SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JULYOctober 31, 2000 Commission file number 0-0113060-11306
-------
VALUE LINE, INC.
-------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-3139843
------------------------------- -------------------- --------------------------------------------------------------------------------
(State or other jurisdiction of I.R.S(I.R.S. Employer
incorporation or organizationorganization) Identification No.)
220 East 42nd Street, New York, New York 10017-5891
- ---------------------------------------- ------------------------------------------------------------------------------------------
(address of principal executive offices) (zip code)
Registrants'Registrant's telephone number including area code (212) 907-1500
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at JulyCLASS OUTSTANDING AT OCTOBER 31, 2000
----- -----------------------------------------------------------
Common Stock,stock, $.10 par value 9,978,625 SharesSHARES
----------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(Unaudited)(UNAUDITED)
JulyOct. 31, April 30,
2000 2000
--------- ---------
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $74,172$70,105 and $47,456, respectively) $ 74,19270,460 $ 47,933
Trading securities 19,17118,574 19,044
Accounts receivable, net of allowance for doubtful
accounts of $136$138 and $133, respectively 2,1831,887 2,495
Receivable from affiliates 3,7733,599 3,061
Prepaid expenses and other current assets 1,0251,233 1,115
Deferred income taxes 139 139
--------- ---------
Total current assets 100,48395,892 73,787
Long term securities available for sale 184,930187,905 210,468
Property and equipment, net 10,08010,102 10,402
Capitalized software and other intangible assets, net 3,5633,491 3,541
--------- ---------
Total assets $ 299,056297,390 $ 298,198
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 6,2456,844 $ 7,162
Accrued salaries 1,2551,668 2,063
Dividends payable 2,495 2,495
Accrued taxes payable 4,100-- 1,041
--------- ---------
Total current liabilities 14,09511,007 12,761
Unearned revenue 39,15236,720 41,116
Deferred income taxes 32,27632,248 33,036
Deferred charges 350281 419
Shareholders' Equity:
Common stock, $.10 par value; authorized 30,000,000
shares; issued 10,000,000 shares 1,000 1,000
Additional paid-in capital 959 959
Retained earnings 153,034157,036 149,304
Treasury stock, at cost (21,375 shares on 7/10/31/00,
and 4/30/00) (411) (411)
Accumulated other comprehensive income, net of taxes 58,601tax 58,550 60,014
--------- ---------
Total shareholders' equity 213,183217,134 210,866
--------- ---------
Total liabilities and shareholders' equity $ 299,056297,390 $ 298,198
========= =========
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
2
PART I - FINANCIAL INFORMATION
ITEMItem 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)Financial Statements
Value Line, Inc.
Consolidated Statements of Income
(in thousands, except per share amounts)
(unaudited)
For the threeThree months ended JulySix months ended
October 31, JulyOctober 31,
2000 1999 2000 1999
------- ------- ------- -------
Revenues:
Investment periodicals and
related publications $14,059 $14,970$13,812 $14,430 $27,871 $29,400
Investment management fees & svcs 10,496 8,86111,861 8,985 22,357 17,846
------- ------- ------- -------
Total revenues 24,555 23,83125,673 23,415 50,228 47,246
------- ------- ------- -------
Expenses:
Advertising and promotion 5,152 3,5405,557 4,368 10,709 7,908
Salaries and employee benefits 6,019 6,0666,072 5,729 12,091 11,795
Production and distribution 1,808 1,7461,881 1,566 3,689 3,312
Office and administration 2,210 2,1872,161 1,927 4,371 4,114
------- ------- ------- -------
Total expenses 15,189 13,53915,671 13,590 30,860 27,129
------- ------- ------- -------
Income from operations 9,366 10,29210,002 9,825 19,368 20,117
Income from securities trans.,transactions, net 1,191 1,1851,023 1,211 2,214 2,396
------- ------- ------- -------
Income before income taxes 10,557 11,47711,025 11,036 21,582 22,513
Provision for income taxes 4,332 4,5634,528 4,650 8,860 9,213
------- ------- ------- -------
Net income $ 6,2256,497 $ 6,9146,386 $12,722 $13,300
======= ======= ======= =======
Earnings per share, basic & fully diluted $ 0.620.65 $ 0.690.64 $ 1.27 $ 1.33
======= ======= ======= =======
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)(UNAUDITED)
For the threesix months
ended
JulyOct. 31, JulyOct. 31,
2000 1999
------- --------------- --------
Cash flows from operating activities:CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 6,225 6,914$ 12,722 $ 13,300
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 802 564
(Gains)1,515 1,159
