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 December 31, 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 February 10, 1999, the Registrant had outstanding
13,585,590 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>
December 31, March 31, December 31,
1998 1998 1997
------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,432 $ 39,713 $ 41,023
Accounts receivable, less
allowances of $9,617,
$6,162 and $8,101
respectively 74,273 65,415 61,337
Inventories 74,017 70,590 66,219
Prepaid expenses 12,607 8,177 7,437
Deferred tax assets 3,276 3,276 8,310
---------- ---------- ----------
Total current assets 166,605 187,171 184,326
Property, plant and equipment 25,200 32,103 32,740
Other assets 9,450 9,843 10,062
Deferred charges 1,790 1,789 1,990
Goodwill 55,394 56,536 56,929
---------- ---------- ----------
TOTAL ASSETS $ 258,439 $ 287,442 $ 286,047
========== ========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable $ 15,372 $ 16,701 $ 11,366
Accrued expenses 16,399 20,182 21,111
Dividends payable 588 685 685
Income taxes currently
payable 4,371 4,286 8,023
Current portion of long-
term debt & capital
lease obligations 4,914 3,975 3,257
---------- ---------- ----------
Total current liabilities 41,644 45,829 44,442
Long-term debt 80,630 79,476 80,725
Capital lease obligations - 84 156
Deferred tax liabilities 3,364 3,364 3,640
Other liabilities 1,953 2,293 2,663
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
13,585,590, 16,002,817
and 16,002,817 shares,
respectively 13,585 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
1,111,924 shares,
respectively 1,106 1,112 1,112
Additional paid-in capital 47,920 79,057 79,057
Retained earnings 68,237 60,224 58,249
---------- ---------- ----------
Total shareholders' equity 130,848 156,396 154,421
---------- ---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 258,439 $ 287,442 $ 286,047
========== ========== ==========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
---------- --------- ---------- ----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES $ 193,023 $ 187,735 $ 66,584 $ 64,658
COST AND EXPENSES:
Cost of goods sold 103,074 103,258 35,590 35,427
Selling, general and
administrative 68,783 63,447 22,353 20,497
Amortization of
goodwill and
non-compete
agreements 1,234 1,433 417 437
--------- --------- --------- ---------
Total expenses 173,091 168,138 58,360 56,361
--------- --------- --------- ---------
OPERATING INCOME 19,932 19,597 8,224 8,297
Other income 369 1,085 47 277
Interest expense 4,752 4,568 1,672 1,483
--------- --------- --------- ---------
Income before income taxes 15,549 16,114 6,599 7,091
Provision for income taxes 5,753 6,103 2,442 2,674
--------- --------- --------- ---------
NET INCOME $ 9,796 $ 10,011 $ 4,157 $ 4,417
========= ========= ========= =========
Weighted average number
of shares outstanding:
Basic 15,497 17,112 14,725 17,112
========= ========= ========= =========
Diluted 18,515 20,384 17,223 20,392
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.63 $ 0.59 $ 0.28 $ 0.26
========= ========= ========= =========
Diluted $ 0.61 $ 0.57 $ 0.27 $ 0.24
========= ========= ========= =========
DIVIDENDS DECLARED
PER SHARE $ 0.12 $ 0.12 $ 0.04 $ 0.04
========= ========= ========= =========
See Accompanying Notes
</TABLE>
<TABLE>
THOMAS NELSON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended December 31,
---------------------------------
1998 1997
------------ --------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING
ACTIVITIES:
Income from continuing operations $ 9,796 $ 10,011
Adjustments to reconcile net
income to net cash provided by
(used in) operations:
Depreciation and amortization 6,944 6,213
Changes in assets and liabilities,
net of acquisitions and disposals:
Accounts receivable, net ( 8,858) 3,289
Inventories ( 3,427) 5,331
Prepaid expenses ( 4,430) 1,984
Accounts payable and accrued
expenses ( 3,166) ( 7,184)
Income taxes currently
payable and deferred 85 ( 11,951)
--------- ----------
Net cash provided by (used in)
continuing operations ( 3,056) 7,693
--------- ----------
Discontinued operations:
Changes in discontinued assets ( 1,946) ( 1,959)
--------- ----------
Net cash used in discontinued operations ( 1,946) ( 1,959)
--------- ----------
Net cash provided by (used in) operating
activities ( 5,002) 5,734
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ( 1,619) ( 2,938)
Proceeds from sale of business and
discontinued assets 5,598 -
Changes in other assets and deferred
charges ( 2,486) ( 803)
--------- ----------
Net cash provided by (used in) investing
activities 1,493 ( 3,741)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 20,500 -
Payments under capital lease
obligation ( 189) ( 256)
Payments on long-term debt ( 18,302) ( 2,392)
Dividends paid ( 1,880) ( 2,052)
Proceeds from issuance of common
stock 93 14
Common stock retired ( 33,676) ( 4)
Other financing activities ( 318) 249
--------- ----------
Net cash used in financing activities ( 33,772) ( 4,441)
--------- ----------
Net decrease in cash and cash equivalents ( 37,281) ( 2,448)
Cash and cash equivalents at beginning
of period 39,713 43,471
--------- ----------
Cash and cash equivalents at end
of period $ 2,432 $ 41,023
========= ==========
Supplemental disclosures of non-cash
investing and financing activities:
Dividends accrued and unpaid $ 588 $ 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.
