Company sold substantially all of the assets of a bindery plant for $2.8 million. A $0.7 million gain on the sale is included in other income in the accompanying financial statements. NOTE C-INVENTORIES Inventories consisted of the following at March 31 (in thousands):
1995 l994 --------------- ---------------- Finished goods $ 59,116 $ 58,463 Work in process and raw materials 10,235 8,531 --------------- ---------------- $ 69,351 $ 66,994 =============== ================
NOTE D-PREPAID EXPENSES Prepaid expenses consisted of the following at March 31 (in thousands):
1995 1994 --------------- ---------------- Direct marketing costs $ 4,562 $ 2,650 Prepaid advertising 1,423 670 Royalties and production costs 11,516 7,096 Other 3,182 984 --------------- ---------------- $ 20,683 $ 11,400 =============== ================
23 13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries NOTE E-PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at March 31 (in thousands):
1995 l994 --------------- ---------------- Land $ 1,916 $ 1,933 Buildings 11,314 11,229 Machinery and equipment 8,959 8,171 Assets under capital leases 2,800 2,800 Furniture and fixtures 3,521 3,190 --------------- ---------------- 28,510 27,323 Less allowance for depreciation and amortization ( 12,284) ( 9,964) --------------- --------------- $ 16,226 $ 17,359 =============== ================
NOTE F-OTHER ASSETS Other assets consisted of the following at March 31 (in thousands):
1995 l994 --------------- ---------------- Prepaid royalties $ 9,050 $ 6,200 Production masters, net of accumulated amortization of $1,267 and $789, respectively 2,089 1,209 Non-compete agreements, net of accumulated amortization of $2,121 and $1,214, respectively 2,682 3,489 Other 867 1,156 --------------- ---------------- $ 14,688 $ 12,054 =============== ================
NOTE G-ACCRUED EXPENSES Accrued expenses consisted of the following at March 31 (in thousands):
1995 l994 --------------- ---------------- Accrued interest $ 1,247 $ 969 Accrued royalties 10,992 9,980 Accrued payroll 4,369 3,043 Other 2,950 4,626 --------------- ---------------- $ 19,558 $ 18,618 =============== ================
Cash payments for interest were $8.0 million in 1995, $6.2 million in 1994 and $2.4 million in 1993. NOTE H-LONG-TERM DEBT Long-term debt consisted of the following at March 31 (in thousands):
1995 1994 --------------- ---------------- Industrial Revenue Bonds, 7.65% to 8.35%, due through 2005 $ 2,700 $ 2,920 Loan Agreement 4,333 5,000 Credit Agreements 58,800 40,500 5.75% Convertible Subordinated Notes, due in 1999 55,000 55,000 Other 167 76 --------------- ---------------- 121,000 103,496 Less current portion ( 892) ( 878) --------------- ---------------- $ 120,108 $ 102,618 =============== ================
At March 31, 1995, Industrial Revenue Bonds were secured by property, plant and equipment with a net book value of approximately $2.3 million. 24 14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries The Loan Agreement indebtedness is secured by property, plant and equipment related to the warehouse and distribution center expansion completed in June 1992. Interest is at the London Interbank Offered Rate ("LIBOR") plus 1.25%, which was 7.4% at March 31, 1995. Semi-annual principal payments are due through March 2002. The Credit Agreements totaling $80 million were obtained in November 1992 from a group of banks, and increased in March, 1995 to $105 million. The primary credit facility provides for a $100 million facility, with any outstanding balance at May 31, 1997 converting to a term loan payable in 16 equal quarterly principal installments thereafter. This credit facility bears interest at either the prime rate or, at the Company's option, the LIBOR plus 1.5%, based on certain financial ratios. At March 31, 1995, the average interest rate was 8.0%. This facility is guaranteed by all of the Company's subsidiaries and the Company has agreed, among other things, to limit the payment of cash dividends to $1.6 million, plus 30% of the Company's cumulative consolidated net income earned after March 31, 1992, and to maintain certain interest coverage, fixed charge coverage, debt-to-total-capital ratios and working capital of at least $60 million. The maximum dividends which the Company may pay for fiscal 1996 would be $4.2 million. Additionally, the Company has a $5 million credit facility which matures July 31, 1996 and bears interest at the prime rate, with covenants which are the same as the $100 million facility. At March 31, 1995, the Company was in compliance with all covenants of the