Gains on sales of trading securities and securities held for sale (716) (395)(1,134) (420)
Unrealized losses/(gains)/losses on trading securities 647 (43)1,179 (495)
Changes in assets and liabilities:
(Decrease)Decrease in unearned revenue (1,964) (1,872)
(Decrease)(4,396) (5,489)
Decrease in deferred charges (69) (69)
Increase/(decrease)(138) (139)
Decrease in accounts payable and accrued expenses (917) 555
(Decrease)(318) (1,020)
Decrease in accrued salaries (808) (780)
Increase(395) (492)
Decrease in accrued taxes payable 3,059 3,835(1,041) (356)
(Increase)/decrease in prepaid expenses and other current assets 90 (50)
(Increase)/decrease(118) 8
Decrease in accounts receivable 312 (130)
(Increase)608 154
Increase in receivable from affiliates (712) (404)
------- -------(538) (560)
-------- --------
Total adjustments (276) 1,211
------- -------
Net cash provided by operations 5,949 8,125
Cash flows from investing activities:(4,776) (7,650)
-------- --------
NET CASH PROVIDED BY OPERATIONS 7,946 5,650
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of long term securities 24,572 --500
Purchases of long term securities (1,267) (2,172)(4,321) (2,374)
Proceeds from sales of trading securities 11,113 6,28322,476 11,857
Purchases of trading securities (11,111) (6,264)
Acquisitions(21,991) (13,456)
Acquisition of property, and equipment net (91) (185)(524) (436)
Expenditures for capitalized software (411) (306)
------- -------
Net cash provided by/(641) (862)
-------- --------
NET CASH PROVIDED BY/(used in) investing activities 22,805 (2,644)
Cash flows from financing activities:USED IN) INVESTING ACTIVITIES 19,571 (4,771)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,495) (2,495)
------- -------(4,990) (4,990)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (4,990) (4,990)
-------- --------
Net cash (used in) financing activities (2,495) (2,495)
------- -------
Net increaseincrease/(decrease) in cash and cash equivalents 26,259 2,986
Cash and cash equivalents at beginning of year22,527 (4,111)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 47,933 41,826
------- -------
Cash and cash equivalents at end of quarter 74,192 44,812
======= =======-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,460 $ 37,715
======== ========
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREESIX MONTHS ENDED JULYOCTOBER 31, 2000
(in thousands, except share amounts)
(Unaudited)(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Common stock Accumulated
Number Additional Other
of paid-in Treasury Comprehensive Retained Comprehensive
shares Amount capital Stock income earnings income Total
-------------------- ------- ------ ------------ --------- ------------- -------- --------------------- --------
Balance at May 1, 2000 9,978,625 $1,000 $959$ 1,000 $ 959 ($411) $149,304 $60,014 $210,866
Comprehensive income
Net income $6,225 6,225 6,225$12,722 12,722 12,722
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities (1,413) (1,413) (1,413)(1,464) (1,464) (1,464)
-------
Comprehensive income $4,812$11,258
=======
Dividends declared (2,495) (2,495)
---------(4,990) (4,990)
----------- ------- ------------- ----- -------- --------------- --------
Balance at JulyOctober 31, 2000 9,978,625 $1,000 $959$ 1,000 $ 959 ($411) $153,034 $58,601 $213,183
=========$157,036 $58,550 $217,134
=========== ======= ============= ===== ======== =============== ========
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREESIX MONTHS ENDED JULYOCTOBER 31, 1999
(in thousands, except share amounts)
(Unaudited)(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
Common stock Accumulated
Number Additional Other
of paid-in Treasury Comprehensive Retained Comprehensive
shares Amount capital Stock income earnings income Total
----------- --------- ------- ---------------- -------- ------------- ---------- -------------- ----- ------------- -------- -------- --------
Balance at May 1, 1999 9,978,125 $1,000 $9599,978,625 $ 1,000 $ 959 ($411) $125,585 $39,770$ 125,585 $ 39,770 $166,903
Comprehensive income
Net income $6,914 6,914 6,914$13,300 13,300 13,300
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities 4,033 4,033 4,033
-------9,069 9,069 9,069
---------
Comprehensive income $10,947
=======$22,369
=========
Dividends declared (2,495) (2,495)(4,990) (4,990)
----------- -------- -------- ------ --------- ------- ------ ----- -------- -------- --------
Balance at JulyOctober 31, 1999 9,978,125 $1,000 $9599,978,625 $ 1,000 $ 959 ($411) $130,004 $43,803 $175,355$ 133,895 $ 48,839 $184,282
=========== ======== ======== ====== ========= ======= ====== ===== ======== ======== ========
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
6
HOROWITZ & ULLMANN, P.C.
