SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
----------- ----------
Commission File No. 0-916-3
PLENUM PUBLISHING CORPORATION
-----------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 13-5648711
-------- -----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
233 Spring Street, New York, New York 10013
- ----------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-620-8000
Securities registered pursuant to Section 12(b) of the Act
Name of each Exchange
Title of each class on which Registered
------------------- ---------------------
None
------------------- ----------------------
Securities registered pursuant to Section 12(g) of the Act
Common Stock, $.10 par value
----------------------------
(Title of Class)
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
X
---
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 14, 1997 was $112,792,956.
-------------
The number of shares outstanding of the Issuer's common stock, as of March 14,
1997, was 3,850,095 shares.
<PAGE>
PART I
Item 1. Business
--------
The Registrant is and for many years has been engaged in the business of
publishing and distributing advanced scientific and technical material, and
original and reprint books of a more general interest. The Registrant
publishes and distributes books and journals and creates and maintains
databases for which it receives royalties from unrelated organizations
providing access to such materials throughout the world under the imprints of
Plenum Press, Consultants Bureau, Da Capo Press, IFI/Plenum Data, and Human
Sciences Press. The Registrant and its subsidiaries maintain offices in New
York, New York; Wilmington, Delaware; Wilmington, North Carolina; London,
England; and Moscow, Russia; and warehouse facilities in Edison, New Jersey.
The Registrant's principal markets for its scientific and technical
material are public and private libraries, technically oriented corporations,
research organizations and individual scientists, engineers, research workers,
other professionals and graduate students throughout the world. Except as to
the sale of reprints and trade books, the Registrant does not generally sell
to book stores. The Registrant's principal methods of marketing are by direct
mail and by advertising in scientific publications, including its own
journals. It also uses the services of sales agents for certain of its books.
The Registrant makes a wide distribution of its catalogs of published
material, as well as plans for new publications. In certain foreign markets,
the Registrant utilizes the services of independent distributors and agents.
The Registrant generally secures copyrights on its publications in its
own name or in the name of its subsidiaries. In some cases, pursuant to
written agreement, the copyright is secured in the name of the author of the
publication or a learned society or other organization. Copyrights on
translations of foreign journals are limited to English language translations
and do not cover the original foreign language works. Those translations of
Russian journals as to which the Registrant is the distributor but not the
publisher are copyrighted in the name of the publisher. Most publications
printed by the Registrant's Da Capo Press subsidiary are reprints of works
in the public domain which are not subject to copyright protection or are
works published by others who have sold to the Registrant certain rights for
publication, either for a fixed payment or under a royalty agreement.
The Registrant does not perform any printing operations. It uses outside
printing and binding services, with much of the material being prepared by the
Registrant for printing. Preparations by the Registrant include editing,
creation of a suitable design and typesetting.
The following table sets forth the total revenues contributed by each
class of similar products and services, and the income (loss) generated from
securities owned by the Registrant.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Subscription Journals $33,131,399 $32,913,103 $32,241,873 $33,297,585 $31,812,705
Outside Journals (a) - - 527,161 1,255,223 1,538,317
Books 13,434,433 14,197,328 13,917,674 13,317,503 14,191,600
Database Products 4,610,269 4,520,290 4,122,123 4,210,802 4,202,308
Miscellaneous Sales 752,783 598,950 549,062 810,581 415,039
Interest Income 2,410,037 1,996,434 441,009 544,290 3,007,811
Dividend Income 477,539 377,698 1,592,837 2,136,989 1,636,462
Net realized gain on sales
of marketable securities 7,491 3,229,729 2,160 801,387 2,476,916
Net unrealized gain (loss)
on marketable securities 4,109,291 3,868,361 2,523,173 (1,713,197) -
Equity in net income (loss)
of Gradco Systems, Inc. 374,330 301,290 102,986 4,565 ( 100,430)
----------- ----------- ----------- ----------- ------------
$59,307,572 $62,003,183 $56,020,058 $54,665,728 $59,180,728
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
<FN>
Notes:
(a) In April 1993, an American learned society with which the Company
had a contract to produce English translations of 11 Russian
language journals for publication by that society gave formal
notice that it would not exercise the option of renewing the
contract beyond the term ending with the 1993 volume year.
</TABLE>
Subscription Journals
- ---------------------
During 1996, the Registrant published a total of 213 journals. 54 were
translations of Russian language scientific journals, 109 were published in
the English Language Journal Program, and 50 were published by the
Registrant's subsidiary, Human Sciences Press, Inc. The Registrant also
distributed translations of 41 Russian scientific journals (see below).
Translations of Russian Language Journals
- -----------------------------------------
The translation journals are in the fields of physical sciences,
mathematics, engineering and life sciences. In November 1993, in settlement
of certain litigation, the Registrant entered into a Journal Production and
Distribution Agreement (the "Distribution Agreement") through the year 2006
with the Russian Academy of Sciences (the "Academy") and other interested
parties.
Since the inception of the Distribution Agreement, MAIK Nauka ("MN"), an
entity owned in part by Pleiades Publishing, Inc. and the Academy, has become
the exclusive publisher of the English translations of 42 Russian scientific
journals (21 journals in 1994, 14 in 1995, 6 in 1996, and 1 in 1997). The
Registrant has become the exclusive distributor of such journals, all of which
the Registrant had translated, published and distributed prior to the date of
the Distribution Agreement. Under the Distribution Agreement, the Registrant
continues to promote and distribute these journals throughout the world, and
continues to deal with and collect from subscribers to the journals, retaining
a portion of such revenues for performing its function. Thus, as to each
journal which is published by MN and distributed by the Registrant under the
Agreement, the Registrant retains 35% of the revenue in the initial year of
distribution, with the amount gradually being reduced to 30% over a six-year
period, and remaining at that level for the balance of the term. The portion
retained is included in subscription revenue.
The Company continues to publish 13 journals which it has been unable to
transfer to MN by reason of objections by the journal publishers. With
reference to such journals, MN has commenced litigation against the Company.
See Item 3, Legal Proceedings.
------------------
The journals published by MN are translated and published in Russia. The
Registrant continues its activities in translating, publishing and
distributing the 40 English Translation Russian Journals which are not subject
to the Distribution Agreement, as well as the 13 journals referred to above.
These activities are undertaken pursuant to the Registrant's existing English
translation and publication contracts with the individual entities publishing
the Russian language journals which generally extend through 2001.
The journals published by MN are distributed by the Registrant under the
MAIK Nauka/Interperiodica imprint, and it is indicated in each journal that it
is distributed worldwide by Plenum/Consultant's Bureau. Those journals
translated and published by the Registrant continue to be published under the
Registrant's "Consultant's Bureau" imprint.
The translation work required for the publication of the Registrant's
non-MN Journals is done primarily by scientists and technical persons in the
United States and elsewhere who have other principal occupations. The
Registrant maintains relationships with approximately 130 such persons, most
of whom have been rendering translation services to the Registrant for several
years. The Registrant has been able to obtain the required translators to
enable it to meet its needs.
Plenum Press Journals
- ---------------------
The Registrant published 109 journals in its English Language Journal
Program in 1996. The journals are published under the Registrant's "Plenum
Press" imprint, and include titles in chemistry, physics, mathematics,
computer science, engineering, biology, medicine, psychiatry, social sciences
and law. Each journal is published under the direction of an editorial board
composed of professionals specializing in the fields of research covered by
the journal.
Human Sciences Press Journals
- -----------------------------
The Registrant's subsidiary, Human Sciences Press, Inc., publishes 50
journals, under the "Human Sciences Press" imprint. These journals are
primarily in the health, behavioral and social science fields.
Outside Journals
- ----------------
The Registrant's Boston-based J.S. Canner & Company, Inc. subsidiary
("Canner") had engaged in the purchase and sale of back issue periodicals to
libraries, colleges, universities and other users. Canner's operations were
discontinued in October 1996.
Books
- -----
The Registrant's Plenum Press division publishes scientific, technical
and medical books for use by scientists, engineers, research workers, other
professionals and graduate students, and their supporting libraries, research
laboratories and institutions. During 1996, the division published 265 new
titles as part of this program, and had an active backlist of approximately
4,000 titles as of December 31, 1996. During 1995, 276 new titles were
published. Titles include comprehensive treatises, monographs and other
advanced text-reference works, as well as proceedings of meetings reporting
original scientific research, works surveying the state of the art in various
scientific fields and specialized bibliographies and data compilations. In
recent years, a number of books treating scientific topics of interest to the
general reader have also been published.
The Registrant's Da Capo Press, Inc. subsidiary publishes a line of
academic/trade paperbacks in the arts, biography and history. During 1996,
this subsidiary published 66 titles compared to 63 titles in the prior year.
As of December 31, 1996, this subsidiary had an active backlist of
approximately 1,500 titles, of which approximately 650 titles were
academic/trade paperbacks, and 850 were hardcover reprints of books in music,
dance, visual arts and the social sciences, which were published by Da Capo in
prior years.
The Registrant's Human Sciences Press, Inc. subsidiary had an active
backlist of approximately 310 titles as of December 31, 1996. The Registrant
has no immediate plans to publish new titles under the Human Sciences imprint,
but will continue to publish the backlist under such imprint. The Human
Sciences books are primarily in the health, behavioral and social science
fields, and are sold mainly to libraries and professionals in these fields.
Database Products
- -----------------
The Registrant's IFI/Plenum Data Corporation subsidiary ("IFI") is
primarily involved in providing to major industrial users on-line access to
the IFI Comprehensive Data Base of Patents, a computerized index file
containing references to all United States chemical and chemical related
patents issued since January 1950. The Registrant's customers generally use
terminals at their own facilities to obtain the information through several
international database networks. The file is further utilized by IFI in its
performance of patent searches for law firms and other customers. IFI
produces other on-line databases for searching chemical, general, electrical
and mechanical United States patents, and publishes in book format the Patent
Intelligence and Technology Report. IFI also offers other online database
products including Mental Health Abstracts and Information Science Abstracts.
Other Publishing Activities
- ---------------------------
Plenum Publishing Company Limited, the Registrant's English subsidiary,
provides sales representation for the Registrant in the United Kingdom and
European markets. Plenum Publishing Company Limited also performs editorial
procurement services for the scientific book and journal publishing programs
of the Registrant.
