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, 1997
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 27, 1998 was $193,296,220.
-------------
The number of shares outstanding of the Issuer's common stock, as of March 27,
1998, was 3,510,251 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. The
Registrant's principal methods of marketing are by direct mail and by
advertising in scientific publications, including its own journals. The
Registrant maintains an internet web site at www.plenum.com. 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.
On February 25, 1998, the Registrant announced that it had engaged
Salomon Smith Barney to explore a possible sale of the Registrant. The
Registrant's decision to engage Salomon Smith Barney was motivated by recent
consolidation in the publishing sector.
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>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Subscription Journals $33,376,556 $33,131,399 $32,913,103 $32,241,873 $33,297,585
Outside Journals (a) - - - 527,161 1,255,223
Books 13,858,855 13,434,433 14,197,328 13,917,674 13,317,503
Database Products 4,545,863 4,610,269 4,520,290 4,122,123 4,210,802
Miscellaneous Sales 852,720 752,783 598,950 549,062 810,581
Interest Income 2,771,821 2,410,037 1,996,434 441,009 544,290
Dividend Income 268,945 477,539 377,698 1,592,837 2,136,989
Net realized gain on sales
of marketable securities 819 7,491 3,229,729 2,160 801,387
Net unrealized (loss) gain
on marketable securities (1,227,545) 4,109,291 3,868,361 2,523,173 (1,713,197)
Equity in net income of
Gradco Systems, Inc. 611,710 374,330 301,290 102,986 4,565
----------- ----------- ----------- ----------- -----------
$55,059,744 $59,307,572 $62,003,183 $56,020,058 $54,665,728
=========== =========== =========== =========== ===========
<FN>
Notes:
(a) In April 1993, an American learned society with which the Registrant
had a contract to produce English translations of 11 Russian language
journals for publication 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 1997, the Registrant published a total of 214 journals. 53 were
translations of Russian language scientific journals, 111 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 42 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. As to some of these journals, 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 Registrant 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
Registrant. 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 111 journals in its English Language Journal
Program in 1997. 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.
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 1997, the division published 248 new
titles as part of this program, and had an active backlist of approximately
4,300 titles as of December 31, 1997. During 1996, 265 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 1997,
this subsidiary published 68 titles compared to 66 titles in the prior year.
As of December 31, 1997, this subsidiary had an active backlist of
approximately 1,375 titles, of which approximately 675 titles were academic/
trade paperbacks, and 700 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 190 titles as of December 31, 1997. 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 $21,452,000 in 1997 (approximately 41% of
consolidated sales). Sales derived from customers outside the United States
were approximately $23,784,000 in 1996 and $22,493,000 in 1995 (approximately
46% and 43%, 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 1997, 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 11% of the Registrant's
pre-tax income from continuing operations. In 1996, such items (net of
interest expense and other investment-related expenses) represented 29% 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 owned 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 at year end had acquired a total of 250,672 shares. Mr. Tash also
has currently exercisable options to purchase 75,000 additional shares. The
filings were required because the Registrant and Mr. and Mrs. Tash as a group
(the "Group") beneficially owned more than 5% of the outstanding shares of
Gradco (11.6% by the Registrant and 4.1% by Mr. and Mrs. Tash, inclusive of
his currently exercisable options, for a total of 15.7%).
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. The five-person Board of Gradco, elected
without any opposing nominees at its September 1997 Annual Meeting, consisted
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. The Board of Gradco
subsequently created a sixth directorship and filled such position by the
unanimous vote of the directors.
The 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.
On March 12, 1998, the Board of Directors of the Registrant declared a
special dividend consisting of approximately 877,600 shares of the
Registrant's shares of Gradco. On March 20, 1998, the Registrant distributed
to each shareholder of record as of March 18, 1998, one share of Gradco for
every four shares of the Registrant owned by such shareholder. Fractional
shares were rounded up to the nearest whole share. The Registrant remains
the owner of approximately 35,400 shares of 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 has
evaluated 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, 1997, 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, 1997, 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 $288,912 in 1998,
New York, NY and increasing to
a maximum
$340,512 in 2006.
3202 Kirkwood Highway
Wilmington, DE 4,300 sq. ft. 2002 $27,000 annually.
101 Back Church Lane 2,500 sq. ft. 2001 $24,341 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 and, after limited discovery, both
parties moved for summary judgment in October 1995. In September 1996, the
District Judge granted a motion for summary judgment and dismissed the case.
The United States Court of Appeals for the Sixth Circuit affirmed the decision
of the lower court in 1997 and dismissed the case, with prejudice.
(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 been commenced in this litigation.