Segment Reporting: In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131").
SFAS 131 requires public companies to report financial and
descriptive information about its reportable operating segments
in annual financial statements and in interim financial reports
issued to shareholders. The Company will start reporting under
SFAS 131 beginning with its annual financial statements for
fiscal year ending March 31, 1999.
Note C - Inventories
Components of inventories consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31, March 31, December 31,
1998 1998 1997
----------- --------- -----------
<S> <C> <C> <C>
Finished goods $ 62,376 $ 54,503 $ 54,031
Raw materials
and work in
process 11,641 16,087 12,188
----------- --------- -----------
$ 74,017 $ 70,590 $ 66,219
=========== ========= ===========
</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 was paid November 16, 1998, to shareholders of record
on November 2, 1998.
On November 19, 1998, the Company's board of directors declared
a cash dividend of $0.04 per share of Common and Class B Common
Stock. The dividend is payable February 15, 1999, to shareholders
of record on February 1, 1999.
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>
Nine Months Ended Fiscal
December 31, Year-to-Year
----------------- Increase
1998 1997 (Decrease)
------- ------- --------
(%) (%) (%)
<S> <C> <C> <C>
Net revenues:
Publishing 63.8 65.6 -
Gift 36.2 34.4 8.1
------ ------
Total net revenues 100.0 100.0 2.8
------ ------
Expenses:
Cost of goods sold 53.4 55.0 (0.2)
Selling, general and
administrative 35.6 33.8 8.4
Amortization of goodwill
and non-compete agreements 0.7 0.8 (13.9)
------ ------
Total expenses 89.7 89.6 -
------ ------
Operating income 10.3 10.4 1.7
====== ======
Net income 5.1 5.3 ( 2.1)
====== ======
</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 nine months of fiscal 1999
increased $5.3 million, or 2.8%, and for the third quarter
increased $1.9 million, or 3.0%, over the same periods in fiscal
1998. The publishing product net revenues for the first nine
months were flat, and for the third quarter increased $1.8
million, or 3.7%, compared to the prior year. Both periods were
affected by the absence of revenues from certain agreements which
have expired, 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. The
increase for the third quarter was primarily due to new product
introductions. Net revenues from gift products for the first
nine months increased $5.3 million, or 8.1%, and for the third
quarter $0.1 million, or 0.8%. The increase for the nine months
was primarily due to increased sales of a special selection of
products, including scrapbooks, to mass merchandisers. The third
quarter for gift product revenues has historically been lower
than the remainder of the year. Price increases did not have a
material effect on net revenues.
The Company's cost of goods sold decreased for the first nine
months of fiscal 1999 by $0.2 million, or 0.2%, and increased for
the third quarter by $0.2 million, or 0.5%, over the same periods
in fiscal 1998 and, as a percentage of net revenues, decreased to
53.4% for the first nine months of fiscal 1999 from 55.0% and for
the third quarter to 53.5% from 54.8% 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 was
greater than the cost for owned products. This decrease was also
attributed to fewer sales of lower margin Bible-type publishing
products and an increase in higher margin book-type products
revenues.