Competition
- -----------
The market in which the Registrant operates both for the procurement of
manuscripts and the sale of its products is highly competitive. The
Registrant is one of the leading publishers and distributors of English
translations of Russian scientific journals. However, several other companies
with English translation capabilities have relationships with individuals and
entities responsible for the publication of scientific and technical material
in the former Soviet Union. In addition, other publishers in the United
States and abroad with greater financial resources than the Registrant are
engaged in the publication of original English language scientific materials
and database products, as well as the reprint of out-of-print books and other
books generally not available. Elsevier Science, John Wiley & Sons and
Springer-Verlag may be deemed to be dominant competitors in the Registrant's
industry.
Export Sales
- ------------
The Registrant's sales derived from customers outside the United States
aggregated approximately $23,784,000 in 1996 (approximately 46% of
consolidated sales). Sales derived from customers outside the United States
were approximately $22,493,000 in 1995 and $20,590,000 in 1994 (approximately
43% and 40%, respectively, of consolidated sales). The Registrant generally
prices its products sold abroad in U.S. dollars. See Note 11 of Notes to
Consolidated Financial Statement included in Item 14(a).
Investments in Securities
- -------------------------
In 1996, the Registrant's dividends, interest income, net realized and
unrealized gains/losses on marketable securities, and equity in the net income
of Gradco Systems, Inc. (the foregoing items net of interest expense and other
investment-related expenses) represented 29% of the Registrant's pre-tax
income from continuing operations. In 1995, such items (net of interest
expense and other investment-related expenses) represented 36% of pre-tax
income from continuing operations.
The Registrant's excess cash is invested in a portfolio of marketable
securities, and in short-term investments such as time deposits, money market
funds and commercial paper. The investments of excess cash are available for
corporate purposes, and have been so used periodically. Market conditions and
the nature of the investments have an impact on the performance of the
marketable securities portfolio.
The Registrant owns 913,000 shares of Common Stock of Gradco Systems,
Inc. ("Gradco"), an office automation company, which were acquired by the
Registrant during the period October, 1989 through August, 1991. The
acquisitions by the Registrant have been reported in a Statement on Schedule
13D and amendments thereto filed jointly with the Securities and Exchange
Commission by the Registrant and by its Chairman, Martin E. Tash, and his
wife, who as of the date hereof had acquired a total of 250,672 shares. Mr.
Tash also has currently exercisable options to purchase 50,000 additional
shares. The filings are required because the Registrant and Mr. and Mrs. Tash
as a group (the "Group") beneficially own more than 5% of the outstanding
shares of Gradco (11.7% by the Company and 3.8% by Mr. and Mrs. Tash,
inclusive of his currently exercisable options, as of the date hereof, for a
total of 15.5%).
In October 1990, in a proxy contest, a five-person slate of directors was
nominated by the Group in opposition to the nominees of Gradco's then current
management. The slate consisted of Martin E. Tash (Registrant's Chairman of
the Board and Chief Executive Officer), Bernard Bressler (Secretary and a
director of Registrant) and three other individuals not affiliated with
Registrant. Three nominees of the Group (including Messrs. Tash and Bressler)
were elected to directorships, constituting a majority of the Board. The
newly named Board named Mr. Tash as Gradco's Chairman and Chief Executive
Officer.
The Group may be deemed to have obtained control of Gradco in October
1990, as a result of the fact that its nominees were elected as a majority of
Gradco's Board of Directors. Gradco's current five-person Board, elected
without any opposing nominees at its September 1996 Annual Meeting, consists
of Messrs. Tash and Bressler, and three other persons. All of the nominees
were designated as such at the request of the Group, which therefore may be
deemed to continue to have control of Gradco.
Registrant has not undertaken any obligations in connection with Gradco's
operations or advanced any funds to it and does not otherwise engage in
business through Gradco.
The Registrant's investment in Gradco is reflected in the Consolidated
Financial Statements included herein using the equity method of accounting.
In view of the securities investments described above, the Registrant
evaluates its status under the Investment Company Act of 1940, as amended
(the "Company Act"), on an annual basis. The Company Act requires the
registration with the Securities and Exchange Commission of, and imposes
various substantive restrictions on, any "investment company." The Company
Act defines the term "investment company" to include a company that engages
primarily, or proposes to engage primarily, in the business of investing,
reinvesting or trading in securities. An "investment company" may also
include a company which engages or proposes to engage in the business of
investing, reinvesting, owning, holding or trading in securities and which
owns or proposes to acquire investment securities (which for this purpose
excludes U.S. Government securities) having a value that exceeds 40% of the
value of such company's total assets (excluding cash items and U.S. Government
securities), unless the company is primarily engaged in a business or
businesses other than that of investing, reinvesting, owning, holding or
trading in securities.
The Registrant's principal business continues to be publishing and
distributing advanced scientific and technical material, and the Registrant is
not primarily engaged in investing, reinvesting or trading in securities. As
of December 31, 1996, investment securities represented less than 40% of the
value of the Registrant's total assets (exclusive of cash items), and in any
event the Registrant continued to be exempt from status as an investment
company pursuant to Rule 3a-1 under the Company Act because less than 45% of
the value of its total assets (exclusive of cash items) consisted of, and
less than 45% of its net income after taxes for the last four fiscal quarters
combined was derived from, securities.
Miscellaneous Information
- -------------------------
The Registrant currently employs approximately 275 full time employees.
Backlog is not significant in the Registrant's business because orders
are filled on a current basis. The Registrant does receive payments and on
occasion records receivables from journal subscribers in advance of the
issuance of journals, and the amounts appearing on the Registrant's
Consolidated Balance Sheets as "Deferred Subscription Income" represent these
items. See Note 1 of Notes to Consolidated Financial Statements.
The business of the Registrant is not seasonal. No material portion of
the business of the Registrant is subject to renegotiation of profits or
termination of contracts at the election of the Government. Compliance with
the provisions enacted regulating the discharge of materials into the
environment or otherwise relating to the protection of the environment does
not have an effect upon the Registrant.
Item 2. Properties
----------
As of December 31, 1996, the Registrant had leases at the following
principal locations:
<TABLE>
<CAPTION>
Expiration
Address Size Date of Lease Annual Rent
- ------- ---- ------------- -----------
<S> <C> <C> <C>
233 Spring Street 61,650 sq. ft. 2007 $282,720 in 1997,
New York, NY and increasing to
a maximum of
$340,512 in 2006.
150 Bay Street 10,000 sq. ft. 1997 $16,467 in 1997
Jersey City, NJ (represents rent
through April 1997,
when lease expires).
3202 Kirkwood Highway 4,300 sq. ft. 2002 $27,000 annually.
Wilmington, De
101 Back Church Lane 2,500 sq. ft. 2001 $25,251 annually.
London, U.K.
</TABLE>
Various of the leases referred to above provide for additional payments
or increases in rent over the base rental specified above under different
circumstances. In addition to the leases referred to above, the Registrant
or its subsidiaries have leases on space at various locations with a total
annual rental of approximately $20,000.
The Registrant's warehouse operations are conducted at a 69,000 square
foot warehouse in Edison, New Jersey which is owned by the Registrant.
Item 3. Legal Proceedings
-----------------
(a) Waterman v. Calt and Da Capo Press, Inc.
----------------------------------------
This civil action was filed on January 5, 1995. Da Capo Press, Inc.
(a wholly-owned subsidiary of the Registrant) published a book entitled I'd
---
Rather be the Devil: Skip James and the Blues about a deceased blues singer
- ---------------------------------------------
(the "Book"). The plaintiff, the singer's former manager, alleged that he
was libeled by certain statements in the Book. He sought compensatory damages
in the amount of $1,500,000 and punitive damages in the amount of $1,500,000
against Da Capo and the book's author, Stephen Calt. Plaintiff also sought
$20,000 in damages for the alleged unauthorized use of a photograph.
The case was removed to the United States District Court for the Western
District of Tennessee. Defendants answered, asserting inter alia that (1) the
----- ----
statements are not defamatory to plaintiff, (2) plaintiff is a public figure,
and (3) the publication of the Book was not malicious. After limited
discovery, both parties moved for summary judgment in October 1995. In
September 1996, the District Judge granted defendants' motion for summary
judgment and dismissed the case. The plaintiff has appealed the decision to
the United States Court of Appeals for the Sixth Circuit. Briefs have been
filed and the appeal is pending.
(b) MAIK Nauka ("MN") v. Plenum Publishing Corporation
--------------------------------------------------
This civil action was commenced against the Registrant on January 22,
1997. Plaintiff alleges that the Registrant breached the Distribution
Agreement entered into in December 1993 (see Item 1, Business, Translations
----------------------
of Russian Language Journals, above). The Agreement provided for the
- ----------------------------
assignment by the Registrant to MN of agreements relating to the publication
of translations of certain Russian scientific journals and their worldwide
distribution where assignment was permitted or agreed to by the publishers.
A number of the publishers of journals have refused to give their consent.
MN asserts that the Registrant did not use its best efforts to obtain consent
or otherwise breached the Distribution Agreement with MN. The Registrant,
which has answered the complaint, believes that it has adequate defenses to
defeat the MN claims. Discovery has not yet been commenced in this
litigation.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
-----------------------------------------------------
The Common Stock of the Registrant is traded on the NASDAQ National
Market System. The following table sets forth, for the calendar quarters
indicated, information furnished by the NASD, Inc. as to the high and low
sale prices for the Registrant's Common Stock as reported on the NASDAQ
National Market System under the symbol PLEN. The table also sets forth
dividends declared during such periods. There were approximately 638 record
holders of the Registrant's Common Stock on March 14, 1997. The number of
holders as so stated does not include individual participants in security
position listings.
