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 Nine Month Period Ended Commission File #0-916-3
September 30, 1997
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 filling 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 11/ 13 /97: 3,510,251
---------
<PAGE>
INDEX
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--
September 30, 1997 and December 31, 1996 3
Condensed consolidated statements of income
and retained earnings -- Nine and Three months
ended September 30, 1997 and 1996 5
Condensed consolidated statements of cash
flows -- Nine months ended September 30, 1997
and 1996 6
Notes to condensed consolidated financial
statements -- September 30, 1997 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- ----------
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30 December 31
------------ ------------
1997 1996
---- ----
(UNAUDITED) ( NOTE )
----------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ( $36,248,010 and $48,930,459 ) $36,677,014 $49,423,477
Marketable securities at aggregate market value 14,001,583 27,417,072
Interest and dividends receivable 143,111 248,198
Receivables net of allowances of $886,000
and $829,000 5,359,702 5,237,940
Inventories --Note D 3,649,731 3,548,543
------------ ------------
Total Current Assets 59,831,141 85,875,230
------------ ------------
Costs Applicable to Deferred Subscription Income 469,230 556,988
------------ ------------
Property, Plant and Equipment, at cost:
Land 690,000 690,000
Building, net of accumulated depreciation of
$715,126 and $638,266 2,818,651 2,895,511
Furniture, fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $759,226 and $614,716 383,506 389,841
Plate costs, net of accumulated depreciation of
$4,970,133 and $3,994,410 3,241,634 3,170,906
------------ ------------
7,133,791 7,146,258
------------ ------------
Deferred Income Tax 40,643 177,444
------------ ------------
Deferred Charges and Other Assets:
Cost of subscription lists of Human Sciences Press
and Agathon journals, net of accumulated amortization
of $2,465,943 and $2,259,499 2,236,621 2,443,066
Royalties 1,709,829 1,486,485
Investment in Gradco Systems, Inc. 2,750,449 2,750,449
Investment in Tutor Time Learning Systems, Inc., at cost,
and related note receivable 1,100,000 1,100,000
Deposits and other 589,162 319,494
------------ ------------
8,386,061 8,099,494
------------ ------------
Excess of Cost of Assets Acquired Over Fair Value
Thereof, net of accumulated amortization of
$237,930 and $231,262 117,711 124,379
------------ ------------
Total Assets $75,978,577 $101,979,793
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to customers $560,251 $544,277
Accounts payable 1,340,357 3,181,286
Income taxes payable 1,817,781 913,250
Royalties payable 1,834,730 2,362,019
Other accrued expenses and sundry liabilities 4,007,478 4,035,185
Dividends payable 1,088,178 1,165,285
Deferred income tax liabilities 98,119 1,230,744
------------ ------------
Total Current Liabilities 10,746,894 13,432,046
Deferred Subscription Income 13,761,033 25,148,620
------------ ------------
Total Liabilities 24,507,927 38,580,666
------------ ------------
Stockholders' Equity -- Note E
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 109,192,236 105,283,732
------------ ------------
113,728,486 109,819,982
Less 2,336,990 and 1,962,956 shares of Common
Stock held in treasury - at cost 62,257,836 46,420,855
------------ ------------
Total Stockholders' Equity 51,470,650 63,399,127
------------ ------------
Total Liabilities and Stockholders' Equity $75,978,577 $101,979,793
============ ============
<FN>
Note: The balance sheet at December 31, 1996 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>
Nine Months Ended September 30 Three Months Ended September 30
-------------------------------- -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income:
Subscriptions, books and other sales, net $38,682,107 $38,524,923 $12,919,245 $13,319,107
------------- ------------- ------------- -------------
Costs and Expenses:
Cost of sales 15,899,700 15,959,040 5,367,102 5,392,390
Royalties 2,583,495 2,889,905 894,712 1,227,172
Selling, general and administrative expenses 8,073,406 8,093,703 2,562,337 2,570,937
------------- ------------- ------------- -------------
26,556,601 26,942,648 8,824,151 9,190,499