Management believes that the ultimate outcome of this matter will not have a
materially adverse effect on the Registrant's financial condition, results of
operations or cash flows.
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 446 record holders of
the Registrant's Common Stock on March 11, 1998. 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
- -------------------------------- ----- --- ---------
1997
- ----
<S> <C> <C> <C>
First Quarter.................... 35-1/2 33-1/2 $.31
Second Quarter................... 38-1/2 34 .31
Third Quarter.................... 50 37-3/8 .31
Fourth Quarter................... 54-1/4 46 .31
1996
- ----
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
</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.
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Subscriptions,
books, outside journals
and other sales, net $52,633,994 $51,928,884 $52,229,671 $51,357,893 $52,891,694
Income from interest and
dividends, and net realized
and unrealized gain (loss)
on marketable securities 1,814,040 7,004,358 9,472,222 4,559,179 1,769,469
Equity in net income of
Gradco Systems, Inc. 611,710 374,330 301,290 102,986 4,565
Income from continuing
operations 12,824,460 14,681,842 15,647,051 12,069,812 10,755,649
Income before
extraordinary item 12,824,460 15,050,343 15,516,804 12,719,118 10,928,707
Extraordinary loss (1) - - - - (1,319,794)
Net Income 12,824,460 15,050,343 15,516,804 12,719,118 9,608,913
Per share of Common Stock
- --basic:
Income from continuing
operations 3.45 3.75 3.96 2.84 2.33
Income before
extraordinary items 3.45 3.84 3.93 2.87 2.37
Extraordinary loss (1) - - - - (0.29)
Net Income 3.45 3.84 3.93 2.87 2.08
Per Share of Common Stock --
diluted(2):
Income from continuing
operations 3.45 3.75 3.96 2.84 2.27
Income before
extraordinary items 3.45 3.84 3.93 2.87 2.30
Extraordinary loss (1) - - - - (0.26)
Net Income 3.45 3.84 3.93 2.87 2.04
Dividend declared per
share of Common Stock 1.24 1.20 1.16 1.12 1.08
Balance sheet data
Total Assets 96,957,278 101,979,793 92,245,305 84,913,166 88,605,160
<FN>
Footnotes to Table of Selected Financial Data
- ---------------------------------------------
The earnings per share amounts prior to 1997 have been restated where
applicable to comply with Statement of Financial Accounting Standards No. 128,
Earnings Per Share.
(1) Extraordinary loss in 1993 resulted from the early retirement of
6 1/2% Convertible Subordinated Debentures on April 30, 1993.
(2) As a result of the redemption of the 6 1/2% Convertible Subordinated
Debentures, diluted net income per share is not applicable in 1997,
1996, 1995 and 1994.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations
- ---------------------
1997 Compared to 1996
Revenues from the Registrant's continuing publishing operations increased
by 1.4%. Revenues from subscriptions increased by .7% due to higher selling
prices and increased sales of single issues of back volume journals, offset by
(a) nonrenewals of subscriptions partially attributable to the reduced buying
power of libraries and to changes in the market for the Registrant's
translations of Russian language journals; and (b) the decrease in revenues
from the translation journals resulting from the Registrant's altered status
with respect to the journals covered by the Journal Production and
Distribution Agreement (see "1996 Compared to 1995", below).
Revenues from book sales increased by 3.2% primarily due to increased
sales of backlist books, offset by the reduction in the number of book titles
published. Revenues from database products decreased by 1.4% mainly due to
decreased usage of the database system.
The cost of sales as a percentage of revenues decreased from 40.4% to
39.3%, primarily due to increased sales of backlist books and back volume
journal issues, which have above average gross margin, offset by the decreased
usage of the database system which also has an above average gross margin.
The Registrant provides for obsolescence by writing down the inventory value
of backlist books and back volume journal issues, resulting in higher gross
margins on backlist sales.
The decrease in royalty expenses was primarily due to the fact that under
the Distribution Agreement, there were no royalties payable on certain Russian
scientific journals published by the Russian Academy of Sciences, offset by
the increase in royalties on increased book sales. The increase in selling,
general and administrative expenses was mainly attributable to increased
advertising expenditures and bad debt expense and higher salaries and
professional fees, offset by decreased repairs and maintenance cost and
insurance expense.
The increase in interest income was principally due to increased
investment in commercial paper, time deposits and money market funds. The
decrease in dividend income was attributable to the changes in the portfolio
of marketable securities. The Registrant had net realized gain of $819 and
net unrealized loss of $1,227,545 on marketable securities for fiscal 1997
as compared to net realized and unrealized gains of $7,491 and $4,109,291,
respectively, on marketable securities for fiscal 1996. The equity in net
income of Gradco Systems, Inc. increased from $374,330 to $611,710.
