SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDED REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
January 19, 1996 (November 7, 1995)
Thomas Nelson, Inc.
- ----------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Tennessee 0-4095 62-0679364
- ----------------------------------------------------------------
(State or other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
Nelson Place at Elm Hill Pike
Nashville, Tennessee 37214
- ----------------------------------------------------------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code: 615/889-9000<PAGE>
1. This Form 8-K/A includes the financial information required
to be filed pursuant to Item 7 (Financial Statements and
Exhibits) of the Current Report on Form 8-K dated November
21, 1995 set forth under subheadings "(a) Financial
Statements" and "(b) Pro Forma Financial Information".
(a) Financial Statements:
Report of independent auditors
Consolidated balance sheets of The C.R. Gibson
Company as of December 31, 1994 and 1993.
Consolidated statements of operations, cash flows
and shareholders' equity of The C.R. Gibson
Company for the years ended December 31, 1994 and
1993.
Notes to consolidated financial statements.
Unaudited condensed consolidated balance sheet of
The C.R. Gibson Company as of September 30, 1995.
Unaudited condensed consolidated statements of
income and cash flows of The C.R. Gibson Company
for the nine month period ended September 30,
1995.
Notes to unaudited condensed consolidated
financial statements.
(b) Pro Forma Financial Information:
Pro Forma consolidated balance sheet of Thomas
Nelson, Inc. as of September 30, 1995 giving
effect to the acquisition of The C.R. Gibson
Company as of September 30, 1995.
Pro Forma consolidated statements of income of
Thomas Nelson, Inc. for the twelve months ended
March 31, 1995 and for the six month periods ended
September 30, 1994 and 1995 giving effect to the
acquisition of The C.R. Gibson Company as if such
transaction had occurred as of April 1, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on behalf by the undersigned hereunto duly authorized.
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
----------------------
Name: Joe L. Powers
Title: Executive Vice
President & Secretary
Date: January 19, 1996<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
The C.R. Gibson Company
We have audited the accompanying consolidated balance sheets of
The C.R. Gibson Company as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders'
equity, and cash flows for the years then ended. 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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of The C.R. Gibson Company at December 31,
1994 and 1993, and the consolidated results of its operations and
its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Stamford, CT
March 14, 1995<PAGE>
<TABLE>
THE C.R. GIBSON COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31
1994 1993
---------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,000 $ 794
Accounts receivable, less allowances of
$288 and $275, respectively 11,026 10,235
Inventories 18,988 16,692
Prepaid expenses and other current assets 1,729 1,773
Recoverable income taxes 1,540 -
---------- ---------
Total Current Assets 34,283 29,494
PROPERTY, PLANT AND EQUIPMENT
Land 775 775
Buildings and improvements 10,077 9,643
Machinery and equipment 16,397 13,564
Designs 10,041 8,336
---------- ---------
37,290 32,318
Less accumulated depreciation and amortization 18,959 16,217
---------- ---------
18,331 16,101
DEFERRED PROMOTION COSTS 3,113 1,714
INTANGIBLES AND OTHER ASSETS 3,356 5,842
---------- ---------
TOTAL ASSETS $ 59,083 $ 53,151
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,307 $ 3,440
Accrued wages and benefits 891 738
Income taxes currently payable 24 120
Short-term borrowings 4,630 2,765
Other current liabilities 2,846 2,783
---------- ---------
Total Current Liabilities 13,698 9,846
LONG-TERM DEBT 12,938 8,417
CAPITAL LEASE OBLIGATIONS 364 325
OTHER LONG-TERM LIABILITIES 380 380
DEFERRED INCOME TAXES 980 1,228
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, authorized
200,000 shares; none issued - -
Common stock, $.10 par value, authorized
15,000,000 shares; issued 7,755,216
and 7,751,924 shares, respectively 776 775
Capital contributed in excess of par value 10,900 10,882
Retained earnings 22,232 23,804
Cumulative translation adjustment ( 596) ( 421)
ESOP unearned compensation ( 243) ( 528)
Treasury Stock, at cost; 313,023 and 216,155
shares of Common Stock ( 2,346) ( 1,557)
---------- ---------
Total Shareholders' Equity 30,723 32,955
---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 59,083 $ 53,151
========== =========
See Accompanying Notes
/TABLE
<PAGE>
<TABLE>
THE C.R. GIBSON COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Year Ended December 31,
1994 1993
------------ -----------
<S> <C> <C>
NET REVENUES $ 78,208 $ 70,277
COST AND EXPENSES
Cost of goods sold 46,949 40,813
Selling, general and
administrative 30,202 22,843
------------ -----------
Total 77,151 63,656
OPERATING INCOME 1,057 6,621
Interest expense 1,253 829
------------ -----------
Income (loss) before income taxes ( 196) 5,792
Provision for income taxes 186 2,168
------------ -----------
NET INCOME (LOSS) ($ 382) $ 3,624
============ ===========
Weighted average number
of shares outstanding 7,455,092 7,537,864
============ ===========
NET INCOME (LOSS) PER SHARE ($ .05) $ .48
============ ===========
See Accompanying Notes
/TABLE
<PAGE>
<TABLE>
