SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] 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)
501 Nelson Place, 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 November 10, 1998, the Registrant had outstanding
13,653,090 shares of Common Stock and 1,106,324 shares of
Class B Common Stock.
Part I
Item 1. Financial Statements
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
September 30, March 31, September 30,
1998 1998 1997
----------- ---------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,978 $ 39,713 $ 23,103
Accounts receivable, less
allowances of $6,988,
$6,162 and $6,814,
respectively 81,888 65,415 76,264
Inventories 75,504 70,590 70,388
Prepaid expenses 11,383 8,177 8,554
Deferred tax assets 3,276 3,276 8,310
----------- ---------- -----------
Total current assets 174,029 187,171 186,619
Property, plant and equipment 30,051 32,103 32,550
Other assets 9,987 9,843 10,769
Deferred charges 2,086 1,789 2,587
Goodwill 55,783 56,536 57,321
----------- ---------- -----------
TOTAL ASSETS $ 271,936 $ 287,442 $ 289,846
============ ========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 17,054 $ 16,701 $ 16,366
Accrued expenses 20,128 21,268 25,422
Dividends payable 590 685 684
Income taxes currently
payable 2,763 4,286 6,943
Current portion of
long-term debt & capital
lease obligations 3,853 3,975 3,369
----------- ---------- -----------
Total current liabilities 44,388 46,915 52,784
Long-term debt 95,039 79,476 80,769
Capital lease obligations 6 84 109
Deferred tax liabilities 3,364 3,364 3,640
Other liabilities 988 1,207 1,860
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 13,653,090,
16,002,817 and 16,002,670
shares, respectively 13,653 16,003 16,003
Class B common stock, $1.00
par value, authorized
5,000,000 shares; issued
1,106,324, 1,111,924 and
1,112,071 shares,
respectively 1,106 1,112 1,112
Additional paid-in capital 48,724 79,057 79,055
Retained earnings 64,668 60,224 54,514
----------- ---------- -----------
Total shareholders' equity 128,151 156,396 150,684
----------- ---------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 271,936 $ 287,442 $ 289,846
=========== =========== ===========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ---------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 126,439 $123,077 $ 70,445 $ 68,618
COST AND EXPENSES:
Cost of goods sold 67,484 67,831 37,150 38,059
Selling, general and
administrative 46,430 42,950 24,274 21,425
Amortization of goodwill
and non-compete
agreements 817 996 409 493
----------- ---------- ---------- -----------
Total expenses 114,731 111,777 61,833 59,977
----------- ---------- ---------- -----------
OPERATING INCOME 11,708 11,300 8,612 8,641
Other income (expense) 387 808 - 298
Interest expense 3,145 3,085 1,655 1,514
----------- ---------- ---------- -----------
Income before income taxes 8,950 9,023 6,957 7,425
Provision for income taxes 3,311 3,429 2,574 2,822
----------- ---------- ---------- -----------
NET INCOME $ 5,639 $ 5,594 $ 4,383 $ 4,603
=========== =========== ========== ===========
Weighted average number
of shares outstanding:
Basic 15,886 17,110 15,055 17,111
=========== =========== ========== ===========
Diluted 19,160 20,386 18,307 20,417
=========== =========== ========== ===========
NET INCOME PER SHARE:
Basic $ 0.35 $ 0.33 $ 0.29 $ 0.27
=========== =========== ========== ===========
Diluted $ 0.35 $ 0.32 $ 0.27 $ 0.25
=========== =========== ========== ===========
DIVIDENDS DECLARED
PER SHARE $ 0.08 $ 0.08 $ 0.04 $ 0.04
=========== =========== ========== ===========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Six Months Ended September 30,
--------------------------------
1998 1997
-------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING
ACTIVITIES:
Income from continuing operations $ 5,639 $ 5,594
Adjustments to reconcile net income
to net cash provided by (used in)
operations:
Depreciation and amortization 4,422 3,825
Changes in assets and liabilities,
net of acquisitions and disposals:
Accounts receivable, net ( 16,473) ( 8,814)
Inventories ( 4,914) 1,162
Prepaid expenses ( 3,206) 867
Accounts payable and accrued
expenses 562 ( 1,896)
Income taxes currently payable
and deferred ( 1,523) ( 13,031)
------------- --------------
Net cash used in continuing operations ( 15,493) ( 12,293)
------------- --------------