The decrease in net income was mainly due to the decrease in investment
income as discussed in the preceding paragraph and decreased income from
discontinued operations, offset by increased income from continuing publishing
operations.
1996 Compared to 1995
Revenues from the Registrant'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 Registrant's altered status with
respect to the journals covered by the Journal Production and Distribution
Agreement, 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 Registrant's
translations of Russian language journals; and (c) fewer journal issues
published.
In December 1993, the Registrant 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 Registrant'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 decreased by 5.4%, primarily due to the
reduction in the number of book titles 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 Registrant 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 Registrant 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.
Liquidity and Sources of Capital
- --------------------------------
The working capital was $64,913,947 at December 31, 1997 compared to
$72,443,184 at December 31, 1996.
Management anticipates that internally generated funds will exceed the
requirements of the operations of the business. The Registrant also has funds
of approximately $71,302,238 at December 31, 1997 invested in marketable
securities and in cash and cash equivalents, which are available for the
operations of the business or acquisitions.
Impact of Year 2000
- -------------------
The Registrant is currently working to resolve the potential impact of
the Year 2000 on the processing of date-sensitive information by the
Registrant's computerized information systems. The Year 2000 problem is
the result of computer programs being written using two digits (rather than
four) to define the applicable year. As a result, those computer programs
that have time-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could cause a system failure or
miscalculations, causing disruptions of operation, including among other
things a temporary inability to process transactions, the generation of
incorrect invoices and other disruptions in normal business activities.
The Registrant is completing an assessment and believes it will have to
modify or replace portions of its software so that its computer systems will
function properly with respect to dates in the Year 2000 and thereafter. The
total Year 2000 project costs are not expected to have a material impact on
the Registrant's results of operations. The Registrant anticipates completing
the Year 2000 project within one year but not later than September 30, 1999,
which is prior to any anticipated impact on its computerized information
systems.
Recently Issued Financial Accounting Standards
- ----------------------------------------------
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," was issued in February, 1997. The
Registrant will be required to adopt the new standard for the year ending
December 31, 1998. This statement requires specific disclosure regarding
the Registrant's capital structure, including descriptions of the securities
comprising the capital structure and the contractual rights of the holders of
such securities. The Registrant plans to adopt this statement in fiscal year
1998 and does not anticipate that the statement will have a significant impact
on its financial statements.
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," was issued in June 1997. The Registrant will be
required to adopt the new standard for the year ending December 31, 1998,
although early adoption is permitted. The primary objective of this statement
is to report and disclose a measure ("Comprehensive Income") of all changes in
equity of a company that result from transactions and other economic events of
the period other than transactions with owners. The Registrant will adopt
this statement in fiscal year 1998 and does not anticipate that the statement
will have a significant impact on its financial statements.
Statement of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information," was issued in June 1997.
The Registrant will be required to adopt the new standard for the year ending
December 31, 1998, although early adoption is permitted. This Statement
requires use of the "management approach" model for segment reporting. The
management approach model is based on the manner in which a company's
management organizes segments within the company for making operating
decisions and assessing performance. Reportable segments are based on
products and services, geography, legal structure, management structure, or
any other manner in which management disaggregates a company. The Registrant
will adopt this statement in fiscal year 1998 and does not anticipate that the
adoption of the statement will have a significant impact on its financial
statements.
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 may be held in June 1998.
<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 1999 Director
Howard F. Mathiasen 1999 Director
Israel Gitman 1999 Director
Nathan Tash 1999 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 1999 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 57 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 59 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 70 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 71 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 1982
age 60 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 has
age 58 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 35 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 61 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 Registrant'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 11, 1998 for services rendered in
all capacities to the Registrant and its subsidiaries during each of the
fiscal years ended December 31, 1997, 1996 and 1995: (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, 1997 required to be
disclosed in column (c) and (d) below exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d)(1) (e)(2)
Name and Principal Year Salary ($) Bonus ($) All Other
Position Compensation ($)
----- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Martin E. Tash 1997 360,000 345,450 26,448
Chairman of the Board 1996 340,000 418,250 26,814
and President (Chief 1995 320,000 428,050 27,435
Executive Officer)
Mark Shaw 1997 360,000 246,750 26,448
Executive Vice President 1996 340,000 298,750 26,814
and Publisher 1995 320,000 305,750 27,435
Ghanshyam A. Patel 1997 165,000 39,000 26,156
Treasurer and Chief 1996 157,500 47,000 25,670
Financial Officer 1995 150,000 48,000 25,308
<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 1995, 1996 and 1997, 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 th e 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 1997 for Messrs. Tash, Shaw and Patel under this Plan are
$514,004, $533,879 and $210,001, 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 $13,000 per annum.