Certified Public Accountants
A member of the 275 Madison Avenue
AICPA SEC Practice Section New York, NY 10016
New York State Society of CPAs Telephone (212) 532-3736
Facsimile (212) 545-8997
E-mail cpas@h-ullmann.com
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Value Line, Inc.
New York, NY
We have reviewed the accompanying consolidated balance sheet of Value Line, Inc.
and its subsidiaries as of July 31, 2000 and the related consolidated statements
of income, changes in stockholders' equity, and cash flows for the three month
periods ended July 31, 2000 and 1999. All information included in these
financial statements is the representation of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modification that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of April 30, 2000 and the related
consolidated statements of income, changes in stockholders equity, and cash
flows for the year then ended (not presented herein), and in our report dated
July 13, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of April 30, 2000 is fairly stated in
all material respects.
/s/ Horowitz & Ullmann, P.C.
September 14, 2000
7
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIESSignificant Accounting Policies - NOTENote 1:
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements contain all adjustments (consisting of normal recurring
accruals except as noted below) considered necessary for a fair presentation.
This report should be read in conjunction with the financial statements and
footnotes contained in the Company's annual report on Form 10-K, dated July 13,
2000 for the fiscal year ended April 30, 2000. Results of operations covered by
this report may not be indicative of the results of operations for the entire
year.
Cash and Cash Equivalents:
The Company considers all cash held at banks and invested in the Value Line
money market funds with an original maturity of less than three months to be
cash and cash equivalents. As of JulyOctober 31, 2000 and April 30, 2000, cash
equivalents included $72,730,000$69,894,000 and $46,726,000, respectively, invested in the
Value Line money market funds.
Valuation of Securities:
The Company's long-term securities portfolio, which consists of shares of the
Value Line Mutual Funds are valued at market value in accordance with Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". Unrealized gains and losses on these securities
are reported, net of applicable taxes, as a separate component of Shareholders'
Equity. Realized gains and losses on sales of the securities are recorded in
earnings on trade date and are determined on the identified cost method.
Trading securities, which consist of securities held by Value Line Securities,
Inc., the Company's broker-dealer subsidiary, are valued at market with realized
and unrealized gains and losses included in earnings.
Advertising expenses:
The Company expenses advertising costs as incurred.
Earnings per Share, basic & fully diluted:
Earnings per share are based on the weighted average number of shares of common
stock outstanding during the period.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
87
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARKETABLE SECURITIESMarketable Securities - NOTENote 2:
Trading Securities:
Securities held by the Company and by Value Line Securities, Inc. had an
aggregate cost of $16,597,000$16,533,000 and $15,821,000 and a market value of $19,171,000$18,574,000
and $19,044,000 at JulyOctober 31, 2000 and April 30, 2000, respectively.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $94,771,000$97,825,000 and $118,135,000
and the market value was $184,930,000$187,905,000 and $210,468,000 at JulyOctober 31, 2000 and
April 30, 2000, respectively. At JulyOctober 31, 2000, the decrease in gross
unrealized appreciation on these securities of $2,173,000,$2,252,000, net of deferred taxes
of $760,000,$788,000, was included in shareholders' equity.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONSupplemental Disclosure of Cash Flow Information - NOTENote 3:
Cash payments for income taxes were $1,273,000$9,910,000 and $1,187,000$10,028,000 during the threesix
months ended JulyOctober 31, 2000 and 1999, respectively.
EMPLOYEES' PROFIT SHARING AND SAVINGS PLANEmployees' Profit Sharing and Savings Plan - NOTENote 4:
Substantially all employees of the Company and its subsidiaries are members of
the Value Line, Inc. Profit Sharing and Savings Plan (the "Plan"). In general,
this is a qualified, contributory plan which provides for a discretionary annual
Company contribution which is determined by a formula based upon the salaries of
eligible employees and the amount of consolidated net operating income as
defined in the Plan. Plan expense, included in salaries and employee benefits in
the Consolidated Statements of Income and Retained Earnings for the threesix months
ended JulyOctober 31, 2000 and 1999, was $345,000.
9$690,000 and $534,000, respectively.
8
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
COMPREHENSIVE INCOMEComprehensive Income - NOTENote 5:
Statement no. 130 requires the reporting of comprehensive income in addition to
net income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial information
that historically has not been recognized in the calculation of net income.