Selling, general and administrative expenses for the first
nine months of fiscal 1999 increased by $5.3 million, or 8.4%,
and for the third quarter increased $1.9 million, or 9.1%, from
the same periods in fiscal 1998. These expenses, expressed as a
percentage of net revenues, increased to 35.6% for the first nine
months of fiscal 1999 versus 33.8% and for the third quarter to
33.6% from 31.7% 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. All services have been
discontinued as of December 31, 1998. In addition, to a lesser
extent, the increases for the nine months and third fiscal
quarter were due to increased marketing costs in the Company's
direct-to-consumer market.
Interest expense for the first nine months of fiscal 1999
increased by $0.2 million, or 4.0%, 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 December 31, 1998, the Company had $2.4 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 December 31, 1998, the Company had working
capital of $125.0 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 December 31,
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 $33.5 million.
Net cash provided by (used in) operating activities was ($5.0)
million and $5.7 million for the first nine months of fiscal 1999
and 1998, respectively. Cash used in operations during the first
nine months of fiscal 1999 was principally attributable to an
increase in accounts receivable, prepaid expenses and inven-
tories. The increase in accounts receivable resulted primarily
from revenues occurring later in this year's third quarter, as
well as, a shift from selling directly to one major mass market
account to a distributor with longer payment terms. The prepaid
expenses increased due to an increase in the number or size of
author advances. Inventory increased to improve stock levels of
Bible-type products under a new availability policy and to provide
sufficient stock of certain gift products during the transition
from manufacturing to outsourcing these products after the Company's
sale of manufacturing operations supporting the gift business.
Cash provided by operations during the first nine months of
fiscal 1998 was principally attributable to income from continuing
operations.
During the first nine months of fiscal 1999, capital
expenditures totaled approximately $1.6 million. During the
remainder of fiscal 1999, the Company anticipates capital
expenditures of approximately $1.0 million primarily consisting
of computer equipment and warehousing equipment.
The Company's bank credit facilities are unsecured and consist
of a $100 million credit facility and a $10 million credit
facility (collectively, the "Credit Agreements"). The $100
million credit facility bears interest at either the prime rate
or, at the Company's option, LIBOR plus a percentage, subject to
quarterly adjustments based on certain financial ratios. This
credit facility was amended on November 30, 1998, to increase the
aggregate amount available for borrowing from $75 million to $100
million and to extend the maturity from December 13, 2002 to
December 13, 2005. (See Exhibit 4.1 filed herewith.) The $10
million credit facility bears interest at the prime rate and
matures on July 31, 2000. At December 31, 1998, the Company had
$20.5 million outstanding under the Credit Agreements, and
$89.5 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 December 31, 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 December 31, 1998, the Company was in compliance with all
covenants of these debt agreements, as amended.
At December 31, 1998, the Company had outstanding $39.9
million of 5.75% convertible subordinated notes ("Convertible
Subordinated Notes") due November 30, 1999. During the first
nine months of fiscal 1999, the Company purchased $15.1 million
in principal amount of the Convertible Subordinated Notes. On
January 7, 1999, the Company announced that it will redeem on
March 1, 1999, all outstanding Convertible Subordinated Notes at
a redemption price of $1,008.20 per $1,000 principal amount, together
with accrued and unpaid interest. The Convertible Subordinated
Notes presently are convertible at the option of the holder
into approximately 58 shares of the Company's common stock
per $1,000 principal amount at the conversion price of $17.00
per share.
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
assessment and implementation of changes to computer systems and
applications necessary to become year 2000 compliant. These
actions are necessary to ensure that the systems and applications
will recognize and process the year 2000 and beyond with no
material adverse effect on customers or disruption to business
operations. The task force has also evaluated non-systems
issues, e.g. security, elevators, timekeeping, etc., relative to
the year 2000.
In addition, the task force has been actively communicating
with third parties concerning the status of their year 2000
readiness. These third parties include the Company's financial
institutions, as well as selected customers, vendors, landlords
and suppliers of telecommunication services and other utilities.
As part of the process of evaluating its options and attempting
to mitigate third party risks, the task force is collecting and
analyzing information from these third parties.
As of December 31, 1998, the Company has completed all
programming revisions to its computer systems and has completed
initial testing of its systems for receipt of electronic orders,
customer invoicing and other processes for transactions dated in
year 2000. The Company anticipates that further compliance tests
will include electronic and other communications with appropriate
customers. The Company has also engaged consultants to certify
that specific systems are year 2000 compliant.