credit facilities. At March 31, 1995, the Company had $46.2 million available under its Credit Agreements. During November 1992, the Company issued $55 million of Convertible Subordinated Notes due November 30, 1999, priced at par to yield 5.75%. The notes are convertible into common stock initially at $17.00 per share and are redeemable at the Company's option on or after November 30, 1995, at 103.29% of the principal amount, declining thereafter to 100% on November 30, 1999. This conversion would result in 3,235,294 additional shares outstanding. Maturities of long-term debt for the years ending March 31, are as follows (in thousands): 1996 $ 892 1997 3,207 1998 15,092 1999 15,117 2000 70,117 2001 and thereafter 16,575 ------------- $ 121,000 =============
25 15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries NOTE I-LEASES Total rental expense for all operating leases, including short-term leases of less than a year, amounted to approximately $2.2 million in 1995, $2.2 million in 1994, and $1.0 million in 1993. Generally, the leases provide that, among other things, the Company shall pay for utilities, insurance, maintenance, and property taxes in excess of base year amounts. Minimum rental commitments under non-cancelable leases for the years ending March 31, are as follows (in thousands):
Operating Capital Leases Leases ------------- ------------- 1996 $ 2,419 $ 818 1997 2,058 51 1998 1,622 34 1999 1,103 -- 2000 495 -- 2001 and thereafter 2,103 -- ------------- ------------- Total minimum lease payments $ 9,800 903 ============= Less amount representing interest ( 43) ------------- Present value of net lease payments 860 Less current portion ( 780) ------------- $ 80 =============
NOTE J-STOCK PLANS EXECUTIVE STOCK PURCHASE PLAN OF 1986: The Company has adopted the Executive Stock Purchase Plan of 1986, which is administered by the Company's Compensation Committee. There were no offers of investment rights under the Executive Stock Purchase Plan of 1986 that required a contribution by the Company for fiscal 1995, 1994 and 1993. Under this plan, there were 99,186 shares of common stock and 371,809 shares of Class B common stock reserved at March 31, 1995. 1986 STOCK INCENTIVE PLAN: The Company has adopted the 1986 Stock Incentive Plan, which is administered by the Company's Compensation Committee. Stock options may be granted under the 1986 Stock Incentive Plan at a price not less than the fair market value ("FMV") of the stock on the date the option is granted and must be exercised not later than five years after the date of grant. Stock options issued to a person then owning more than 10% of the voting power in all classes of the Company's outstanding stock must be granted at a purchase price of not less than 110% of the FMV and exercised within five years from the date of grant. Shares reserved and options outstanding under this plan are as follows: 26 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries
COMMON STOCK CLASS B COMMON STOCK FMV --------------------------------- --------------------------------- ----------------- Remaining Remaining Shares Outstanding Shares Outstanding Exercise Reserved Optioned Reserved Optioned Prices For Grant Shares For Grant Shares Per Share ------------- ------------- ------------- ------------- ----------------- APRIL 1, 1992 30,000 59,000 126,700 103,700 $ 4.05 -$ 9.35 Stock Dividend 16,000 26,700 63,375 51,750 ( 1.35)-( 3.12) Exercised ( 28,462) ( 80,038) 2.70 - 5.00 Cancelled 10,738 ( 10,738) 412 ( 412) 2.70 - 5.00 ------------- ------------- ------------- ------------- ----------------- MARCH 31, 1993 56,738 46,500 190,487 75,000 5.00 - 6.23 Exercised ( 9,000) 5.00 Cancelled 1,500 ( 1,500) 5.00 ------------- ------------- ------------- ------------- ----------------- MARCH 31, 1994 58,238 36,000 190,487 75,000 5.00 - 6.23 Granted ( 60,238) 200,000 ( 189,762) 50,000 14.40 - 18.40 Stock Dividend 54,750 181 16,250 ( 1.00) - (1.83) Exercised ( 15,000) ( 60,000) 4.00 - 4.40 Cancelled 2,000 ( 2,000) -- 4.00 ------------- ------------- ------------- ------------- ----------------- MARCH 31, 1995 -- 273,750 906 81,250 $ 4.00 -$ 18.40 ============= ============= ============= ============= =================