THE C.R. GIBSON COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended December 31,
1994 1993
------------ -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) ($ 382) $ 3,624
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation 2,754 2,806
Amortization 1,094 844
Write-off of Rytex intangibles 1,868 -
Deferred income taxes ( 517) 230
Changes in assets and liabilities,
net of acquisition
Accounts receivable, net ( 791) ( 440)
Inventories ( 2,296) ( 2,592)
Prepaid expenses and other
current assets 44 ( 312)
Recoverable income taxes ( 1,540) -
Accounts payable and accrued
expenses 2,020 994
Deferred promotion costs,
net of charges of $6,192 and
$3,077, respectively ( 1,399) ( 966)
Other 332 87
------------ -----------
Net Cash Provided By Operating Activities 1,187 4,275
------------ -----------
Cash Flows From Investing Activities:
Capital expenditures ( 4,756) ( 3,420)
Proceeds from the surrender of life
insurance policies 485 -
Purchase of The Rytex Company - ( 1,502)
Other Investing Activities ( 961) ( 1,237)
------------ -----------
Net Cash Used in Investing Activities ( 5,232) ( 6,159)
------------ -----------
Cash Flows From Financing Activities:
Repurchase of treasury stock ( 814) ( 636)
Principal payments under line of credit,
long-term debt and capital lease
obligations ( 597) ( 1,772)
Dividends paid ( 1,190) ( 1,061)
Net proceeds from debt issuance 4,987 -
Proceeds from lines of credit 1,865 2,765
------------ -----------
Net Cash Provided by (Used in) Financing
Activities 4,251 ( 704)
------------ -----------
Net Increase (Decrease) in Cash and
Cash Equivalents 206 ( 2,588)
Cash and Cash Equivalents at Beginning of Year 794 3,382
------------ -----------
Cash and Cash Equivalents at End of Year $ 1,000 $ 794
============ ===========
Supplemental Cash Flow Information:
Capital lease obligations incurred to
lease new equipment $ 229 $ -
============ ===========
Income Taxes Paid $ 2,399 $ 1,661
============ ===========
Interest Paid $ 966 $ 854
============ ===========
See Accompanying Notes/TABLE
<PAGE>
<TABLE>
THE C.R. GIBSON COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<CAPTION>
Common Capital
Shares Common in Excess Retained Treasury
Outstanding Stock of Par Value Earnings Stock
----------- ------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1992 7,582,973 $ 769 $ 10,592 $ 21,275 $ 761
Issuance of treasury
shares for outside
directors' compensation 3,430 ( 30)
Common Stock issued and
receipt of treasury shares
related to the exercise
of stock options 40,211 6 290 201
Issuance of treasury shares
for sales incentive award
program 1,535 ( 11)
Repurchase of treasury shares (92,380) 636
Net income 3,624
Cash dividends declared
($.145 per share) ( 1,095)
----------- ------ ------------ --------- --------
Balance at December 31,
1993 7,535,769 775 10,882 23,804 1,557
Issuance of treasury shares
for outside directors'
compensation 4,219 ( 30)
Common Stock issued and
receipt of treasury shares
related to the exercise
of stock options 993 1 18 18
Issuance of treasury shares
for sales incentive award
program 1,635 ( 13)
Repurchase of treasury shares (100,423) 814
Net loss ( 382)
Cash dividends declared
($.16 per share) ( 1,190)
----------- ------ ------------ --------- --------
Balance at December 31,
1994 7,442,193 $ 776 $ 10,900 $ 22,232 $ 2,346
=========== ====== ============ ========= ========
Foreign currency translation adjustments were ($175) for 1994 and ($147) for
1993.
See Accompanying Notes
/TABLE
<PAGE>
THE C.R. GIBSON COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Accounting Policies
- ----------------------------
The C.R. Gibson Company (the "Company") operates exclusively in
one industry segment (line of business), the manufacturing and
publishing of products primarily designed for the retail gift and
stationery markets throughout the United States and Canada. The
Company's classes of products include memory books, photo albums,
gift books, church supplies, stationery, greeting cards, paper
tableware, photo frames, playing cards and gift wrap. In
addition, The Rytex Company ("Rytex"), a wholly-owned subsidiary
of the Company, manufactures personalized stationery products
which are marketed through direct mail catalogs.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. Intercompany accounts
and transactions have been eliminated in consolidation.
Certain amounts reflect reclassifications to conform to the
current year's presentation.
Fair Value of Financial Instruments and Concentration of Credit
Risks
The carrying amount of the Company's cash and cash equivalents
and short and long-term debt reported in the balance sheet
approximates fair value.
Financial instruments which potentially subject the Company to
concentration of credit risk consist primarily of accounts
receivable. This risk is limited due to the larger number of
entities comprising the Company's customer base. These customers
include both large retail department stores and smaller gift
store operations which are primarily located throughout the
United States and Canada.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with a
maturity date at time of purchase of three months or less to be
cash equivalents.
Inventories
Inventories are stated at the lower of cost, generally determined
by the first-in, first-out (FIFO) method, or market.
Property, Plant and Equipment
Property, plant and equipment are stated on the basis of cost.
depreciation is computed by the straight-line method based on
estimated useful lives ranging from three to forty years.