Discontinued operations:
Changes in discontinued assets ( 1,349) ( 760)
------------- --------------
Net cash used in discontinued operations ( 1,349) ( 760)
------------- --------------
Net cash used in operating activities ( 16,842) ( 13,053)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 1,384) ( 1,649)
Proceeds from sale of business and
discontinued assets 1,408 -
Changes in other assets and deferred
charges ( 2,083) ( 1,210)
------------- --------------
Net cash used in investing activities ( 2,059) ( 2,859)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 20,500 -
Payments under capital lease obligation ( 131) ( 268)
Payments on long-term debt ( 5,006) ( 2,271)
Dividends paid ( 1,290) ( 1,371)
Proceeds from issuance of common stock 47 12
Common stock retired ( 32,757) ( 4)
Other financing activities ( 197) ( 554)
------------- --------------
Net cash used in financing activities ( 18,834) ( 4,456)
------------- --------------
Net decrease in cash and cash equivalents ( 37,735) ( 20,368)
Cash and cash equivalents at beginning
of period 39,713 43,471
------------- --------------
Cash and cash equivalents at end of period $ 1,978 $ 23,103
============= ==============
Supplemental disclosures of non-cash
investing and financing activities:
Dividends accrued and unpaid $ 590 $ 685
</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, 1998.
The balance sheet and related information in these notes as of
March 31, 1998 have been taken from the audited consolidated
financial statements as of that date. Certain reclassifications
have been made to conform presentation of the fiscal 1998
financial statements with fiscal 1999 presentation.
Note B - New Pronouncements
Reporting on the Costs of Start-Up Activities: In April 1998,
the Accounting Standards Executive Committee ("AcSEC") of the
American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-5, "Reporting on the Costs of
Start-up Activities" ("SOP 98-5"). SOP 98-5 requires the costs
of start-up activities and organization costs, as defined, to be
expensed as incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. The Company will adopt the
pronouncement during the first quarter of fiscal 2000. The
Company does not expect the adoption to have a material impact on
the Company's results of operations, financial condition or cash
flows.
Note C - Inventories
Components of inventories consisted of the following (in
thousands):
<TABLE>
<CAPTION>
September 30, March 31, September 30,
1998 1998 1997
------------ ---------- ------------
<S> <C> <C> <C>
Finished goods $ 62,702 $ 54,503 $ 55,485
Raw materials and
work in process 12,802 16,087 14,903
------------ ---------- ------------
$ 75,504 $ 70,590 $ 70,388
============ ========== ============
</TABLE>
Note D - Cash Dividend
On May 21, 1998, the Company's board of directors declared a
cash dividend of $.04 per share of Common and Class B Common
Stock. The dividend was paid August 17, 1998, to shareholders of
record on August 3, 1998.
On August 21, 1998, the Company's board of directors declared
a cash dividend of $.04 per share of Common and Class B Common
Stock. The dividend is payable November 16, 1998, to
shareholders of record on November 2, 1998.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The following table sets forth for the periods indicated
certain selected statements of operations 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>
Six Months Ended Fiscal
September 30, Year-to-Year
---------------- Increase
1998 1997 (Decrease)
------ ------ ----------
(%) (%) (%)
<S> <C> <C> <C>
Net revenues
Publishing 58.1 61.1 ( 2.3)
Gift 41.9 38.9 10.7
------ ------
Total net revenues 100.0 100.0 2.7
------ ------
Expenses
Cost of goods sold 53.4 55.1 ( 0.5)
Selling, general and
administrative 36.7 34.9 8.1
Amortization of
goodwill and non-
compete agreements 0.6 0.8 (18.0)
------ ------
Total expenses 90.7 90.8 2.6
------ ------
Operating income 9.3 9.2 3.6
====== ======
Net income 4.5 4.5 0.8
====== ======
</TABLE>
The Company's net revenues fluctuate seasonally, with net
revenues in the first fiscal quarter historically being lower
than those for the remainder of the year. This seasonality is
the result of increased consumer purchases of the Company's
products during the traditional holiday periods. 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.
