FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-4095
THOMAS NELSON, INC.
(Exact name of Registrant as specified in its charter)
Tennessee 62-0679364
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615)889-9000
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
At February 10, 1994, the Registrant had outstanding
9,898,940 shares of Common Stock and 794,003 shares of Class B
Common Stock.
<TABLE>
Part I
Item 1. Financial Statements
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31, March 31, December 31,
1994 1994 1993
____________ _________ ___________
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,564 $ 788 $ 2,714
Accounts receivable, less
allowances of $13,057,
$8,345 and $13,851
respectively 82,673 58,038 61,000
Inventories 65,468 66,994 59,763
Prepaid expenses 21,050 11,400 10,163
Deferred tax asset 12,673 12,673 12,703
_________ _________ _________
Total Current Assets 183,428 149,893 146,343
PROPERTY, PLANT AND EQUIPMENT 27,624 26,179 24,250
Less accumulated depreciation ( 10,624) ( 8,820) ( 7,710)
_________ _________ _________
17,000 17,359 16,540
OTHER ASSETS 12,772 12,054 10,586
DEFERRED CHARGES 3,530 4,179 4,359
GOODWILL 31,618 32,278 32,870
_________ _________ _________
TOTAL ASSETS $ 248,348 $ 215,763 $ 210,698
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 22,070 $ 20,798 $ 21,866
Accrued expenses 18,893 18,618 18,185
Dividends payable 428 428 423
Income taxes currently payable 5,050 4,471 3,678
Current portion of long-term
debt 892 878 1,189
Current portion of capital
lease obligation 765 723 710
_________ _________ _________
Total Current Liabilities 48,098 45,916 46,051
LONG-TERM DEBT 126,636 102,618 97,288
CAPITAL LEASE OBLIGATION 281 861 1,046
DEFERRED TAX LIABILITY 768 768 1,065
OTHER LIABILITIES 1,413 2,875 3,551
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par
value, authorized 1,000,000
shares; none issued - - -
Common stock, $1.00 par value,
authorized 20,000,000 shares;
issued 9,895,678, 9,891,233
and 9,882,221 shares,
respectively 9,896 9,891 9,882
Class B common stock, $1.00 par
value, authorized 5,000,000
shares; issued 795,233, 799,933
and 801,445 shares, respectively 795 800 801
Additional paid-in capital 20,963 20,982 20,953
Retained earnings 39,017 30,651 29,772
Foreign currency translation
adjustments 481 401 289
_________ _________ _________
Total Shareholders' Equity 71,152 62,725 61,697
_________ _________ _________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 248,348 $ 215,763 $ 210,698
========= ========= =========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
1994 1993 1994 1993
__________ __________ __________ __________
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 190,701 $ 169,930 $ 71,086 $ 60,727
COST AND EXPENSES:
Cost of goods sold 96,255 87,369 35,634 31,278
Selling, general and
administrative 71,394 65,169 25,251 21,577
Amortization of goodwill
and non-compete
agreements 1,197 1,188 320 200
__________ __________ __________ _________
Total 168,846 153,726 61,205 53,055
__________ __________ __________ _________
OPERATING INCOME 21,855 16,204 9,881 7,672
Other (income) expense ( 164) ( 140) ( 66) ( 78)
Interest expense 6,330 5,409 2,300 1,853
__________ __________ __________ _________
Income before income taxes 15,689 10,935 7,647 5,897
Provision for income taxes 5,795 3,717 2,832 2,074
__________ __________ __________ _________
Net income before
cumulative effect of
change in accounting
principle 9,894 7,218 4,815 3,823
Cumulative effect of change
in accounting principle
for income taxes 0 336 0 0
__________ __________ __________ _________
NET INCOME $ 9,894 $ 7,554 $ 4,815 $ 3,823
========== ========== ========== =========
Weighted average number
of shares outstanding 10,692 10,683 10,693 10,683
Fully-diluted 13,424 13,360 13,425 13,360
NET INCOME PER SHARE:
Before cumulative effect
of change in
