<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Three Month Period Ended Commission File #0-916-3
March 31, 1994
PLENUM PUBLISHING CORPORATION
(Exact name of the Registrant
as specified in Charter)
Delaware 13-5648711
(State of Incorporation) (I.R.S. Employer
Identification No.)
233 Spring Street
New York, New York 10013
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including Area Code (212) 620-8000
SECURITIES REGISTERED PURSUANT
TO SECTION 12 (g) OF THE ACT:
COMMON STOCK $.10 PAR VALUE
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 the filing requirements for at least the past 90 days.
Yes [x] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of 05/12/94: 4,496,000
---------
<PAGE>
INDEX
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
- - ---------------------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--
March 31, 1994 and December 31, 1993 3
Condensed consolidated statements of income
and retained earnings -- Three months ended
March 31, 1994 and 1993 5
Condensed consolidated statements of cash
flows -- Three months ended March 31, 1994
and 1993 6
Notes to condensed consolidated financial
statements -- March 31, 1994 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II. OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
- - ----------
<PAGE>
<TABLE>
PART 1 - FINANCIAL INFORMATION
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
1994 1993
---- ----
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ($1,761,980 and $1,441,576).......... $2,983,044 $ 5,030,060
Marketable securities at aggregate market value................ 48,169,338 48,825,213
Interest and dividends receivable.............................. 336,038 224,568
Receivables - net of allowances of $1,086,000
and $848,000................................................... 7,795,046 8,698,080
Advance under the Distribution Agreement....................... 750,000 750,000
Inventories - Note D........................................... 4,308,920 4,179,185
Deferred income tax benefits................................... 4,649,491 2,930,691
------------ ------------
Total Current Assets....................................... 68,991,877 70,637,797
------------ ------------
Costs Applicable to Deferred Subscription Income................. 801,989 657,950
------------ ------------
Property, Plant and Equipment, at cost:
Land........................................................... 690,000 690,000
Building, net of accumulated depreciation of
$356,446 and $330,826... .............................. 3,177,331 3,202,951
Furniture, Fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $818,578 and $760,100................................ 420,332 454,850
Plate costs, net of accumulated depreciation of
$5,110,371 and $4,656,154............................... 3,220,993 3,393,917
------------ ------------
7,508,656 7,741,718
------------ ------------
Deferred Income Tax.............................................. 1,075,609 1,070,309
------------ ------------
Deferred Charges and Other Assets:
Cost of subscription lists of Human Sciences Press
and Agathon journals, net of accumulated amortization
of $1,502,517 and $1,433,699............................. 3,200,048 3,268,866
Royalties...................................................... 2,063,895 2,075,189
Investment in Gradco Systems, Inc.............................. 1,971,843 1,971,843
Other.......................................................... 845,611 272,476
------------ ------------
8,081,397 7,588,374
------------ ------------
Excess of Cost of Assets Acquired over Book Amount
Thereof, net of accumulated amortization of
$1,243,206 and $1,229,838...................................... 895,644 909,012
------------ ------------
Total Assets $87,355,172 $88,605,160
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>
Current liabilities: <C> <C>
Due to customers............................................... $434,693 $612,460
Accounts payable............................................... 1,441,795 1,508,098
Due to brokers 2,143,929 --
Income taxes payable........................................... 3,432,206 2,184,797
Royalties payable.............................................. 3,201,308 3,162,734
Other accrued expenses and sundry liabilities.................. 1,831,476 2,534,040
Dividends payable.............................................. 1,259,703 1,219,267
------------ ------------
Total Current Liabilities................................ 13,745,110 $11,221,396
Deferred Subscription Income..................................... 22,471,450 25,153,027
Total Liabilities ------------ ------------
36,216,560 36,374,423
------------ ------------
Stockholders' Equity -- Note F
Preferred Stock, par value $1 per share;
Authorized - 1,000,000 shares; none issued
Common Stock, par value $.10 per share;
Authorized - 12,000,000 shares;
Issued -5,847,241 shares................................. 584,724 584,724
Paid-in additional capital..................................... 3,951,526 3,951,526
Retained earnings.............................................. 75,519,513 76,165,428
------------ ------------
80,055,763 80,701,678
Less 1,348,301 and 1,331,436 shares of Common
Stock held in treasury - at cost......................... 28,917,151 28,470,941
------------ ------------
Total Stockholders' Equity............................... 51,138,612 52,230,737
------------ ------------
Total Liabilities and Stockholders' Equity $87,355,172 $88,605,160
============ ============
<FN>
Note: The balance sheet at December 31, 1993 has been derived from the audited consolidated financial
statements at that date. See Notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED
EARNINGS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
---------------------------
1994 1993
---- ----
<S> <C> <C>
Income:
Subscriptions, books, outside journals and other sales, net.......... $13,508,484 $12,618,897
------------ -----------
Costs and Expenses:
Cost of sales........................................................ 5,649,242 5,317,041
Royalties............................................................ 1,235,304 1,087,041
