SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Nine Month Period Ended Commission File #0-916-3
September 30, 1994
PLENUM PUBLISHING CORPORATION
(Exact name of the Registrant
as specified in Charter)
Delaware 13-5648711
(State of Incorporation) (I.R.S. Employer
Identification No.)
233 Spring Street
New York, New York 10013
(Address of principal (Zip Code)
executive offices)
Registrant's Telephone Number,
Including Area Code (212) 620-8000
SECURITIES REGISTERED PURSUANT
TO SECTION 12 (g) OF THE ACT:
COMMON STOCK $.10 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes x No
---- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of 11/10/94: 4,261,796
----------
INDEX
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
PART I. FINANCIAL INFORMATION
- - ----------------------------------
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--
September 30, 1994 and December 31, 1993
Condensed consolidated statements of income
and retained earnings -- Nine and Three months ended
September 30, 1994 and 1993
Condensed consolidated statements of cash
flows -- Nine months ended September 30, 1994
and 1993
Notes to condensed consolidated financial
statements -- September 30, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
- - -------------------------------
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
September 30 December 31
1994 1993
---- -----
(UNAUDITED) (NOTE)
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents ($7,640,606 and $1,441,576)...................... $8,376,336 $5,030,060
Marketable securities at aggregate market value ........................... 43,690,526 48,825,213
Interest and dividends receivable.......................................... 187,124 224,568
Receivables -- net of allowances of $1,122,000
and $848,000.......................................................... 5,418,216 8,698,080
Advance under the Distribution Agreement .................................. 740,464 750,000
Inventories -- Note D...................................................... 3,933,557 4,179,185
Deferred income tax benefits............................................... 2,722,891 2,930,691
------------ ------------
Total Current Assets.............................................. 65,069,114 70,637,797
------------ ------------
Costs Applicable to Deferred Subscription Income.............................. 699,414 657,950
------------ ------------
Property, Plant and Equipment, at cost:
Land...................................................................... 690,000 690,000
Building, net of accumulated depreciation of
$407,686 and $330,826................................................. 3,126,091 3,202,951
Furniture, Fixtures, equipment and leasehold improvements,
net of accumulated depreciation and amortization
of $935,382 and $760,100.............................................. 389,220 454,850
Plate costs, net of accumulated depreciation of
$5,667,937 and $4,656,154............................................. 3,529,084 3,393,917
------------ ------------
7,734,395 7,741,718
------------ ------------
Deferred Income Tax........................................................... 923,028 1,070,309
Deferred Charges and Other Assets:
Cost of subscription lists of Human Sciences Press
and Agathon journals, net of accumulated amortization
of $1,640,152 and $1,433,699........................................ 3,062,413 3,268,866
Royalties.................................................................. 1,969,730 2,075,189
Investment in Gradco Systems, Inc.......................................... 1,971,843 1,971,843
Other...................................................................... 610,033 272,476
------------ ------------
7,614,019 7,588,374
Excess of Cost of Assets Acquired Over Book Amount
Thereof, net of accumulated amortization of
$1,269,941 and $1,229,838................................................. 868,909 909,012
------------ ------------
Total Assets $82,908,879 $88,605,160
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Due to customers.......................................................... $555,982 $612,460
Accounts payable.......................................................... 1,156,272 1,508,098
Income taxes payable...................................................... 1,784,783 2,184,797
Royalties payable......................................................... 2,841,057 3,162,734
Other accrued expenses and sundry liabilities............................. 3,136,679 2,534,040
Dividends payable......................................................... 1,254,638 1,219,267
------------- -----------
Total Current Liabilities............................... 10,729,411 11,221,396
Deferred Subscription Income.................................................. 15,746,707 25,153,027
------------- -----------
Total Liabilities 26,476,118 36,374,423
------------- -----------
Stockholders'Equity -- Note F
Preferred Stock, par value $1 per share;
Authorized - 1,000,000 shares; none issued
Common Stock, par value $.10 per share;
Authorized-12,000,000 shares;
Issued-5,847,241 shares............................................... 584,724 584,724
Paid-in additional capital................................................ 3,951,526 3,951,526
Retained earnings......................................................... 81,260,230 76,165,428
------------- -----------
85,796,480 80,701,678
Less 1,366,392 and 1,331,436 shares of Common
Stock held in treasury - at cost...................................... 29,363,719 28,470,941
------------- -----------
Total Stockholders' Equity............................. 56,432,761 52,230,737
------------- -----------
Total Liabilities and Stockholders' Equity $82,908,879 $88,605,160
============= ===========
<FN>
Note: The balance sheet at December 31, 1993 has been derived from the audited consolidated financial
statements at that date. See Notes to condensed consolidated financial statements.