Deferred Promotion Costs
The Company defers certain costs related to direct-response
advertising of its products. Such costs are amortized over
periods that correspond to the estimated revenue stream of the
individual advertising activity.
Intangibles and Other Assets
Intangibles include the excess of cost over the fair value of net
assets of acquired businesses (goodwill) and the cost of customer
lists. Goodwill is generally amortized over periods of twenty to
forty years on a straight-line basis. Customer lists are
generally amortized over periods of five to seven years on a
straight-line basis.
Income Taxes
Effective January 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes," which requires a change in
method of accounting for income taxes from the deferred method to
the liability method. The effect of the change on pretax income
for 1993 was not material. The cumulative effect of the change
at January 1, 1993 was not material.
Taxes on Foreign Earnings
Federal income taxes have not been provided on the undistributed
earnings of the Company's Canadian subsidiary ($46,000 at
December 31, 1994) because it is the Company's intention to
reinvest all of the undistributed earnings of this subsidiary.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during each year.
Note 2 - Purchase of Rytex
- --------------------------
On May 7, 1993, The C.R. Gibson Company acquired substantially
all of the assets, properties and business of Rytex, exclusive of
goodwill, for a purchase price of approximately $1.5 million plus
the assumption of certain liabilities and obligations of Rytex
aggregating approximately $2.9 million. The acquisition was
accounted for as a purchase and the results of operations have
been included in the financial statements from the acquisition
date. The excess of cost over the fair value of assets acquired
(goodwill) was approximately $1.5 million. The pro forma
unaudited results of operations for the year ended December 31,
1993, assuming consummation of the purchase at the beginning of
the year, is as follows (dollars in thousands except per share
data):
Year Ended
December 31, 1993
-----------------
Net revenues $ 73,562
Net income 3,577
Net income per common share .47
The pro forma information above is not necessarily indicative of
results that would have occurred had the transaction taken place
at the beginning of the year.
Note 3 - Inventories
- --------------------
The components of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1994 1993
----------- -----------
<S> <C> <C>
Raw materials $ 5,914 $ 5,717
Work-in-process 3,657 3,123
Finished goods 9,417 7,852
----------- -----------
$ 18,988 $ 16,692
=========== ===========
</TABLE>
Note 4 - Intangibles
- --------------------
Goodwill at December 31, 1994 and 1993 amounted to $736,000 and
$2,212,000, respectively, net of accumulated amortization of
$117,000 and $123,000, respectively. Customer lists acquired in
connection with the acquisition of Rytex at December 31, 1993,
amounted to $883,000, net of accumulated amortization of
$106,000. During 1994, Rytex initiated unsuccessful marketing
programs that adversely affected its business and impaired the
value of these intangibles. Accordingly, the Company wrote-off
$1,868,000 of Rytex intangibles considered to be impaired.
Note 5 - Other Current Liabilities
- ----------------------------------
Other current liabilities consist of the following (in
thousands):
<TABLE>
<CAPTION>
December 31
1994 1993
----------- -----------
<S> <C> <C>
Accrued royalties $ 538 $ 557
Dividends payable 298 301
Current portion of long-term
debt 422 461
Current portion of deferred
income taxes - 151
Accrued property taxes 52 50
Other accrued liabilities 1,536 1,263
----------- -----------
$ 2,846 $ 2,783
=========== ===========
</TABLE>
Note 6 - Short-Term Borrowings
- ------------------------------
Under line of credit arrangements for short-term borrowings with
several banks, the Company may borrow up to $19,100,000 at
interest rates generally below the prime rate. These agreements
do not require the Company to maintain compensating balances or
to pay a commitment fee on any unused facility. At December 31,
1994, there was $4,630,000 outstanding under these lines of
credit. The Company had average outstanding borrowings of
$6,002,000 during 1994 and $3,880,000 during 1993 at a weighted
average interest rate of 5.0% for 1994 and 3.6% for 1993. The
maximum amount outstanding was $9,205,000 during 1994 and
$8,560,000 during 1993.
Note 7 - Long-Term Debt
- -----------------------
In September of 1989, the Company entered into a $10,000,000
long-term loan agreement with the Metropolitan Life Insurance
Company. The loan (senior notes), which has a term of ten years,
provides for a fixed rate of interest of 9 1/2 on the outstanding
balance. During the first quarter of 1992, the Company entered
into an agreement with Metropolitan to prepay without penalty $3
million of the outstanding long-term indebtedness. In June 1994,
the Company also entered into a $5,000,000 long-term loan
agreement with the Metropolitan Life Insurance Company. This
loan (senior notes) has a term of ten years and a fixed rate of
interest of 8.31%. Both loans contain various provisions as to
the incurrence of additional debt and the maintenance of certain
minimum net worth requirements. As of December 31, 1994, net
worth, as defined, was approximately $14,268,000 greater than the
required minimum. Additionally, the agreements restrict the
amount of future dividends which the Company may declare to
$1,500,000 plus 50% of net income as defined ($1,754,000 at
December 31, 1994). Borrowings under the aforementioned loans,
as well as other long-term debt of the Company, consist of the
following (in thousands):
<TABLE>
<CAPTION>
December 31
1994 1993
---------- ----------
<S> <C> <C>
5% interest rate loans secured by cash
surrender value of insurance, no
specific repayment date $ 517 $ 576
Mortgage loan secured by land and
building, payable in installments,
including interest at 70% of prime,
through December 1998 552 690
ESOP loan secured by Company shares
held by the ESOP, payable in equal
quarterly installments through
December 1995, with interest of 8.375% 243 528
8.31% senior notes due June 23, 2004,
interest payable semi-annually in June
and December with principal payments
beginning in 1998 5,000 -
9 1/2% senior notes due September 23, 1999,
interest payable semi-annually in March
and September with principal payments
beginning in 1996 7,000 7,000
Other long-term debt 48 84
---------- ----------
13,360 8,878
Less current maturities ( 422) ( 461)
---------- ----------
$ 12,938 $ 8,417
========== ==========
</TABLE>
Maturities of long-term debt obligations, excluding the life
insurance loans which have no scheduled maturity date are as
follows (in thousands):
1996 $ 1,145
1997 2,138
1998 2,852
1999 2,714
Thereafter 3,572
--------
Total $ 12,421
========
Interest incurred on the ESOP loan was $30,000 and $54,000 in
1994 and 1993, respectively.