The effect of year 2000 non-compliance on the business of the
Company is difficult to predict. 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. At this time, the Company
does not believe these risks will have a material adverse effect
on the Company's results of operations, liquidity or financial
condition.
The Company expensed approximately $346,000 in costs during the
first nine months of fiscal 1999, primarily for programmer costs
and software upgrades related to becoming year 2000 compliant,
and expects to incur additional costs of $200,000 and $400,000
for the remainder of fiscal 1999 and for fiscal 2000,
respectively. These costs include internal 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.
The task force is currently developing a contingency plan that
is expected to address financial and operational problems that
might arise on and around January 1, 2000. This contingency plan
will include identifying alternate vendors and back-up processes
that do not rely on computers, whenever possible. The Company
expects to have the contingency plan completed during the fourth
quarter of fiscal 1999 and to reevaluate this plan on a quarterly
basis.
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 - Fifth Amendment to Credit Agreement dated as
of December 17, 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 Corporate Finance,
Inc. (formerly 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 December 31, 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)
February 12, 1999 BY /s/ Joe L. Powers
- ----------------------------- ----------------------
Joe L. Powers
Executive Vice President
(Principal Financial and
Accounting Officer)
INDEX TO EXHIBITS
Exhibit
Number
- ------
4.1 - Fifth Amendment to Credit Agreement dated as of December
17, 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 Corporate Finance, Inc.
(formerly 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 December 31, 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,432
<SECURITIES> 0
<RECEIVABLES> 83,890
<ALLOWANCES> 9,617
<INVENTORY> 74,017
<CURRENT-ASSETS> 166,605
<PP&E> 48,643
<DEPRECIATION> 23,443
<TOTAL-ASSETS> 258,439
<CURRENT-LIABILITIES> 41,644
<BONDS> 80,630
0
0
<COMMON> 14,691
<OTHER-SE> 116,157
<TOTAL-LIABILITY-AND-EQUITY> 258,439
<SALES> 191,205
<TOTAL-REVENUES> 193,023
<CGS> 103,074
<TOTAL-COSTS> 171,857
<OTHER-EXPENSES> 1,234
<LOSS-PROVISION> 1,663
<INTEREST-EXPENSE> 4,752
<INCOME-PRETAX> 15,549
<INCOME-TAX> 5,753
<INCOME-CONTINUING> 9,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,796
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.61
</TABLE>
<TABLE>
EXHIBIT 11
STATEMENT RE-COMPUTATION OF PER SHARE EARNINGS
(Dollars in thousands, except per share data)
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
1998 1997 1998 1997
--------- --------- --------- ---------
(Unaudited)(Unaudited)(Unaudited)(Unaudited)
<S> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE:
Weighted average shares
outstanding 15,497 17,112 14,725 17,112
======== ======== ======= =======
Net income $ 9,796 $ 10,011 $ 4,157 $ 4,417
======== ======== ======= =======
Net income per share $ 0.63 $ 0.59 $ 0.28 $ 0.26
======== ======== ======= =======
DILUTED EARNINGS PER SHARE:
Weighted average shares
outstanding 15,497 17,149 14,725 17,157
Dilutive effect of common
stock options 73 -- 58 --
Convertible notes 2,945 3,235 2,440 3,235
-------- -------- ------- -------
Total shares 18,515 20,384 17,223 20,392
======== ======== ======= =======
Net income<F1> $ 11,280 $ 11,542 $ 4,574 $ 4,925
======== ======== ======= =======
Net income per share $ 0.61 $ 0.57 $ 0.27 $ 0.24
======== ======== ======= =======
<FN>
<F1> Adjusted for interest on convertible debt
</TABLE>
FIFTH AMENDMENT TO AMENDED
AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (the "Fifth Amendment") is entered into on November
30, 1998, but to be effective as of June 10, 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, as further amended by
that certain Third Amendment to Amended and Restated Credit
Agreement dated as of January 7, 1997, and as further amended by
that certain Fourth Amendment to Amended and Restated Credit
Agreement dated as of March 31, 1998 (the "Fourth 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 of a portion of its outstanding common
stock and certain convertible subordinated notes 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; and
WHEREAS, Nelson has requested that Lenders consent to an
extension of the Initial Reduction Date, and Lenders are willing
to consent to such request, upon the terms contained herein; and
WHEREAS, Nelson has requested that Lenders consent to a
change in the calculation with respect to adjustments concerning
certain pricing with respect to the Credit Agreement, and Lenders
are willing to consent to such request, upon the terms contained
herein; and
WHEREAS, Nelson has requested that Lenders consent to an
increase in the Revolving Loan Commitment, and Lenders are
willing to consent to such request, upon the terms contained
herein; and
WHEREAS, Nelson has requested that Lenders consent to
certain other changes in the Credit Agreement, as set forth
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. Stock Repurchase. Nelson may from time to time purchase up
to 3,000,000 shares (the "Maximum Number of Shares") of the
outstanding common stock of Nelson (the "Stock Repurchase").