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED
EARNINGS (UNAUDITED)
Nine Months Ended September 30 Three Months Ended September 30
------------------------------ -------------------------------
1994 1993 1994 1993
---- ---- ---- ----
Income:
Subscriptions, books, outside journals and other sales, net.... $39,232,721 $40,222,929 $12,537,868 $13,608,535
---------- ------------ ----------- -----------
Costs and Expenses
Cost of sales................................................... 15,900,143 16,442,987 5,049,087 5,667,423
Royalties....................................................... 3,408,521 3,411,886 1,215,868 1,157,512
Selling, general and administrative expenses.................... 8,348,096 8,533,338 2,708,417 2,681,665
---------- ------------ ----------- -----------
27,656,760 28,388,211 8,973,372 9,506,600
---------- ------------ ----------- -----------
Income From Operations............................. 11,575,961 11,834,718 3,564,496 4,101,935
Dividend income.................................................... 1,327,418 1,748,083 394,006 642,757
Interest income.................................................... 179,809 539,811 40,270 9,674
Realized (loss) gain on sales of marketable securities............. (2,516,689) 748,294 (675,501) 232,768
Net unrealized gain (loss) on marketable securities................ 3,756,525 (3,728,148) 3,875,161 (2,026,863)
Interest expense................................................... (20,320) (968,242) (4,082) (39,641)
Other investment-related expenses.................................. (274,681) (161,630) (172,499) (42,137)
----------- ------------ ------------ -----------
Income Before Items Shown Below.................... 14,028,023 10,012,886 7,021,851 2,878,493
----------- ------------ ------------ -----------
Income taxes--Note G:
Federal......................................................... 3,900,000 2,500,000 2,000,000 737,000
State and City.................................................. 1,260,000 822,000 676,000 122,000
----------- ------------ ------------ -----------
5,160,000 3,322,000 2,676,000 859,000
------------ ------------ ------------ -----------
Income Before Extraordinary Items.................. 8,868,023 6,690,886 4,345,851 2,019,493
----------- ------------ ------------ -----------
Extraordinary items - Note E:
Gain on repurchase of 6-1/2% Convertible Subordinated Debentures
due April 15, 2007 less applicable income taxes of $2,400 -- 3,656 -- --
Loss from early retirement of 6-1/2% Convertible Subordinated
Debentures due April 15, 2007, net of income tax benefit
of $674,900................................................ -- (1,323,450) -- --
----------- ------------ ------------ ------------
Extraordinary Loss................................ -- (1,319,794) -- --
----------- ------------ ------------- ------------
Net income......................................................... 8,868,023 5,371,092 4,345,851 2,019,493
Retained earnings - beginning of period............................ 76,165,428 71,520,740 78,169,017 72,374,917
----------- ------------ ------------ -------------
85,033,451 76,891,832 82,514,868 74,394,410
Cash dividends ($.84 and $.81 a share and $.28 and $.27 a share)... 3,773,221 3,744,958 1,254,638 1,247,536
----------- ------------ ------------ ------------
Retained earnings - end of period.................................. $81,260,230 $73,146,874 $81,260,230 $73,146,874
=========== ============ ============ ============
Per share of Common Stock- - Note F
Income before extraordinary items.............................. $1.97 $1.45 $0.97 $0.44
Extraordinary loss............................................ -- (0.29) -- --
----------- ----------- ------------ ------------
Net Income......................................... $1.97 $1.16 $0.97 $0.44
============ =========== ============ ============
<FN>
See notes to condensed consolidated financial statements.
