SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Three Month Period Ended Commission File #0-916-3
March 31, 1998
PLENUM PUBLISHING CORPORATION
(Exact name of the Registrant
as specified in Charter)
Delaware 13-5648711
(State of Incorporation) (I.R.S. Employer
Identification No.)
233 Spring Street
New York, New York 10013
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including Area Code (212) 620-8000
SECURITIES REGISTERED PURSUANT
TO SECTION 12 (g) OF THE ACT:
COMMON STOCK $.10 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filling requirements for at least the past 90 days.
Yes X No
------- ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of 05/ 15 /98: 3,510,251
---------
<PAGE>
INDEX
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
PART I FINANCIAL INFORMATION
- ------ ---------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--
March 31, 1998 and December 31, 1997 3
Condensed consolidated statements of income
and retained earnings -- Three months ended
March 31, 1998 and 1997 5
Condensed consolidated statements of cash
flows -- Three months ended March 31, 1998
and 1997 6
Notes to condensed consolidated financial
statements -- March 31, 1998 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
- ----------
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31 December 31
-------- -----------
1998 1997
---- ----
(UNAUDITED) (NOTE)
----------- ------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ($50,546,248 and $44,669,899 ) $51,231,491 $45,359,551
Marketable securities at aggregate market value 13,877,110 25,942,687
Interest and dividends receivable 166,878 329,272
Receivables net of allowances of $879,000
and $839,000 5,942,014 5,359,260
Inventories -- Note C 4,301,521 3,781,269
Deferred income tax benefits 1,967,751 -
------------ ------------
Total Current Assets 77,486,765 80,772,039
------------ ------------
Costs Applicable to Deferred Subscription Income 530,490 368,041
------------ ------------
Property, Plant and Equipment, at cost:
Land 690,000 690,000
Building, net of accumulated depreciation of
$766,366 and $740,746 2,767,411 2,793,031
Furniture, fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $531,284 and $503,874 378,298 389,340
Plate costs, net of accumulated depreciation of
$3,756,944 and $3,450,608 3,283,850 3,252,034
------------ ------------
7,119,559 7,124,405
------------ ------------
Deferred Income Tax - 19,144
------------ ------------
Deferred Charges and Other Assets:
Cost of subscription lists of Human Sciences Press
and Agathon journals, net of accumulated amortization
of $2,603,573 and $2,534,759 2,098,992 2,167,806
Royalties 1,675,694 1,506,167
Investment in Gradco Systems, Inc. - 3,362,159
Investment in Tutor Time Learning Systems, Inc., at cost,
and related note receivable 1,100,000 1,100,000
Deposits and other 959,676 422,029
------------ ------------
5,834,362 8,558,161
------------ ------------
Excess of Cost of Assets Acquired Over Fair Value
Thereof, net of accumulated amortization of
$242,375 and $240,153 113,266 115,488
------------ ------------
Total Assets $91,084,442 $96,957,278
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to customers $579,862 $491,339
Accounts payable 1,771,681 3,222,244
Income taxes payable 3,015,961 1,338,436
Royalties payable 2,445,741 2,380,844
Dividends payable 1,123,280 1,088,178
Deferred income tax liabilities - 882,797
Other current liabilities - Note F 6,701,775 6,454,254
------------ ------------
Total Current Liabilities 15,638,300 15,858,092
Deferred Subscription Income 23,754,527 25,270,152
------------ ------------
Total Liabilities 39,392,827 41,128,244
------------ ------------
Stockholders' Equity -- Note D
Preferred Stock, par value $1 per share;
Authorized - 1,000,000 shares; none issued
Common Stock, par value $.10 per share;
Authorized-12,000,000 shares;
Issued-5,847,241 shares 584,724 584,724
Paid-in additional capital 3,951,526 3,951,526
Retained earnings 109,413,201 113,550,620
------------ ------------
113,949,451 118,086,870
Less 2,336,990 shares of Common
Stock held in treasury - at cost 62,257,836 62,257,836
------------ ------------
Total Stockholders' Equity 51,691,615 55,829,034
------------ ------------
Total Liabilities and Stockholders' Equity $91,084,442 $96,957,278
============ ============
<FN>
Note: The balance sheet at December 31, 1997 has been derived from the
audited consolidated financial statements at that date. See Notes
to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED
EARNINGS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Income:
Subscriptions, books and other sales, net $13,069,025 $12,287,468
-------------- ---------------
Costs and Expenses:
Cost of sales 5,289,602 5,243,509
Royalties 844,819 832,995
Selling, general and administrative expenses 2,686,537 2,589,832
-------------- ---------------
8,820,958 8,666,336
-------------- ---------------
Income From Operations 4,248,067 3,621,132
Dividend income 90,842 80,927
Interest income 719,999 747,869
Net realized gain on sales of marketable securities 4,442,769 202,381
Net unrealized loss on marketable securities (7,694,603) (2,524,800)
Other investment related expenses (57,457) (56,725)
-------------- ---------------
Income from operations before income taxes 1,749,617 2,070,784
-------------- ---------------
Income tax (benefits) provision -- Note E
Federal (961,000) 567,000
State and City 122,000 144,000
-------------- ---------------
(839,000) 711,000
-------------- ---------------
Net income 2,588,617 1,359,784