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 August 1, 1996, Registrant adopted Second Amended Contingent
Compensation Agreements with Martin E. Tash, Mark Shaw and Ghanshyam Patel
(executive officers of the Registrant named in the table in Item 11(a)) and
with Harry Allcock and Ken Derham (officers of subsidiaries of the
Registrant). The Second Amended Contingent Compensation Agreements supersede
certain earlier Contingent Compensation Agreements, 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 August 1, 1996, the Registrant entered into Contingent Compensation
Agreements with John Hwang, Carol Bischoff and Tom Mulak (officers and key
employees of the Registrant) which provide that if (a) during the officer's
employment or within twelve 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 100% of the officer's average annual
taxable compensation over the preceding five calendar years.
(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. 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.
(e) 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, 1997, 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, 1997, 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, 1997, 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 11, 1998, based on 3,510,251 shares
of Common Stock, $.10 par value, outstanding as of such date.
<TABLE>
<CAPTION>
Nature of
Title of Class Name and Address of Beneficial Percentage of
Beneficial Owner Ownership Class
- -------------- ------------------- ---------- ----------
<S> <C> <C> <C>
Common Stock Martin E. Tash
$.10 par value 233 Spring Street 423,485 12.1%
New York, NY 10013 shares (1)
Arlene S. Tash
17049 Northwest Circle 298,229 8.5%
Boca Raton, FL 33496 shares (2)
Royce & Associates, Inc.
Quest Advisory Corp.
and Charles M. Royce
as a Group
1414 Avenue of the
Americas 241,950
New York, NY 10019 shares (3) 6.9%
College Retirement
Equities Fund
730 Third Avenue 191,550
New York, NY 10017 shares (4) 5.5%
<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 February 4, 1998 reporting ownership as of December 31,
1997. According to such Schedule 13G, Royce & Associates, Inc. ("Royce &
Associates") is an Investment Adviser registered under the Investment
Advisers Act of 1940. Royce & Associates has sole voting and dispositive
power as to the 241,950 shares shown above. The Schedule 13G also includes
Charles M. Royce as a member of a Group with Royce & Associates and indicates
that he may be deemed to be a controlling person of Royce & Associates and
as such may be deemed to beneficially own the shares of the Registrant
beneficially owned by Royce & Associates. Mr. Royce owns no shares of the
Registrant outside of Royce 7 Associates and has disclaimed beneficial
ownership of the shares reported above.
(4) Number of shares as shown in beneficial owner's Schedule 13G (initial
filing) dated February 2, 1998 reporting ownership as of December 31, 1997.
According to such Schedule 13G, College Retirement Equities Fund ("CREF") is
an Investment Company registered under the Investment Company Act. CREF has
shared dispositive power, shared with its investment advisers, TIAA-CREF
Investment Management, LLC, as to the 191,550 shares.
</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
directors as a group (8 persons), as of March 12, 1998.
<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) 12.1%
New York, NY 10013
Mark Shaw 80,667
233 Spring Street shares (2) 2.3%
New York, NY 10013
Earl Ubell 1,000
114 West 27th Street shares *
New York, NY 10001
Howard F. Mathiasen 7,125
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 400 *
2313 Pine Heights shares
Drive N.E.
Atlanta, GA 30324
Ghanshyam A. Patel 10,529
233 Spring Street shares (4) *
New York, NY 10013
All Executive Officers 536,463
and Directors shares shares 15.3%
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 10,497 shares held by
Mr. Bressler's wife as to which he disclaims beneficial ownership.
(4) Includes 5,179 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 1997 fiscal year, the Registrant paid legal fees of $145,927 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) Reports on Form 8-K - 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 Vo
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 27, 1998
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 27, 1998
By: /s/ Mark Shaw
----------------------------------
Mark Shaw
Executive Vice President and
a Director
Dated: March 27, 1998
By: /s/ Ghanshyam A. Patel
----------------------------------
Ghanshyam A. Patel
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
Dated: March 27, 1998
By: /s/ Bernard Bressler
----------------------------------
Bernard Bressler
Secretary and a Director
Dated: March 27, 1998
By: /s/ Earl Ubell
----------------------------------
Earl Ubell
Director
Dated: March 27, 1998
By: /s/ Howard F. Mathiasen
----------------------------------
Howard F. Mathiasen
Director
Dated: March 27, 1998
By: /s/ Israel Gitman
----------------------------------
Israel Gitman
Director
Dated: March 27, 1998
By: /s/ Nathan Tash
----------------------------------
Nathan Tash
Director
Dated: March 27, 1998
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Form 10-K Item 14(a)(1) and (2)
Index to Consolidated 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, 1997 and 1996 S-2
Consolidated Statements of Income-Years ended
December 31, 1997, 1996 and 1995 S-4
Consolidated Statements of Stockholders' Equity-Years
ended December 31, 1997, 1996 and 1995 S-5
Consolidated Statements of Cash Flows-Years ended
December 31, 1997, 1996 and 1995 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-22
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.