accounting principle $ 0.93 $ 0.68 $ 0.45 $ 0.36
Cumulative effect of
change in accounting
principle 0.00 0.03 0.00 0.00
__________ __________ __________ __________
Net income per share $ 0.93 $ 0.71 $ 0.45 $ 0.36
========== ========== ========== ==========
Fully-diluted -
Before cumulative
effect of change in
accounting principle $ 0.85 $ 0.65 $ 0.40 $ 0.33
Cumulative effect of
change in accounting
principle 0.00 0.03 0.00 0.00
__________ __________ __________ __________
Net income per share $ 0.85 $ 0.68 $ 0.40 $ 0.33
========== ========== ========== ==========
DIVIDENDS DECLARED PER
SHARE $ 0.12 $ 0.12 $ 0.04 $ 0.04
========== ========== ========== ==========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Nine Months Ended December 31,
______________________________
1994 1993
(Unaudited) (Unaudited)
____________ ___________
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 9,894 $ 7,554
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization 4,451 4,273
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable, net ( 24,135) ( 11,266)
Inventories 1,825 ( 5,794)
Prepaid expenses ( 9,601) 436
Accounts payable and accrued expenses 822 4,252
Income taxes currently payable and
deferred 324 ( 4,680)
__________ __________
Net Cash Used In Operating Activities ( 16,420) ( 5,225)
__________ __________
Cash Flows From Investing Activities:
Capital expenditures ( 1,550) ( 836)
Proceeds from sale of property, plant
and equipment, excluding effects of
disposition ( 2) 32
Purchase of net assets of acquired
companies - net of cash ( 187) --
Proceeds from sales of business assets -- 4,155
Changes in other assets and deferred
charges ( 1,787) 2,941
__________ __________
Net Cash Used in Investing Activities ( 3,526) 6,292
__________ __________
Cash Flows From Financing Activities:
Borrowings under line of credit 24,350 4,154
Payments under warehouse construction
loans ( 333) --
Payments under industrial revenue bonds ( 75) ( 70)
Payments under capital lease obligation ( 537) ( 399)
Dividends paid ( 1,283) ( 1,268)
Changes in other liabilities ( 1,462) ( 1,666)
Proceeds from issuance of common stock 10 388
Common stock retired ( 28) ( 101)
__________ __________
Net Cash Provided by Financing Activities 20,642 1,038
__________ __________
Effect of Translation Rate Changes 80 ( 191)
__________ __________
Net Increase in Cash and Cash Equivalents 776 1,914
Cash and Cash Equivalents at Beginning of
Period 788 800
__________ __________
Cash and Cash Equivalents at End of Period $ 1,564 $ 2,714
========== ==========
Supplemental Disclosures of Non-cash
Investing and Financing Activities:
Dividends accrued and unpaid $ 428 $ 423
Capital lease obligation incurred
to lease new equipment $ 761
See Accompanying Notes
</TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(A) - Basis of Presentation
The accompanying unaudited consolidated financial statements
reflect all adjustments (which are of a normal recurring nature)
that are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to SEC
rules and regulations. The statements should be read in
conjunction with the Summary of Significant Accounting Policies
and notes to the consolidated financial statements included in
the Company's annual report for the year ended March 31, 1994.
The balance sheet and related information in these notes as of
March 31, 1994, have been taken from the audited consolidated
financial statements as of that date. Certain reclassifications
have been made to conform presentation of the fiscal 1994
Financial Statements with reclassifications made in fiscal 1995.
In March 1994, PPC, Inc. (Pretty Paper Company) became a
wholly-owned subsidiary of the Company through a pooling of
interest transaction, and accordingly financial statements have
been restated to include the accounts and operations of Pretty
Paper Company for all periods prior to the combination.