The following discussion includes certain forward-looking
statements. Actual results could differ materially from those
reflected by the forward-looking statements and a number of
factors may affect future results, liquidity and capital
resources. These factors include softness in the general retail
environment, the timing of products being introduced into the
market, the level of returns experienced by operating divisions,
the level of margins achievable in the marketplace and the
ability to minimize operating expenses. Although the Company
believes it has the business strategy and resources needed for
improved operations, future revenue and margin trends cannot be
reliably predicted and may cause the Company to adjust its
business strategy during the remainder of fiscal 1999. The
Company disclaims any intent or obligation to update forward-
looking statements.
Results of Operations
Net revenues for the first six months of fiscal 1999 increased
$3.4 million, or 2.7%, and for the second quarter increased $1.8
million, or 2.7%, over the same periods in fiscal 1998. The
publishing product net revenues for the first six months
decreased $1.7 million, or 2.3%, and for the second quarter
decreased $1.0 million, or 2.3%, compared to the prior year. The
decreases for both periods were primarily due to the expiration
of certain agreements whereby the Company acted as a distributor
of publishing products. The Company does not plan to enter into
any material distribution agreements in the near future. Net
revenues from gift products for the first six months increased
$5.1 million, or 10.7%, and for the second quarter increased $2.8
million, or 10.7%. The increases for both periods were primarily
due to increased sales of a special selection of products,
including scrapbooks, to mass merchandisers. The Company has in
the past eighteen months reduced marketing of deeply discounted
gift products to mass merchandisers. The current product
offerings to mass merchandisers are consistent with the Gift
Division's strategy to focus on higher margin product promotions.
Price increases did not have a material effect on net revenues.
The Company's cost of goods sold decreased for the first six
months of fiscal 1999 by $347,000, or 0.5%, and for the second
quarter by $909,000, or 2.4%, over the same periods in fiscal
1998 and, as a percentage of net revenues, decreased to 53.4% for
the first six months of fiscal 1999 from 55.1% and for the second
quarter to 52.7% from 55.5% in the comparable periods in fiscal
1998. The decrease in cost of goods sold, as a percentage of net
revenues, for both periods resulted primarily from the expiration
of certain distribution agreements referenced above. The cost to
the Company for distributed products is greater than the cost for
owned products.
Selling, general and administrative expenses for the first six
months of fiscal 1999 increased by $3.5 million, or 8.1%, and for
the second quarter increased $2.8 million, or 13.3%, from the
same periods in fiscal 1998. These expenses, expressed as a
percentage of net revenues, increased to 36.7% for the first six
months of fiscal 1999 versus 34.9% and for the second quarter to
34.5% from 31.2% in the same periods in fiscal 1998. These
increases for both periods were primarily attributable to a
decline in fees charged for operations services provided to the
purchaser of the Company's music business, which was sold in
January 1997. The fees for these services were credited to
selling, general and administrative expenses and have declined as
certain services were discontinued. The Company anticipates that
all the services will be discontinued on or about December 31,
1998. In addition, to a lesser extent, the increases for the six
months and second quarter were due to increased marketing costs
in the Company's direct-to-consumer market. The Company believes
that the selling, general and administrative expenses, as a
percentage of revenues, for the full year of fiscal 1999 should
be comparable to that for fiscal 1998.
Interest expense for the first six months of fiscal 1999
increased by $60,000, or 1.9%, over the same period in fiscal
1998 due to increases in indebtedness incurred for repurchases of
shares of common stock.
Liquidity and Capital Resources
At September 30, 1998, the Company had $2.0 million in cash
and cash equivalents. 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 September 30, 1998, the Company had
working capital of $129.6 million.
On June 10, 1998, the Company announced its intention to
repurchase up to three million shares of common stock and/or
Class B common stock from time to time in the open market or
through privately negotiated transactions. As of September 30,
1998, the Company had repurchased approximately 2.4 million
shares of common stock in the open market at an aggregate cost to
the Company of $32.6 million.