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, 1997 and
1996, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997. 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,
1997 and 1996, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997, 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
March 18, 1998
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1997 1996
------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ($44,669,899 and $48,930,459
in 1997 and 1996 $45,359,551 $49,423,477
Marketable securities, at aggregate market value 25,942,687 27,417,072
Interest and dividends receivable 329,272 248,198
Receivables-substantially all trade, net of allowances
for doubtful accounts ($99,000 and $79,000) and sales
returns ($740,000 and $750,000) in 1997 and 1996 5,359,260 5,237,940
Inventories 3,781,269 3,548,543
----------------------------
Total current assets 80,772,039 85,875,230
----------------------------
Costs applicable to deferred subscription income 368,041 556,988
----------------------------
Property, plant and equipment, at cost:
Land 690,000 690,000
Building, net of accumulated depreciation of $740,746
and $638,266 2,793,031 2,895,511
Furniture, fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $503,874 and $614,716 389,340 389,841
Plate costs, net of accumulated depreciation of $3,450,608
and $3,994,410 3,252,034 3,170,906
----------------------------
7,124,405 7,146,258
----------------------------
Deferred income taxes 19,144 177,444
----------------------------
Deferred charges and other assets:
Cost of subscription lists of Human Sciences Press and
Agathon journals, net of accumulated amortization of
$2,534,759 and $2,259,499 2,167,806 2,443,066
Royalties 1,506,167 1,486,485
Investment in Gradco Systems, Inc. 3,362,159 2,750,449
Investment in Tutor Time Learning Systems, Inc., at cost,
and related note receivable 1,100,000 1,100,000
Deposits and other 422,029 319,494
----------------------------
8,558,161 8,099,494
----------------------------
Excess of cost of assets acquired over fair value thereof,
net of accumulated amortization of $240,153 and $231,262 115,488 124,379
----------------------------
Total assets $96,957,278 $101,979,793
============================
Liabilities and stockholders' equity
Current liabilities:
Due to customers $ 491,339 $ 544,277
Accounts payable 3,222,244 3,181,286
Income taxes payable 1,338,436 913,250
Royalties payable 2,380,844 2,362,019
Dividends payable 1,088,178 1,165,285
Deferred income tax liabilities 882,797 1,230,744
Other current liabilities 6,454,254 4,035,185
----------------------------
Total current liabilities 15,858,092 13,432,046
Deferred subscription income 25,270,152 25,148,620
----------------------------
Total liabilities 41,128,244 38,580,666
----------------------------
Commitments and contingencies
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 113,550,620 105,283,732
----------------------------
118,086,870 109,819,982
Less 2,336,990 and 1,962,956 shares of common stock
held in treasury-at cost 62,257,836 46,420,855
----------------------------
Total stockholders' equity 55,829,034 63,399,127
----------------------------
Total liabilities and stockholders' equity $96,957,278 $101,979,793
============================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Income
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
---------------------------------------------
<S> <C> <C> <C>
Subscriptions, books and other sales, net $52,633,994 $51,928,884 $52,229,671
---------------------------------------------
Costs and expenses:
Cost of sales 20,709,590 20,953,870 21,236,836
Royalties 3,484,839 3,874,419 4,141,404
Selling, general and administrative expenses 10,813,438 10,659,819 10,745,276
---------------------------------------------
35,007,867 35,488,108 36,123,516
---------------------------------------------
Income from operations 17,626,127 16,440,776 16,106,155
Investment income and other:
Dividend income 268,945 477,539 377,698
Interest income 2,771,821 2,410,037 1,996,434
Net realized gain on sales of marketable
securities 819 7,491 3,229,729
Net unrealized (loss) gain on marketable
securities (1,227,545) 4,109,291 3,868,361
Equity in net income of Gradco Systems, Inc. 611,710 374,330 301,290
Other investment related expenses (327,417) (539,622) (648,616)
---------------------------------------------
Income from continuing operations before
income taxes 19,724,460 23,279,842 25,231,051
Income taxes 6,900,000 8,598,000 9,584,000
---------------------------------------------
Income from continuing operations 12,824,460 14,681,842 15,647,051
---------------------------------------------
Discontinued operations:
Income (loss), net of income tax provision
(benefit) of $199,000 and $(600,000) - 368,501 (46,192)