Selling, general and administrative expenses......................... 2,800,438 2,918,016
------------ -----------
9,684,984 9,322,098
------------ -----------
Income From Operations.................................. 3,823,500 3,296,799
Dividend income........................................................ 526,207 591,088
Interest income........................................................ 76,564 474,915
Realized (loss) gain on sales of marketable securities................. (978,577) 651,338
Net unrealized loss on marketable securities........................... (2,654,065) (3,020,328)
Interest expense....................................................... (3,525) (650,392)
Other investment-related expenses...................................... (54,616) (65,991)
------------ -----------
Income Before items shown below......................... 735,488 1,277,429
------------ -----------
Income taxes--Note G:
Federal.............................................................. 30,000 192,000
State and City....................................................... 91,700 74,000
------------ -----------
121,700 266,000
------------ -----------
Income Before Extraordinary Credit...................... 613,788 1,011,429
Extraordinary credit:
Gain on repurchase of 6-1/2% Convertible Subordinated Debentures
due April 15, 2007 less applicable income taxes of $2,400
- Note E.......................................................... -- 3,656
------------ -----------
Net Income.............................................. 613,788 1,015,085
Retained earnings - beginning of period................................ 76,165,428 71,520,740
------------ -----------
76,779,216 72,535,825
Cash dividends ($.28 and $.27 a share) ................................ 1,259,703 1,249,295
------------ -----------
Retained earnings - end of period...................................... $75,519,513 $71,286,530
============ ===========
Net income per share of Common Stock - Note F $0.14 $0.22
============ ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
----------------------------
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income.......................................................................... $613,788 $1,015,085
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plate costs...................................................... 454,217 488,754
Depreciation and amortization of building
furniture, fixtures, equipment and
leasehold improvements............................................................ 84,098 83,677
Amortization of deferred charges and excess
of cost of assets acquired over book amount
thereof........................................................................... 677,603 789,423
Realized loss (gain) on sale of marketable
securities........................................................................ 978,577 (651,338)
Net unrealized loss on marketable securities............... 2,654,065 3,020,328
Extraordinary credit, net of income taxes............................................ -- (3,656)
Increase in deferred income
tax benefits...................................................................... (1,724,100) (1,489,700)
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables....................................................................... 791,564 (17,320)
Inventories....................................................................... (129,735) (270,199)
Other assets...................................................................... (1,157,258) (1,355,595)
Increase (decrease) in:
Accounts payable, accrued expenses and
sundry liabilities............................................................. (908,060) 157,960
Due to brokers.................................................................... 2,143,929 --
Income taxes payable.............................................................. 1,247,409 1,127,006
Deferred subscription income and costs
applicable thereto-net......................................................... (2,825,616) (1,631,232)
------------ ------------
Net Cash Provided by Operating Activities.................................. 2,900,481 1,263,193
------------ ------------
Cash flows from investing activities:
Additions to plate costs........................................................ (281,293) (494,850)
Additions to furniture, fixtures, equipment
and leasehold improvements.................................................. (23,960) (42,630)
Proceeds from sale and redemption of U.S. Government securities...... -- 30,863,189
Purchases of marketable securities.............................................. (12,373,884) (15,961,632)
Proceeds from sale of marketable securities..................................... 9,397,117 6,491,595
------------ ------------
Net Cash (Used in) Provided by Investing Activities........................ (3,282,020) 20,855,672
Cash flows from financing activities: ------------ ------------
Repurchase of 6-1/2 % Convertible Subordinated
Debentures.................................................................. -- (1,114,902)
Acquisition of treasury stock................................................... (446,210) --
Dividends paid.................................................................. (1,219,267) --
------------ ------------
Net Cash Used in Financing Activities...................................... (1,665,477) (1,114,902)
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents.................................. (2,047,016) 21,003,963
Cash and cash equivalents at beginning of period...................................... 5,030,060 10,703,199
------------ ------------
Cash and Cash Equivalents at End of Period................................. $2,983,044 $31,707,162
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
March 31, 1994
NOTE A -- BASIS OF PRESENTATION
- - -------------------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q 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. Operating results for
the three month period ended March 31, 1994 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1994. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1993.