Net cash used in operating activities was $16.8 million and
$13.1 million for the first six months of fiscal 1999 and 1998,
respectively. Cash used in operations during the first six
months of fiscal 1999 was principally attributable to an increase
in accounts receivable. Cash used in operations during the first
six months of fiscal 1998 was principally attributable to the
payment of income taxes and an increase in accounts receivable.
During the first six months of fiscal 1999, capital
expenditures totaled approximately $1.4 million. During the
remainder of fiscal 1999, the Company anticipates capital
expenditures of approximately $1.5 million primarily consisting
of additional computer equipment and warehousing equipment.
The Company's bank credit facilities are unsecured and consist
of a $75 million credit facility and a $10 million credit
facility (collectively, the "Credit Agreements"). The $75
million credit facility bears interest at either the prime rate
or, at the Company's option, LIBOR plus a percentage, subject to
adjustment based on certain financial ratios, and matures on
December 13, 2002. The $10 million credit facility bears
interest at the prime rate and matures on July 31, 2000. At
September 30, 1998, the Company had $20.5 million outstanding
under the Credit Agreements, and $64.5 million available for
borrowing. Due to the seasonality of the Company's business,
borrowings under the Credit Agreements typically peak during the
third quarter of the fiscal year.
At September 30, 1998, the Company had outstanding
approximately $21.3 million of unsecured senior notes ("Senior
Notes"). The Senior Notes bear interest at rates from 6.68% to
9.50% due through fiscal 2006.
Under the terms of the Credit Agreements and the Senior Notes,
the Company has agreed to limit the payment of dividends and to
maintain certain interest coverage and debt-to-total-capital
ratios which are similarly calculated for each debt agreement.
At September 30, 1998, the Company was in compliance with all
covenants of these debt agreements, as amended.
At September 30, 1998, the Company had outstanding $53.1
million of 5.75% convertible subordinated notes ("Convertible
Subordinated Notes") due November 30, 1999. During the first six
months of fiscal 1999, the Company purchased $1.9 million in
principal amount of the Convertible Subordinated Notes.
Subsequent to September 30, 1998, the Company purchased $13.2
million in principal amount of the Convertible Subordinated
Notes. The Convertible Subordinated Notes presently are
convertible into common stock at $17.00 per share and are
redeemable at the Company's option currently at 101.64% of the
principal amount, declining to 100.82% on November 30, 1998, and
to 100% on November 30, 1999. This conversion would result in
3,124,118 and 2,350,235 additional shares outstanding as of
September 30, 1998 and November 12, 1998, respectively.
Management believes cash generated by operations and
borrowings available under the Credit Agreements will be
sufficient to fund anticipated working capital requirements for
existing operations through the remainder of fiscal 1999.
Year 2000 Conversion
The Company has established a task force to coordinate the
implementation of changes to computer systems and applications
necessary to become year 2000 compliant with no material adverse
effect on customers or disruption to business operations. These
actions are necessary to ensure that the systems and applications
will recognize and process the year 2000 and beyond. The Company
believes that possible risks if compliance is not accomplished
could include delays in receiving and/or shipping of products and
in invoicing to and/or receiving payments from customers in the
days immediately after January 1, 2000. The Company anticipates
that, beginning in the third quarter of fiscal 1999, testing will
commence for receipt of electronic orders, customer invoicing and
other Company systems. The Company also is communicating with
suppliers, customers, financial institutions and others with
which it does business to determine the status of their being
year 2000 compliant. The Company anticipates that its compliance
tests will include electronic and other communications with a
cross-section of its customers. The Company has also evaluated
non-system issues, e.g. security, elevators, timekeeping, etc.,
relative to the year 2000. The Company expensed approximately
$220,000 in costs during the first six months of fiscal 1999
primarily for programmer costs and software upgrades related to
becoming year 2000 compliant and expects to incur additional
costs of $500,000 and $400,000 for the remainder of fiscal 1999
and for fiscal 2000, respectively. These costs are expected
to include programmer costs for modification of software
programs, costs for a testing site, software purchases and
consulting fees and will be expensed as they are incurred.