(B) - Inventories
Components of inventories consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, March 31, December 31,
1994 1994 1993
__________ _________ ___________
<S> <C> <C> <C>
Finished goods $ 57,767 $ 58,463 $ 55,034
Raw materials and work
in process 7,701 8,531 4,729
__________ __________ __________
$ 65,468 $ 66,994 $ 59,763
========== ========== ==========
</TABLE>
(C) - Prepaid Expenses
Components of prepaid expenses consisted of the following (in thousands):
<TABLE>
<CAPTION> December 31, March 31, December 31,
1994 1994 1993
__________ _________ ___________
<S> <C> <C> <C>
Direct marketing costs $ 4,711 $ 3,320 $ 2,145
Royalty advances &
production costs 14,135 7,096 6,077
Other 2,204 984 1,941
__________ __________ __________
$ 21,050 $ 11,400 $ 10,163
========== ========== ==========
</TABLE>
(D) - Other Assets
Components of other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31, December 31,
1994 1994 1993
__________ _________ ___________
<S> <C> <C> <C>
Prepaid royalties $ 6,621 $ 6,200 $ 6,190
Copyright production masters,
net of accumulated
amortization of $1,130,
$789 and $775, respectively 2,232 1,209 757
Non-compete agreements, net of
accumulated amortization of
$1,801, $1,214, and $1,040,
respectively 3,033 3,489 3,394
Other 886 1,156 245
__________ __________ __________
$ 12,772 $ 12,054 $ 10,586
========== ========== ==========
</TABLE>
(E) - Accrued Expenses
Components of accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31, December 31,
1994 1994 1993
__________ _________ ___________
<S> <C> <C> <C>
Accrued interest $ 404 $ 969 $ 222
Accrued royalties 12,394 9,980 10,419
Accrued payroll 2,071 3,043 2,444
Contractual commitments 1,603 1,626 1,174
Deferred subscriptions
revenues 549 699 837
Other 1,872 2,301 3,089
__________ __________ __________
$ 18,893 $ 18,618 $ 18,185
========== ========== ==========
</TABLE>
(F) - Cash Dividend
On May 24, 1994, the Company's directors declared a cash
dividend of $.04 per share of Common and Class B stock. The
dividend was paid August 15, 1994, to shareholders of record on
August 1, 1994.
On August 25, 1994, the Company's directors declared a cash
dividend of $.04 per share of Common and Class B stock. The
dividend was paid November 21, 1994, to shareholders of record on
November 7, 1994.
On November 22, 1994, the Company's directors declared a cash
dividend of $.04 per share of Common and Class B stock. The
dividend is payable February 15, 1995, to shareholders of record
on February 1, 1995.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The following table sets forth certain selected statements of
income data expressed as a percentage of net revenues and the
percentage change in dollars in such data from the prior fiscal
year.
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
___________________
Increase
1994 1993 (Decrease)
________ _______ ________
<S> <C> <C> <C>
Net revenues:
Bibles 21.4% 22.0% 9.2%
Books 33.1% 34.2% 8.5%
Gifts 8.8% 8.5% 20.6%
Music 34.9% 33.9% 15.8%
Other 1.8% 1.4% 14.5%
_______ _______ ______
Total 100.0% 100.0% 12.2%
Cost and expenses:
Cost of goods sold 50.5 51.4 10.2%
Selling, general and
administrative 37.4 38.4 9.6%
Amortization of goodwill and
non-compete agreements 0.6 0.7 0.8%
_______ _______ _______
Total 88.5 90.5 9.8%
_______ _______ _______
Operating income 11.5 9.5 34.9%
Income before income taxes 8.2 6.4 43.5%
Net income before
cumulative effect of change
in accounting principle 5.2 4.2 37.1%
Net income 5.2 4.4 31.0%
</TABLE>
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. In addition, the Company's
net revenues normally 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.
Results of Operations
Net revenues increased by $20.8 million, or approximately
12%, for the first nine months of fiscal 1995 and $10.4
million, or approximately 17%, for the third quarter of fiscal
1995 when compared to the comparable previous year period. The
increase was primarily due to volume increases arising from
the introduction of new book, gift, Bible and music
products. Price increases did not have a material effect on net
revenues.
The Company's cost of goods sold increased by $8.9 million
for the first nine months of fiscal 1995 and as a percentage
of net revenues decreased to 50.5% from 51.4% in the comparable
period in fiscal 1994. Cost of goods sold increased for the
third quarter of fiscal 1995 by $4.4 million, or approximately
14%, over the comparable period in fiscal 1994, and as a
percentage of net revenues decreased to 50.1% from 51.5% in the
comparable period in fiscal 1994. The decrease of cost of goods
sold, as a percentage of net revenues, was the result of changes
in the mix of product types and market channels where these
products are distributed. During this period gift and Bible
products which have lower gross margins than the Company's other
product lines contributed a greater portion of net revenues than
in the comparable prior period. In addition, during this period
the Company had a greater percentage of its net revenues derived
from sales to retail stores and mass merchandisers which have lower
gross margins than sales through direct marketing.