Estimated loss on disposal, net of income tax
benefit of $45,300 - - (84,055)
---------------------------------------------
Income (loss) from discontinued operations - 368,501 (130,247)
---------------------------------------------
Net income $12,824,460 $15,050,343 $15,516,804
=============================================
Basic and diluted earnings per share:
Income from continuing operations $3.45 $3.75 $3.96
Income (loss) from discontinued operations - .09 (.03)
---------------------------------------------
Net income $3.45 $3.84 $3.93
=============================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Issued Paid-in
--------------------
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, 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 3,951,521 105,283,732 1,962,956 46,420,855 63,399,127
Net income for the year ended
December 31, 1997 - - - 12,824,460 - - 12,824,460
Dividend declared, $1.24 a share - - - (4,557,572) - - (4,557,572)
Acquisition of Common Stock for
treasury - - - - 374,034 15,836,981 (15,836,981)
--------------------------------------------------------------------------------------------
Balance at December 31, 1997 5,847,241 $584,724 $3,951,526 $113,550,620 2,336,990 $62,257,836 $55,829,034
============================================================================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $12,824,460 $15,050,343 $15,516,804
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plate costs 1,275,373 1,406,875 1,465,390
Depreciation and amortization of building, furniture,
fixtures, equipment and leasehold improvements 286,001 280,696 294,634
Amortization of deferred charges and excess of cost
of assets acquired over fair value thereof 1,941,534 1,818,233 2,801,351
Net realized gain on sales of marketable securities (819) (7,491) (3,229,729)
Net unrealized loss (gain) on marketable securities 1,227,545 (4,109,291) (3,868,361)
Purchase of marketable securities (5,348,721) (7,620,588) (14,949,402)
Proceeds from sale of marketable securities 8,051,946 10,593,561 20,065,104
Equity in net income of Gradco Systems, Inc. (611,710) (374,330) (301,290)
Deferred income taxes (189,647) 2,717,370 1,273,876
Changes in operating assets and liabilities:
Receivables (202,394) 416,304 270,860
Inventories (232,726) (56,217) 143,975
Other assets (1,779,600) (1,480,629) (1,630,036)
Due to customers, accounts payable, royalties
payable, accrued expenses and sundry liabilities (29,652) 258,702 820,045
Income taxes payable 425,186 (799,409) (433,213)
Deferred subscription income and costs applicable
thereto-net 310,479 608,354 (1,630,207)
-------------------------------------------
Net cash provided by operating activities 17,947,255 18,702,483 16,609,801
-------------------------------------------
Cash flows from investing activities
Additions to plate costs (1,356,501) (1,370,808) (1,425,471)
Additions to furniture, fixtures, equipment and
leasehold improvements (183,020) (286,288) (89,704)
Investment in Tutor Time Learning Systems, Inc.,
at cost, and related note receivable - (1,100,000) -
-------------------------------------------
Net cash used in investing activities (1,539,521) (2,757,096) (1,515,175)
-------------------------------------------
Cash flows from financing activities
Acquisition of treasury stock $(15,836,981) $(1,943,152) $(2,219,547)
Dividends paid (4,634,679) (4,671,863) (4,557,592)
-------------------------------------------
Net cash used in financing activities (20,471,660) (6,615,015) (6,777,139)
-------------------------------------------
Net (decrease) increase in cash and cash equivalents (4,063,926) 9,330,372 8,317,487
Cash and cash equivalents at beginning of year 49,423,477 40,093,105 31,775,618
-------------------------------------------
Cash and cash equivalents at end of year $45,359,551 $49,423,477 $40,093,105
===========================================
<FN>
See accompanying notes.
</TABLE>
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Notes to Consolidated Financial Statements
December 31, 1997
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, 1997, the Company had time deposits, commercial paper and money
market accounts totaling approximately $44,670,000 substantially on deposit
with six financial institutions. As of December 31, 1996, the Company had
time deposits, commercial paper and money market accounts of approximately
$48,930,000 on deposit with five financial institutions.
At December 31, 1997 and 1996, cash equivalents included commercial paper
totaling $37,793,000 and $46,479,000, 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 1997, 1996 and 1995 of approximately
$6,664,000, $6,879,000 and $8,098,000, respectively.
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.