<TABLE>
<CAPTION>
Dividends
Calendar Year Ended December 31, High Low Per Share
- -------------------------------- ---- --- ---------
1996
- ----
<S> <C> <C> <C>
First Quarter.................... 40-1/2 36-1/4 $.30
Second Quarter................... 39-1/2 33 .30
Third Quarter.................... 39 32-3/4 .30
Fourth Quarter................... 36-1/2 33-3/4 .30
<CAPTION>
1995
- ----
<S> <C> <C> <C>
First Quarter.................... 33-3/4 29 $.29
Second Quarter................... 36-1/4 29-1/4 .29
Third Quarter.................... 36-3/4 33-3/4 .29
Fourth Quarter................... 42-3/4 34 .29
</TABLE>
The Registrant has paid cash dividends on its Common Stock in each year
since 1974. The payment and amount of future dividends are dependent upon
the Registrant's earnings, general financial condition and the requirements
of the business and upon declaration of the dividend from time to time by the
Board of Directors.
<TABLE>
Item 6. Selected Financial Data
-----------------------
<CAPTION>
Years Ended December 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Subscriptions, books,
outside journals and
other sales, net $51,928,884 $52,229,671 $51,357,893 $52,891,694 $52,159,969
Income from interest and
dividends, and net realized
and unrealized gain on
marketable securities 7,004,358 9,472,222 4,559,179 1,769,469 7,121,189
Equity in net income (loss)
of Gradco Systems, Inc. 374,330 301,290 102,986 4,565 (100,430)
Income from continuing
operations 14,681,842 15,647,051 12,609,812 10,755,649 11,953,875
Income before extraordinary
items and cumulative effect
on prior years of accounting
change 15,050,343 15,516,804 12,719,118 10,928,707 12,148,883
Extraordinary (loss)
gain (1) - - - (1,319,794) 394,823
Cumulative effect on prior
year of accounting change (2) - - - - 1,179,950
Net income 15,050,343 15,516,804 12,719,118 9,608,913 13,723,656
Per share of Common Stock
- -- primary:
Income from continuing
operations 3.75 3.96 2.84 2.33 2.53
Income before extraordinary
items and cumulative effect
on prior years of accounting
change 3.84 3.93 2.87 2.37 2.57
Extraordinary (loss) gain (1) - - - (.29) .08
Cumulative effect on prior
years of accounting change (2) - - - - .25
Net income 3.84 3.93 2.87 2.08 2.90
Per share of Common Stock
- -- fully diluted (3)
Income from continuing
operations - - - 2.27 2.25
Income before extraordinary
items and cumulative effect
on prior years of accounting
change - - - 2.30 2.28
Extraordinary (loss) gain (1) - - - (.26) .06
Cumulative effect on prior
years of accounting change (2) - - - - .19
Net income - - - 2.04 2.53
Dividend declared per
share of Common Stock 1.20 1.16 1.12 1.08 1.04
Balance sheet data
Total assets 101,979,793 92,245,305 84,913,166 88,605,160 125,852,355
Long-term debt - - - - 40,827,000
<FN>
Footnotes to Table of Selected Financial Data
- ---------------------------------------------
(1) Extraordinary loss in 1993 resulted from the early retirement of
6 1/2% Convertible Subordinated Debentures on April 30, 1993.
(2) Effective January 1, 1992, the Registrant made an accounting change
for deferred taxes as a result of the application of the Statement of
Financial Accounting Standards No. 109.
(3) As a result of the redemption of the 6 1/2% Convertible Subordinated
Debentures, fully diluted net income per share is not applicable in
1996, 1995 and 1994.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations
- ---------------------
1996 Compared to 1995
Revenues from the Company's continuing publishing operations decreased by
.6%. Revenues from subscriptions increased by .7% primarily due to higher
selling prices, offset by the following: (a) the decrease in revenues from the
translation journals resulting from the Company's altered status with respect
to the journals covered by the Journal Production and Distribution Agreement
(see "1995 Compared to 1994", below), which became applicable to additional
journals in 1996; (b) non-renewals 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; and (c) fewer journal
issues published.
Management expects that in 1997 and thereafter, further decreases in the
Company's revenues from translation journals will occur as a result of the
Company's altered status with respect to the journals covered by the
Distribution Agreement, and also as a result of the political and economic
situation in Russia and in the other republics of the former Soviet Union.
Revenues from book sales decreased by 5.4%, primarily due to the
reduction in the number of book titles being published and decreased sales of
backlist books. Revenues from database products increased by 2.0%, mainly due
to higher selling prices.
The cost of sales from continuing operations as a percentage of revenues
decreased from 40.7% to 40.4%, principally due to higher selling prices,
offset by decreased sales of backlist books. The Company provides for
obsolescence by writing down the inventory value of backlist books, resulting
in higher gross margins on backlist sales. The decrease in royalty expenses
resulted from the decline in book sales and also 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. The
decrease in selling, general and administrative expenses was primarily due to
decreased professional fees, advertising expenditures and bad debt expense,
and sales and use taxes paid in 1995 with respect to prior years' audit
assessments, offset by higher salaries and increased repairs and maintenance
cost.
The increase in interest income was principally due to increased
investment in commercial paper, time deposits, money market funds and foreign
government securities. The increase in dividend income was attributable to
the changes in the portfolio of marketable securities. The Company had net
realized and unrealized gains of $7,491 and $4,109,291, respectively, on
marketable securities for fiscal 1996 as compared to net realized and
unrealized gains of $3,229,729 and $3,868,361, respectively, on marketable
securities for fiscal 1995.
The decrease in net income in fiscal 1996 was principally attributable
to the decrease in investment income as discussed in the preceding paragraph,
offset by increased income from continuing publishing operations and
discontinued operations.
1995 Compared to 1994
- ---------------------
Revenues from the Company's continuing publishing operations increased
by 1.7%. Revenues from subscriptions and outside journals increased by .4%
primarily due to more journal issues published and higher selling prices,
offset by the following: (a) cessation of the publication of 11 Russian
language journals under a contract with an American learned society, which
ended with the 1993 volume year (revenues from these journals were $527,000
in 1994, and ceased during that year); (b) the decrease in revenues from the
translation journals resulting from the Company's altered status with respect
to the journals covered by the Journal Production and Distribution Agreement,
which had its inception in 1994 (see below) and became applicable to
additional journals in 1995; and (c) non-renewals of subscriptions partially
attributable to the reduced buying power of libraries and to changes in the
market for the Company's translation of Russian language journals.
In December 1993, the Company entered into a Journal Production and
Distribution Agreement (the "Distribution Agreement") with the Russian Academy
of Sciences (the "Academy") and other interested parties pursuant to which
litigation then pending, relating to the translation of Russian scientific
journals, was ended, and the Company's role as publisher and distributor of
certain of such journals was altered. The Distribution Agreement extends
from 1994 through 2006.
Revenues from book sales increased by 2.3%, primarily due to an increase
in the number of book titles being published. Revenues from database products
increased by 9.7%, mainly due to the increased usage of the database system.
The cost of sales from continuing operations as a percentage of revenues
decreased from 40.8% to 40.7%, principally due to higher selling prices and
increased usage of the database system which has an above average gross
margin, offset by a lower gross margin on certain Russian scientific journals
published by the Academy under the Distribution Agreement and the cessation of
the publication of 11 Russian language journals under a contract with an
American learned society, which had an above average gross margin. Under the
Distribution Agreement, there were no royalties payable on certain Russian
scientific journals published by the Academy, resulting in decreased royalty
expenses. The increase in selling, general and administrative expenses was
primarily due to increased professional fees, advertising expenditures and
sales and use taxes paid in 1995 with respect to prior years' audit
assessments, offset by decreased mailing and telephone expenses.
The increase in interest income was principally due to increased
investment in commercial paper, time deposits, money market funds and foreign
government securities. The decrease in dividend income was attributable to
decreased investment in marketable securities. The Company had net realized
and unrealized gains of $3,229,729 and $3,868,361, respectively, on marketable
securities for fiscal 1995 as compared to net realized and unrealized gains of
$2,160 and $2,523,176, respectively, on marketable securities for fiscal 1994.
The increase in net income in fiscal 1995 was principally attributable to
the increase in investment income as discussed in the preceding paragraph and
increased income from continuing publishing operations, offset by a net loss
from discontinued operations. In December 1995, the Company's Board of
Directors adopted a plan to discontinue its wholly-owned subsidiary, J.S.
Canner & Company, Inc. effective October 1996.
Liquidity and Sources of Capital
- --------------------------------
The ratio of current assets to current liabilities is 6.4 to 1 at
December 31, 1996 compared to 6.1 to 1 at December 31, 1995.
Management anticipates that internally generated funds will exceed the
requirements of the operations of the business. The Company also has funds of
approximately $76,841,000 at December 31, 1996 invested in marketable
securities and in cash and cash equivalents, which are available for corporate
purposes.
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Response to this Item is contained in Item 14(a).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
------------------------------------------------
Not applicable
PART III
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
(a) The following table sets forth the name of each director and
executive officer of the Registrant, the date on which his present
term as a director will expire, and the nature of all positions
and offices with the Registrant held by him at present. The term
of office of all executive officers expires at the next Annual
Meeting of Stockholders of the Registrant, which is to be held in
June 1997.
<TABLE>
<CAPTION>
Present Term
as Director
Name Expires Position
- ------- ------------- --------
<S> <C> <C>
Martin E. Tash 1998 President and Chairman
of the Board of Directors
Mark Shaw 1998 Executive Vice President
and Director
Bernard Bressler 1998 Secretary and Director
Earl Ubell 1997 Director
Howard F. Mathiasen 1997 Director
Israel Gitman 1997 Director
Nathan Tash 1997 Director
Ghanshyam A. Patel ---- Treasurer and Chief
Financial Officer;
Assistant Secretary
</TABLE>
The Registrant's Board of Directors is divided into two classes. One
class consists of four members, and the other class consists of three members.
Each class is elected in alternate years for a term of two years. The term of
one class (consisting of Messrs. Ubell and Mathiasen, Dr. Gitman and Nathan
Tash) expires at the 1997 Annual Meeting. The term of office of the other
class (consisting of Messrs. Shaw, Bressler, and Martin E. Tash) expires at
the 1998 Annual Meeting.
(b) The following is a brief account of the recent business experience
of each director and executive officer, and directorships held
with other companies which file reports with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
Director
Name Since Business Experience
- ------- -------- -------------------
<S> <C> <C>
Martin E. Tash, 1972 Mr. Tash has been actively engaged in
age 56 the Registrant's business since 1971.
