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.
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.
Item 2. Properties 	 ----------
As of December 31, 1997, the Registrant had leases at the following principal locations:
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders 	 ---------------------------------------------------
	 Not applicable.
			 PART II
Item 5.
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.
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.
Item 6. Selected Financial Data 	 -----------------------
Item 7.
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.
Item 8. Financial Statements and Supplementary Data 	 -------------------------------------------
	 Response to this Item is contained in Item 14(a).
Item 9.
Item 9. Changes in and Disagreements with Accountants on 	 Accounting and Financial Disclosure 	 ------------------------------------------------
	 Not applicable
				PART III
Item 10.
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.
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.
Item 11.
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.
(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.
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.
(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. 									
Item 13.
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.
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
		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
			 Plenum Publishing Corporation 			 and Subsidiary Companies
			 Consolidated Balance Sheets
			 Plenum Publishing Corporation 			 and Subsidiary Companies
			 Consolidated Statements of Income
			 Plenum Publishing Corporation 			 and Subsidiary Companies
		 Consolidated Statements of Stockholders' Equity
			 Plenum Publishing Corporation 			 and Subsidiary Companies
		 Consolidated Statements of Cash Flows
			 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):
5. Income Taxes
Income taxes for the years ended December 31 consist of the following:
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:
Significant components of the Company's deferred tax assets (liabilities) as of December 31 are as follows:
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:
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)
(1) Amounts of discontinued operations included in net income and net income per share of common stock are as follows:
(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:
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.
			 Plenum Publishing Corporation 			 and Subsidiary Companies
		 Schedule II-Valuation and Qualifying Accounts