FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-4095
THOMAS NELSON, INC.
(Exact name of Registrant as specified in its charter)
Tennessee 62-0679364
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
Nelson Place at Elm Hill Pike, Nashville, Tennessee 37214-1000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 889-9000
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
At August 9, 1995, the Registrant had outstanding 15,245,973
shares of Common Stock and 1,085,825 shares of Class B Common
Stock.
<TABLE>
Part I
Item 1. Financial Statements
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30, March 31, June 30,
1995 1995 1994
----------- ---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 686 $ 779 $ 1,932
Accounts receivable, less
allowances of $7,919,
$9,029 and $7,606,
respectively 79,935 85,100 56,177
Inventories 76,564 69,351 70,052
Prepaid expenses 28,507 20,683 14,076
Deferred tax asset 7,714 7,714 12,673
--------- --------- ---------
Total Current Assets 193,406 183,627 154,910
PROPERTY, PLANT AND EQUIPMENT 29,824 28,510 26,550
Less accumulated depreciation ( 13,110) ( 12,284) ( 9,174)
--------- --------- ---------
16,714 16,226 17,376
OTHER ASSETS 15,328 14,688 14,927
DEFERRED CHARGES 3,857 4,149 4,009
GOODWILL 31,624 31,179 32,013
--------- --------- ---------
TOTAL ASSETS $ 260,929 $ 249,869 $ 223,235
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 29,943 $ 32,419 $ 19,131
Accrued expenses 15,382 19,558 17,034
Dividends payable 538 537 428
Current portion of long-term
debt 892 892 845
Current portion of capital
lease obligation 752 780 736
--------- --------- ---------
Total Current Liabilities 47,507 54,186 38,174
LONG-TERM DEBT 138,277 120,108 118,884
CAPITAL LEASE OBLIGATION 713 80 671
DEFERRED TAX LIABILITY 1,410 1,410 768
OTHER LIABILITIES 1,201 1,356 2,760
SHAREHOLDERS' EQUITY
Preferred stock, $1.00 par value,
authorized 1,000,000 shares;
none issued - - -
Common stock, $1.00 par value,
authorized 20,000,000 shares;
issued 12,370,579, 12,362,377
and 9,891,233 shares,
respectively 12,371 12,362 9,891
Class B common stock, $1.00 par
value, authorized 5,000,000
shares; issued 1,085,844,
1,067,094 and 799,933 shares,
respectively 1,086 1,067 800
Additional paid-in capital 18,192 18,211 20,982
Retained earnings 39,642 40,538 29,704
Foreign currency translation
adjustments 530 551 601
--------- --------- ---------
Total Shareholders' Equity 71,821 72,729 61,978
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 260,929 $ 249,869 $ 223,235
========= ========= =========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
<CAPTION>
Three Months Ended
June 30,
--------------------------
1995 1994
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
NET REVENUES $ 61,106 $ 49,103
EXPENSES:
Cost of goods sold 29,023 25,274
Selling, general and
administrative 29,591 22,382
Amortization of goodwill and
non-compete agreements 450 440
----------- -----------
Total 59,064 48,096
----------- -----------
OPERATING INCOME 2,042 1,007
Other (income) expense 49 ( 46)
Interest expense 2,561 1,917
----------- -----------
Loss before income taxes ( 568) ( 864)
Provision (benefit) for income taxes ( 210) ( 320)
----------- -----------
NET LOSS ($ 358) ($ 544)
=========== ==========
Weighted average number
of shares outstanding 13,567 13,364
=========== ==========
NET LOSS PER SHARE ($ 0.03) ($ 0.04)
=========== ==========
DIVIDENDS DECLARED PER SHARE $ 0.040 $ 0.032
=========== ==========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Three Months Ended June 30,
---------------------------
1995 1994
------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss ($ 358) ($ 544)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization 1,632 1,545
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable, net 5,166 2,361
Inventories ( 7,214) ( 2,759)
Prepaid expenses ( 7,824) ( 2,627)
Accounts payable and accrued expenses ( 6,652) ( 3,941)
Income taxes currently payable and
deferred - ( 4,506)
----------- -----------
Net Cash Used In Operating Activities ( 15,250) ( 10,471)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures ( 493) ( 488)
Purchase of net assets of acquired
companies - net of cash - ( 187)
Changes in other assets and deferred charges ( 1,633) ( 3,333)
----------- -----------
Net Cash Used in Investing Activities ( 2,126) ( 4,008)
----------- -----------
Cash Flows From Financing Activities:
Borrowings under line of credit 18,169 16,266
Payments under capital lease obligation ( 225) ( 176)
Dividends paid ( 537) ( 428)
Changes in other liabilities ( 155) ( 239)
Proceeds from issuance of common stock 135 -
Common stock retired ( 125) -