Earnings Per Share
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share. Statement 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the Statement 128
requirements.
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 was 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 for each of the years
ended December 31, 1996 and 1995.
3. Inventories
Inventories at December 31 are comprised of:
1997 1996
-------------------------
Finished publications $3,461,117 $3,177,949
Work in process 320,152 370,594
-------------------------
$3,781,269 $3,548,543
=========================
4. Investment in Gradco Systems, Inc.
As of December 31, 1997 and 1996, the Company owned 913,000 common shares
of Gradco, a company engaged in the development and marketing of photocopier
machine technology, representing approximately 11.6% 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, 1997
and 1996 amounted to approximately $6,733,400 and $3,423,800, respectively.
Selected financial data of Gradco as of and for the 12 months ended
December 31, 1997, 1996 and 1995 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>
1997 1996 1995
--------------------------------
<S> <C> <C> <C>
Balance sheet data
Total assets $45,329 $60,576 $58,957
Working capital 14,649 19,438 18,032
Noncurrent liabilities, including
minority interest and excluding
current installments 3,370 17,545 17,988
Shareholders' equity 20,298 15,736 15,715
Statement of operations data
Net revenues 120,433 100,467 101,069
Net income 5,404 3,199 2,576
<FN>
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.
On March 12, 1998, the Company's Board of Directors declared a special
dividend consisting of approximately 877,600 common shares of Gradco owned
by the Company. After such dividend, the Company will own 35,400 shares of
Gradco.
</TABLE>
5. Income Taxes
Income taxes for the years ended December 31 consist of the following:
<TABLE>
<CAPTION>
1997
---------------------------------------
Current Deferred Total
---------------------------------------
<S> <C> <C> <C>
Federal $5,781,937 $(151,937) $5,630,000
State and local 1,307,710 (37,710) 1,270,000
---------------------------------------
$7,089,647 $(189,647) $6,900,000
=======================================
<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
=======================================
</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>
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Valuation of inventories $ 121,553 $ 179,261 $ (95,869)
Depreciation 158,300 273,100 412,584
Allowance for doubtful
accounts, etc. 24,000 (10,930) 26,100
Adjustments applicable to
net unrealized gains (losses) (493,500) 1,651,900 1,555,100
Intangibles related to
discontinued operations - 624,039 (624,039)
---------------------------------------
$ (189,647) $2,717,370 $1,273,876
=======================================
</TABLE>
Significant components of the Company's deferred tax assets (liabilities) as
of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------
<S> <C> <C>
Valuation of inventories $2,042,493 $ 2,164,046
Depreciation 19,144 177,444
Allowance for doubtful accounts, etc. 119,110 143,110
Net unrealized gains (3,044,400) (3,537,900)
Equity in losses of Gradco 1,511,000 1,725,000
---------------------------
Total deferred tax assets 647,347 671,700
Valuation allowance (1,511,000) (1,725,000)
---------------------------
Net deferred tax assets (liabilities) $ (863,653) $(1,053,300)
===========================
</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 1997, 1996 and 1995 was $(214,000),
$(131,000) and $(106,400), 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>
1997 1996 1995
----------------------------------------------------------------------------------------
% of Income % of Income % of Income
Before Before Before
Amount Income Amount Income Amount Income
Taxes Taxes Taxes
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Computed "expected" tax expense $6,903,600 35.0% $8,147,900 35.0% $8,830,900 35.0%
Increases (reductions) in tax
resulting from:
State and city income taxes,
net of Federal income tax
benefit 825,500 4.2 1,212,900 5.2 1,300,700 5.2
Nontaxable portion of
dividend income (65,900) (.3) (117,000) (.5) (92,500) (.4)
Foreign Sales Corporation
income taxed at a lower rate (454,000) (2.3) (431,200) (1.9) (363,000) (1.4)
Equity in net income of Gradco
Systems, Inc. not recognized as
deferred tax benefits (214,000) (1.1) (131,000) (.6) (106,400) (.5)
Miscellaneous-net (95,200) (.5) (83,600) (.3) 14,300 .1
----------------------------------------------------------------------------------------
Actual tax expense $6,900,000 35.0% $8,598,000 36.9% $9,584,000 38.0%
========================================================================================
</TABLE>
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:
1997 $652,000
1996 812,000
1995 769,000
Approximate future minimum rentals under all noncancelable operating
leases for real property at December 31, 1997 are as follows:
1998 $340,000
1999 346,000
2000 353,000
2001 344,000
2002 316,000
Subsequent to 2002 1,430,000
-------------
$3,129,000
=============
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
$1,070,000 (1997), $1,065,000 (1996) and $1,096,000 (1995). Other accrued
expenses and sundry liabilities include accrued contributions under the plan
of $1,070,000 (1997) and $1,065,000 (1996).