NOTE B -- ACCOUNTING CHANGE
- - ---------------------------
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for certain Investments
in Debt and Equity Securities." The Company adopted the provisions of the
new standard for investments held as of or acquired after January 1, 1994.
Accordingly, the Company has classified its marketable equity securities held
as trading securities on the basis of its intent to trade such securities and
has carried them at fair market value, with unrealized gains and losses
reported as a component of current earnings.
Since at December 31, 1993, the Company valued marketable equity securities
as trading securities and reported such securities at the lower of aggregate
cost or market, with unrealized losses reported as a component of current
earnings, there was no cumulative effect as of January 1, 1994 of adopting
Statement 115 on net income.
NOTE C -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
- - -----------------------------------------------------------
Cash paid during the three months ended March 31, 1994 and 1993 for:
1994 1993
---- ----
Income Taxes $598,391 $634,098
Interest 3,525 28,434
NOTE D -- INVENTORIES
- - ---------------------
Inventories at March 31, 1994 and December 31, 1993 are comprised of:
1994 1993
---- ----
Finished publications $3,955,439 $3,612,257
Work in process 353,481 566,928
---------- ----------
$4,308,920 $4,179,185
========== ==========
NOTE E -- 6-1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE APRIL 15, 2007
- - -----------------------------------------------------------------------
In February 1993, the Company purchased debentures of $1,149,000 for an
aggregate cost (including the write-off of related deferred issuance costs
of approximately $28,000) of approximately $1,143,000.
On April 30, 1993 (the "Redemption Date"), pursuant to a notice of election
to redeem which had been given to the holders on March 24, 1993, the Company
redeemed the 6-1/2% Convertible Subordinated Debentures due April 15, 2007
(the "Debentures") which were outstanding on the Redemption Date. In
accordance with the terms of the Debentures and the applicable Trust
Indenture, the redemption price was equal to 102.60% of the principal amount
of outstanding Debentures, and the holders were also paid accrued interest
for the period from April 15, 1993 (the date on which the last semi-annual
installment of interest was paid) to the Redemption Date. Prior to the
Redemption Date, Debentures in the aggregate principal amount of $80,000 were
converted into 2,560 shares of Common Stock at the applicable conversion rate
of $31.25 per $1,000 of principal amount. On the Redemption Date, Debentures
in the aggregate principal amount of $39,598,000 were outstanding, requiring
a total payment to the holders of $40,734,793 (including accrued interest).
This amount was funded by liquidating a portion of the Company's investments
of its excess cash, and from short-term borrowing on the Company's margin
account with a broker.
NOTE F -- PER SHARE AMOUNTS
- - ---------------------------
Net income per share of Common Stock is computed on the basis of the weighted
average number of shares outstanding. The number of shares used in this
computation for the three months ended March 31, 1994 and 1993 is 4,507,373
and 4,627,020, respectively.