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits required by Item 601 of Regulation S-K
Exhibit
Number
-------
4.1 - Fourth Amendment to Credit Agreement dated as of
March 31, 1998, among the Company, SunTrust
Bank, Nashville, N.A., National City Bank of
Louisville, First American National Bank in
Nashville, Nationsbank of Texas, N.A. in Dallas,
and Creditanstalt-Bankverein in New York.
11 - Statement re Computation of Per Share Earnings
27 - Financial Data Schedule
(b) No Form 8-K was filed by the Company during the quarter
ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Thomas Nelson, Inc.
(Registrant)
November 13, 1998 BY Joe L. Powers
------------------------- ---------------------
Joe L. Powers
Executive Vice President
(Principal Financial and
Accounting Officer)
INDEX TO EXHIBITS
Exhibit
Number
- -------
4.1 - Fourth Amendment to Credit Agreement dated as of March
31, 1998, among the Company, SunTrust Bank, Nashville,
N.A., National City Bank of Louisville, First American
National Bank in Nashville, Nationsbank of Texas, N.A. in
Dallas, and Creditanstalt-Bankverein in New York.
11 - Statement re Computation of Per Share Earnings
27 - Financial Data Schedule (for SEC purposes only)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Company's 10-Q for the period ended September 30, 1998,
and is qualified in its entirety by reference to such financial
statements and the notes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,978
<SECURITIES> 0
<RECEIVABLES> 88,876
<ALLOWANCES> 6,988
<INVENTORY> 75,504
<CURRENT-ASSETS> 174,029
<PP&E> 58,189
<DEPRECIATION> 28,138
<TOTAL-ASSETS> 271,936
<CURRENT-LIABILITIES> 44,388
<BONDS> 95,045
0
0
<COMMON> 14,759
<OTHER-SE> 113,392
<TOTAL-LIABILITY-AND-EQUITY> 271,936
<SALES> 124,823
<TOTAL-REVENUES> 126,439
<CGS> 67,484
<TOTAL-COSTS> 113,914
<OTHER-EXPENSES> 817
<LOSS-PROVISION> 1,075
<INTEREST-EXPENSE> 3,145
<INCOME-PRETAX> 8,950
<INCOME-TAX> 3,311
<INCOME-CONTINUING> 5,639
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,639
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
<TABLE>
EXHIBIT 11
STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share data)
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
--------- --------- --------- ---------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted average shares
outstanding 15,886 17,110 15,055 17,111
======== ======== ======= =======
Net income $ 5,639 $ 5,594 $ 4,383 $ 4,603
======== ======== ======= =======
Net income per share $ 0.35 $ 0.33 $ 0.29 $ 0.27
======== ======== ======= =======
DILUTED EARNINGS PER SHARE:
Weighted average shares
outstanding 15,886 17,110 15,055 17,111
Dilutive effect of common
stock options 76 41 80 71
Convertible notes 3,198 3,235 3,172 3,235
-------- -------- ------- -------
Total shares 19,160 20,386 18,307 20,417
======== ======== ======= =======
Net income<F1> $ 6,699 $ 6,616 $ 4,903 $ 5,111
======== ======== ======= =======
Net income per share $ 0.35 $ 0.32 $ 0.27 $ 0.25
======== ======== ======= =======
<FN>
<F1> Adjusted for interest on convertible debt
</TABLE>
FOURTH AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (the "Fourth Amendment") is entered into as of the
31st day of March, 1998 (the "Effective Date"), by and among
THOMAS NELSON, INC., a Tennessee corporation ("Nelson"),
SUNTRUST BANK, NASHVILLE, N.A., a national banking
association ("SunTrust"), the other banks and lending
institutions listed on the signature pages hereof and any
assignees of SunTrust or such other banks and lending
institutions that become "lenders", (SunTrust and such other
banks, lending institutions and assignees are referred to
collectively herein as the "Lenders"), and SUNTRUST BANK,
NASHVILLE, N.A., in its capacity as agent for the Lenders
(the "Agent").