------------- ------------- ------------- -------------
Income from operations 12,125,506 11,582,275 4,095,094 4,128,608
Dividend income 206,956 381,270 63,769 99,707
Interest income 2,196,346 1,847,557 706,047 585,024
Net realized gain (loss) on sales of marketable securities 656,795 703,456 353,439 (46,714)
Net unrealized (loss) gain on marketable securities (3,107,830) 1,723,112 (4,208,742) 2,285,383
Other investment-related (expenses) credit (166,875) (376,185) 83,678 (190,235)
------------- ------------- ------------- -------------
Income from continuing operations before income taxes 11,910,898 15,861,485 1,093,285 6,861,773
------------- ------------- ------------- -------------
Income taxes--Note F
Federal 3,533,000 4,701,000 213,000 2,076,000
State and City 1,000,000 1,362,000 190,000 549,000
------------- ------------- ------------- -------------
4,533,000 6,063,000 403,000 2,625,000
------------- ------------- ------------- -------------
Income from continuing operations 7,377,898 9,798,485 690,285 4,236,773
Income from discontinued operations, net of
income tax of $199,000 and $64,000 - 368,501 - 118,602
------------- ------------- ------------- -------------
Net income 7,377,898 10,166,986 690,285 4,355,375
Retained earnings - beginning of period 105,283,732 94,927,495 109,590,129 98,377,992
------------- ------------- ------------- -------------
112,661,630 105,094,481 110,280,414 102,733,367
Cash dividends ($.93 and $.90 a share and
$.31 and $.30 a share) 3,469,394 3,528,821 1,088,178 1,167,707
------------- ------------- ------------- -------------
Retained earnings - end of period $109,192,236 $101,565,660 $109,192,236 $101,565,660
============= ============= ============= =============
Per Share of Common Stock - Notes C and E:
Income from continuing operations $1.95 $2.50 $.19 $1.09
Income from discontinued operations - .09 - $.03
------------- ------------- ------------- -------------
Net income $1.95 $2.59 $.19 $1.12
============= ============= ============= =============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended September 30
-------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $7,377,898 $10,166,986
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plate costs 975,723 1,074,271
Depreciation and amortization of building,
furniture, fixtures, equipment and
leasehold improvements 221,370 252,108
Amortization of deferred charges and excess
of cost of assets acquired over book amount
thereof 1,213,697 1,305,958
Net realized gain on sale of marketable
securities (656,795) (703,456)
Net unrealized loss (gain) on marketable securities 3,107,830 (1,723,112)
Purchases of marketable securities (5,348,721) (6,657,146)
Proceeds from sale of marketable securities 16,313,175 8,441,069
Deferred income taxes (995,824) 714,900
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables (16,675) 451,583
Inventories (101,188) (27,758)
Other assets (1,493,595) (1,536,230)
Increase (decrease) in:
Due to customers, accounts payable, royalties payable,
accrued expenses and sundry liabilities (2,379,951) (2,652,122)
Income taxes payable 904,531 (179,257)
Deferred subscription income and costs
applicable thereto-net (11,299,829) (9,456,443)
------------ ------------
Net Cash Provided by (Used in) Operating Activities 7,821,646 (528,649)
------------ ------------
Cash flows from investing activities:
Additions to plate costs (1,046,451) (1,072,774)
Additions to furniture, fixtures, equipment
and leasehold improvements (138,176) (210,657)
------------ ------------
Net Cash Used in Investing Activities (1,184,627) (1,283,431)
------------ ------------
Cash flows from financing activities:
Acquisition of treasury stock (15,836,981) (1,666,721)
Dividends paid (3,546,501) (3,504,156)
------------ ------------
Net Cash Used in Financing Activities (19,383,482) (5,170,877)
------------ ------------
Net Decrease in Cash and Cash Equivalents (12,746,463) (6,982,957)
Cash and cash equivalents at beginning of period 49,423,477 40,093,105
------------ ------------
Cash and Cash Equivalents at End of Period $36,677,014 $33,110,148
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30,1997
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 nine
month period ended September 30,1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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, 1996.