Note 8 - Shareholders' Equity
- -----------------------------
In 1992, the Company announced that it intended to repurchase up
to $2,000,000 of its Common Stock. The total number of shares
repurchased by the Company since the announcement is 230,453
shares at a cost of $1,723,000.
During 1988, the Company entered into a mirror loan transaction
with The Connecticut Bank and Trust Company and the C.R. Gibson
Employee Stock Ownership Plan (ESOP) whereby proceeds of the loan
of $1,957,000 were used by the ESOP to purchase 417,489 common
shares from certain shareholders. In addition, the Company also
makes contributions for the purchase of additional shares of
Common Stock to be allocated in accordance with the ESOP (see
Note 10). All shares held by the ESOP are considered outstanding
for purposes of computing net income per common share. Dividends
paid on ESOP shares are charged to retained earnings. The
Company has guaranteed the ESOP loan and has reported the unpaid
balance as a liability of the Company with unearned compensation
reported as a reduction in shareholders' equity.
Note 9 - Stock Plans
- --------------------
As of December 31, 1994 and 1993, under the Company's Stock
Option Plan, 363,198 and 366,490 shares of Common Stock,
respectively, were reserved for purchase by eligible employees.
All options have been granted under the Plan at 100% of the
market value on the date of such grant. At December 31, 1994,
there were options outstanding under the Plan for the purchase of
334,074 shares of Common Stock (188,088 vested), at prices
ranging from $5.70 to $8.75, such options expiring on various
dates from September 1996 to December 2004. At December 31,
1993, there were options outstanding under the Plan for the
purchase of 355,645 shares of Common Stock (145,597 vested), at
prices ranging from $5.70 to $8.75, such options expiring on
various dates from September 1996 to December 2003. Options for
25,000 and 92,000 shares of Common Stock were granted during 1994
and 1993, respectively. In 1994, options to purchase 3,292
shares of Common Stock at $5.70 per share were exercised.
Options to purchase 62,322 shares of Common Stock were exercised
in 1993 at prices ranging from $4.69 to $5.70 per share. During
1994 and 1993, options to purchase 43,279 and 20,890 shares of
Common Stock, respectively, were cancelled. In addition, during
1993, 10,000 options at $6.625 (all of which are outstanding at
December 31, 1994) were granted to employees who are not included
in the Plan.
Note 10 - Employee Benefit Plans
- --------------------------------
Employee benefit plan expense was $1,216,000 in 1994 and
$1,195,000 in 1993. These amounts include contributions made by
the Company to a 401(k) defined contribution plan. Under the
terms of this plan, eligible employees may contribute up to 10%
of their gross compensation to the plan up to certain defined
limits. The Company, at its discretion, contributes an amount
equal to 25% of the employee contribution to the plan on behalf
of participating employees. Total benefit plan expense also
includes contributions to the Employee Stock Ownership Plan.
Under the terms of the Plan, contributions are made to the Plan
in an amount equal to 6% of the wages of eligible employees with
at least twelve months of service. Contributions are used to
repay the ESOP loan and to acquire additional shares of the
Company's Common Stock. The shares acquired by the ESOP are
released and allocated to the participants as the ESOP loan is
paid by the Company's contributions. As of December 31, 1994,
the ESOP has allocated shares of 844,030 and unallocated shares
of 41,760.
Contributions to the Plan charged to pension expense amounted to
$894,000 and $881,000 in 1994 and 1993, respectively. Dividends
received by the Plan related to unallocated shares, approximated
$11,000 in 1994 and $17,000 in 1993, and have been used to pay
expenses of the Plan. Dividends received by the Plan on
allocated shares approximated $130,000 in 1994 and $111,000 in
1993, and have been allocated to participants in accordance with
the Plan. At December 31, 1994, there were no unfunded vested
benefits or past service costs under any of the Company's plans.
Note 11 - Income Taxes
- ----------------------
Effective January 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes." Under Statement 109, the
liability method is used in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are
expected to reverse. Prior to the adoption of Statement 109,
income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements
and tax returns and were measured at the tax rate in effect in
the year the difference originated.
