<PAGE> 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.
================================================================================
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Documents from which portions
Part of Form 10-K are incorporated by reference
- --------------------------------------------------- ------------------------------------------------------
<S> <C> <C>
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.
</TABLE>
2
<PAGE> 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:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------
1995 1994 1993
---------------- ---------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C>
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
======== ===== ======== ===== ======== =====
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
DATE FIRST PROPRIETARY
TRANSLATION PUBLISHED TO THE COMPANY
-------------------------------------------------------------- ---------- --------------
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 9
<TABLE>
<CAPTION>
Name Age Position with the Company
------------------- --- --------------------------------------------------
<S> <C> <C>
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
</TABLE>
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
<PAGE> 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:
<TABLE>
<CAPTION>
Square Annual Lease
Location Use Feet Rent Expiration
- ----------------------- ------------------------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
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)
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
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
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
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)*
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
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.
</TABLE>
____________________________
* Management contract or compensatory plan or arrangement
16
<PAGE> 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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/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
</TABLE>
17
<PAGE> 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
<PAGE> 19
THOMAS NELSON, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
ALLOWANCES FOR TRADE ACCOUNTS RECEIVABLE
------------------------------------------------------------
March 31, 1995 March 31, 1994 March 31, 1993
------------------------------------------------------------
Reserve for Sales Returns
------------------------------------------------------------
<S> <C> <C> <C>
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
========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
Reserve for Doubtful Accounts
------------------------------------------------------------
March 31, 1995 March 31, 1994 March 31, 1993
------------------------------------------------------------
<S> <C> <C> <C>
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
========== ========== ==========
</TABLE>
(1) Reserves acquired in connection with acquisitions - Word in 1993.
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number
- ------
<S> <C>
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)
</TABLE>
<PAGE> 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.
<PAGE> 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 -----------------------------
<PAGE> 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
<PAGE> 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:
<PAGE> 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:
------------------------------------
<PAGE> 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:
------------------------------------
<PAGE> 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:
<PAGE> 2
<TABLE>
<CAPTION>
Interest
Revolving Term Coverage Leverage
Loans Loans Ratio Ratio
--------- ----- -------- --------
<S> <C> <C> <C>
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
</TABLE>
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:
<PAGE> 3
<TABLE>
<CAPTION>
Interest
Revolving Term Coverage Leverage
Loans Loans Ratio Ratio
--------- ----- -------- --------
<S> <C> <C> <C>
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
</TABLE>
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.
<PAGE> 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:
----------------------------
<PAGE> 5
NATIONSBANK OF TEXAS, N.A.
By: /s/ David James
------------------------------
Title:
----------------------------
CREDITANSTALT - BANKVEREIN
By: /s/ Robert M. Biringer
------------------------------
Title:
----------------------------
By:
-------------------------------
Title:
----------------------------
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 1
EXHIBIT 11
STATEMENT RE-COMPUTATION OF
PER SHARE EARNINGS
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994 March 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
(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.