Nelson's common stock to be acquired pursuant to the Stock
Repurchase shall be referred to as the "Repurchased Shares."
Nelson shall accomplish the Stock Repurchase by any of the
following (a) purchasing the Repurchased Shares on the open
market ("Open Market Acquisitions"), or (b) in privately
negotiated transactions ("Private Acquisitions"), or (c)
pursuant to a tender offer in accordance with Rule 13a-4
promulgated under the Securities Exchange Act of 1934 ("Self-
Tender"). The Stock Repurchase shall be completed in
accordance with one of the following schedules, as
applicable (the "Completion Date"): (i) on or before one (1)
year from the Effective Date in the event Nelson utilizes a
Private Acquisition or Open Market Acquisitions to
accomplish the Stock Repurchase, or (ii) on or before ninety
(90) days from the date Nelson initiates the Self-Tender
(the "Initiation Date") in the event Nelson utilizes a Self-
Tender to accomplish the Stock Repurchase. The Initiation
Date may not occur more than one year after the Effective
Date. In the event Nelson elects to accomplish the Stock
Repurchase pursuant to a Self-Tender, Nelson shall give the
Agent written notice of the Initiation Date and the
anticipated Completion Date at least five (5) days prior to
the Initiation Date. Subject to the terms and provisions of
Section 2 and Section 3 hereof, Nelson proposes to fund the
acquisition of the Repurchased Shares by utilizing a
combination of (a) its working capital and available cash,
and (b) borrowings under the Revolving Loan Commitments.
3. Lender's Consent. Nelson has requested that Lenders consent
to the Stock Repurchase as described in this Fifth
Amendment, and that, with respect to the Stock 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 Fifth Amendment to consummate the Stock
Repurchase. Lenders hereby consent to Nelson's request with
respect to the Stock Repurchase as described herein. Lenders
further consent to borrowings by Nelson under the Revolving
Loan Commitments to wholly or partially fund the Stock
Repurchase. Nelson shall be entitled to use borrowings under
the Revolving Loan Commitments for the Stock Repurchase
through the Completion Date; it shall make no additional
borrowings thereafter for the Stock Repurchase. After the
Completion Date, Nelson shall not be permitted to borrow
under the Revolving Loan Commitments for the purpose of the
Stock Repurchase.
4. Terms of Stock Repurchase. Nelson hereby covenants with
Lenders that in connection with the Stock Repurchase (a)
Nelson shall purchase no more than the Maximum Number of
Shares, (b) the Stock Repurchase shall be completed on or
before the Completion Date, and (c) the price to be paid for
each Repurchased Share shall not exceed $18 per share
excluding ordinary and customary trading commissions and
fees.
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 funds available under the
Revolving Loans to fund the Stock Repurchase. Any borrowing
of such funds shall be made in accordance with the Credit
Agreement as amended by this Fifth Amendment, including
without limitation, Article III and Article IV of the Credit
Agreement.
6. Section 11.04 of the Credit Agreement. Lenders hereby agree
that the provisions of Section 11.04 of the Credit Agreement
restricting the purchase of subordinated debt or capital
stock shall not apply to the Stock Repurchase.
7. Debenture Repurchase. Nelson anticipates purchasing up to
$55,000,000 of its outstanding 5 3/4% Convertible Subordinated
Notes due November 30, 1999 in the total principal amount of
$55,000,000 and dated November 30, 1992 (the "Debenture
Repurchase"). Nelson and Lender agree that at any time prior
to November 30, 1999 Nelson may fund the Debenture
Repurchase by borrowings under the Revolving Loan
Commitment. Any borrowing of such funds shall be made in
accordance with the Credit Agreement, as amended, including
without limitation Articles III and IV of the Credit
Agreement.