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30
-------------------------------
1994 1993
---- ----
Cash flows from operating activities:
Net income......................................................................... $8,868,023 $5,371,092
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of plate costs............................................... 1,011,783 1,377,935
Depreciation and amortization of building,
furniture, fixtures, equipment and
leasehold improvements................................................. 252,142 242,043
Amortization of deferred charges and excess
of cost of assets acquired over book amount
thereof................................................................ 1,841,336 1,607,026
Realized loss(gain) on sales of marketable
securities..................................................................... 2,516,689 (748,294)
Net unrealized (gain) loss on
marketable securities..................................................... (3,756,525) 3,728,148
Extraordinary loss, net of income taxes................................... -- 1,319,794
Decrease (increase) in deferred income
tax benefits........................................................... 355,081 (2,054,750)
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables.......................................................... 3,326,844 158,279
Inventories.......................................................... 245,628 270,223
Other assets......................................................... (1,826,878) (1,650,754)
Increase (decrease) in:
Accounts payable, accrued expenses and
sundry liabilities............................................... (127,342) (1,063,789)
Due to brokers....................................................... -- 1,646,973
Income taxes payable................................................. (400,014) 1,335,164
Deferred subscription income and costs
applicable thereto-net........................................... (9,447,784) (8,297,676)
------------ ------------
Net Cash Provided by Operating Activities.................. 2,858,983 3,241,414
Cash flows from investing activities: ------------ ------------
Additions to plate costs........................................................... (1,146,950) (1,335,500)
Additions to furniture, fixtures, equipment
and leasehold improvements..................................................... (109,652) (184,135)
Proceeds from sale and redemption of U.S. Government securities.................... -- 32,858,033
Purchases of marketable securities................................................. (27,619,720) (22,371,906)
Proceeds from sale of marketable securities........................................ 33,994,243 22,843,210
------------ ------------
Net Cash Provided by Investing Activities.................. 5,117,921 31,809,702
Cash flows from financing activities: ------------ ------------
Repurchase of 6-1/2 % Convertible Subordinated
Debentures..................................................................... -- (41,755,663)
Acquisition of treasury stock.............................................. (892,778) (239,105)
Dividends paid..................................................................... (3,737,850) (2,497,422)
------------ ------------
Net Cash Used in Financing Activities...................... (4,630,628) (44,492,190)
------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents.................................... 3,346,276 (9,441,074)
Cash and cash equivalents at beginning of period......................................... 5,030,060 10,703,199
----------- ------------
Cash and Cash Equivalents at End of Period................. $8,376,336 $1,262,125
============ ============
<FN>
See notes to condensed consolidated financial statements.
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1994
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September
30, 1994 are not necessarily indicative of the results that may be expected
for the year ended December 31, 1994. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1993.
NOTE B -- ACCOUNTING CHANGE
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for certain Investments
in Debt and Equity Securities." The Company adopted the provisions of the
new standard for investments held as of or acquired after January 1, 1994.
Accordingly, the Company has classified its marketable equity securities
held as trading securities on the basis of its intent to trade such
securities and has carried them at fair market value, with unrealized gains
and losses reported as a component of current earnings.
Since at December 31, 1993, the Company valued marketable equity securities
as trading securities and reported such securities at the lower of aggregate
cost or market, with unrealized losses reported as a component of current
earnings, there was no cumulative effect as of January 1, 1994 of adopting
Statement 115 on net income.
NOTE C -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the nine months ended September 30, 1994 and 1993
for:
1994 1993
---------- ---------
Income Taxes $5,204,933 $4,041,586
Interest 20,320 1,535,346
NOTE D -- INVENTORIES
Inventories at September 30, 1994 and December 31, 1993 are
comprised of:
1994 1993
---------- ----------
Finished publications $3,639,299 $3,612,257
Work in process 294,258 566,928
---------- ----------
$3,933,557 $4,179,185
========== ==========
NOTE E -- 6-1/2% CONVERTIBLE SUBORDINATED DEBENTURES DUE APRIL 15, 2007
In February 1993 the Company purchased Debentures of $1,149,000 for
an aggregate cost (including the write-off of related deferred
issuance costs of approximately $28,000) of approximately $1,143,000.