As permitted by Statement 109, the Company has elected not to
restate the financial statements of any prior years. The effect
of the change on net income for 1993 was not material. The
cumulative effect of the change at January 1, 1993 was not
material.
Significant components of the Company's deferred tax liabilities
and assets are as follows (in thousands):
<TABLE>
<CAPTION>
December 31
1994 1993
----------- -----------
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $ 946 $ 795
Deferred costs 979 615
Conversion from LIFO to FIFO 97 192
Other 20 26
----------- -----------
Total deferred tax liabilities 2,042 1,628
----------- -----------
Deferred tax assets:
Accrued vacations 183 116
Bad debt 117 98
Allowance for obsolete inventory 93 -
Contribution deduction carryforward 117 -
Intangibles impairment 635 -
Other 35 35
----------- -----------
Total deferred tax assets 1,180 249
----------- -----------
Net deferred tax liabilities $ 862 $ 1,379
=========== ===========
</TABLE>
The provision (benefit) for income taxes consists of the
following (in thousands):
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Current:
Federal $ 370 $ 1,632
State 309 305
Foreign 24 1
----------- -----------
Total current 703 1,938
Deferred:
Federal ( 552) 194
State 35 36
----------- -----------
Total deferred ( 517) 230
----------- -----------
Provision for income taxes $ 186 $ 2,168
=========== ===========
</TABLE>
The foreign current provision is based upon pretax foreign income
(loss) of $40,000 and ($31,000) for 1994 and 1993, respectively.
A reconciliation of the federal statutory income tax rate to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Federal statutory income tax rate ( 34.0%) 34.0%
State income taxes, net of federal
income tax benefit 115.8 3.9
Charitable contributions ( 18.7) ( .9)
Other 31.8 .4
----------- -----------
Effective income tax rate 94.9% 37.4%
=========== ===========
</TABLE>
State income taxes in 1994 reflect no state tax benefit for
losses incurred at Rytex.
Note 12 - Operating Leases
- --------------------------
The Company leases three manufacturing plants and all of its
showrooms under renewable operating leases expiring through 2001.
Future minimum annual lease payments under these and other
operating leases, which have initial or remaining noncancelable
lease terms in excess of one year at December 31, 1994 are
$783,000, $713,000, $683,000, $488,000 and $285,000 in 1995,
1996, 1997, 1998 and 1999, respectively, and $416,000 thereafter.
Rental expense was $1,454,000 in 1994 and $1,421,000 in 1993.
Note 13 - Capital Leases
- ------------------------
The Company leases a warehouse facility from the Connecticut
Development Authority. The warehouse lease, which expires in
October 1999, contains an option to purchase the warehouse for
one dollar upon maturity of the lease. Lease payments are equal
to the principal and interest payments required to be made by
the Connecticut Development Authority under the terms of the
industrial development bonds issued to finance the purchase of
the warehouse facility. In addition, the Company has guaranteed
payment to the bondholder of all principal and interest due.
The Company also has capital lease agreements for various office
furniture and equipment with terms which expire through January
1998.
Property, plant and equipment includes the following assets held
under capital leases (in thousands):
<TABLE>
<CAPTION>
December 31
1994 1993
----------- -----------
<S> <C> <C>
Land $ 23 $ 23
Buildings 627 627
Machinery and equipment 442 193
----------- -----------
1,092 843
Less: accumulated
depreciation ( 365) ( 290)
----------- -----------
$ 727 $ 553
=========== ===========
</TABLE>
Future minimum annual lease payments as of December 31, 1994 are
as follows (in thousands):
Future minimum annual lease payments
(1995 through 1999) $ 597
Less amount representing interest ( 93)
-----------
Present value of minimum lease payments 504
Less current maturities ( 140)
-----------
$ 364
===========
Future minimum annual lease payments under these capital leases
are $178,000, $140,000, $113,000, $108,000 and $58,000 in 1995,
1996, 1997, 1998 and 1999, respectively.
Note 14 - Quarterly Data (unaudited)
- ------------------------------------
A summary of the Company's quarterly results follows (in
thousands except per share data):
<TABLE>
<CAPTION>
Year ended December 31, 1994
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
(Restated) (Restated) (Restated)
<S> <C> <C> <C> <C>
Net revenues $ 19,573 $ 18,042 $ 22,736 $ 17,857
Gross profit $ 7,960 $ 7,288 $ 9,181 $ 6,830
Net income (loss) $ 106 $ 362 $ 898 ($ 1,748)
Net income (loss)
per common share $ .01 $ .05 $ .12 ($ .23)
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1994
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 15,731 $ 15,921 $ 21,435 $ 17,190
Gross profit $ 6,195 $ 6,691 $ 9,163 $ 7,415
Net income $ 806 $ 751 $ 1,501 $ 566
Net income per
common share $ .11 $ .10 $ .20 $ .07
</TABLE>
The quarterly results of operations for 1994 presented above have
been restated principally to properly account for the
amortization of deferred promotion costs, inventories, accounts
receivable and sales returns at Rytex. The restatements had the
effect of decreasing previously reported first, second and third
quarter amounts as follows: sales by $261,000, $185,000 and
$322,000, respectively; gross profit by $438,000, $478,000 and
$563,000, respectively; net income by $818,000, $557,000 and
$622,000, respectively; and net income per common share by $.11,
$.07 and $.08, respectively.