Retained earnings - beginning of period 113,550,620 105,283,732
-------------- ---------------
116,139,237 106,643,516
-------------- ---------------
Cash dividend ($.32 and $.31 a share) 1,123,280 1,193,529
Special dividend of 878,175 shares of
Gradco Systems, Inc. 5,602,756 -
-------------- ---------------
6,726,036 1,193,529
-------------- ---------------
Retained earnings - end of period $109,413,201 $105,449,987
============== ===============
Basic and diluted earnings per share - Note D:
Net income $.74 $.35
============== ===============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
Three Months Ended March 31
----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $2,588,617 $1,359,784
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plate costs 306,336 328,624
Depreciation and amortization of building,
furniture, fixtures, equipment and
leasehold improvements 67,245 90,543
Amortization of deferred charges and excess
of cost of assets acquired over fair value
thereof 406,665 527,114
Net realized gain on sale of marketable securities (4,442,769) (202,381)
Net unrealized loss on marketable securities 7,694,603 2,524,800
Purchases of marketable securities (13,867,795) (3,627,569)
Proceeds from sale of marketable securities 22,031,236 4,994,619
Deferred income taxes (2,831,404) (1,047,599)
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables (420,360) (93,446)
Inventories (520,252) (336,682)
Other assets (1,042,803) (1,242,992)
Increase (decrease) in:
Due to customers, accounts payable, royalties payable,
accrued expenses and sundry liabilities (2,639,917) (2,022,510)
Income taxes payable 1,677,525 1,487,875
Deferred subscription income and costs
applicable thereto-net (1,678,074) (1,145,653)
------------ ------------
Net Cash Provided by Operating Activities 7,328,853 1,594,527
------------ ------------
Cash flows from investing activities:
Additions to plate costs (338,152) (395,572)
Additions to furniture, fixtures, equipment
and leasehold improvements (30,583) (42,250)
------------ ------------
Net Cash Used in Investing Activities (368,735) (437,822)
------------ ------------
Cash flows from financing activities:
Acquisition of treasury stock - (1,191,597)
Dividends paid (a) (1,088,178) (1,165,285)
------------ ------------
Net Cash Provided by (Used in) Financing Activities (1,088,178) (2,356,882)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents 5,871,940 (1,200,177)
Cash and cash equivalents at beginning of period 45,359,551 49,423,477
------------ ------------
Cash and Cash Equivalents at End of Period $51,231,491 $48,223,300
============ ============
<FN>
See notes to condensed consolidated financial statements.
(a) The special dividend of 878,175 shares of Gradco Systems, Inc. on
March 12, 1998 has no impact on Cash flows.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1997.
NOTE B -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the three months ended March 31, 1998 and 1997 for:
1998 1997
---- ----
Income Tax $314,879 $270,724
NOTE C -- INVENTORIES
Inventories at March 31, 1998 and December 31, 1997 are comprised of:
1998 1997
---- ----
Finished publications $4,087,605 $3,461,117
Work in process 213,916 320,152
---------- ----------
$4,301,521 $3,781,269
========== ==========
NOTE D -- PER SHARE AMOUNTS
Basic and diluted earnings per share is computed on the basis of the
weighted average number of shares outstanding. The number of shares used in
this computation for the three months ended March 31, 1998 and 1997 is
3,510,251 and 3,871,593 , respectively.
NOTE E -- INCOME TAXES:
Total tax (benefit) expense for the three month periods ended March 31, 1998
and 1997 amounted to ($839,000) and $711,000 (effective rates of (49.95%) and
34.33%), totals different from those computed by applying the U.S. Federal
income tax rate to income before taxes. The reasons for these differences
are as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1998 1997
-----------------------------------------------------------
% of % of
Income Income
Before Before
Income Income
Amount Taxes Amount Taxes
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense $612,400 35.00% $724,800 35.00%
Increases (reductions) in tax
resulting from:
State and local income
taxes, net of Federal
income tax benefit 79,300 4.53 93,600 4.52
Nontaxable portion of
dividend income (22,300) (1.27) (500)
FSC income taxed at a
lower rate (87,500) (5.00) (87,500) (4.22)
Reversal of valuation allowance for
equity in losses of Gradco not
recognized as deferred tax benefits
in prior years. (1,416,700) (80.97)
Miscellaneous - net (4,200) (2.24) (19,400) (.97)
------------ ------------ ------------ -----------
Actual Tax (Benefit) Expense ($839,000) (49.95%) $711,000 34.33%
============ ============ ============ ===========
</TABLE>
NOTE F -- OTHER CURRENT LIABILITIES:
Included in other current liabilities is approximately $4 million
representing amounts required to purchase securities to cover a short sale.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THREE MONTH PERIOD - 1998 vs 1997
- ---------------------------------
Revenues from the Company's publishing operations increased by 6.4% to
$13,069,025. Revenues from subscriptions did not materially change from the
comparable period in 1997. Revenues from book sales increased by 21.9%,
mainly due to the increase in the number of book titles published and
increased sales of backlist books. Revenues from database products decreased
by 14.0%, mainly due to the decreased usage of the database system.