NOTE B -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the nine months ended September 30, 1997 and 1996 for:
1997 1996
---- ----
Income Tax $4,624,293 $5,726,357
NOTE C -- DISCONTINUED OPERATIONS
In December 1995, the Company's Board of Directors adopted a plan to
discontinue the operations of its wholly-owned subsidiary, J.S. Canner &
Company, Inc., effective October 1996.
NOTE D -- INVENTORIES
Inventories at September 30, 1997 and December 31, 1996 are comprised of:
1997 1996
---- ----
Finished publications $3,396,488 $3,177,949
Work in process 253,243 370,594
---------- ----------
$3,649,731 $3,548,543
========== ==========
NOTE E -- 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 and nine months ended September 30, 1997 and 1996
is as follows:
1997 1996
---- ----
Nine months 3,784,788 3,924,273
Three months 3,670,751 3,901,481
In February 1997, the Financial Accounting Standards Board issued Statement
No.128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. The adoption of Statement 128 will not have a material impact on the
calculation of fully diluted earnings per share for all periods.
<PAGE>
NOTE F -- INCOME TAXES:
Total tax expense for the nine months periods ended September 30, 1997 and
1996 amounted to $4,533,000 and $6,063,000 (effective rates of 38.06% and
38.20%), and for the three month periods ended September 30, 1997 and 1996
amounted to $403,000 and $2,625,000 (effectiv rates of 36.86% and 38.25%)
totals different from those computed by applying the U.S. Federal income
tax rate of 35% to income before income taxes. The reasons for these
differences are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30 Three Months Ended September 30
------------------------------ -------------------------------
1997 1996 1997 1996
---------------------------------------------------------------------------------------------
% of % of % of
Income Income Income
Before Before Before
Income Income Income
Amount Taxes Amount Taxes Amount Taxes Amount Taxes
--------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $4,168,800 35.00% $5,551,500 35.00% $382,600 35.00% $2,401,700 35.00%
Increases (reductions) in tax
resulting from:
State and local income
taxes, net of Federal
income tax benefit 650,000 5.45 885,300 5.58 123,500 11.29 356,900 5.20
Nontaxable portion of
dividend income (14,000) (0.12) (93,400) (0.59) (14,000) (1.28) (24,400) (0.36)
FSC income taxed at a
lower rate (262,500) (2.20) (295,700) (1.86) (87,500) (8.00) (96,200) (1.40)
Miscellaneous - net (9,300) (0.07) 15,300 0.07 (1,600) (0.15) (13,000) (0.19)
------------ ------ ---------- ------ ---------- ------ ----------- ------
Actual Tax Expense $4,533,000 38.06% $6,063,000 38.20% $403,000 36.86% $2,625,000 38.25%
============ ====== ========== ====== ========== ====== =========== ======
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATIONS
- ----------
Revenues from the Company's publishing operations for the three months
ended September 30, 1997 decreased by 3.0%, whereas those for the nine months
ended September 30, 1997 increased by 0.4%. Revenues from subscriptions for
the three months ended September 30, 1997 decreased by 6.5% primarily due to
fewer journal issues published, and 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, offset by
higher selling prices and increased sales of single issues of back volume
journals. Revenues from subscriptions for the nine months ended September 30,
1997 increased by 0.5% primarily due to higher selling prices and increased
sales of single issues of back volume journals, 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 for the three and nine months ended September
30, 1997 increased by 8.8% and 1.4%, respectively, primarily due to increased
sales of backlist books, offset by the reduction in the number of book titles
published. Revenues from database products for the three and nine months
ended September 30, 1997 decreased by 13.2% and 3.2%, respectively, mainly
due to decreased usage of the database system.
The cost of sales as a percentage of revenues for the three months
ended September 30,1997 increased from 40.5% to 41.5%, primarily due to
decreased usage of the database system which has an above average gross
margin, offset by increased sales of backlist books and back volume journal
issues, which have above average gross margin. The Company provides for
obsolescence by writing down the inventory value of backlist books and back
volume journal issues, resulting in higher gross margins on backlist sales.