The 1994 fourth quarter net loss includes $1,233,000 ($.17 per
common share) relating to the write-off of Rytex intangibles.
Note 15 - Subsequent Events
- ---------------------------
In January, 1995, the ESOP (see Notes 8 and 10) purchased 150,000
shares of the Company's Common Stock at a cost of $1,050,000.
On March 14, 1995, the Board of Directors of the Company decided
to seek a buyer for the Rytex subsidiary. The 1994 net sales and
net loss of Rytex were $11,046,000 and $3,586,000, respectively.<PAGE>
THE C.R. GIBSON COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1995<PAGE>
THE C.R. GIBSON COMPANY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
September 30,
1995
-------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 47
Accounts receivable, less allowance of $346 17,633
Inventories 17,418
Prepaid expenses and other current assets 2,162
-------------
Total Current Assets 37,260
PROPERTY, PLANT AND EQUIPMENT
Land 775
Buildings and improvements 9,846
Machinery and equipment 14,564
Designs 11,266
-------------
36,451
Less accumulated depreciation and amortization 19,984
-------------
16,467
INTANGIBLES AND OTHER ASSETS 3,350
-------------
TOTAL ASSETS $ 57,077
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,438
Accrued wages and benefits 868
Income Taxes currently payable 24
Short-term borrowings 6,885
Other current liabilities 2,280
-------------
Total Current Liabilities 12,495
LONG-TERM DEBT 12,828
CAPITAL LEASE OBLIGATIONS 146
OTHER LONG-TERM LIABILITIES 383
DEFERRED INCOME TAX 980
SHAREHOLDERS' EQUITY
Preferred stock, $10 par value, authorized
200,000 shares; none issued -
Common stock, $.10 par value, authorized
15,000,000 shares; issued 7,774,113 777
Additional paid-in capital 11,031
Retained earnings 22,543
Foreign currency translation adjustments ( 547)
ESOP unearned compensation ( 1,078)
Treasury Stock, at cost; 330,074 shares of
Common Stock ( 2,481)
-------------
Total Shareholders' Equity 30,245
-------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 57,077
=============
See Accompanying Notes
THE C.R. GIBSON COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share data)
Nine Months Ended
September 30,
1995
-------------
NET REVENUES $ 57,558
COST AND EXPENSES
Cost of goods sold 34,359
Selling, general and
administrative 18,842
-------------
Total 53,201
-------------
OPERATING INCOME 4,357
Other income (expense) ( 1,118)
Interest expense 1,152
-------------
Income before income taxes 2,087
Provision for income taxes 883
-------------
NET INCOME $ 1,204
=============
Weighted average number
of shares outstanding 7,289,667
=============
NET INCOME PER SHARE $ .17
=============
See Accompanying Notes<PAGE>
THE C.R. GIBSON COMPANY
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended
September 30,
1995
-------------
Cash Flows From Operating Activities:
Net Income $ 1,204
Adjustments to reconcile net income to net cash
used in operations:
Depreciation 2,370
Amortization 861
Increase in cash surrender value of life
insurance ( 3)
Changes in assets and liabilities, net of
disposition:
Accounts receivable, net ( 6,607)
Inventories 601
Prepaid and other current assets 2,157
Accounts payable and accrued expenses ( 3,178)
Deferred promotion costs, net of charges
of $769 ( 15)
Other 48
-------------
Net Cash Used In Operating Activities ( 2,562)
-------------
Cash Flows From Investing Activities:
Capital expenditures ( 1,881)
Retirement of fixed assets 74
Other investing activities 1,104
Loan to ESOP ( 1,050)
-------------
Net Cash Used in Investing Activities ( 1,753)
-------------
Cash Flows From Financing Activities:
Repurchase of treasury stock ( 135)
Principal payments under line of credit,
long-term debt and capital lease obligations ( 345)
Dividends paid ( 893)
Proceeds from sale of The Rytex Company 2,055
Proceeds from lines of credit 2,255
Proceeds from repayment of ESOP Loan 214
Other 211
-------------
Net Cash Provided by (Used in) Financing Activities 3,362
-------------
Net (Decrease) in Cash and Cash Equivalents ( 953)
Cash and Cash Equivalents at Beginning of Period 1,000
-------------
Cash and Cash Equivalents at End of Period $ 47
=============
Supplemental Cash Flow Information:
Income taxes paid $ 806
Interest paid $ 1,289
See Accompanying Notes
<PAGE>
THE C.R. GIBSON COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. For further
information, refer to the financial statements and footnotes
thereto incorporated into the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
Note B - Inventories
- --------------------
The components of inventory are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials $ 4,441 $ 5,914
Work-in-process 2,902 3,657
Finished goods 10,075 9,417
------------- ------------
$ 17,418 $ 18,988
============= ============
</TABLE>
Note C - Net Income (Loss) Per Common Share
- -------------------------------------------
Net income (loss) per common share is computed by dividing net
income (loss) by the weighted average number of common shares
outstanding during each period. There were 150,000 shares
purchased by the Employee Stock Ownership Plan in January,
1995, currently held in suspense, which are not considered
outstanding and therefore not included in the computation of
net income (loss) per common share in 1995.