The cost of sales as a percentage of revenues decreased from 42.7% to
40.5%, primarily due to increased sales of backlist books, which have an
above average gross margin, offset by the decreased usage of the database
system which also has an above average gross margin. The Company provides
for obsolescence by writing down the inventory value of backlist books,
resulting in higher gross margin on backlist sales. The increase in royalty
expenses resulted primarily from the increase in book sales. The increase in
selling, general, and administrative expenses was primarily due to increased
advertising expenditures, offset by lower professional fees and mailing
expenses.
The decrease in interest income was principally due to decreased
investment in commercial paper, time deposits and money market funds. The
increase in dividend income was attributable to the changes in the portfolio
of marketable securities. The company had net realized gain of $4,442,769 and
net unrealized loss of $7,694,603 on marketable securities for the three
months ended March 31, 1998, as compared to net realized gain of $202,381 and
net unrealized loss of $2,524,800 on marketable securities for the three
months ended March 31, 1997.
The increase in net income was principally attributable to (a) increased
income from publishing operations and (b) income tax benefits which resulted
from the reversal of valuation allowance for equity in losses of Gradco
Systems Inc. not recognized as deferred tax benefits in prior years, offset
by the decrease in investment income as discussed in the preceding paragraph.
LIQUIDITY AND SOURCES OF CAPITAL CASH FLOWS INFORMATION
- -------------------------------------------------------
The working capital was $61,848,465 at March 31, 1998 compared to
$64,913,947 at December 31,1997.
Cash flows from operating activities were $7,328,853 for the three
months ended March 31,1998 compared to $1,594,527 for the three months ended
March 31, 1997. The increase was primarily due to the sale of marketable
securities. The Company invested $368,735 in capital assets and paid
dividends of $1,088,178 for the three months ended March 31, 1998.
Management anticipates that internally generated funds will exceed the
requirements of the operations of the business. The Company also has funds
of approximately $65,108,600 at March 31, 1998 invested in marketable
securities and in cash and cash equivalents, which are available for use
in business or acquisitions.
IMPACT OF A POSSIBLE SALE OF THE COMPANY ON SHAREHOLDERS
- --------------------------------------------------------
On February 25, 1998, the Company announced that it had engaged Salomon
Smith Barney to explore a possible sale of the Company. The sale process is
currently underway and the Company's shareholders are expected to benefit
from the successful sale of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
- ------- -------------------------------
(a) Exhibits: None
(b) Reports on Form 8-K: None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PLENUM PUBLISHING CORPORATION
-----------------------------
By: /s/ Martin E. Tash
Date: May 15, 1998 ---------------------------------------
Martin E. Tash
President and CEO
By: /s/ Ghanshyam A. Patel
Date: May 15, 1998 ---------------------------------------
Ghanshyam A. Patel
Treasurer and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from quarterly
financial statements for the three months ended March 30, 1998 and is
qualified in its entirety by reference to such financial statements.
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<PERIOD-TYPE> 3-MOS
<CASH> 51,231,490
<SECURITIES> 13,877,110
<RECEIVABLES> 6,821,014
<ALLOWANCES> (879,000)
<INVENTORY> 4,301,521
<CURRENT-ASSETS> 77,486,765
<PP&E> 12,174,153
<DEPRECIATION> (5,054,594)
<TOTAL-ASSETS> 91,084,442
<CURRENT-LIABILITIES> 15,638,300
<BONDS> 0
0
0
<COMMON> 584,724
<OTHER-SE> 51,106,891
<TOTAL-LIABILITY-AND-EQUITY> 91,084,442
<SALES> 13,069,025
<TOTAL-REVENUES> 18,322,635
<CGS> 5,289,602
<TOTAL-COSTS> 5,289,602
<OTHER-EXPENSES> 57,457
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,749,617
<INCOME-TAX> (839,000)
<INCOME-CONTINUING> 2,588,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,588,617
<EPS-PRIMARY> 0.74
<EPS-DILUTED> 0.74
</TABLE>