He has been Chairman of the Board and
President since July 15, 1977, and
served as Treasurer and Chief Financial
Officer from 1971 until September 29,
1986. Mr. Tash is also Chairman of the
Board and Chief Executive Officer of
Gradco Systems, Inc.
Mark Shaw, 1977 Mr. Shaw has been actively engaged in
age 58 the Registrant's business since 1963.
He has been Executive Vice President
since July 15, 1977, and manages the
Registrant's book and journal
publication program.
Bernard Bressler, 1962 Mr. Bressler has been a practicing
age 69 attorney since 1952, and is presently a
member of the firm of Bressler, Amery &
Ross, P.C. counsel to the Registrant.
Mr. Bressler is also a director of
Gradco Systems, Inc.
Earl Ubell, 1972 Mr. Ubell is retired. From September
age 70 1978 until August 1995, he was Health
and Science Editor of WCBS-TV. Between
August 1976 and September 1978, Mr.
Ubell was the Producer of Special Events
and Documentaries for NBC News. For
more than three years prior to that
time, Mr. Ubell was the Director of News
of WNBC-TV.
Howard F. Mathiasen, 1978 Mr. Mathiasen is retired. From July
age 59 1982 to June 1987, Mr. Mathiasen was
Senior Vice President of National
Westminster Bank U.S.A. (formerly known
as The National Bank of North America).
Between June 1979 and July 1982 he was
Vice President of that Bank. Between
May 1, 1978 and April 1979, Mr.
Mathiasen was Senior Vice President of
Nassau Trust Company. Between January
1975 and May 1978, Mr. Mathiasen was
Vice President of Chemical Bank.
Israel Gitman, 1995 For the past twenty years, Dr. Gitman
age 57 has been a consultant to Fortune 500
companies in the development of advanced
communications systems and technology
and in the formulation of systems
strategies. From 1979 to 1994, he was
Chairman and President of DVI
Communications, Inc., a systems
engineering and consulting company that
he co-founded. Prior thereto, he was
active in research and development in
the areas of computer-communications and
artificial intelligence. Dr. Gitman has
published widely in scientific and
technical journals, and has been a
speaker and chairman in national and
international conferences.
Nathan A. Tash, 1995 From 1990 through 1992, Mr. Tash, an
age 34 attorney, was associated with the law
firm of McKenna & Cuneo in Washington,
D.C. From 1993 to 1996, he was engaged
in private business, providing legal
and investment advice to private
clientele regarding real estate matters.
Since 1996, he has been engaged in the
private practice of law with offices in
Atlanta, Georgia.
Ghanshyam A. Patel, -- Mr. Patel has been Treasurer and Chief
age 60 Financial Officer of the Registrant
since September 29, 1986. Prior to that
he was with the accounting firm of Ernst
& Whinney (predecessor to Ernst & Young
LLP) from April 1970 and served in the
capacity of Senior Manager commencing
June 1977.
<FN>
(c) Nathan Tash is the son of Martin E. Tash, the Company's Chairman
and President.
</TABLE>
Item 11. Executive Compensation
----------------------
(a) Summary Compensation Table. The following table sets
--------------------------
forth all compensation awarded to, earned by or paid to the following persons
through March 14, 1997 for services rendered in all capacities to the
Registrant and its subsidiaries during each of the fiscal years ended December
31, 1996, 1995 and 1994: (1) the Registrant's Chief Executive Officer, and
(2) each of the other executive officers whose total compensation for the
fiscal year ended December 31, 1996 required to be disclosed in column (c)
and (d) below exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d)1 (e)2
Name and All other
Principal Position Year Salary ($) Bonus ($) Compensation ($)
- ------------------ ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
Martin E. Tash 1996 340,000 418,250 26,814
Chairman of the 1995 320,000 428,050 27,435
Board and President 1994 305,000 353,525 27,657
(Chief Executive Officer)
Mark Shaw 1996 340,000 298,750 26,814
Executive Vice 1995 320,000 305,750 27,435
President 1994 305,000 252,375 27,657
Ghanshyam A. Patel 1996 157,500 47,000 25,670
Treasurer and Chief 1995 150,000 48,000 25,308
Financial Officer 1994 143,000 40,000 23,173
<FN>
Footnotes to Summary Compensation Table:
- ---------------------------------------
1 Represents amounts paid to the named executive officer, for the
applicable fiscal year, under the Registrant's Incentive Compensation
Plan. For each fiscal year an amount equal to 5% of the Registrant's
Income from Operations as reported in the Registrant's year-end
financial statements (together with, when applicable, 5% of the excess
of cumulative Investment Profit over cumulative Investment Loss) is
distributed to key employees. Thirty-five percent of such amount is
distributed to the chief executive officer and 25% is distributed to
the next senior officer. The balance of such amount is distributed as
determined by the chief executive officer. Since there was Investment
Profit (as defined) in 1994, 1995 and 1996, the amount of such Profit
was added to Income from Operations for the purpose of calculating
incentive compensation for each of such years.
2 Represents amount of contribution made to or accrued for the account of
the named executive officer, in respect of the applicable fiscal year,
in the Registrant's Profit Sharing Plan (a defined contribution plan
qualified under the Internal Revenue Code). The Plan is maintained for
all full-time employees who have completed certain minimum periods of
service. The Registrant contributes to the Plan specified amounts
based upon its after tax income as a percentage of gross revenue. The
Registrant's contribution to the Plan for each employee is determined
by his salary level and length of service. Contributions are invested
by the Plan Trustee in stock of the Registrant and/or in a variety of
other investment options, depending upon the employee's election.
Interests in the Plan become vested to the extent of 20% after three
years of service and vest at the rate of an additional 20% for each
year of service thereafter and in any event become 100% vested at death
or at the "normal retirement age" of 55 as specified in the Plan. Each
employee (or his beneficiary) is entitled to receive the value of his
vested interest upon his death or retirement. He may also receive the
value of such interest upon prior termination of his services with the
Registrant, or if he elects at any time to withdraw his interest. The
interests of Messrs. Tash, Shaw and Patel are fully vested. The
aggregate contributions made or accrued by the Registrant through the
end of fiscal 1996 for Messrs. Tash, Shaw and Patel under this Plan are
$487,556, $507,431 and $183,845, respectively; these contributions have
been invested in the manner set forth above, and (as to Mr. Shaw) a
portion of the investments was transferred from the Plan into a private
profit sharing plan of which Mr. Shaw is the beneficiary.
</TABLE>
(b) Compensation of Directors
-------------------------
Directors fees for Dr. Israel Gitman and Messrs. Earl Ubell, Howard F.
Mathiasen and Nathan Tash are currently at the rate of $12,000 per annum each.
Directors of the Registrant who are also officers of the Registrant receive no
additional compensation for their services as directors.
(c) Termination of Employment and Change of Control
Arrangements Regarding Named Executive Officers
-----------------------------------------------
(i) See footnote (2) to table in Item 11(a) for information as
to entitlement of Messrs. Tash, Shaw and Patel to receive certain
distributions under the Registrant's Profit Sharing Plan upon termination of
their employment.
(ii) On September 22, 1989, the Registrant adopted Amended
Contingent Compensation Agreements with Martin Tash and Mark Shaw (executive
officers of the Registrant named in the table in Item 11(a)) and with Harry
Allcock and Marshall Lebowitz (officers of subsidiaries of the Registrant).
The Amended Agreements supersede the Contingent Compensation Agreements,
adopted on October 8, 1986, and provide that if (a) during the officer's
employment or within six months after his employment terminates, there is a
sale of 75% of the book value of the Registrant's operating assets (as
defined), or if any person or group becomes the owner of over 25% of the
Registrant's outstanding stock, and (b) the officer's employment is terminated
at or prior to the end of the sixth month after such event, then the
Registrant or a successor in interest to the Registrant shall pay the
terminated officer cash equal to 290% of the officer's average annual taxable
compensation over the preceding five calendar years.
On December 14, 1993, the Registrant entered into
Contingent Compensation Agreements with Ghanshyam A. Patel (an executive
officer of the Registrant named in the table in Item 11(a)) and Ken Derham
(as officer of a subsidiary of the Registrant) on the same terms as the
Amended Agreements described above.
(d) Indemnification Agreements
--------------------------
In September 1987, the Registrant's liability insurance for its
directors and officers expired and was not renewed due to the significantly
increased cost. In light of this development, and to provide increased
protection, the Registrant's By-Laws were amended on November 18, 1987 to
require the Registrant to advance expenses of directors or officers in
defending a civil or criminal action as such expenses are incurred, subject
to certain conditions. Furthermore, on that date the Registrant entered
into a contract with each person then holding a position as a director or
executive officer, requiring indemnification for expenses, judgments, fines
and amounts paid in settlement, in accordance with the By-Laws as amended, or
any future By-Laws which provide greater indemnification. On December 14,
1993, the Registrant entered into a substantially identical contract with an
officer of one of its subsidiaries, and as of March 14, 1996, the Registrant
entered into substantially identical contracts with Israel Gitman and Nathan
Tash (who became directors on June 23, 1995).
The present By-Laws provide for indemnification of directors and
officers, in connection with claims arising from service to the Registrant, or
to another entity at Registrant's request, except where it would be prohibited
under applicable law.
(c) Compensation Committee Interlocks and
Insider Participation
-------------------------------------
The Registrant's Board of Directors has no compensation committee
(or other Board committee performing equivalent functions); compensation
policies applicable to executive officers are determined by the Board.
During the fiscal year ended December 31, 1996, the officers of the
Registrant participating in the Board's deliberations concerning executive
compensation were Martin E. Tash, Mark Shaw and Bernard Bressler (who are
members of the Board).
During the fiscal year ended December 31, 1996, Martin E. Tash
(an executive officer of the Registrant) served as a member of the Board of
Directors of Gradco Systems, Inc. ("Gradco"). Gradco has no compensation
committee (or other Board committee performing equivalent functions);
compensation policies applicable to executive officers are determined by its
Board. Mr. Tash is an executive officer of Gradco and is the only such
executive officer who also served on Registrant's Board. Bernard Bressler
(Secretary and a director of Registrant) is an officer and director of Gradco,
but he is not an executive officer of either entity.