----------- -----------
Net Cash Provided by Financing Activities 17,262 15,423
----------- -----------
Effect of Translation Rate Changes on Cash 21 200
----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents ( 93) 1,144
Cash and Cash Equivalents at Beginning of
Period 779 788
----------- -----------
Cash and Cash Equivalents at End of Period $ 686 $ 1,932
========== ==========
Supplemental Disclosures of Non-cash
Investing and Financing Activities:
Dividends accrued and unpaid $ 538 $ 428
Capital lease obligations incurred to
lease new equipment $ 830 $ -
See Accompanying Notes
</TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited consolidated financial
statements reflect all adjustments (which are of a normal
recurring nature) that are,in the opinion of management,
necessary for a fair statement of the results for the interim
periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted
pursuant to SEC rules and regulations. The statements should be
read in conjunction with the Summary of Significant Accounting
Policies and notes to the consolidated financial statements
included in the Company's annual report for the year ended March
31, 1995.
The balance sheet and related information in these notes as
of March 31, 1995, have been taken from the audited consolidated
financial statements as of that date.
Note B - Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1995 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Finished goods $ 67,852 $ 59,116 $ 61,899
Raw materials and work
in process 8,712 10,235 8,153
---------- --------- ----------
$ 76,564 $ 69,351 $ 70,052
========== ========= ==========
</TABLE>
Note C - Prepaid Expenses
Prepaid expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1995 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Direct marketing costs $ 4,289 $ 4,562 $ 2,648
Prepaid advertising 1,948 1,423 580
Royalty and production
costs 17,120 11,516 9,428
Other 5,150 3,182 1,420
---------- --------- ----------
$ 28,507 $ 20,683 $ 14,076
========== ========= ==========
</TABLE>
Note D - Other Assets
Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1995 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Prepaid royalties $ 9,820 $ 9,050 $ 9,152
Copyright production
masters, net of
accumulated
amortization of $1,420,
$1,267 and $880,
respectively 2,268 2,089 1,279
Non-compete agreements,
net of accumulated
amortization of $2,349,
$2,121, and $1,437,
respectively 2,448 2,682 3,266
Other 792 867 1,230
---------- --------- ----------
$ 15,328 $ 14,688 $ 14,927
========== ========= ==========
</TABLE>
Note E - Accrued Expenses
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
June 30, March 31, June 30,
1995 1995 1994
-------- --------- --------
<S> <C> <C> <C>
Accrued interest $ 390 $ 1,247 $ 197
Accrued royalties 9,756 10,992 9,883
Accrued payroll 2,249 4,369 1,518
Other 2,987 2,950 5,436
---------- --------- ----------
$ 15,382 $ 19,558 $ 17,034
========== ========= ==========
</TABLE>
Note F - Cash Dividend
On May 24, 1995, the Company's directors declared a
cash dividend of $.04 per share of Common and Class B Common
Stock. The dividend is payable on August 14, 1995, to
shareholders of record on July 31, 1995.
Note G - Subsequent Event
On July 24, 1995 the Company sold 2,875,000 shares of
Common Stock at $20.00 per share to a group of underwriters
in a registered public offering. The net proceeds to the
Company of approximately $54.6 million will be used to
repay amounts outstanding under the Company's bank credit
facilities.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The table below 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 in such data from the prior fiscal year.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1995 1994 Increase
-------- ------- --------
<S> <C> <C> <C>
Net revenues:
Publishing
Book 35.5% 37.2% 18.9%
Bible 24.1% 22.3% 34.7%
-------- ------- --------
Total Publishing 59.6% 59.5% 24.8%
Music 30.4% 30.7% 23.1%
Gift 7.9% 8.4% 15.9%
Other 2.1% 1.4% 89.5%
-------- ------- --------
Total Revenues 100.0% 100.0% 24.4%
-------- ------- --------
Expenses:
Cost of goods sold 47.5 51.5 14.8%
Selling, general and
administrative 48.4 45.5 32.2%
Amortization of goodwill and
non-compete agreements 0.8 0.9 2.3%
-------- ------- --------
Total Expenses 96.7 97.9 22.8%
-------- ------- --------
Operating income 3.3 2.1 102.8%
Loss before income taxes (0.9) (1.8) -
Net Loss (0.6) (1.1) -
</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
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 new product
introductions, the timing of selling and marketing expenses
and changes in sales and product mixes.