Note D - Sale of The Rytex Company
- ----------------------------------
On May 15, 1995, The C.R. Gibson Company sold substantially all
of the assets and business of its subsidiary, The Rytex Company
("Rytex"). The sale to a wholly-owned subsidiary of The
American Stationery Company, Inc. was for a purchase price of
approximately $3,100,000 in cash and notes, and resulted in a
net loss of $739,000.
Note E - Subsequent Event
- -------------------------
On September 13, 1995, the Company and Thomas Nelson, Inc.
announced a definitive agreement had been signed whereby Thomas
Nelson, Inc. would acquire all of the outstanding shares of the
Company in a cash transaction valued at approximately
$67,000,000. Thomas Nelson has made a cash tender offer of
$9.00 per share, pursuant to the agreement that has been
unanimously approved by the Company's Board of Directors. The
tender offer, originally scheduled to expire on October 17,
1995, was extended to October 30, 1995. The offer was extended
to allow the dissemination of additional information concerning
the tender offer to the Company's shareholders. As of the date
of this filing, the Company is now a subsidiary of Thomas
Nelson, Inc.
Thomas Nelson, Inc. is a leading publisher, producer and
distributor of books and recorded music emphasizing Christian,
inspirational and family value themes. Thomas Nelson, Inc.
also designs and markets a broad line of gift and stationery
products.
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
On November 7, 1995, Thomas Nelson, Inc. ("Nelson") consummated
the acquisition of all of the issued and outstanding capital
stock of The C.R. Gibson Company. An unaudited pro forma
consolidated balance sheet prepared as if the business
combination occurred September 30, 1995 (most recent interim
date for which a balance sheet is required) has been included,
along with the unaudited pro forma consolidated statements of
income for the six months ended September 30, 1994 and 1995 and
for the twelve months ended March 31, 1995 prepared as if the
acquisition had occurred on April 1, 1994.
For purposes of presenting pro forma results, no changes in
revenues and expenses have been made to reflect the results of
any modification to operations that might have been made had
the acquisition been consummated on the assumed effective
dates, other than the exclusion of The Rytex Company ("Rytex")
operations. The C.R. Gibson Company sold substantially all the
assets and business of its subsidiary, Rytex, in May, 1995.
The pro forma expenses include the recurring and nonrecurring
costs that are directly attributable to the acquisition such as
interest expense and the related tax effects and amortization
of goodwill. The pro forma financial information does not
purport to be indicative of the results that would actually
have been obtained had the acquisition been completed for the
periods presented or that may be obtained in the future.<PAGE>
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995
UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE SIX MONTHS
ENDED SEPTEMBER 30, 1994 AND 1995
UNAUDITED PRO FORMA STATEMENTS OF INCOME FOR THE TWELVE MONTHS
ENDED MARCH 31, 1995<PAGE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1995
(Dollars in thousands)
<CAPTION>
Pro Forma
Historical C.R. Gibson Adjustments Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash
equivalents $ 771 $ 47 $ 818
Accounts Receivable,
less allowances of
$10,289 (Historical)
and $346 C.R. Gibson) 103,142 17,633 120,775
Inventories 80,573 17,418 97,991
Prepaid expenses 25,610 2,162 27,772
Deferred tax asset 7,714 - 7,714
---------- ----------- ----------- -----------
Total Current Assets 217,810 37,260 255,070
PROPERTY, PLANT AND
EQUIPMENT 16,638 16,467 33,105
OTHER ASSETS 16,600 2,745 19,345
GOODWILL 31,402 605 $ 42,677 A 74,684
DEFERRED CHARGES 4,840 - 4,840
---------- ----------- ----------- -----------
TOTAL ASSETS 287,290 57,077 42,677 387,044
========== =========== =========== ===========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable 34,193 2,438 36,631
Accrued Expenses 16,786 3,148 19,934
Dividends Payable 654 - 654
Income taxes currently
payable - 24 901 B 925
Current portion of long-
term debt and capital
lease obligation 1,466 6,885 8,351
---------- ----------- ----------- -----------
Total Current Liabilities 53,099 12,495 901 66,495
LONG-TERM DEBT 101,898 12,828 74,000 A 188,726
CAPITAL LEASE OBLIGATION 651 146 797
DEFERRED TAX LIABILITY AND
OTHER LIABILITIES 2,636 1,363 3,999
SHAREHOLDERS' EQUITY:
Preferred stock, $1.00
par value, authorized
1,000,000 shares; none
issued (Historical) - - -
Common stock, $1.00 par
value, authorized
20,000,000 shares;
issued 15,256,641
(Historical) and $.10
par value, authorized
15,000,000 shares; issued
7,774,113 (C.R. Gibson) 15,257 777 ( 777) A 15,257
Class B common stock, $1.00
par value, authorized
5,000,000 shares; issued
1,085,825 (Historical) 1,086 - 1,086
Treasury stock, at cost -
330,074 shares of common
stock (C.R. Gibson) - ( 2,481) 2,481 A -
ESOP unearned compensation
(C.R. Gibson) - ( 1,078) ( 1,078)
Additional paid-in capital 69,787 11,031 ( 11,031)A 69,787
Retained earnings 42,315 22,543 ( 22,543)A 41,414
( 901)B
Foreign currency
translation adjustments 561 ( 547) 547 A 561
---------- ----------- ----------- -----------
Total Shareholders' Equity 129,006 30,245 ( 32,224) 127,027
---------- ----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS'EQUITY $ 287,290 $ 57,077 $ 42,677 $ 387,044
========== =========== =========== ===========
A - Record estimated debt increase and goodwill after investment elimination.