R E C I T A L S:
WHEREAS, Lenders, Agent and Nelson entered into an
Amended and Restated Credit Agreement dated as of December
13, 1995, as amended by that certain First Amendment to
Amended and Restated Credit Agreement dated as of January 3,
1996, as further amended by that certain Second Amendment to
Amended and Restated Credit Agreement dated as of November
15, 1996, and as further amended by that certain Third
Amendment to Amended and Restated Credit Agreement dated as
of January 7, 1997 (the "Third Amendment") (as amended or
otherwise modified from time to time, the "Credit
Agreement"), wherein Lenders agreed to extend certain
financial accommodations to Nelson; and
WHEREAS, Nelson has requested that Lenders consent to
Nelson's repurchasing certain of its outstanding debentures
and to use proceeds of the Credit Agreement for such
purpose, and Lenders are willing to consent to such
repurchasing and such use of proceeds, and to modify the
application of certain provisions of the Credit Agreement
with respect to such repurchasing and such use of proceeds,
upon the terms contained herein;
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and
adequacy of which are mutually acknowledged, the parties
hereby agree as follows:
1. Defined Terms. All defined terms used and not
otherwise defined herein shall have the meaning ascribed to
such terms in the Credit Agreement.
2. Debenture Repurchase. As long as no Event of
Default exists or is continuing, Nelson may from time to
time, at any time prior to November 30, 1999 (the
"Completion Date"), purchase up to $55,000,000 of its
outstanding 5 3/4% Convertible Subordinated Notes due 1999 in
the total original principal amount of $55,000,000 and dated
November 30, 1992 (the "Debenture Repurchase"). Nelson
proposes to fund the acquisition of the Debenture Repurchase
by utilizing a combination of (a) its working capital and
available cash, and (b) borrowings under the Revolving Loan
Commitments in an amount not to exceed $35,000,000.
3. Lender's Consent. Nelson has requested that
lenders consent to the Debenture Repurchase as described in
this Fourth Amendment, and that, with respect to the
Debenture Repurchase only, Lenders consent to modify certain
terms and provisions of the Credit Agreement to permit the
use of funds by Nelson as set forth in this Fourth Amendment
to assist in consummating the Debenture Repurchase. To the
extent the requirements of Section 11.04 and/or Section
11.08 of the Credit Agreement are applicable, Lenders hereby
consent to Nelson's request with respect to the Debenture
Repurchase as described herein. Lenders further consent to
borrowings by Nelson under the Revolving Loan Commitments in
an amount not to exceed Thirty-Five Million Dollars
($35,000,000) to partially fund the Debenture Repurchase.
Nelson shall be entitled to use borrowings under the
Revolving Loan Commitments for the Debenture Repurchase only
through the Completion Date. After the Completion Date,
Nelson shall not be permitted to borrow under the Revolving
Loan Commitments for the purpose of the Debenture
Repurchase.
4. Terms of Debenture Repurchase. Nelson hereby
covenants with Lenders in connection with the Debenture
Repurchase that the Debenture Repurchase shall be completed
on or before the Completion Date, and that the purchase
price of the Debenture Repurchase shall not exceed
$60,000,000 in the aggregate.
5. Section 2.02 of the Credit Agreement. Lenders
hereby agree that Section 2.02 of the Credit Agreement is
hereby modified to permit the use by Nelson of an amount not
to exceed Thirty-Five Million Dollars ($35,000,000) from the
funds available under the Revolving Loans to partially fund
the Debenture Repurchase. Any borrowing of such funds shall
be made in accordance with the Credit Agreement as amended
by this Fourth Amendment, including without limitation,
Article III and Article IV of the Credit Agreement.
6. Consent of Third Parties. Nelson represents and
warrants that any and all consents required to be obtained
by Nelson in connection with the Debenture Repurchase and
the funding of same have been obtained and delivered to
Agent.
7. Fee to Lender. Lenders and Nelson hereby agree
that simultaneously with the execution of this Fourth
Amendment, Nelson shall pay to Lenders a fee in the amount
of Twenty-Five Thousand Dollars ($25,000) in consideration
of Lenders' execution of this Fourth Amendment and the
agreements set forth herein.
8. Future Transactions. Nelson and Lenders hereby
agree that the waivers and modifications set forth herein
shall apply only to the Debenture Repurchase, shall
terminate on November 30, 1999 and shall not extend to any
future debenture acquisitions or uses of proceeds that may
be contemplated by Nelson without the express written
consent of Lenders.