During the period since January 1, 1996, there were no
transactions between the Registrant and Gradco of the type required to be
disclosed under Item 13, Certain Relationships and Related Transactions.
----------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners
and Management
-----------------------------------------------
(a) The following table sets forth information regarding persons known
to the Registrant to be the beneficial owners of more than 5% of the
Registrant's voting securities as of March 14, 1997, based on 3,850,095 shares
of Common Stock, $.10 par value, outstanding as of such date.
<TABLE>
<CAPTION>
Nature of
Name and Address of Beneficial Percentage
Title of Class Beneficial Owner Ownership of Class
- --------------- ---------------- ---------- ----------
<S> <C> <C> <C>
Common Stock Martin E. Tash 423,485
$.10 par value 233 Spring Street shares (1) 11.0%
New York, NY 10013
Arlene S. Tash 298,229
17049 Northway Circle shares (2) 7.7%
Boca Raton, FL 33496
Southeastern Asset 321,000
Management, Inc. shares (3) 8.3%
6075 Poplar Avenue
Suite 900
Memphis, TN 38119
Quest Advisory Corp. 257,150
and Charles M. Royce shares (4) 6.7%
as a Group
1414 Avenue of the
Americas
New York, NY 10019
<FN>
(1) Includes 112,336 shares held by the Registrant's Profit Sharing Plan,
as to which Mr. Tash has voting and investment power. Of the aggregate of
423,485 shares shown, Mr. Tash has sole voting and investment power as to
125,256, and shared voting and investment power with his wife as to 298,229.
(2) Shares are owned jointly by Mrs. Tash with her husband, Martin E.
Tash, and she shares voting and investment power with him. Shares are
included in the 423,485 shares shown as owned by Mr. Tash.
(3) Number of shares as shown in beneficial owner's Amendment No. 5 to
Schedule 13G dated January 31, 1997, filed with the Securities and Exchange
Commission, reporting ownership as of December 31, 1996. According to such
Schedule 13G, Southeastern Asset Management, Inc. is an Investment Adviser
registered under the Investment Advisers Act of 1940. It has sole voting
and dispositive power as to 211,000 of the shares shown, and shared voting
and dispositive power as to 110,000 of said shares. According to the Schedule
13G, all of the aforesaid securities "are owned legally by Southeastern's
investment advisory clients and none are owned directly or indirectly by
Southeastern. As permitted by Rule 13d-4, the filing of this statement shall
not be construed as an admission that Southeastern Asset Management, Inc. is
the beneficial owner of any of [such] securities." The Schedule 13G was also
filed by O. Mason Hawkins, Chairman of the Board and C.E.O. of Southeastern
"in the event he could be deemed to be a controlling person of that firm as
the result of his official position with or ownership of its voting
securities. The existence of such control is expressly disclaimed.
Mr. Hawkins does not own directly or indirectly any securities covered by
this statement for his own account. As permitted by Rule 13d-4, the filing
of this statement shall not be construed as an admission that Mr. Hawkins is
the beneficial owner of any of the securities covered by this statement."
The Schedule 13G reflects that Mr. Hawkins has voting or dispositive power as
to none of the Registrant's shares.
(4) Number of shares as shown in beneficial owner's Amendment No. 4 to
Schedule 13G dated February 4, 1997, reporting ownership as of December 31,
1996. According to such Schedule 13G, Quest Advisory Corp. ("Quest") is an
Investment Adviser registered under the Investment Advisers Act of 1940.
Quest has sole voting and dispositive power as to the 257,150 shares shown
above. The Schedule 13G also includes Charles M. Royce as a member of a
Group with Quest, and indicates that he may be deemed to be a controlling
person of Quest, and as such may be deemed to beneficially own the shares of
the Registrant beneficially owned by Quest. Mr. Royce owns no shares of the
Registrant outside of Quest and has disclaimed beneficial ownership of the
shares reported above.
</TABLE>
(b) The following table sets forth information regarding the voting
securities of the Registrant beneficially owned by each director of the
Registrant, each of the executive officers named in the Summary Compensation
table in Item 11, Executive Compensation and all executive officers and
----------------------
<TABLE>
<CAPTIION>
directors as a group (8 persons), as of March 14, 1997.
Nature of
Name and Address of Beneficial Percentage
Title of Class Beneficial Owner Ownership of Class
- ----------------- ------------------- ---------- ----------
<S> <C> <C> <C>
Common Stock Martin E. Tash 423,485
$.10 par value 233 Spring Street shares (1) 11.0%
New York, NY 10013
Mark Shaw 80,667
233 Spring Street shares (2) 2.1%
New York, NY 10013
Earl Ubell 1,000
114 West 27th Street shares *
New York, NY 10001
Howard F. Mathiasen 28,125
10276 Totem Run shares *
Littleton, CO 80125
Bernard Bressler 12,757
Bressler, Amery & shares (3) *
Ross, P.C.
17 State Street
New York, NY 10004
Israel Gitman 500
12 West 72nd Street shares *
New York, NY 10023
Nathan Tash --
2313 Pine Heights
Drive N.E.
Atlanta, GA 30324
Ghanshyam A. Patel 10,336
233 Spring Street shares (4) *
New York, NY 10013
All Executive Officers 556,870
and Directors shares shares 14.5%
as a Group (comprising
the 8 persons shown
above)
<FN>
*Less than 1%.
(1) See footnote (1) to table in Item 12(a).
(2) Includes 50,625 shares held in trust for adult children. Of the
aggregate of 80,667 shares shown, Mr. Shaw has sole voting and dispositive
power as to 67,085 and shared voting and dispositive power with his wife as
to 13,582.
(3) Includes 520 shares held by a trustee for Mr. Bressler under an
Individual Retirement Account. Does not include 12,497 shares held by Mr.
Bressler's wife as to which he disclaims beneficial ownership.
(4) Includes 4,986 shares held by the Registrant's Profit Sharing Plan,
as to which Mr. Patel has sole voting and dispositive power. As to the
balance of 5,350 shares, Mr. Patel shares voting and dispositive power with
his wife.
</TABLE>
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
Bernard Bressler, Secretary and a director of the Registrant, is a
member of the law firm of Bressler, Amery & Ross, P.C., counsel to the
Registrant. During the 1996 fiscal year, the Registrant paid legal fees of
$76,537.00, to such firm.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
-------------------------------------------
(a) See index to financial statements and financial statement
schedules. See list of exhibits in paragraph (c) below.
(b) 8-K reports - None.
(c) Exhibits -
3.1 Certificate of Incorporation of the Registrant has
been filed as part of Exhibit 3 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1986. (1)
3.2 (a) By-Laws of the Registrant, as amended November 18,
1987, have been filed as Exhibit 3.2 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987. (1)
(b) Section 2.1 of By-Laws, as amended March 10, 1995,
has been filed as Exhibit 3.2(b) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994. (1)
10.1 Journal Production and Distribution Agreement dated
November 29, 1993 among the Registrant, MAIK Nauka,
Interperiodica, Pleiades Publishing, Inc., the Russian
Academy of Sciences and V5io Nauka, has been filed as
Exhibit 99 to the Registrant's Report on Form 8-K dated
December 13, 1993. (1)
10.2 Incentive Compensation Plan for Executive Officers and
Key Employees of Registrant as amended on June 18, 1985
has been filed as part of Exhibit 10 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1985. (1)
(1) Not filed with this report but incorporated by reference herein.
10.3 Amendment adopted on December 5, 1990 to Plan referred
to in Item 10.3 has been filed as Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990. (1)
10.4 Amended Contingent Compensation Agreements dated
September 22, 1989 between the Registrant and
Martin Tash, Mark Shaw, Harry Allcock and Marshall
Lebowitz have been filed as Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.1 The Registrant has
entered into identical agreements as of December 14,
1993, with Ghanshyam A. Patel and Ken Derham. To avoid
unnecessary duplication, such additional agreements
have been omitted from the exhibit filing.
10.5 Indemnification Agreement dated as of November 18, 1987
between the Registrant and Martin E. Tash has been
filed as Exhibit 10.6 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31,
1987. (1) The Registrant has entered into identical
agreements as of the same date with each of the
following persons: Howard F. Mathiasen, Mark Shaw,
Earl Ubell, and Bernard Bressler. The Registrant has
entered into substantially identical agreements dated
March 9, 1988 with Ghanshyam A. Patel, dated December
14, 1993 with Ken Derham, and dated as of March 14,
1996 with Israel Gitman and Nathan Tash. To avoid
unnecessary duplication, such additional agreements
have been omitted from the exhibit filing.
10.6 Amendment dated March 9, 1988 to Indemnification
Agreements referred to in Item 10.6 between the
Registrant and Martin E. Tash has been filed as
Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987.
(1) The Registrant has entered into identical
amendments of the same date with Mark Shaw and
Bernard Bressler. To avoid unnecessary duplication,
such identical amendments were omitted from the
exhibit filing.
21 Subsidiaries of Registrant
(i) Plenum Publishing Co., Ltd
(United Kingdom)
(1) Not filed with this report but incorporated by reference herein.
(ii) Da Capo Press, Incorporated
(New York)
(iii) Plenum International Sales
Corporation (Virgin Islands)
(iv) IFI/Plenum Data Corporation
(Delaware)
(v) Human Sciences Press, Inc.