8. Consent of Third Parties. Nelson represents and warrants
that any and all consents required to be obtained by Nelson
in connection with the Stock Repurchase and the funding of
same have been obtained and delivered to Agent.
9. Fee to Lender. Lenders and Nelson hereby agree that
simultaneously with the execution of this Fifth Amendment,
Nelson shall pay to Lenders a fee in the amount of Sixty-
Eight Thousand Seven Hundred Fifty and No/100 Dollars
($68,750.00) in consideration of Lenders' execution of this
Fifth Amendment and the agreements set forth herein.
10. Future Transactions. Nelson and Lenders hereby agree that
the waivers and modifications set forth herein shall apply
only to the Stock Repurchase and the Debenture Repurchase,
shall terminate with respect to the Stock Repurchase on June
10, 1999, shall terminate with respect to the Debenture
Repurchase on November 30, 1999 and shall not extend to any
future stock acquisitions or uses of proceeds that may be
contemplated by Nelson without the express written consent
of Lenders.
11. Extension of Initial Reduction Date. Nelson has requested,
and Lenders hereby agree, that the Initial Reduction Date
shall mean December 13, 2001, pursuant to the provisions of
Section 2.08 of the Credit Agreement.
12. Change in Definitions. Nelson and Lenders hereby agree that
the definitions of "Applicable LIBOR Rate Margin" and
"Commitment Percentage" shall be deleted in their entirety
and the following language shall be substituted in lieu of
such definitions:
"Commitment Percentage" shall mean the
relevant percentage indicated below based
upon the percentages indicated for Nelson's
Interest Coverage Ratio and Senior Funded
Debt to Total Capital as determined on a
quarterly basis, within sixty (60) days after
the end of each fiscal quarter of Nelson and
on that date which is ninety (90) days after
the end of the fiscal year of Nelson, based
upon unaudited financial statements for the
quarters ending June 30, September 30 and
December 31 and based upon audited financial
statements for the fiscal year ending March
31, with such Commitment Percentage to become
effective on the first business day of the
quarter immediately succeeding such date of
determination with respect to all outstanding
amounts under the Revolving Loans:
<TABLE>
<CAPTION>
INTEREST COVERAGE | PERCENTAGE OF SENIOR
RATIO | FUNDED DEBT
| TO TOTAL CAPITAL
| >45% 35%-45% <35%
|---------------------------------
<S> | <C> <C> <C>
<2.5:1:0 | .375% .30% .25%
2.5:1.0 - 3.0:1.0 | .25% .25% .20%
>3.0:1.0 - 5.0:1.0 | .25% .20% .15%
>5.0:1.0 | .20% .15% .125%
</TABLE>
Notwithstanding the foregoing, in
the event Nelson does not deliver the
audited financial statements for the
immediately preceding fiscal year, or
unaudited financial statements for the
immediately preceding fiscal quarter, as
applicable, in a manner that permits the
determinations required in the
definition of the Commitment Percentage
within ninety (90) days of the end of
Nelson's fiscal year or within sixty
(60) days of the end of each fiscal
quarter, as applicable, commencing at
the end of such ninety (90) day or sixty
(60) day period, as applicable, and
continuing until such audited or
unaudited financial statements, as
applicable, are made available, the
Commitment Percentage shall be the
highest percentage set forth in the
preceding chart. At such time as Agent
changes the Commitment Percentage as set
forth in the preceding sentence, it
agrees to give written notice of such
change to Nelson and to reduce the
Commitment Percentage to its appropriate
rate at such time as Nelson delivers the
financial statements as set forth
herein.