1990 DEFERRED COMPENSATION OPTION PLAN FOR OUTSIDE DIRECTORS: The Company has adopted the 1990 Deferred Compensation Option Plan for Outside Directors. Options may be awarded, on or prior to the annual meeting of shareholders or on initial election to the Board of Directors ("Board"), to each Director of the Company who files with the Company an irrevocable election to receive options in lieu of not less than fifty percent (50%) of the retainer fees to be earned during each fiscal year. The option price shall be $1.00 per share with the number of shares being determined by dividing the amount of the annual retainer fee by the fair market value of the shares on the option date less $1.00 per share. The amount of annual retainer fee for options is expensed by the Company as earned. Options granted and outstanding under this plan are as follows:
COMMON STOCK ----------------------------- Remaining Shares Outstanding Reserved Optioned For Grant Shares ------------- ------------- APRIL 1, 1992 90,630 4,228 Stock Dividend 44,035 2,866 Exercised ( 1,057) Granted ( 2,560) 2,560 ------------- ------------- MARCH 31, 1993 132,105 8,597 Granted ( 3,840) 3,840 ------------- ------------- MARCH 31, 1994 128,265 12,437 Stock Dividend 31,023 4,153 Granted ( 4,175) 4,175 ------------- ------------- MARCH 31, 1995 155,113 20,765 ============= =============
27 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries 1992 EMPLOYEE STOCK INCENTIVE PLAN: In 1992, the Company's shareholders approved the 1992 Employee Stock Incentive Plan. Stock options, stock appreciation rights, restricted stock, deferred stock, stock purchase rights and other stock-based awards may be granted under this plan. There are 562,500 shares of common stock and 375,000 shares of Class B common stock reserved under this plan at fiscal year end. Restricted stock awards of 132,084 shares of common stock and 55,000 shares of Class B common stock were granted during fiscal 1995. Under the provision of the restricted stock awards, employees may earn 50% of the award in fiscal years 1995 and 1996 based upon achieving performance goals in each year provided the employee does not voluntarily terminate his or her employment for two years subsequent to when an award is earned. Due to the results of fiscal 1995, the Company will issue approximately 66,000 shares of common stock and recognize compensation of approximately $1.3 million over two years which is the period in which the risk of forfeiture lapses. NOTE K-RETIREMENT PLANS The Company has adopted an Employee Stock Ownership Plan ("ESOP") for all eligible officers and employees who are not covered under a profit-sharing plan established through collective bargaining. The Company matches 25% of each employee's 401(k) contributions annually and, in addition, may make retirement contributions to the ESOP at its discretion. Contributions to the ESOP including the Company's matching 401(k) contribution totaled $1.0 million, $0.9 million and $0.7 million in 1995, 1994 and 1993, respectively. NOTE L-COMMON STOCK On March 24, 1995, the Company effected a five-for-four stock split in the form of a 25% stock dividend. All common stock, Class B common stock, dividends per share and earnings per share data has been restated to reflect this five-for-four stock split. On September 30, 1992, the Company effected a three-for-two stock split in the form of a 50% stock dividend. All common stock, Class B common stock, dividends per share and earnings per share data has been restated to reflect this three-for-two stock split. 28 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries NOTE M-INCOME TAXES The summary below sets forth the components of the federal and state income tax provision (benefit) for the years ending March 31 (in thousands):
1995 1994 1993 ----------------- ----------------- ----------------- Current: Federal $ 97 $ 4,973 $ 3,051 State 839 417 313 Foreign 102 219 - ----------------- ----------------- ----------------- 1,038 5,609 3,364 Deferred 5,601 ( 1,062) ( 309) ----------------- ----------------- ---------------- Total $ 6,639 $ 4,547 $ 3,055 ================= ================= =================
The deferred income tax provision (benefit) is comprised of the following for the years ending March 31 (in thousands):
1995 1994 1993 --------------- --------------- --------------- Accelerated depreciation $ 176 $ 91 $ 88 Contributions ( 386) 48 147 Inventory reserve 2,100 ( 539) 246 Bad debt and return reserves 1,281 ( 468) ( 1,262) Inventory - tax over book 612 ( 588) ( 1,111) Advances and prepaid expenses 1,717 889 382 Deferred charges 95 ( 172) 573 Accrued liabilities 6 ( 323) 459 Other - - 169 --------------- --------------- --------------- $ 5,601 ($ 1,062) ($ 309) =============== =============== ==============
The effective income tax rate applicable to income differs from the U.S. federal income tax rate ("statutory rate") for the following reasons:
Percent of pre-tax income ------------------------------ 1995 1994 1993 ------------- ------------- ------------- Effective tax rate 36.2% 34.2% 32.7% State taxes on income ( 4.6 ) ( 3.1 ) ( 3.3 ) Other 2.9 3.1 4.6 ------------- ------------- ------------ Statutory rate 34.5% 34.2% 34.0% ============= ============= ============
The deferred tax asset consists primarily of temporary differences in inventory, accounts receivable, advances and prepaid expenses. The Company's federal income tax returns have been examined by the Internal Revenue Service for the fiscal years through 1987. 29 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries As discussed in Note A, the Company adopted SFAS No. 109 as of the beginning of fiscal 1994. The cumulative effect on the prior years of this change in accounting principle increased fiscal 1994 net income by $0.3 million, or $.03 per share, and is reported in the consolidated statements of income for the year ended March 31, 1994 as a cumulative effect of accounting change. Fiscal 1993 financial statements have not been restated to apply the provisions of SFAS No. 109. Cash payments for income taxes were $6.0 million, $0.4 million, and $3.4 million in 1995, 1994 and 1993, respectively. A Federal Income Tax receivable of approximately $0.9 million is included in current year consolidated prepaid expenses. NOTE N-QUARTERLY RESULTS (UNAUDITED) Summarized results for each quarter in the fiscal years ended March 31, 1995 and March 31, 1994 are as follows (dollars in thousands, except per share data):
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter ----------------- ----------------- ----------------- ---------------- 1995 - ---- Net revenues $ 49,103 $ 70,512 $ 71,086 $ 74,406 Gross profit $ 23,829 $ 35,165 $ 35,452 $ 37,011 Net income (loss) ($ 544) $ 5,623 $ 4,815 $ 1,816 Net income (loss) per share ($ .04) $ .42 $ .36 $ .14 1994 - ---- Net revenues $ 44,839 $ 64,363 $ 60,728 $ 56,504 Gross profit $ 21,877 $ 31,234 $ 29,450 $ 28,672 Net income (loss) ($ 829) $ 4,560 $ 3,823 $ 1,527 Net income (loss) per share ($ .06) $ .34 $ .29 $ .11
NOTE O-COMMITMENTS AND CONTINGENCIES The Company has commitments to provide advances to certain artists and authors in connection with products they are developing for the Company. Estimated commitments totalled $28 million at March 31, 1995. The timing of payments will be dependent upon the performance by the authors and artists of conditions provided in the applicable contracts. It is anticipated that a substantial portion of the commitments will be completed within the next three years. The Company is subject to various legal proceedings, claims and liabilities, which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. 30 20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries NOTE P-FINANCIAL INSTRUMENTS The following disclosure of estimated fair value of financial instruments as of March 31, 1995 is made in accordance with SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The estimated fair value amounts have been determined by the Company using available market information as of March 31, 1995 and 1994, respectively. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market transaction.
1995 1994 ---------------------------- ---------------------------- (Dollars in thousands) Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value ----------- ----------- ---------- ----------- CASH AND CASH EQUIVALENTS $ 779 $ 779 $ 788 $ 788 LONG-TERM DEBT: 5.75% Convertible Subordinated Notes $ 55,000 $ 65,450 $ 55,000 $ 65,450 Credit Agreements $ 58,800 $ 58,800 $ 40,500 $ 40,500 Loan Agreement $ 4,333 $ 4,333 $ 5,000 $ 5,000 Industrial Revenue Bonds $ 2,700 $ 2,700 $ 2,920 $ 2,920
The fair value of the 5.75% Convertible Subordinated Notes is based on the unofficial market for these privately placed instruments. The carrying value of the Company's Credit Agreements and Loan Agreement approximates the fair value. Due to the variable rate nature of the instruments, the interest rate paid by the Company approximates the current market rate demanded by investors; therefore, the instruments are valued at par. The carrying value of the Industrial Revenue Bonds approximates the fair value. Financial instruments which potentially subject the Company to credit risk consist primarily of trade receivables. Credit risk on trade receivables is minimized as a result of the large and diverse nature of the Company's customer base. 31 21 - -------------------------------------------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- Thomas Nelson, Inc. and Subsidiaries To the Shareholders and Board of Directors of Thomas Nelson, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheets of Thomas Nelson, Inc. and Subsidiaries (a Tennessee corporation) as of March 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1995. 