On April 30, 1993 (the "Redemption Date"), pursuant to a notice of
election to redeem which had been given to the holders on March 24,
1993, the Company redeemed the Debentures which were outstanding on
the Redemption Date. In accordance with the terms of the Debentures
and the applicable Trust Indenture, the redemption price was equal to
102.60% of the principal amount of outstanding Debentures, and the
holders were also paid accrued interest for the period April 15, 1993
(the date on which the last semi-annual installment of interest was
paid) to the Redemption Date. Prior to the Redemption Date, Debentures
in the aggregate principal amount of $80,000 were converted into 2,560
shares of Common Stock at the applicable conversion rate of $31.25 per
$1,000 of principal amount. On the Redemption Date, Debentures in the
aggregate principal amount of $39,598,000 were outstanding, requiring a
total payment to the holders of $40,734,793 (including accrued interest).
This amount was funded by liquidating a portion of the Company's
investments of its excess cash, and from short-term borrowing on the
Company's margin account with a broker.
The premium paid for the Debentures, the Write-off of related deferred
issuance costs of approximately $956,000, and professional fees of
approximately $13,000 incurred for redemption, net of applicable income
tax benefit of $675,000 totaled approximately $1,323,000, which had been
accounted for as an extraordinary loss.
NOTE F -- PER SHARE AMOUNTS
Net income per share of Common Stock is computed on the basis of the weighted
average number of shares outstanding. The number of shares used in this
computation for the nine and three months ended September 30, 1994 and 1993
is 4,496,964, 4,624,485, 4,487,037, and 4,621,124, respectively.
NOTE G -- INCOME TAXES:
Total tax expense for the nine month periods ended September 30, 1994 and 1993 amounted to $5,160,000 and $3,322,000 (effective
rates of 36.78 % and 33.2%), and for the three month periods ended September 30, 1994 and 1993 amounted to $2,676,000 and
$859,000 (effective rates of 38.11% and 29.8%), totals different from those computed by applying the U.S. Federal
income tax rate of 35.0% to income before income taxes. The reasons for these differences are as follows:
Nine Months Ended September 30 Three Months Ended September 30
---------------------------------- --------------------------------------
1994 1993 1994 1993
--------------------------------- --------------------------------------
% of % of % of % of
Income Income Income Income
Before Before Before Before
Income Income Income Income
Amount Taxes Amount Taxes Amount Taxes Amount Taxes
---------------------------------------------------------------------------------
Computed "expected" tax expense $4,909,800 35.00% $3,504,500 35.00% $2,457,800 35.00% $1,007,500 35.00%
Increases (reductions) in tax
resulting from:
State and local income
taxes, net of Federal
income tax benefit 819,000 5.84 534,300 5.40 439,400 6.26 79,300 2.80
Nontaxable portion of
dividend income (325,200) (2.32) (428,300) (4.30) (96,500) (1.37) (154,200) (5.40)
FSC income taxed at a
lower rate (262,500) (1.87) (291,000) (2.90) (87,500) (1.25) (120,800) (4.20)
Miscellaneous - net 18,900 0.13 2,500 -- (37,200) (0.53) 47,200 1.60
----------------------------------------------------------------------------------
Actual Tax Expense $5,160,000 36.78% $3,322,000 33.20% $2,676,000 38.11% $859,000 29.80%
========== ====== ========== ===== ========== ===== ======== =====
NOTE H -- CONTINGENCIES
In 1991, the Company was named as a co-defendant in an action brought by
former executives of Gradco, seeking compensatory and other damages of a
material amount. Management of the Company, after consultation with
counsel, believes the action will not result in a material loss to the
Company and intends to vigorously defend against it.
PLENUM PUBLISHING CORPORATION AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATIONS
- - ----------
Revenues from the Company's publishing operations for the three and nine
months ended September 30, 1994 decreased by 7.9% and 2.5%, respectively.
Revenues from subscriptions and outside journals for the three and nine
months ended September 30,1994 decreased by 13.2% and 4.4%, respectively.
The decrease in revenues for the third quarter of fiscal year 1994 was
primarily due to the following:
(a) cessation of the publication of 11 Russian language journals under
a contract with an American learned society (which ended with the 1993
volume year - see below),
(b) the decrease in revenues from the translation journals resulting
from the Company's modified relationship under the Journal Production
and Distribution Agreement (see below),
(c) non-renewals of subscriptions partially attributable to the reduced
buying power of libraries and to changes in the market for the Company's
translation of Russian language journals, offset by higher selling
prices.