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 13
SELECTED FINANCIAL DATA
YEARS ENDED
March 31, 1995 1994 1993(a) 1992 1991
(Dollars in thousands,
except per share data)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<TABLE>
<CAPTION>
Fiscal Year to Year
Year Ended March 31, Increase
----------------------------------------- --------------------------
1995 1994 1993 1994 to 1995 1993 to 1994
------------ ------------ ----------- ------------ ------------
(%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 6
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
Thomas Nelson, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In thousands, except per share data)
Years Ended March 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
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
================= ================ ================
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17
<PAGE> 7
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Thomas Nelson, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
March 31,
------------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
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
================ ================
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18
<PAGE> 8
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Thomas Nelson, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(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
------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
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 $ --
=========== =========== =========== ========= =========== ============
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
Thomas Nelson, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands)
Years Ended March 31,
---------------------------------------------
1995 1994 1993
-------------- ------------- -------------
<S> <C> <C> <C>
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
</TABLE>
See NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20
<PAGE> 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
<PAGE> 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
<PAGE> 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):
<TABLE>
<CAPTION>
1995 l994
--------------- ----------------
<S> <C> <C>
Finished goods $ 59,116 $ 58,463
Work in process and raw materials 10,235 8,531
--------------- ----------------
$ 69,351 $ 66,994
=============== ================
</TABLE>
NOTE D-PREPAID EXPENSES
Prepaid expenses consisted of the following at March 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994
--------------- ----------------
<S> <C> <C>
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
=============== ================
</TABLE>
23
<PAGE> 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):
<TABLE>
<CAPTION>
1995 l994
--------------- ----------------
<S> <C> <C>
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
=============== ================
</TABLE>
NOTE F-OTHER ASSETS
Other assets consisted of the following at March 31 (in thousands):
<TABLE>
<CAPTION>
1995 l994
--------------- ----------------
<S> <C> <C>
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
=============== ================
</TABLE>
NOTE G-ACCRUED EXPENSES
Accrued expenses consisted of the following at March 31 (in thousands):
<TABLE>
<CAPTION>
1995 l994
--------------- ----------------
<S> <C> <C>
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
=============== ================
</TABLE>
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):
<TABLE>
<CAPTION>
1995 1994
--------------- ----------------
<S> <C> <C>
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
=============== ================
</TABLE>
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
<PAGE> 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):
<TABLE>
<S> <C>
1996 $ 892
1997 3,207
1998 15,092
1999 15,117
2000 70,117
2001 and thereafter 16,575
-------------
$ 121,000
=============
</TABLE>
25
<PAGE> 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):
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
------------- -------------
<S> <C> <C>
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
=============
</TABLE>
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
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Thomas Nelson, Inc. and Subsidiaries
<TABLE>
<CAPTION>
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
------------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
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
============= ============= ============= ============= =================
</TABLE>
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:
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------
Remaining
Shares Outstanding
Reserved Optioned
For Grant Shares
------------- -------------
<S> <C> <C>
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
============= =============
</TABLE>
27
<PAGE> 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
<PAGE> 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):
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ----------------- -----------------
<S> <C> <C> <C>
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
================= ================= =================
</TABLE>
The deferred income tax provision (benefit) is comprised of the following
for the years ending March 31 (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
--------------- --------------- ---------------
<S> <C> <C> <C>
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)
=============== =============== ==============
</TABLE>
The effective income tax rate applicable to income differs from the U.S.
federal income tax rate ("statutory rate") for the following reasons:
<TABLE>
<CAPTION>
Percent of pre-tax income
------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
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%
============= ============= ============
</TABLE>
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
<PAGE> 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):
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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.
<TABLE>
<CAPTION>
1995 1994
---------------------------- ----------------------------
(Dollars in thousands)
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
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
</TABLE>
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
<PAGE> 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
<PAGE> 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.)
<TABLE>
<CAPTION>
Common Class B
Stock Common Stock
-------------------------- -------------------------- Dividends Paid
High Low High Low Per Share (a)
---------- ---------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
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
============
</TABLE>
(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
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Percentage
Jurisdiction of Ownership of
Subsidiary Incorporation Capital Stock
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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%
</TABLE>
<PAGE> 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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-START> APR-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 779
<SECURITIES> 0
<RECEIVABLES> 94,129
<ALLOWANCES> 9,029
<INVENTORY> 69,351
<CURRENT-ASSETS> 183,627
<PP&E> 28,510
<DEPRECIATION> 12,284
<TOTAL-ASSETS> 249,869
<CURRENT-LIABILITIES> 54,186
<BONDS> 120,188
<COMMON> 13,429
0
0
<OTHER-SE> 59,300
<TOTAL-LIABILITY-AND-EQUITY> 249,869
<SALES> 260,877
<TOTAL-REVENUES> 265,107
<CGS> 133,650
<TOTAL-COSTS> 237,264
<OTHER-EXPENSES> 1,806
<LOSS-PROVISION> 4,446
<INTEREST-EXPENSE> 8,585
<INCOME-PRETAX> 18,349
<INCOME-TAX> 6,639
<INCOME-CONTINUING> 11,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,710
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.83
</TABLE>