"Applicable LIBOR Rate Margin" shall
mean, with respect to all outstanding
Borrowings consisting of LIBOR Advances
hereunder, the relevant percentage
indicated below based upon the
percentages indicated for Nelson's
Interest Coverage Ratio and Senior
Funded Debt to Total Capital as
determined on the date that is sixty
(60) days after the end of each fiscal
quarter and on the date that is ninety
(90) days after the end of each fiscal
year of Nelson; based, in the case of
the end of any quarter, upon unaudited
financial statements for the immediately
preceding fiscal quarter, and based, in
the case of the fiscal year end, upon
audited financial statements for the
immediately preceding fiscal year, with
such Applicable LIBOR Rate Margin to
become effective on the first business
day of the quarter immediately
succeeding such date of determination
with respect to all outstanding amounts
under the Revolving Loans:
<TABLE>
<CAPTION>
INTEREST COVERAGE | PERCENTAGE OF
RATIO | SENIOR FUNDED DEBT
| TO TOTAL CAPITAL
| >45% 35%-45% <35%
|---------------------------------
<S> | <C> <C> <C>
<2.5:1:10 | 1.00% .875% .75%
2.5:1.0 - 3.0:1.0 | .875% .75% .625%
>3.0:1.0 - 5.0:1.0 | .75% .625% .50%
>5.0:1.0 | .625% .50% .375%
</TABLE>
Notwithstanding the foregoing, in the
event Nelson does not deliver the audited or
unaudited financial statements for the
immediately preceding fiscal year or fiscal
quarter, as applicable, in a manner that
permits the determinations required in the
definition of Applicable LIBOR Rate Margin
within ninety (90) days of the end of
Nelson's fiscal year and within sixty (60)
days of the end of each fiscal quarter, as
applicable, commencing at the end of such
ninety (90) day or sixty (60) day period, as
applicable, and continuing until such audited
or unaudited financial statements, as
applicable, are made available, the
Applicable LIBOR Rate Margin shall be the
highest rate set forth in the preceding
chart. At such time as the Agent changes the
interest rate as set forth in the preceding
sentence, it agrees to give written notice of
such change to Nelson and to reduce the
Commitment Percentage to its appropriate rate
at such time as Nelson delivers the financial
statements as set forth herein.
The table below shall reflect the effective
date(s) with respect to the quarterly
determination(s) required by the definitions of
the "Applicable LIBOR Rate Margin" and "Commitment
Percentage":
<TABLE>
<CAPTION>
DATE OF DELIVERY
OF FINANCIAL EFFECTIVE
PERIOD STATEMENTS DATE
------------------------------------------------------------
<S> <C> <C>
Fiscal Year Within 90 days Effective the first
ending March 31 (audited financial business day after
statements June 30
Quarter ending Within 60 days Effective the first
June 30 (unaudited financial business day after
statements) September 30
Quarter ending Within 60 days Effective the first
September 30 (unaudited financial business day after
statements) December 31
Quarter ending Within 60 days Effective the first
December 31 (unaudited financial business day after
statements) March 31
</TABLE>
13. Revolving Loan Commitment. The aggregate amount of Revolving
Loan Commitments of the Lenders shall be One Hundred Million
Dollars ($100,000,000) principal amount, and the pro rata
portions of each Lender shall be as set forth in Exhibit A
attached hereto. Nelson shall execute new Revolving Credit
Notes in the amounts set forth in Exhibit A and shall
promptly execute and deliver such Notes to Agent.
14. Final Maturity Date. The parties hereto agree that the
phrase "December 13, 2002" set forth in the definition of
"Final Maturity Date" in the Credit Agreement shall be
deleted and be replaced with "December 13, 2005".
15. Sale of Assets. Lenders consent to the sale of assets by
Nelson of C.R. Gibson Company and hereby waive the
requirements of Section 2.06 of the Credit Agreement with
respect to such asset sales; provided, however, that the
only assets which may be sold pursuant to this section are
those listed on Exhibit B attached hereto, and further
provided that the total amount of proceeds resulting from
such asset sales shall not exceed $14,000,000 in the
aggregate. Lenders acknowledge that Nelson shall not be
required to use proceeds of such asset sales to reduce
amounts outstanding under the Revolving Credit Notes.
16. Effective Date. Although the parties hereto agree that the
effective date of this Fifth Amendment is as of June 10,
1998, the quarterly determinations required by the
definitions of "Applicable LIBOR Rate Margin" and
"Commitment Percentage" shall be effective commencing with
the quarter ending September 30, 1998.
17. Governing Law. This Fifth Amendment shall be governed by and
construed in accordance with the laws of the State of
Tennessee.
18. Full Force and Effect. Except as specifically amended by
this Fifth Amendment, all other terms and provisions of the
Credit Agreement shall remain in full force and effect.