(Delaware)
27 Financial Data Schedule - filed herewith
Signatures
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PLENUM PUBLISHING CORPORATION
(Registrant)
By: /s/ Martin E. Tash
-----------------------
Martin E. Tash
Chairman of the Board of Directors
and President
Dated: March 25, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By: /s/ Martin E. Tash
-----------------------
Martin E. Tash
Chairman of the Board of Directors
and President (Principal Executive
Officer)
Dated: March 25, 1997
By: /s/ Mark Shaw
-----------------------
Mark Shaw
Executive Vice President and
a Director
Dated: March 25, 1997
By: /s/ Ghanshyam A. Patel
-----------------------
Ghanshyam A. Patel
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
Dated: March 25, 1997
By: /s/ Bernard Bressler
-----------------------
Bernard Bressler
Secretary and a Director
Dated: March 25, 1997
By: /s/ Earl Ubell
-----------------------
Earl Ubell
Director
Dated: March 25, 1997
By: /s/ Howard F. Mathiasen
-----------------------
Howard F. Mathiasen
Director
Dated: March 25, 1997
By: /s/ Israel Gitman
-----------------------
Israel Gitman
Director
Dated: March 25, 1997
By: /s/ Nathan Tash
-----------------------
Nathan Tash
Director
Dated: March 25, 1997
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Form 10-K Item 14(a)(1) and (2)
Index to Financial Statements
and Financial Statement Schedule
The following consolidated financial statements of Plenum Publishing
Corporation and subsidiary companies are included in Item 8:
Report of Independent Auditors S- 1
Consolidated Balance Sheets-December 31, 1996 and 1995 S- 2
Consolidated Statements of Income-Years ended
December 31, 1996, 1995 and 1994 S- 4
Consolidated Statements of Stockholders' Equity-Years ended
December 31, 1996, 1995 and 1994 S- 5
Consolidated Statements of Cash Flows-Years ended
December 31, 1996, 1995 and 1994 S- 6
Notes to Consolidated Financial Statements S- 8
The following consolidated financial statement schedule of Plenum Publishing
Corporation and subsidiary companies is included in Item 14(d):
Schedule:
II Valuation and Qualifying Accounts S-21
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
<PAGE>
Report of Independent Auditors
Stockholders and Board of Directors
Plenum Publishing Corporation
We have audited the accompanying consolidated balance sheets of Plenum
Publishing Corporation and subsidiary companies as of December 31, 1996 and
1995, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1996. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Plenum Publishing Corporation and subsidiary companies at December 31, 1996
and 1995, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Ernst & Young LLP
New York, NY
March 14, 1997
<PAGE>
<TABLE>
<CAPTION>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Balance Sheets
December 31
1996 1995
-------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ($48,930,459 and $39,326,264)
in 1996 and 1995 $ 49,423,477 $ 40,093,105
Marketable securities, at aggregate market value (Note 9) 27,417,072 26,273,263
Interest and dividends receivable 248,198 258,347
Receivables-substantially all trade, net of allowances for
doubtful accounts ($79,000 and $125,000) and sales returns
($750,000 and $810,000) in 1996 and 1995 5,237,940 5,644,095
Inventories (Note 3) 3,548,543 3,492,326
Deferred income tax benefits (Note 5) - 1,213,526
-------------- --------------
Total current assets 85,875,230 76,974,662
-------------- --------------
Costs applicable to deferred subscription income 556,988 556,219
-------------- --------------
Property, plant and equipment, at cost:
Land 690,000 690,000
Building, net of accumulated depreciation of $638,266 and
$535,786 2,895,511 2,997,991
Furniture, fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization of $614,716
and $682,192 389,841 281,769
Plate costs, net of accumulated depreciation of $3,994,410
and $4,344,770 3,170,906 3,206,973
-------------- --------------
7,146,258 7,176,733
-------------- --------------
Deferred income taxes (Note 5) 177,444 450,544
-------------- --------------
Deferred charges and other assets:
Cost of subscription lists of Human Sciences Press and Agathon
journals, net of accumulated amortization of $2,259,499 and
$1,984,240 2,443,066 2,718,325
Royalties 1,486,485 1,581,130
Investment in Gradco Systems, Inc. (Note 4) 2,750,449 2,376,119
Investment in Tutor Time Learning Systems, Inc., at cost and
related note receivable 1,100,000 -
Deposits and other 319,494 278,303
-------------- --------------
8,099,494 6,953,877
-------------- --------------
Excess of cost of assets acquired over fair value thereof, net of
accumulated amortization of $231,262 and $222,371 124,379 133,270
-------------- --------------
Total assets $ 101,979,793 $ 92,245,305
============== ==============
Liabilities and stockholders' equity
Current liabilities:
Due to customers $ 544,277 $ 552,298
Accounts payable 3,181,286 2,552,396
Income taxes payable 913,250 1,712,659
Royalties payable 2,362,019 2,642,191
Other accrued expenses and sundry liabilities (Note 7) 4,035,185 4,117,180
Dividends payable 1,165,285 1,143,042
Deferred income tax liabilities (Note 5) 1,230,744 -
-------------- --------------
Total current liabilities 13,432,046 12,719,766
Deferred subscription income 25,148,620 24,539,497
-------------- --------------
Total liabilities 38,580,666 37,259,263
-------------- --------------
Commitments and contingencies (Notes 6, 7, 12 and 13)
Stockholders' equity:
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 105,283,732 94,927,495
-------------- --------------
109,819,982 99,463,745
Less 1,962,956 and 1,905,718 shares of common stock held in
treasury-at cost 46,420,855 44,477,703
-------------- --------------
Total stockholders' equity 63,399,127 54,986,042
-------------- --------------
Total liabilities and stockholders' equity $ 101,979,793 $ 92,245,305
============== ==============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Income
<CAPTION>
Year ended December 31
1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Subscriptions, books and other sales, net $51,928,884 $52,229,671 $51,357,893
------------ ------------ ------------
Costs and expenses:
Cost of sales 20,953,870 21,236,836 20,957,751
Royalties (Note 12) 3,874,419 4,141,404 4,257,729
Selling, general and administrative expenses 10,659,819 10,745,276 10,408,969
------------ ------------ ------------
35,488,108 36,123,516 35,624,449
------------ ------------ ------------
Income from operations 16,440,776 16,106,155 15,733,444
Investment income and other:
Dividend income 477,539 377,698 1,592,837
Interest income 2,410,037 1,996,434 441,009
Net realized gain on sales of marketable securities 7,491 3,229,729 2,160
Net unrealized gain on marketable securities 4,109,291 3,868,361 2,523,173
Equity in net income of Gradco Systems, Inc.
(Note 4) 374,330 301,290 102,986
Interest expense - - (20,320)
Other investment related expenses (539,622) (648,616) (412,477)
------------ ------------ ------------
Income from continuing operations before
income taxes 23,279,842 25,231,051 19,962,812
Income taxes (Note 5) 8,598,000 9,584,000 7,353,000
------------ ------------ ------------
Income from continuing operations 14,681,842 15,647,051 12,609,812
------------ ------------ ------------
Discontinued operations (Note 2):
Income (loss), net of income tax provision
(benefit) of $199,000, $(600,000), and $113,000 368,501 (46,192) 109,306
Estimated loss on disposal, net of income tax benefit
of $45,300 - (84,055) -
------------ ------------ ------------
Income (loss) from discontinued operations 368,501 (130,247) 109,306
------------ ------------ ------------
Net income $15,050,343 $15,516,804 $12,719,118
============ ============ ============
Per share of Common Stock (Note 8):
Income from continuing operations $3.75 $3.96 $2.84
Income (loss) from discontinued operations .09 (.03) .03
------------ ------------ ------------
Net income $3.84 $3.93 $2.87
============ ============ ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Stockholders' Equity
<CAPTION>
Common Stock Issued Paid-In Total
-------------------
Par Additional Retained Treasury Stock Stockholders'
--------------
Shares Value Capital Earnings Shares Cost Equity
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 5,847,241 $584,724 $3,951,526 $76,165,428 1,331,436 $28,470,941 $52,230,737
Net income for the year ended
December 31, 1994 - - - 12,719,118 - - 12,719,118
Dividend declared, $1.12 a share - - - (4,900,947) - - (4,900,947)
Acquisition of Common Stock for
treasury - - - - 531,547 14,718,090 (14,718,090)
---------- --------- ----------- ------------------------------------------------------
Balance at December 31, 1994 5,847,241 584,724 3,951,526 83,983,599 1,862,983 43,189,031 45,330,818
Net income for the year ended
December 31, 1995 - - - 15,516,804 - - 15,516,804
Dividend declared, $1.16 a share - - - (4,572,908) - - (4,572,908)
Acquisition of Common Stock for
treasury - - - - 42,735 1,288,672 (1,288,672)
---------- --------- ----------- ------------------------------------------------------
Balance at December 31, 1995 5,847,241 584,724 3,951,526 94,927,495 1,905,718 44,477,703 54,986,042
Net income for the year ended
December 31, 1996 - - - 15,050,343 - - 15,050,343
Dividend declared, $1.20 a share - - - (4,694,106) - - (4,694,106)
Acquisition of Common Stock for
treasury - - - - 57,238 1,943,152 (1,943,152)
---------- --------- ----------- ------------------------------------------------------
Balance at December 31, 1996 5,847,241 $584,724 $3,951,526 $105,283,732 1,962,956 $46,420,855 $63,399,127
========== ========= =========== ======================================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Cash Flows
<CAPTION>
Year ended December 31
1996 1995 1994
--------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $15,050,343 $15,516,804 12,719,118
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of plate costs 1,406,875 1,465,390 1,620,375
Depreciation and amortization of building, furniture,
fixtures, equipment and leasehold improvements 280,696 294,634 313,233
Amortization of deferred charges and excess of cost
of assets acquired over book amount thereof 1,818,233 2,801,351 2,626,442
Net realized gain on sales of marketable securities (7,491) (3,229,729) (2,160)
Net unrealized gain on marketable securities (4,109,291) (3,868,361) (2,523,173)
Purchase of marketable securities (7,620,588) (14,949,402) (30,183,628)
Proceeds from sale of marketable securities 10,593,561 20,065,104 57,243,299
Equity in net income of Gradco Systems, Inc. (374,330) (301,290) (102,986)
Deferred income taxes 2,717,370 1,273,876 1,063,054
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables 416,304 270,860 2,749,346
Advance under the Distribution Agreement - - 750,000
Inventories (56,217) 143,975 542,884
Other assets (1,480,629) (1,630,036) (1,983,242)
Increase (decrease) in:
Due to customers, accounts payable, royalties
payable, accrued expenses and sundry liabilities 258,702 820,045 1,226,688
Income taxes payable (799,409) (433,213) (38,925)
Deferred subscription income and costs applicable
thereto-net 608,354 (1,630,207) 1,118,408
------------ ------------- ------------
Net cash provided by operating activities 18,702,483 16,609,801 47,138,733
------------ ------------- ------------
Cash flows from investing activities
Additions to plate costs (1,370,808) (1,425,471) (1,473,350)
Additions to furniture, fixtures, equipment and
leasehold improvements (286,288) (89,704) (140,122)
Investment in Tutor Time Learning Systems, Inc., at cost
and related note receivable (1,100,000) - -
------------ ------------- ------------
Net cash used in investing activities (2,757,096) (1,515,175) (1,613,472)
------------ ------------- ------------
Cash flows from financing activities
Acquisition of treasury stock (1,943,152) (2,219,547) (13,787,125)
Dividends paid (4,671,863) (4,557,592) (4,992,488)
------------ ------------- ------------
Net cash used in financing activities (6,615,015) (6,777,139) (18,779,703)
------------ ------------- ------------
Net increase in cash and cash equivalents 9,330,372 8,317,487 26,745,558
Cash and cash equivalents at beginning of year 40,093,105 31,775,618 5,030,060
------------ ------------- ------------
Cash and cash equivalents at end of year $49,423,477 $40,093,105 $31,775,618
============ ============= ============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of Plenum Publishing Corporation (the "Company") and its domestic and foreign
subsidiaries, which are wholly-owned. The accounts of the foreign subsidiaries
are not material. Intercompany items and transactions are eliminated in
consolidation.