9. Governing Law. This Fourth Amendment shall be
governed by and construed in accordance with the laws of the
State of Tennessee.
10. Full Force and Effect. Except as specifically
amended by this Fourth Amendment, all other terms and
provisions of the Credit Agreement shall remain in full
force and effect.
11. No Other Waiver. Except as expressly stated
herein, no other waiver of any term or provision of the
Credit Agreement shall be inferred or implied.
IN WITNESS WHEREOF, the parties have caused this Fourth
Amendment to be duly executed as of the Effective Date.
THOMAS NELSON, INC.
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
ACCEPTED AND AGREED TO:
SUNTRUST BANK, NASHVILLE, N.A., as Agent
By: /s/ Allen Oakley
-------------------------------------
Title: Senior Vice President
-------------------------------------
Acceptance Date:
--------------------------
SUNTRUST BANK, NASHVILLE, N.A.
By: /s/ Allen Oakley
-------------------------------------
Title: Senior Vice President
-------------------------------------
Acceptance Date:
--------------------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ John E. Ball
-------------------------------------
Title: Senior Vice President
-------------------------------------
Acceptance Date:
--------------------------
CREDITANSTALT-BANKVEREIN
By: /s/ John G. Taylor
-------------------------------------
Title: Senior Associate
-------------------------------------
By: /s/ Carl S. Drake
-------------------------------------
Title: Vice President
-------------------------------------
Acceptance Date: April 4, 1998
---------------------------
NATIONAL CITY BANK, KENTUCKY
By: /s/ Kevin L. Anderson
-------------------------------------
Title: Vice President
-------------------------------------
Acceptance Date: April 6, 1998
---------------------------
FIRST AMERICAN NATIONAL BANK
By: /s/ Scott Bane
-------------------------------------
Title: Senior Vice President
-------------------------------------
Acceptance Date: April 7, 1998
---------------------------
The undersigned join in the execution of this Fourth
Amendment in order to acknowledge their consent to the terms
and provisions of this Fourth Amendment and to confirm that
the execution of this Fourth Amendment by the parties hereto
in no way affects the undersigneds' respective obligations
under the Amended and Restated Guaranty Agreement executed
as of December 13, 1995 by Word, Incorporated, a corporation
organized and existing under the laws of the State of
Delaware, PPC, Inc., a corporation organized and existing
under the laws of the State of North Carolina, Editorial
Caribe, Inc., a corporation organized and existing under the
laws of the State of Florida, Morningstar Radio Network,
Inc., a corporation organized and existing under the laws of
the State of Texas, Nelson Word Ltd., a corporation
organized and existing under the laws of the United Kingdom,
Word Communications, Ltd., a corporation organized and
existing under the laws of British Columbia, Canada, Word
Direct, Inc., a corporation organized and existing under the
laws of the State of Texas, Word Direct Paratners, L.P., a
limited partnership organized and existing under the laws of
the State of Texas, The C.R. Gibson Company, a corporation
organized and existing under the laws of the State of
Delaware, 855673 Ontario Limited, a corporation organized
and existing under the laws of Ontario, Canada, in favor of
SunTrust Bank, Nashville, N.A., 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.
WORTHY, INCORPORATED (f/k/a/
WORD, INCORPORATED)
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
PPC, INC.
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
EDITORIAL CARIBE, INC.
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
MORNINGSTAR RADIO NETWORK, INC.
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
C.R. GIBSON (UK) LTD. (f/k/a NELSON
MEDIA (UK) LTD.) (f/k/a NELSONWORD
LTD.)
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
NELSON MEDIA (CANADA) LTD.
(f/k/a WORD COMMUNICATIONS, LTD.)
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
NELSON DIRECT, INC. (f/k/a WORD
DIRECT, INC.)
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
NELSON DIRECT PARTNERS, L.P.
(f/k/a WORD DIRECT PARTNERS, L.P.)
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
THE C.R. GIBSON COMPANY
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
855763 ONTARIO LIMITED
By: /s/ Joe L. Powers
---------------------
Title: Executive Vice President
---------------------