<PAGE>
<TABLE>
NOTE G -- INCOME TAXES
Total tax expense for the three month periods ended March 31, 1994 and 1993 amounted to $121,700 and $266,000 (effective rates
of 16.5% and 20.82%), totals different from those computed by applying the U.S. Federal income tax rate of 35% in 1994 and 34%
in 1993 to income before income taxes. The reasons for these differences are as follows
<CAPTION>
Three Months Ended March 31
-----------------------------
1994 1993
-------------------------------------------------------
% of % of
Income Income
Before Before
Income Income
Amount Taxes Amount Taxes
-------------------------------------------------------
<S> <C> <C> <C> <C>
Computed expected tax expense $257,400 35.00% $434,300 34.00%
Increases (reductions) in tax
resulting from:
State and local income
taxes, net of Federal
income tax benefit 59,600 8.10 48,800 3.82
Nontaxable portion of
dividend income (128,900) (17.50) (140,700) (11.01)
FSC income taxed at a
lower rate (87,500) (11.90) (82,600) (6.47)
Miscellanoeus - net 21,100 2.80 6,200 0.48
--------- ------- --------- ------
Actual Tax Expense $121,700 16.50% $266,000 20.82%
========= ======= ========= ======
</TABLE>
-9-
<PAGE>
NOTE H -- CONTINGENCIES
- - --------------------------------
In 1991, the Company was named as a co-defendant in an action brought by
former executives of Gradco, seeking compensatory and other damages of a
material amount. Management of the Company, after consultation with counsel,
believes the action will not result in a material loss to the Company and
intends to vigorously defend against it.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Three Month Period - 1994 vs 1993
- - ---------------------------------
Revenues from the Company's publishing operations increased by 7.0% to
$13,508,484. Revenues from subscriptions and outside journals accounted for
half of the total increase in revenues for the three months ended March 31,
1994, primarily due to higher selling prices and more issues of 11 Russian
language journals being published under a contract with an American learned
society (which ended with the 1993 volume year - see below), offset by
nonrenewals of subscriptions partially attributable to the reduced buying
power of libraries and to changes in the market for the Company's
translations of Russian language journals. Revenues from book sales
accounted for half of the total increase in revenues, primarily due to an
increase in backlist sales.
In April 1993, an American learned society with whom the Company had a
contract to produce English translation of 11 Russian language journals for
publication by that society gave formal notice that they would not exercise
the option of renewing the contract beyond the term ending with the 1993
volume year. The amount of revenue generated from the production of these 11
journals was approximately $386,000 for the three months ended March 31,
1994; however, such revenues will cease during the second quarter of fiscal
year 1994.
The Journal Production and Distribution Agreement (the "Distribution
Agreement") which the Company entered into in December 1993 with the Russian
Academy of Sciences and other interested parties relating to translations of
certain Russian Scientific Journals, was described in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Report on Form 10-K for the fiscal year ended December 31,
1993. While management expects that revenues and net income from subscription
journals will decrease as a result of the Company's modified relationship
to the translation journals covered by the Distribution Agreement, the new
arrangement had an insignificant impact on such results for the three months
ended March 31, 1994, since publication of most of the affected translation
journals for the 1994 volume year will not commence until the second quarter
of fiscal 1994.
The cost of sales as a percentage of revenues decreased from 42.1% in
1993 to 41.8% in 1994 mainly due to increased backlist sales. The Company
provides for obsolescence by writing down the inventory values of backlist
books, resulting in higher gross margins on backlist sales, as compared to
frontlist sales. The increase in royalty expenses was principally
attributable to increased royalty rates. The decrease in selling, general
and administrative expenses was primarily due to decreased professional fees,
bad debt expense and mailing expenses. The decrease in interest income was
principally due to lower interest rates and decreased investment in U.S.
Government securities, time deposits and money market funds, arising mainly
because of the decrease in investment assets utilized for redemption of the
Company's Convertible Subordinated Debentures on April 30, 1993. The
decrease in dividend income was due to decreased investment in marketable
securities. The Company has a net realized loss of $978,577 and an
unrealized loss of $2,654,065 on marketable securities for the quarter ended
March 31, 1994, as compared to a net realized gain of $651,338 and an
unrealized loss of $3,020,328 on marketable securities for the quarter ended
March 31, 1993.
The decrease in net income was principally attributable to the decrease
in investment income as discussed in the preceding paragraph, offset by
increased income from publishing operations.
LIQUIDITY AND SOURCES OF CAPITAL
- - --------------------------------
The ratio of current assets to current liabilities is 5.0 to 1 at March
31, 1994 compared to 6.3 to 1 at December 31, 1993.
Management anticipates that internally generated funds will exceed the
requirements of the operations of the business. The Company also has funds of
approximately $51,152,000 at March 31, 1994 invested in marketable securities
and in cash, which are available for corporate purposes.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
- - ----------------------------------------
(a) Exhibits - None.
(b) Reports on Form 8 - K - None.
<PAGE>
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PLENUM PUBLISHING CORPORATION
-----------------------------
By:s/Martin E. Tash
----------------
Martin E. Tash
Chairman of the Board of Directors and
President (Principal Executive Officer)
Dated: May 16, 1994
By:s/Ghanshyam A. Patel
---------------------
Ghanshyam A. Patel
Treasurer and Chief Financial Officer
Dated: May 16, 1994