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 financial statements referred to above present fairly, in all material respects, the financial position of Thomas Nelson, Inc. and Subsidiaries as of March 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1995 in conformity with generally accepted accounting principles. As explained in Note M to the financial statements, effective April 1, 1993, the Company changed its method of accounting for income taxes. ARTHUR ANDERSEN LLP Nashville, Tennessee May 19, 1995 32 22 OTHER FINANCIAL INFORMATION - -------------------------------------------------------------------------------- The common stock and Class B common stock are traded in the over-the-counter market on The Nasdaq National Market under the symbols TNEL and TNELB, respectively. The following table sets forth the high and low bid prices of the common stock and Class B common stock as reported on The Nasdaq National Market for the periods indicated. On September 30, 1992, a three-for-two stock split in the form of a 50% stock dividend was distributed to the shareholders. On March 24, 1995, a five-for-four stock split in the form of a 25% stock dividend was distributed to the shareholders. The historical per share prices have been adjusted to reflect the split. Subsequent to the fiscal year end, the common stock and Class B common stock began to trade on the New York Stock Exchange. Declaration of dividends is within the discretion of the Board of Directors of the Company. The Board considers the payment of dividends on a quarterly basis, taking into account the Company's earnings and capital requirements as well as financial and other conditions existing at the time. The declaration of dividends is subject to certain covenants contained in the Company's primary credit facility. (See Note H to the Consolidated Financial Statements.)
Common Class B Stock Common Stock -------------------------- -------------------------- Dividends Paid High Low High Low Per Share (a) ---------- ---------- ---------- ---------- ---------------- Fiscal l995 - ------------ First Quarter $ 17 5/8 $ 15 1/4 $ 17 5/8 $ 16 3/8 $ .032 Second Quarter 16 5/8 14 1/4 16 3/8 14 5/8 .032 Third Quarter 19 1/4 14 1/4 18 3/4 14 5/8 .032 Fourth Quarter 20 3/8 18 3/4 19 3/8 17 5/8 .032 ------------ $ .128 ============ Fiscal 1994 - ----------- First Quarter $ 14 3/8 $12 $ 14 $ 12 3/8 $ .032 Second Quarter 17 5/8 13 5/8 16 3/4 13 5/8 .032 Third Quarter 20 3/4 15 3/4 19 5/8 15 3/4 .032 Fourth Quarter 20 1/4 15 5/8 20 17 1/4 .032 ------------ $ .128 ============
(a) Does not include dividends of $.04 per share declared but not paid at March 31, 1995. As of May 19, 1995, the Company had approximately 1,145 and 874 shareholders of record of the common stock and the Class B common stock, respectively. 33 EX-21 9 SUBSIDIARIES OF THE COMPANY 1
EXHIBIT 21 SUBSIDIARIES OF THE COMPANY Percentage Jurisdiction of Ownership of Subsidiary Incorporation Capital Stock - ---------------------------------------------------------------------------------------------------------------- Word, Incorporated Delaware 100% Word Communications, Ltd. British Columbia, 100% Canada DMS Partners, LP Texas 100% Nelson Word ("U.K.") Limited United Kingdom 100% Editorial Caribe, Inc. Florida 100% PPC, Inc. North Carolina 100% American Bible Company, Inc. Tennessee 100% Morningstar Radio Network, Inc. Texas 80% DMS - GP, Inc. Texas 100% Word Direct Marketing Services, Inc. Delaware 100%
EX-23 10 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 10-K of our report dated May 19, 1995 included in Thomas Nelson, Inc.'s annual report to shareholders. In addition, we hereby consent to the incorporation of our reports incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement on Form S-8 (File No. 33-80086). /s/ Arthur Andersen LLP ----------------------- ARTHUR ANDERSEN LLP Nashville, Tennessee June 23, 1995 EX-27 11 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THOMAS NELSON, INC. FOR TWELVE MONTHS ENDED MARCH 31, 1995, AND IS QUAILIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR MAR-31-1995 APR-01-1994 MAR-31-1995 779 0 94,129 9,029 69,351 183,627 28,510 12,284 249,869 54,186 120,188 13,429 0 0 59,300 249,869 260,877 265,107 133,650 237,264 1,806 4,446 8,585 18,349 6,639 11,710 0 0 0 11,710 0.88 0.83
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