The cost of sales as a percentage of revenues for the nine months ended
September 30,1997 did not significantly change from the same period in 1996.
The decrease in royalty expenses for the three and nine months ended
September 30,1997 was primarily due to the fact that under the Distribution
Agreement, there were no royalties payable on certain Russian scientific
journals published by the Russian Academy of Sciences, offset by the
increase in royalties on increased book sales. The decrease in selling,
general and administrative expenses for the three and nine months ended
September 30, 1997 was mainly attributable to decreased advertising
expenditures, mailing expenses, repairs and maintenance cost, bad debt
expense and insurance expense, offset by higher salaries and professional
fees.
The increase in interest income for the three and nine months ended
September 30, 1997 was principally due to increased investment in commercial
paper, time deposits and money market funds. The decrease in dividend income
for the three and nine months ended September 30, 1997 was attributable to
the changes in the portfolio of marketable securities. The Company had net
realized gain of $353,439 and net unrealized loss of $4,208,742 on marketable
securities for the three months ended September 30, 1997 as compared to net
realized loss of $46,714 and net unrealized gains of $2,285,383 on marketable
securities for the three months ended September 30, 1996. The Company had net
realized gain of $656,795 and net unrealized loss of $3,107,830 on marketable
securities for the nine months ended September 30, 1997 as compared to net
realized and unrealized gains of $703,456 and $1,723,112, respectively, on
marketable securities for the nine months ended September 30, 1996.
The decrease in net income for the three months ended September 30,
1997 was mainly due to the decrease in investment income as discussed in the
preceding paragraph and decreased income from publishing operations. The
decrease in net income for the nine months ended September 30, 1997 was
mainly due 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 5.6 to 1 at
September 30, 1997 compared to 6.4 to 1 at December 31, 1996.
Management anticipates that internally generated fund will exceed the
requirements of the operations of the business. The Company also has funds of
approximately $50,679,000 at September 30, 1997 invested in marketable
securites and in cash and cash equivalents, which are available for the
operations of the business or acquisitions.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
- ------- -------------------------------
(a) Exhibits - None.
(b) Reports on Form 8 - K
REDEMPTION OF 321,000 SHARES OF COMMON STOCK
--------------------------------------------
On August 28, 1997 the Company announced that it had purchased for
its treasury 321,000 shares of its common stock, constituting the
entire holdings of Southeastern Asset Management Inc. of Memphis
Tennessee ("Southeastern"). Such shares represented approximately 8.4%
of the Company's outstanding stock and such shares will be held in the
Company's treasury. Immediately after such action, Plenum had
approximately 3,510,000 shares outstanding. The transaction was
negotiated between the Company and Southeastern and the Company paid
Southeastern a total price of $13,963,500 for such shares.
<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
Date: Nov 13, 1997 ---------------------------------------
Martin E. Tash
President and CEO
By: /s/ Ghanshyam A. Patel
Date: Nov 13, 1997 ---------------------------------------
Ghanshyam A. Patel
Treasurer and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from quarterly
financial statements for the nine months ended September 30, 1997 and is
qualified in its entirety by reference to such financial statements.
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<PERIOD-TYPE> 9-MOS
<CASH> 36,677,014
<SECURITIES> 14,001,583
<RECEIVABLES> 6,245,702
<ALLOWANCES> (886,000)
<INVENTORY> 3,649,731
<CURRENT-ASSETS> 59,831,141
<PP&E> 13,578,276
<DEPRECIATION> (6,444,485)
<TOTAL-ASSETS> 75,978,577
<CURRENT-LIABILITIES> 10,746,894
<BONDS> 0
0
0
<COMMON> 584,724
<OTHER-SE> 50,885,926
<TOTAL-LIABILITY-AND-EQUITY> 75,978,577
<SALES> 38,682,107
<TOTAL-REVENUES> 41,742,204
<CGS> 15,899,700
<TOTAL-COSTS> 15,899,700
<OTHER-EXPENSES> 166,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,910,898
<INCOME-TAX> 4,533,000
<INCOME-CONTINUING> 7,377,898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,377,898
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 0
</TABLE>