At JulyOctober 31, 2000 and 1999, the Company held long term securities classified
as available-for-sale. The decrease during the first three months ended July 31,
2000 in gross unrealized gains on these
securities during the first six months ended October 31, 2000 and the related
deferred taxes was $2,173,000$2,252,000 and $760,000,$788,000, respectively. The increase during
the first quartersix months of fiscal 2000 in gross unrealized gains on these
securities and the related deferred taxes was $6,205,000$13,951,000 and $2,172,000,$4,882,000,
respectively.
RELATED PARTY TRANSACTIONSRelated Party Transactions - NOTENote 6:
The Company acts as investment adviser and manager for fifteen open-ended
investment companies, the Value Line Family of Funds. The Company earns
investment management fees based upon the average daily net asset values of the
respective funds. Effective July 1, 2000, the Company received service and
distribution fees under rule 12b-1 of the Investment Company Act of 1940 from
substantially all but three of the fifteen mutual funds for which Value Line mutual funds.is the adviser.
The Company also earns brokerage commission income, net of clearing fees, on
securities transactions executed by Value Line Securities, Inc. on behalf of the
funds that are cleared on a fully disclosed basis through non-affiliated
brokers. For the threesix months ended JulyOctober 31, 2000 and October 31, 1999
investment management fees, 12b-1 service and distribution fees and brokerage
commission income, net of clearing fees, amounted to $9,554,000$20,609,000 and
$7,975,000,$15,952,000, respectively. These amounts include service and distribution fees
of $860,000$2,900,000 and $156,000,$337,000, respectively. The related receivables from the funds
for management advisory fees and 12b-1 service fees included in Receivable from
affiliates were $3,688,000$3,478,000 and $2,972,000 at JulyOctober 31, 2000 and April 30,
2000, respectively.
For the six months ended October 31, 2000 and 1999, the Company was reimbursed
$263,000 and $274,000, respectively, for payments it made on behalf of and
services it provided to Arnold Bernhard and Company, Inc. (the "Parent"). At
JulyOctober 31, 2000 and April 30, 2000, Receivable from affiliatesAffiliates included a
receivable from the Parent of $43,000 and $44,000 at the end of both periods,
respectively. For the threesix months ended JulyOctober 31, 2000 and July 31, 1999, the Company
made federal income tax payments to the Parent amounting to $300,000$7,950,000 and
$200,000,$7,900,000, respectively.
109
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEDERAL, STATE AND LOCAL INCOME TAXESFederal, State and Local Income Taxes - NOTENote 7:
The Company computes its tax in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
The provision for income taxes includes the following:
ThreeSix months ended JulyOctober 31,
2000 1999
-----------------------------------------------------
(in thousands)
Current:
Federal $3,662 $3,636$ 7,455 $ 7,360
State and local 883 708
-------------------------
4,545 4,3441,774 1,416
------- -------
9,229 8,776
Deferred:
Federal (215) 194(357) 388
State and local 2 25
-------------------------
(213) 219
-------------------------
$4,332 $4,563
=========================(12) 49
------- -------
(369) 437
------- -------
$ 8,860 $ 9,213
======= =======
Deferred taxes are provided for temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. The tax effect of temporary differences giving rise to the
Company's deferred tax asset/(liability) are primarily a result of unrealized
gains on the Company's trading and long term securities portfolios.
BUSINESS SEGMENTSBusiness Segments - NOTENote 8:
The Company operates two reportable business segments: Publishing and Investment
Management Services. The publishing segment produces investment related
periodicals in both print and electronic form. The investment management segment
provides advisory services to mutual funds, institutional and individual clients
as well as brokerage services for the Value Line family of mutual funds. The
segments are differentiated by the products and services they offer.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company allocates all revenues
and expenses, except for depreciation related to corporate assets, between the
two reportable segments.