B - Exclude balances related to The Rytex Company which was sold in May 1995.
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended September 30, 1995
(Dollars in thousands, except per share data)
<CAPTION>
Pro Forma
Historical C.R. Gibson Adjustments Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $ 142,572 $ 36,065 ( 547)C $ 178,090
COST AND EXPENSES
Cost of goods sold 72,320 21,619 ( 347)C 93,592
Selling, general and
administrative 60,014 11,228 ( 868)C 70,374
Amortization of goodwill
and non-compete
agreements 901 9 533 A 1,443
---------- ----------- ----------- -----------
Total 133,235 32,856 ( 682) 165,409
---------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 9,337 3,209 135 12,681
Other income (expense) 238 132 ( 132)C 238
Interest expense 4,680 765 2,775 B 8,186
( 34)C
---------- ----------- ----------- -----------
Income (loss) before
income taxes 4,895 2,576 ( 2,738) 4,733
Provision (benefit) for
income taxes 1,811 973 ( 1,013) 1,771
---------- ----------- ----------- -----------
NET INCOME (LOSS) $ 3,084 $ 1,603 ($ 1,725) $ 2,962
========== =========== =========== ===========
Weighted average number
of shares outstanding: 14,658 14,658
========== ===========
NET INCOME (LOSS) PER
SHARE: $ .21 $ .20
========== ===========
A - Amortize estimated goodwill of $42,677 over forty years.
B - Incremental interest expense on estimated $74,000 debt increase at 7.5% per annum.
C - Exclude results of operations related to The Rytex Company which was sold in May 1995.
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Six Months Ended September 30, 1994
(Dollars in thousands, except per share data)
<CAPTION>
Pro Forma
Historical C.R. Gibson Adjustments Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $ 119,615 $ 40,778 ( 4,666)C $ 155,727
COST AND EXPENSES
Cost of goods sold 60,621 24,309 ( 2,912)C 82,018
Selling, general and
administrative 46,143 13,665 ( 3,250)C 56,558
Amortization of goodwill
and non-compete
agreements 877 76 533 A 1,419
( 67)C
---------- ----------- ----------- -----------
Total 107,641 38,050 ( 5,696) 139,995
---------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 11,974 2,728 1,030 15,732
Other income (expense) 98 - 98
Interest expense 4,030 627 2,590 B 7,127
( 120)C
---------- ----------- ----------- -----------
Income (loss) before
income taxes 8,042 2,101 ( 1,440) 8,703
Provision (benefit) for
income taxes 2,963 841 ( 533) 3,271
---------- ----------- ----------- -----------
NET INCOME (LOSS) $ 5,079 $ 1,260 ($ 907) $ 5,432
========== =========== =========== ===========
Weighted average number
of shares outstanding 13,364 13,364
========== ==========
NET INCOME (LOSS) PER
SHARE: $ .38 $ .41
========== ==========
A - Amortize estimated goodwill of $42,677 over forty years.
B - Incremental interest expense on estimated $74,000 debt increase at 7.0% per
annum.
C - Exclude results of operation related to The Rytex Company which was sold in
May 1995.
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
For the Twelve Months Ended March 31, 1995
(Dollars in thousands, except per share data)
<CAPTION>
Pro Forma
Historical C.R. Gibson Adjustments Pro Forma
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $ 265,107 $ 80,128 ($ 10,770)C $ 334,465
COST AND EXPENSES
Cost of goods sold 133,650 48,076 ( 6,046)C 175,680
Selling, general and
administrative 103,614 28,869 ( 9,527)C 122,956
Amortization of goodwill
and non-compete
agreements 1,806 1,432 1,067 A 4,199
( 106)C
---------- ----------- ----------- -----------
Total 239,070 78,377 ( 14,612) 302,835
---------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 26,037 1,751 3,842 31,630
Other income (expense) 897 ( 1,250) 1,250 C 897
Interest expense 8,585 1,402 5,402 B 15,092
( 297)C
---------- ----------- ----------- -----------
Income (loss) before
income taxes 18,349 ( 901) ( 13) 17,435
Provision (benefit) for
income taxes 6,639 ( 14) ( 5) 6,620
---------- ----------- ----------- -----------
NET INCOME (LOSS) $ 11,710 ($ 887) ($ 8) $ 10,815
========== =========== =========== ===========
Weighted average number
of shares outstanding 13,374 13,374
========== ==========
NET INCOME (LOSS) PER
SHARE: $ .88 $ .81
========== ==========
A - Amortize estimated goodwill of $42,677 over forty years.
B - Incremental interest expense on estimated $74,000 debt increase at 7.3% per
annum.
C - Exclude results of operations related to The Rytex Company which was sold in
May 1995.
</TABLE>