19. 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 Fifth
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 K. Oakley
----------------------------------
Title: Senior Vice President
-------------------------------
Acceptance Date: November 30, 1998
---------------------
SUNTRUST BANK, NASHVILLE, N.A.
(Revolving Credit Amount: $26,000,000)
By: /s/ Allen K. Oakley
----------------------------------
Title: Senior Vice President
-------------------------------
Acceptance Date: November 30, 1998
---------------------
NATIONSBANK, N.A.
(Revolving Credit Amount: $20,000,000)
By: /s/ Fred K. Wyatt, Jr.
----------------------------------
Title: Senior Vice President
-------------------------------
Acceptance Date: November 30, 1998
---------------------
CREDITANSTALT CORPORATE FINANCE, INC.
(Revolving Credit Amount: $17,000,000)
By: /s/ John G. Taylor
----------------------------------
Title: Senior Associate
-------------------------------
By: /s/ William E. McCollum
----------------------------------
Title: Senior Associate
-------------------------------
Acceptance Date: November 30, 1998
---------------------
NATIONAL CITY BANK, KENTUCKY
(Revolving Credit Amount: $17,000,000)
By: /s/ Kevin L. Anderson
----------------------------------
Title: Vice President
-------------------------------
Acceptance Date: November 30, 1998
---------------------
FIRST AMERICAN NATIONAL BANK
(Revolving Credit Amount: $20,000,000)
By: /s/ Scott Bane
----------------------------------
Title: Senior Vice President
-------------------------------
Acceptance Date: November 30, 1998
---------------------
The undersigned join in the execution of this Fifth
Amendment in order to acknowledge their consent to the terms and
provisions of this Fifth Amendment and to confirm that the
execution of this Fifth 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 Partners, 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:
-----------------------------
EDITORIAL CARIBE, INC.
By: /s/ Joe L. Powers
-------------------------------
Title:
-----------------------------
C.R. GIBSON (UK) LIMITED (f/k/a
NELSON MEDIA (UK) LTD.
By: /s/ Joe L. Powers
-------------------------------
Title:
-----------------------------
NELSON MEDIA (CANADA) LTD.
(f/k/a WORD COMMUNICATIONS, LTD.)
By: /s/ Joe L. Powers
-------------------------------
Title: President
-----------------------------
NELSON DIRECT, INC. (f/k/a WORD
DIRECT, INC.)
By: /s/ Joe L. Powers
-------------------------------
Title: Treasurer and Secretary
-----------------------------
NELSON DIRECT MARKETING SERVICES,
INC.
By: /s/ Joe L. Powers
-------------------------------
Title: Treasurer and Secretary
-----------------------------
NELSON DIRECT PARTNERS, L.P.
(f/k/a WORD DIRECT PARTNERS, L.P.)
By: /s/ Joe L. Powers
-------------------------------
Title: Treasurer and Secretary
-----------------------------
THE C.R. GIBSON COMPANY
By: /s/ Joe L. Powers
-------------------------------
Title: Treasurer and Secretary
-----------------------------
CRG ACQUISITION, INC.
By: /s/ Joe L. Powers
-------------------------------
Title: Treasurer and Secretary
-----------------------------
855763 ONTARIO LIMITED (d/b/a DAWN
DISTRIBUTORS)
By: /s/ Joe L. Powers
-------------------------------
Title: Secretary
-----------------------------
EXHIBIT A
REVOLVING LOAN COMMITMENTS
SunTrust Bank, Nashville, N.A. $ 26,000,000
First American National Bank 20,000,000
NationsBank, N.A. 20,000,000
National City Bank, Kentucky 17,000,000
Creditanstalt Corporate Finance, Inc. 17,000,000
----------------
TOTAL $ 100,000,000
EXHIBIT B
<TABLE>
<CAPTION>
ADDRESS DESCRIPTION LOCATION
------- ----------- --------
<S> <C> <C>
32 Knight Street Manufacturing, Norwalk, CT
warehousing, shipping
and office space
39 Knight Street Factory Outlet Store Norwalk, CT
41 Knight Street .38 acre lot w/unoccupied Norwalk, CT
apartment house
22 North Avenue 1.24 acre empty lot Norwalk, CT
17 North Avenue Corporate Office Norwalk, CT
</TABLE>
Including land and buildings, equipment, work in process and raw
materials included in or located at the locations described
above.