The Company accounts for its investment in Gradco Systems, Inc.
("Gradco") under the equity method (see Note 4).
Inventories
Inventories are stated at the lower of cost (principally average cost or
specific invoice cost) or market (based on selling market).
Use of Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Amortization
Depreciation is provided for by the straight-line method or by the
declining-balance method over estimated useful lives ranging from 4 to 35
years. Amortization of leasehold improvements is provided for by the
straight-line method generally over the terms of the related leases or the
estimated useful lives of the improvements, whichever period is shorter.
The excess of cost of assets acquired over fair value thereof is being
amortized by the straight-line method over 40 years.
The cost of the subscription lists of Human Sciences Press and Agathon
journals is being amortized by the straight-line method over estimated useful
lives ranging from 12 to 20 years.
Other assets include the cost of rights to produce and distribute certain
journals, which is being amortized by the straight-line method, primarily over
a period of 15 years.
Deferred Subscription Income
The Company bills subscribers to certain publications and patent
information services in advance of issuance thereof. The publications are
generally issued over a one-year period and subscription revenues are taken
into income by the straight-line method based on the relationship of the
number of publications issued to the number ordered by subscribers. Patent
information service revenues are taken into income when published.
The portion of advance billings which will require use of financial
resources within one year is not practicable to determine and, accordingly,
no portion thereof is included in current liabilities; expenditures at balance
sheet dates in respect of such advance billings have similarly been excluded
from current assets.
Marketable Securities
As determined by management, marketable securities are classified as
trading securities and are stated at fair market value. Gains and losses, both
realized and unrealized, are included as a component of current earnings.
Realized gains and losses on marketable securities are determined based on
specific identification of securities sold.
Cash Equivalents and Supplemental Cash Flow Information
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents. As of
December 31, 1996, the Company had time deposits, commercial paper and money
market accounts totaling approximately $48,930,000 substantially on deposit
with five financial institutions. As of December 31, 1995, the Company had
time deposits, commercial paper and money market accounts of approximately
$39,326,000 on deposit with three financial institutions.
At December 31, 1996 and 1995, cash equivalents included commercial paper
totaling $46,479,000 and $38,000,000, respectively. The commercial paper is
held to maturity and, as such, it is recorded at amortized cost which
approximates fair value.
The Company paid income taxes in 1996, 1995 and 1994 of approximately
$6,879,000, $8,098,000 and $6,442,000, respectively. In addition, the Company
paid interest of approximately $20,000 in 1994.
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of, which requires impairment losses to be recorded on
long-lived assets used in operation when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement No. 121 in the first quarter of 1996 with no impact
on its financial statements.
2. Discontinued Operations
In December 1995, the Company's Board of Directors adopted a plan to
discontinue its wholly-owned subsidiary, J.S. Canner & Company, Inc.
("Canner") effective October 1996. Canner is engaged in the purchase and sale
of back issue periodicals to libraries, universities, colleges and other
users. Loss from discontinued operations in 1995 includes the write-off of
Canner's unamortized intangible assets of $89,284, net of applicable income
tax benefit of $624,000. The remaining assets and liabilities of Canner at
December 31, 1995 are not material to the consolidated financial statements.
Net sales of Canner were approximately $1 million, $1 million and $1.1
million for the years ended December 31, 1996, 1995 and 1994, respectively.
3. Inventories
Inventories at December 31 are comprised of:
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
Finished publications $3,177,949 $3,033,329
Work in process 370,594 458,997
----------- -----------
$3,548,543 $3,492,326
=========== ===========
</TABLE>
4. Investment in Gradco Systems, Inc.
As of December 31, 1996 and 1995, the Company owned 913,000 common
shares of Gradco, a company engaged in the development and marketing of
photocopier machine technology, representing approximately 11.7% of its
outstanding common stock. Gradco stock is publicly traded on the NASDAQ
National Market System. The aggregate market value of this investment as
of December 31, 1996 and 1995 amounted to approximately $3,423,750 and
$2,111,000, respectively.
Selected financial data of Gradco as of and for the 12 months ended
December 31, 1996, 1995 and 1994 is as follows and has been extracted from
unaudited financial information as filed by Gradco with the Securities and
Exchange Commission (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------------------------------
<S> <C> <C> <C>
Balance sheet data
Total assets $ 60,576 $ 58,957 $ 54,800
Working capital 19,438 18,032 12,744
Noncurrent liabilities, including minority
interest and excluding current installments 17,545 17,988 17,689
Shareholders' equity 15,736 15,715 12,477
Statement of operations data
Net revenues 100,467 101,069 71,458
Net income 3,199 2,576 878
</TABLE>
The President and Chairman of the Board of the Company, Mr. Martin E.
Tash, is also the President and Chairman of the Board of Gradco.
5. Income Taxes
Income taxes for the years ended December 31 consist of the following:
<TABLE>
<CAPTION>
1996
-------------------------------------
Current Deferred Total
-------------------------------------
<S> <C> <C> <C>
Federal $4,481,117 $2,250,883 $6,732,000
State and local 1,399,513 466,487 1,866,000
----------- ----------- -----------
$5,880,630 $2,717,370 $8,598,000
=========== =========== ===========
<CAPTION>
1995
-------------------------------------
Current Deferred Total
-------------------------------------
<S> <C> <C> <C>
Federal $6,680,477 $ 902,523 $7,583,000
State and local 1,629,647 371,353 2,001,000
----------- ----------- -----------
$8,310,124 $1,273,876 $9,584,000
=========== =========== ===========
<CAPTION>
1994
-------------------------------------
Current Deferred Total
----------- ----------- -----------
<S> <C> <C> <C>
Federal $4,800,664 $ 838,336 $5,639,000
State and local 1,489,282 224,718 1,714,000
----------- ----------- -----------
$6,289,946 $1,063,054 $7,353,000
=========== =========== ===========
</TABLE>
Deferred income taxes result from the recognition of the income tax
effect of timing differences in reporting transactions for financial and tax
purposes. A description of the differences and the related tax effect follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Valuation of inventories $ 179,261 $ (95,869) $ (129,727)
Depreciation 273,100 412,584 207,181
Allowance for doubtful accounts, etc. (10,930) 26,100 (45,100)
Adjustments applicable to net
unrealized gains (losses) 1,651,900 1,555,100 1,030,700
Intangibles related to discontinued
operations 624,039 (624,039) -
----------- ----------- -----------
$2,717,370 $1,273,876 $1,063,054
=========== =========== ===========
</TABLE>
Significant components of the Company's deferred tax assets (liabilities)
as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------
<S> <C> <C>
Valuation of inventories $ 2,164,046 $2,343,307
Depreciation 177,444 450,544
Allowance for doubtful accounts, etc. 143,110 132,180
Net unrealized gains (3,537,900) (1,886,000)
Intangibles related to discontinued operations - 624,039
Equity in losses of Gradco 1,725,000 1,856,000
------------ ----------
Total deferred tax assets 671,700 3,520,070
Valuation allowance (1,725,000) (1,856,000)
------------ ----------
Net deferred tax assets (liabilities) $(1,053,300) $1,664,070
============ ==========
</TABLE>
The Company has recorded a valuation allowance for the entire value of
the deferred tax asset attributable to the equity in losses of Gradco, since
management believes the realization of such asset is not reasonably assured.
The change in the valuation allowance in 1996, 1995 and 1994 was $(131,000),
$(106,400) and $(36,000), respectively.
A reconciliation of the computed "expected" tax expense at the Federal
statutory rate and the actual tax expense for the years shown below is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------------------------------
% of Income % of Income % of Income
Before Before Before
Income Income Income
Amount Taxes Amount Taxes Amount Taxes
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $8,147,900 35.0% $8,830,900 35.0% $6,987,000 35.0%
Increases (reductions) in tax resulting from:
State and city income taxes, net of Federal
income tax benefit 1,212,900 5.2 1,300,700 5.2 1,114,000 5.6
Nontaxable portion of dividend income (117,000) (.5) (92,500) (.4) (390,200) (2.0)
Foreign Sales Corporation income taxed
at a lower rate (431,200) (1.9) (363,000) (1.4) (363,000) (1.8)
Equity in net income of Gradco Systems, Inc.
not recognized as deferred tax benefits (131,000) (.6) (106,400) (.5) (36,000) (.2)
Miscellaneous-net (83,600) (.3) 14,300 .1 41,200 .2
----------- ----- ----------- ----- ---------- ------
Actual tax expense $8,598,000 36.9% $9,584,000 38.0% $7,353,000 36.8%
=========== ===== =========== ===== ========== ======
6. Leases
The Company leases certain real properties. Certain leases provide for
the payment of real estate taxes and escalation of rentals based on increases
in real estate taxes.