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 1997, 1996 and 1995, the amount of such income was
added to income from operations for the purpose of calculating incentive
compensation for such years. Distributions under the plan aggregated $987,000
(1997), $1,195,000 (1996) and $1,223,000 (1995). Other accrued expenses and
sundry liabilities include accrued incentive compensation of $777,000 (1997)
and $750,000 (1996).
The Company has the right to change, modify or terminate the above plans
at any time.
8. Per Share Amounts
Basic and diluted earnings per share of Common Stock is computed on the
basis of weighted average number of common shares outstanding (3,721,433
(1997), 3,915,045 (1996) and 3,945,629 (1995).
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, 1997 and 1996. At December 31,
1997 and 1996, the market value of the Company's largest holding (invested in
a company operating in the pharmaceutical industry) was $15,483,000 and
$10,234,000, respectively.
10. Quarterly Financial Information (Unaudited)
<TABLE>
<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) (2)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
First $12,287,468 $5,243,509 $(1,550,348) $1,359,784 $ .35
Second 13,475,394 5,289,089 4,337,549 5,327,829 1.39
Third 12,919,245 5,367,102 (3,001,809) 690,285 .19
Fourth 13,951,887 4,809,890 2,312,941 5,446,562 1.55
1996
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
</TABLE>
(1) Amounts of discontinued operations included in net income and net income
per share of common stock are as follows:
<TABLE>
<CAPTION>
1996
---------------------------------
Net Income
Net Per Share
Quarter Income of
Common
Stock
---------------------------------
<S> <C> <C>
First $ 70,472 $ .02
Second 179,427 .04
Third 118,602 .03
Fourth - -
--------------------
$368,501 $ .09
====================
</TABLE>
(2) Earnings per share amounts have been restated, where applicable, to
comply with Statement of Financial Accounting Standards No. 128, Earnings
Per Share.
11. Business Segments and Geographic Areas
The Company operates in only one reportable business segment.
The Company and its subsidiaries are engaged primarily 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, 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------
<S> <C> <C> <C>
Canada $ 2,995,000 $ 2,950,000 $ 2,789,000
Asia 5,492,000 6,477,000 6,118,000
Europe 10,025,000 11,872,000 11,251,000
Pacific Rim 1,639,000 1,323,000 1,260,000
Other 1,301,000 1,162,000 1,075,000
-----------------------------------------
$21,452,000 $23,784,000 $22,493,000
=========================================
</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.
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 undertook 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 14).
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. Other Current Liabilities
Included in other current liabilities is approximately $2.5 million
representing amounts required to purchase securities to cover a short sale.
14. 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 Distribution 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.
Management believes that the ultimate outcome of this matter will not have a
materially adverse effect on the Company's financial condition, results of
operations or cash flows.
<PAGE>
Plenum Publishing Corporation
and Subsidiary Companies
Schedule II-Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------
Additions
Balance Charged to Balance at
at Beginning Costs and End of
Description of period Expenses Deductions Period
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997
Allowances deducted from
assets to which they apply:
Allowance for doubtful accounts $ 79,000 $ 90,2000 $ $70,200 (a) $ 99,000
Allowance for sales returns $750,000 $2,939,626 $2,949,626 (b) $740,000
Year ended December 31, 1996
Allowances deducted from
assets to which they apply:
Allowance for doubtful accounts $125,000 $ $71,700 $ 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
<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, 1997 and is qualified in
its entirety by reference to such financial statements.
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 45,359,551
<SECURITIES> 25,942,687
<RECEIVABLES> 6,208,260
<ALLOWANCES> (849,000)
<INVENTORY> 3,781,269
<CURRENT-ASSETS> 80,772,039
<PP&E> 11,819,633
<DEPRECIATION> (4,695,228)
<TOTAL-ASSETS> 96,957,278
<CURRENT-LIABILITIES> 15,858,092
<BONDS> 0
0
0
<COMMON> 584,724
<OTHER-SE> 55,244,310
<TOTAL-LIABILITY-AND-EQUITY> 96,957,278
<SALES> 52,633,994
<TOTAL-REVENUES> 56,287,289
<CGS> 20,709,590
<TOTAL-COSTS> 20,709,590
<OTHER-EXPENSES> 327,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 19,724,460
<INCOME-TAX> 6,900,000
<INCOME-CONTINUING> 12,824,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,824,460
<EPS-PRIMARY> 3.45
<EPS-DILUTED> 0
</TABLE>