Selling, general and administrative expenses increased over
the previous comparable fiscal year period by $6.2 million for
the nine months, or approximately 10%, and for the quarter by
$3.7 million, or approximately 17%. These expenses as a
percentage of net revenues decreased to 37.4% for the first nine
months of fiscal 1995 from 38.4% in the comparable prior year
period primarily due to the decreases in salaries and benefits
as a percentage of revenues as a result of volume increase arising
from the introduction of new products. In addition, sales commissions,
as a percentage of revenues, decreased due to the increase in non-
commissioned revenues.
Amortization of goodwill and non-compete agreements
increased 1% from the prior nine months due to purchase price
adjustments relating to the acquisition of Word, Incorporated.
Interest expense increased 17% and 24% for the first nine
months and third quarter, respectively, over the prior year
period due to increased borrowings used for working capital needs
and higher interest rates.
Liquidity and Capital Resources
The primary sources of liquidity to meet the Company's
future obligations and working capital needs are the cash
generated by its operations, collections of its accounts
receivable, and the credit available pursuant to its $80
million credit facilities, that may be used for working capital
requirements and other business purposes. At December
31, 1994, the Company had approximately $15.2 million available
in long-term credit under its credit facilities. As previously
addressed, seasonality has a major impact on company revenues
which in turn have a direct bearing on the level of borrowings.
The Company believes that the current credit facilities will
provide for its obligations and working capital needs over the
next twelve months. With expanding operations and examining
possible business opportunities, the Company will look at
expanding its current credit facilities or seek to raise additional
capital through public or private financing.
During the nine months ended December 31, 1994, capital
expenditures totaled approximately $1.6 million. The Company
has no plans that will require significant capital expenditures
for the remainder of fiscal 1995.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
Exhibit 11 - Statement Regarding Computation of Per
Share Earnings for Period Ended
December 31, 1994
Exhibit 27 - Financial Data Schedule
(b) No Form 8-K was filed by the Company during the
quarter ended December 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Thomas Nelson, Inc.
(Registrant)
February 13, 1994 BY /s/ Joe L. Powers
____________________________ ________________________
Joe L. Powers
Vice President
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S 10-Q FOR THE PERIOD ENDED DECEMBER 31, 1994, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,564
<SECURITIES> 0
<RECEIVABLES> 95,730
<ALLOWANCES> 13,057
<INVENTORY> 65,468
<CURRENT-ASSETS> 183,428
<PP&E> 27,624
<DEPRECIATION> 10,624
<TOTAL-ASSETS> 248,348
<CURRENT-LIABILITIES> 48,098
<BONDS> 126,917
<COMMON> 10,691
0
0
<OTHER-SE> 60,461
<TOTAL-LIABILITY-AND-EQUITY> 248,348
<SALES> 187,969
<TOTAL-REVENUES> 190,701
<CGS> 96,255
<TOTAL-COSTS> 167,649
<OTHER-EXPENSES> 1,197
<LOSS-PROVISION> 2,680
<INTEREST-EXPENSE> 6,330
<INCOME-PRETAX> 15,689
<INCOME-TAX> 5,795
<INCOME-CONTINUING> 9,894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,894
<EPS-PRIMARY> 0.93
<EPS-DILUTED> 0.85
</TABLE>
<TABLE> EXHIBIT 11
THOMAS NELSON, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share data)
<CAPTION>
Nine Months Ended December 31,
______________________________
1994 1993
(Unaudited) (Unaudited)
___________ ___________
<S> <C> <C>
Earnings Per Share:
Weighted Average Shares Outstanding 10,692 10,683
=========== ==========
Net Income $ 9,894 $ 7,554
=========== ==========
Earnings Per Share: $ 0.93 $ 0.71
=========== ==========
Fully Diluted Earnings Per Share:
Weighted Average Shares Outstanding 10,692 10,683
Exercise of Subordinated Convertible
Bonds ($55,000,000 / $21.25) 2,588 2,588
Dilutive stock options - (1)
based on treasury stock method using
year-end market price, if higher than
average market price 144 89
___________ ___________
Total Shares 13,424 13,360
=========== ===========
Net Income (2) $ 11,471 $ 9,131
=========== ===========
Earnings Per Share $ 0.85 $ 0.68
=========== ===========
</TABLE>
(1) The effects of dilutive stock options on primary earnings have not been
presented because the impact is immaterial.
(2) Add back interest savings (net of tax) due to bond conversion.