1110
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Disclosure of Reportable Segment Profit and Segment Assets (in thousands)
JulySix months ended October 31, 2000
Publishing Investment Total
Management
Services
Revenues from external customers $14,059 $10,496 $24,555$ 27,871 $ 22,357 $ 50,228
Intersegment revenues 1554 -- 1554
Income from securities transactions 65 1,126 1,191138 2,076 2,214
Depreciation and amortization 770 17 7871,457 29 1,486
Segment profit 4,112 5,269 9,3818,039 11,358 19,397
Segment assets 20,891 277,507 298,39820,589 276,161 296,750
Expenditures for segment assets 3111,064 90 4011,154
JulySix months ended October 31, 1999
Publishing Investment Total
Management
Services
Revenues from external customers $14,970 $8,861 $23,831$ 29,400 $ 17,846 $ 47,246
Intersegment revenues 1623 -- 1623
Income from securities transactions 68 1,117 1,185125 2,271 2,396
Depreciation and amortization 522 12 5341,113 15 1,128
Segment profit 5,823 4,499 10,32210,534 9,614 20,148
Segment assets 19,676 235,036 254,71220,064 237,345 257,409
Expenditures for segment assets 306 -- 306434 2 436
1211
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of Reportable Segment Revenues,
Operating Profit and Assets (in thousands)
Six months ended October 31,
2000 1999
Revenues
Total revenues for reportable segments $24,570 $23,847$ 50,282 $ 47,269
Elimination of intersegment revenues (15) (16)
-------------------------(54) (23)
--------- ---------
Total consolidated revenues $24,555 $23,831
=========================$ 50,228 $ 47,246
========= =========
Segment profit
Total profit for reportable segments $10,572 $11,507$ 21,611 $ 22,544
Less: Depreciation related to corporate assets (15) (30)
-------------------------(29) (31)
--------- ---------
Income before income taxes $10,557 $11,477
=========================$ 21,582 $ 22,513
========= =========
Assets
Total assets for reportable segments $298,398 $254,712$ 296,750 $ 257,409
Corporate assets 658 1,388
-------------------------640 1,164
--------- ---------
Consolidated total assets $299,056 $256,100
=========================$ 297,390 $ 258,573
========= =========
12
[LETTERHEAD OF HOROWITZ & ULLMANN, P.C.
HOROWITZ & ULLMANN, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
A member of the 275 Madison Avenue
AICPA SEC Pratice Section New York, NY 10016
New York State Society of CPAs Telephone (212) 532-3736
Facsimile (212) 545-8997
E-mail cpas@h-ullmann.com
REPORT OF INDEPENDENT ACCOUTANTS
To the Board of Directors and Shareholders of
Value Line, Inc.
New York, NY
We have reviewed the accompanying consolidated balance sheet of Value Line, Inc.
and its subsidiaries as of October 31, 2000 and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
six month periods ended October 31, 2000 and 1999. All information included in
these financial statements is the representation of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of April 30, 2000 and the related
consolidated statements of income, changes in stockholders equity, and cash
flows for the year then ended (not presented herein), and in our report dated
July 13, 2000, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of April 30, 2000 is fairly stated in
all material respects.
/s/ HOROWITZ & ULLMANN, P.C.
December 14, 2000
13
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
LIQUIDITY AND CAPITAL RESOURCES:
Value Line, Inc. (the "Company") had liquid resources, which are used in its
business, of $271,318,000$272,790,000 at JulyOctober 31, 2000. In addition to $86,388,000$84,885,000 of
working capital, the Company had long-term securities available for sale with a
market value of $184,930,000,$187,905,000, that, although classified as non-current assets,
are also readily marketable should the need arise.
The Company's cash flow from operations of $5,949,000$7,946,000 for the threesix months ended
JulyOctober 31, 2000 was lower40% higher than thefiscal 2000's cash flow of $8,125,000 for the same
period last fiscal year.$5,650,000. The
declineincrease was primarily due to the timing of the
company's funding of the employee's benefit plan during fiscal 2001.a 26% increase in new full term subscription
orders. Net cash inflows from investing activities during the first six months
of fiscal 2001 were $25,449,000$24,342,000 higher than net cash flows for the first six
months of fiscal 2000's2000 due largely to the company'sCompany's decision to realign its
long-term securities holdings.
Management believes that the Company's cash and other liquid asset resources
used in its business together with the future cash flows from operations will be
sufficient to finance current and forecasted operations. Management anticipates
no borrowing for fiscal year 2001.
RESULTS OF OPERATIONS:
Revenues for the second quarter and first six months of fiscal year 2001
exceeded the prior year's results by 10% and 6%, respectively and reached record
high levels. Net incomeearnings for the second quarter ended October 31, 2000 were
$6,497,000 or $.65 per share, a 2% increase when compared to net earnings of
$6,386,000 or $.64 per share for the three months ended JulyOctober 31, 1999. The
Company's net earnings for the six months ended October 31, 2000 of $6,225,000,$12,722,000
or $.62$1.27 per share comparescompared to prior year's net incomeearnings of $6,914,000,$13,300,000 or $.69$1.33 per share. Revenues of $24,555,000share
during fiscal 2000. The decline in the six months' net earnings was largely
attributable to a substantial increase in advertising for the first three months of fiscal year 2001
were 3% higher than last year's revenues. Operating income of $9,366,000 for
the three months ended July 31, 2000 was lower than operating income of
$10,292,000 for the same period of last fiscal year. The decline from last
year's operating income is primarily a result of additional advertising
expenses for the Value LineCompany's mutual
funds and publications.