Results of Operations
Net revenues for the first three months of fiscal
1996 increased by $12.0 million or 24.4% over the same
period in fiscal 1995. The increase was primarily due to volume
increases arising from the sales of previously released Bible
products and the introduction of new book and music products.
Price increases did not have a material effect on net revenues.
The Company's cost of goods sold for the first three months
of fiscal 1996 increased by $3.7 million or 14.8% over the
same period in fiscal 1995 and, as a percentage of net
revenues, decreased to 47.5% for the first three months of fiscal
1996 from 51.5% in the comparable period in fiscal 1995. The
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 the first three
months of fiscal 1996, 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 sales of proprietary
publishing and music products as a percentage of total sales
which also have greater gross margins than other product
types. In addition, the Company realized a current period
benefit in gross margins as a result of price increases, though
immaterial to net revenues, in anticipation of increasing
component costs while still selling from existing inventory.
Selling, general and administrative expenses for the
first three months of fiscal 1996 increased by $7.2 million or
32.2% over the same period in fiscal 1995. These expenses,
expressed as a percentage of net revenues, increased to 48.4% for
the first three months of fiscal 1996 from 45.5% in the same
period in fiscal 1995 primarily due to the increases in
salaries and benefits and selling and marketing costs.
These selling and marketing costs are related to the direct
marketing sales and sales of proprietary products referred
to above which have relatively higher selling and marketing
costs than sales of other distribution channels and product
types.
Interest expense for the first three months of fiscal
1996 increased by $0.6 million or 33.6% over the same period in
fiscal 1995 due to increased borrowings.
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 June 30, 1995, the Company had $77
million outstanding, and $28 million available for borrowing
under its credit facilities. As previously addressed,
seasonality has a major impact on the Company's revenues which
in turn have a direct bearing on the level of borrowings.
Subsequent to June 30, 1995, a substantial portion of the
borrowings under the credit facilities were paid with the $54.6
million of net proceeds from a stock offering referred to in
Note G - Subsequent Event.
During the first three months of fiscal 1996,
capital expenditures totaled approximately $1.3 million.
During the remainder of fiscal 1996, the Company
anticipates capital expenditures of approximately $2 million
primarily consisting of warehouse improvements and computer
equipment.
The Company believes cash generated by operations
and borrowings available through its bank credit facilities
will be sufficient to fund anticipated working capital
requirements for existing operations through the remainder of
fiscal 1996.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
Exhibit 27 - Financial Data Schedule
(b) No Form 8-K was filed by the Company during the
quarter ended June 30, 1995.
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.
(Registrant)
August 11, 1995 BY s/ Joe L. Powers
- ---------------------- ---------------------------
Joe L. Powers
Executive Vice President
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S 10-Q FOR THE PERIOD ENDED JUNE 30, 1995, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 686
<SECURITIES> 0
<RECEIVABLES> 87,854
<ALLOWANCES> 7,919
<INVENTORY> 76,564
<CURRENT-ASSETS> 193,406
<PP&E> 29,824
<DEPRECIATION> 13,110
<TOTAL-ASSETS> 260,929
<CURRENT-LIABILITIES> 47,507
<BONDS> 138,990
<COMMON> 13,457
0
0
<OTHER-SE> 58,364
<TOTAL-LIABILITY-AND-EQUITY> 260,929
<SALES> 60,182
<TOTAL-REVENUES> 61,106
<CGS> 29,023
<TOTAL-COSTS> 58,614
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 860
<INTEREST-EXPENSE> 2,561
<INCOME-PRETAX> (568)
<INCOME-TAX> (210)
<INCOME-CONTINUING> (358)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (358)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