Rental expense for the years ended December 31 is as follows:
1996 $ 812,000
1995 769,000
1994 737,000
Approximate future minimum rentals under all noncancelable operating
leases for real property at December 31, 1996 are as follows:
1997 $ 351,000
1998 341,000
1999 347,000
2000 354,000
2001 344,000
Subsequent to 2001 1,746,000
----------
$3,483,000
==========
<PAGE>
7. Profit Sharing and Incentive Compensation Plans
The Company has a profit sharing plan for its employees which provides
for annual contributions based upon the Company's net income as a percentage
of gross revenue and the employees' salary level and length of service. Such
contributions, which are placed in a trust fund, are invested at the
employees' discretion. Contributions under the plan aggregated approximately
$1,065,000 (1996), $1,096,000 (1995) and $1,032,000 (1994). Other accrued
expenses and sundry liabilities include accrued contributions under the plan
of $1,065,000 (1996) and $1,096,000 (1995).
The Company has an incentive compensation plan for executive officers and
key employees of the Company providing for 5% of the Company's income from
operations to be distributed (as provided) to participants of the plan. In
addition to the amounts payable as set forth above, since there was investment
income (as defined) in 1994, 1995 and 1996, the amount of such income was
added to income from operations for the purpose of calculating incentive
compensation for 1994, 1995 and 1996. Distributions under the plan aggregated
$1,195,000 (1996), $1,223,000 (1995) and $1,009,500 (1994). Other accrued
expenses and sundry liabilities include accrued incentive compensation of
$750,000 (1996) and $908,000 (1995).
The Company has the right to change, modify or terminate the above plans
at any time.
8. Per Share Amounts
Net income per share of Common Stock is computed on the basis of weighted
average number of common shares outstanding (3,915,045 (1996), 3,945,629
(1995) and 4,435,831 (1994)).
9. Marketable Securities
The Company's portfolio of marketable securities is substantially
invested in a limited number of issuers, operating principally in the
pharmaceutical and communications industries at December 31, 1996 and 1995.
At December 31, 1996 and 1995, the market value of the Company's largest
holding (invested in a company operating in the pharmaceutical industry)
was $10,234,000 and $8,436,000, respectively.
</TABLE>
<TABLE>
10. Quarterly Financial Information (Unaudited)
<CAPTION>
Income (Loss) Net Income
Subscriptions from Securities, Per Share of
and Cost Net of Certain Net Common
Quarter Other Sales of Sales Expenses Income (1) Stock (1)
- --------------------------------------------------------------------------------------------
1996
- ----
<S> <C> <C> <C> <C> <C>
First $12,847,602 $5,224,006 $(190,283) $2,479,733 $.63
Second 12,358,214 5,342,644 1,736,328 3,331,878 .85
Third 13,319,107 5,392,390 2,733,165 4,355,375 1.12
Fourth 13,403,961 4,994,830 2,559,856 4,883,357 1.26
<CAPTION>
1995
- ----
<S> <C> <C> <C> <C> <C>
First $13,117,926 $5,518,593 $2,817,339 $4,005,796 $1.01
Second 12,637,378 5,370,779 2,298,868 3,713,695 .94
Third 13,487,629 5,245,042 1,946,339 3,917,411 .99
Fourth 12,986,738 5,102,422 2,062,350 3,879,902 .98
</TABLE>
<TABLE>
(1) Amounts of discontinued operations included in net income and net
income per share of common stock are as follows:
<CAPTION>
1996 1995
---------------------------------------------------------------------------
Net Income Net Net Income (Loss)
Net Per Share of Income Per Share of
Quarter Income Common Stock (Loss) Common Stock
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $ 70,472 $.02 $ 22,226 $ .01
Second 179,427 .04 15,787 .005
Third 118,602 .03 16,311 .005
Fourth - - (184,571) (.05)
--------- ------ ---------- -------
$368,501 $ .09 $(130,247) $(.03)
========= ====== ========== =======
</TABLE>
11. Business Segments and Geographic Areas
The Company operates in only one reportable business segment.
<TABLE>
The Company and its subsidiaries are engaged in the publishing and
distribution of advanced scientific materials in the United States and in
foreign countries. Export sales by geographic area for the fiscal years ended
December 31, 1996, 1995 and 1994 were as follows:
<CAPTION>
1996 1995 1994
---------------------------------------------
<S> <C> <C> <C>
Canada $ 2,950,000 $ 2,789,000 $ 2,553,000
Asia 6,477,000 6,118,000 5,600,000
Europe 11,872,000 11,251,000 10,299,000
Pacific Rim 1,323,000 1,260,000 1,153,000
Other 1,162,000 1,075,000 985,000
------------- ------------ ------------
$23,784,000 $22,493,000 $20,590,000
============= ============ ============
</TABLE>
Operating margins attributable to foreign sales were not materially
different from operating margins attributable to domestic sales. The Company
has no significant assets located in the geographic areas listed above.
12. Distribution Agreement
In November 1993, the Company entered into a Journal Production and
Distribution Agreement (the "Distribution Agreement") with the Russian Academy
of Sciences (the "Academy") and other interested parties pursuant to which the
litigation then pending, relating to the translation of Russian scientific
journals, was ended, and the Company's role as publisher and distributor of
certain of such journals was altered. The Distribution Agreement extends from
1994 through 2006.
Pursuant to the Distribution Agreement, in 1994 the Company distributed
for MAIK Nauka ("MN"), an entity owned in part by Pleiades Publishing, Inc.
and the Academy, 21 Russian scientific journals in English. MN became the
exclusive publisher of such journals. Prior thereto, the Company had
translated, published and distributed these journals under a contract with
the Copyright Agency of the former Soviet government, and under contracts
with the individual institutes publishing the journals, and had paid royalties
based in part upon the number of subscribers. Under the Distribution
Agreement, the Company continues to promote and distribute these journals
throughout the world, and continues to deal with and collect from subscribers
to the journals, retaining a portion of such revenues for performing these
functions. In 1994, the Company retained 35% of the revenue. The amount will
gradually be reduced to 30% in 1999 and will remain at that level for the
balance of the term of the Distribution Agreement.
Under the Distribution Agreement in 1995, MN undertook the publication
of the English translations of 14 additional Russian journals, which are
promoted and distributed by the Company. In 1996, MN undertook the
publication of the English translations of six additional Russian journals to
be promoted and distributed by the Company, and in 1997 it has undertaken the
publication of one additional journal. As to each additional journal which is
published by MN and distributed by the Company under the Distribution
Agreement, the Company will retain 35% of the revenue in the initial year of
distribution, with the amount gradually being reduced to 30% over a six-year
period.
The Company continues to publish 13 journals which it has been unable to
transfer to MN by reason of objections by the journal publishers. With
reference to such journals, MN has commenced a litigation against the Company
(see Note 13).
The journals published by MN are translated and published in Russia. The
Company continues its activities in translating, publishing and distributing
the 40 English Translation Russian Journals not subject to the Agreement, as
well as the 13 journals referred to above. These activities are undertaken
pursuant to the Company's existing English translation and publication
contracts with the individual entities publishing the Russian language
journals which generally extend through 2001.
13. Contingencies
The Company has contingent compensation agreements with certain key
personnel. Each agreement provides for the cash payment of an amount equal to
290% of average annual compensation (as defined), in the event of termination
of employment, under certain conditions which include, among other matters,
(a) the sale of 75% of the book value of the Company's operating assets (as
defined) or (b) any person (as defined) becoming the owner of more than 25%
of the issued and outstanding shares of the Company's voting stock.
On January 22, 1997, MN commenced a civil action against the Company.
MN alleges that the Company breached the Distribution Agreement referred to
in Note 12. The Agreement provided for the assignment by the Company to MN of
agreements relating to the publication of translations of certain Russian
scientific journals and their worldwide distribution where assignment was
permitted or agreed to by the publishers. A number of the publishers of
journals have refused to give their consent. MN asserts that the Company did
not use its best efforts to obtain consent or otherwise breached the
Distribution Agreement with MN. The Company, which has answered the complaint,
believes that it has adequate defenses to defeat the MN claims. Discovery has
not yet been commenced in this litigation. Management believes that the
ultimate outcome of this matter will not have a materially adverse effect on
the Company's financial condition.
<TABLE>
Plenum Publishing Corporation
and Subsidiary Companies
Schedule II-Valuation and Qualifying Accounts
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------
Additions
Balance Charged to Balance
at beginning Costs and End of
Description of Period Expenses Deductions Period
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowances deducted from assets to
which they apply:
Allowance for doubtful accounts $125,000 $ 25,700 $ 71,700 (a) $ 79,000
Allowance for sales returns $810,000 $2,977,603 $3,037,603 (b) $ 750,000
Year ended December 31, 1995
Allowances deducted from assets to
which they apply:
Allowance for doubtful accounts $181,000 $ 30,260 $ 86,260 (a) $ 125,000
Allowance for sales returns $740,000 $2,790,457 $2,720,457 (b) $ 810,000
Year ended December 31, 1994
Allowances deducted from assets to
which they apply:
Allowance for doubtful accounts $179,000 $ 14,168 $ 12,168 (a) $ 181,000
Allowance for sales returns $669,000 $2,774,520 $2,703,520 (b) $ 740,000
<FN>
Notes:
(a) Uncollectible receivables written off.
(b) Returns made by customers.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from financial
statements for the twelve months ended December 31, 1996 and is qualified in
its entirety by reference to such financial statements.
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<CASH> 49,423,477
<SECURITIES> 27,417,072
<RECEIVABLES> 6,066,940
<ALLOWANCES> (829,000)
<INVENTORY> 3,548,543
<CURRENT-ASSETS> 85,875,230
<PP&E> 12,393,650
<DEPRECIATION> (5,247,392)
<TOTAL-ASSETS> 101,979,793
<CURRENT-LIABILITIES> 13,432,046
<BONDS> 0
0
0
<COMMON> 584,724
<OTHER-SE> 62,814,403
<TOTAL-LIABILITY-AND-EQUITY> 101,979,793
<SALES> 51,928,884
<TOTAL-REVENUES> 59,307,572
<CGS> 20,953,870
<TOTAL-COSTS> 20,953,870
<OTHER-EXPENSES> 539,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 23,279,842
<INCOME-TAX> 8,598,000
<INCOME-CONTINUING> 14,681,842
<DISCONTINUED> 368,501
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,050,343
<EPS-PRIMARY> 3.84
<EPS-DILUTED> 0
</TABLE>
