Earnings Jump at Thomas Nelson, Bullish on '05

Despite only a 2% revenue gain, to $222.6 million, net income jumped 59%, to $16.2 million, for the fiscal year ended March 31 at Thomas Nelson. Company executives attributed the leap in earnings to a much leaner cost structure that has been achieved by streamlining the company's infrastructure.

Both Nelson chairman Sam Moore and president Michael Hyatt noted that in addition to cost savings, Nelson's success has been due to a more diverse publishing program and wider distribution. Sales have not only increased in general bookstores, but to special markets as well, including such areas as gardening centers and clothing stores. Sales to the ABA market rose 20% in the year and increased 6% to the CBA market. Sales fell 13% to mass merchandisers, which Hyatt said was partly due to Nelson's decision to "walk away" from some lower-margin products. International sales were down 5%.

Much of the discussion with analysts about the fiscal year dealt with what Nelson executives expect to be a strong fiscal 2005 for the company. Hyatt said Nelson can achieve "substantial sales growth" without sacrificing margins. One strategy would be to create brands that can grow in value, Hyatt said, citing such areas as fiction and business. Moore said he has "great optimism for our future" and cited "the most encouraging opportunity for sales growth that we've seen in several years." Moore noted that going forward, Nelson will rely more on sales growth than cost controls to improve earnings.

Moore did not rule out an acquisition this year, but said that a purchase would need to "properly fit" into Nelson's core operations. He said the company was approaching the acquisition market carefully, noting that it has been "burned" in the past. Nelson's purchase of the gift company C.R. Gibson in 1995 proved to be a disaster for the company.