(d) fewer journal issues being published.
Despite the reduction in the number of book titles being published,
revenues from book sales for the three and nine months ended September 30,
1994 increased by 5.5% and 3%, respectively, primarily due to an increase
in backlist sales.
In April 1993, an American learned society with whom the Company had a
contract to produce English translations of 11 Russian language journals for
publication by that society gave formal notice that they would not exercise
the option of renewing the contract beyond the term ending with the 1993
volume year. The amount of revenue generated from the production of these 11
journals was approximately $527,000 for the nine months ended September 30,
1994, compared to $365,000 and $951,000 for the three and nine months ended
September 30, 1993. Such revenues ceased during the second quarter of fiscal
1994.
The Journal Production and Distribution Agreement (the "Distribution
Agreement") which the Company entered into in December 1993 with the Russian
Academy of Sciences and other interested parties relating to translations of
certain Russian scientific journals, was described in the Management's
Analysis of Financial Condition and Results of Operations included in the
Report on Form 10-K for the fiscal year ended December 31, 1993. The new
arrangement resulted in decreased revenues from subscription journals for the
three and nine months ended September 30,1994, since the publication of most
of the affected translation journals for the 1994 volume year commenced
during the second quarter of fiscal 1994.
The cost of sales as a percentage of revenues for the three and nine
months ended September 30,1994 decreased from 41.7% and 40.9% to 40.3% and
40.5%, respectively, principally due to increased backlist sales and the
reduction in production costs of certain Russian scientific journals as such
costs are borne by the Russian Academy of Sciences under the Distribution
Agreement, offset by the cessation of the publication of 11 Russian language
journals under a contract with an American learned society, which had an
above average gross margin. The Company provides for obsolescence by writing
down the inventory values of backlist books, resulting in higher gross
margins on backlist sales, as compared to frontlist sales. The decrease in
selling, general and administrative expenses for the nine months ended
September 30,1994 was principally attributable to decreased professional
fees, bad debt expense and mailing expenses.
The decrease in interest income for the nine months ended September 30,
1994 was principally due to lower interest rates and decreased investment in
U.S. Government securities, time deposits and money market funds, arising
mainly because of the decrease in investment assets utilized for redemption
of the Company's Convertible Subordinated Debentures on April 30, 1993.
The decrease in dividend income for the three and nine months ended September
30, 1994 was due to decreased investment in marketable securities. The
Company had a net realized loss of $2,516,689 and an unrealized gain of
$3,756,525 on marketable securities for the nine months ended September 30,
1994, as compared to a net realized gain of $748,294, and an unrealized loss
of $3,728,148 on marketable securities for the nine months ended September
30, 1993. The Company had a net realized loss of $675,501 and an unrealized
gain of $3,875,161 on marketable securities for the quarter ended September
30, 1994, as compared to a net realized gain of $232,768 and an unrealized
loss of $2,026,863 on marketable securities for the quarter ended September
30, 1993. The decrease in interest expense was primarily due to the
redemption of 6-1/2% Convertible Subordinated Debentures on April 30, 1993.
The increase in net income for the nine months ended September 30, 1994
was principally attributable to the increase in investment income as discussed
in the preceding paragraph, and extraordinary loss from early retirement of
6-1/2% Convertible Subordinated Debentures for the nine months ended September
30, 1993, offset by decreased income from publishing operations. The increase
in net income for the three months ended September 30, 1994 was mainly due to
the increase in investment income as discussed in the preceding paragraph,
offset by decreased income from publishing operations.
LIQUIDITY AND SOURCES OF CAPITAL
- - --------------------------------
The ratio of current assets to current liabilities is 6.1 to 1 at
September 30, 1994 compared to 6.3 to 1 at December 31, 1993.
Management anticipates that internally generated funds will exceed the
requirements of the operations of the business. The Company also has funds of
approximately $52,067,000 at September 30, 1994 invested in marketable
securities and in cash, which are available for corporate purposes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Exhibit 27-Financial data schedule
(b) Reports on Form 8 - K - None.
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
Date: November 14, 1994
-----------------------------
Martin E. Tash
President and CEO
Date: November 14, 1994
-----------------------------
Ghanshyam A. Patel
Treasurer and CFO