Total assets at JulyOctober 31, 2000 of $299,056,000$297,390,000 increased 17%15% from the balance
at JulyOctober 31, 1999.
Subscription revenues of $14,059,000$27,871,000 were 6% below revenues from the prior
fiscal year. The decrease in subscription revenues compared to the prior year is
due primarily to a 6% net decrease in revenues from the Value Line Investment
Survey and related products, which includes the Value Line Investment Survey for
Windows, Condensed Edition, Expanded Edition and Value Line Select. The decrease
in publication revenues is largely a result of the reduced level of advertising
during last fiscal year that occurred while the Company had been in the process
of revising its advertising strategy. Additionally, the availability of free or
low cost data on the Internet has also had a negative impact on revenue growth.
Investment management fees and services revenues of $10,496,000$22,357,000 for the threesix
months ended JulyOctober 31, 2000, were 18%25% above the prior fiscal year's revenues.
The higher revenues from investment management fees and services, compared to
the prior year, resulted primarily from the receipt of service and distribution
fees from a plan adopted under Rule 12b-1 of the Investment Company Act of 1940
for all but three of the fifteen mutual funds for which Value Line is the
adviser, effective July 1, 2000. The increase in the year-over-year average net
assets under management in the Company's mutual funds.funds also contributed to the
higher revenues. Assets under management in the Company's mutual funds at
JulyOctober 31, 2000 increased 10%5% from the level at JulyOctober 31, 1999. Additionally,
effective July 1, 2000, the Company received service and distribution fees under
rule 12b-1 of the Investment Company Act of 1940 from substantially all of the
Value Line mutual funds. This contributed to approximately 8% of the increase in
investment management fees and services revenues.
Operating expenses for the three months ended July 31, 2000 of $15,189,000 were
12% above last year's expenses of $13,539,000. Total company-wide advertising
and promotional expenses of $5,152,000 were 46% above the prior year's expenses.
As previously indicated, the prior year's advertising expenses for the Company's
publication business had been reduced while the Company had been in the process
of revising its advertising strategy. The current year's advertising expenses
for the publication business is
14
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
approximately $728,000 higher thanOperating expenses for the six months ended October 31, 2000 of $30,860,000
were 14% above last year's expenses of $27,129,000. Total advertising and
promotional expenses of $10,709,000 were 35% above the prior year's.year's expenses.
The additional increase inCompany compensated for the reduced level of advertising during the first
quarter of last fiscal year, while it was revising its advertising strategy
by increasing the level of advertising expenses relatesduring this fiscal year. When
compared to the prior year, expenses increased 30% for the Value Line
Investment Survey and related products, and $822,000 for the Value Line
Mutual Funds, including expenses related to a selling arrangement for two of
the Company's equity mutual funds and an increase in media and general advertising for the
Value Line mutual funds. Additionally, the increase in promotion fees to discount
brokers increased $414,000 based on the higher level of invested assets in
the Value Line family of
mutual funds fromthrough these brokers also added to the increased advertising
expenses.brokers. Salaries and employee
benefit expenses of $6,019,000$12,091,000 were slightly
below3% above expenses of $6,066,000$11,795,000
recorded in the prior fiscal year. The decrease
from the prior yearincrease in salaries and employee
benefit expenses is primarily attributable to higher anticipated employee
benefit expenses as compared to last year's. The increase is partially offset
by lower expenses due to the outsourcing of the Customer Service division at
the Compupower Corporation and staff reductions in the Asset Management and Y2K divisions.
Production and distribution costs of $1,808,000$3,689,000 were 3%11% above expenses of
$1,746,000$3,312,000 for the threesix months ended JulyOctober 31, 1999. This increaseThe additional
production expenses resulted from higher outside data collection service expenses
related to both mutual fund and Internet datathe amortization of development costs for
the Company's Web site. In
addition, expensesThe Value Line Investment Survey for the development of THE VALUE LINE INVESTMENT SURVEY FOR
WINDOWSWindows Version 3, and for Version 2 of
the Company's Website were amortized as
required by SOP 98-1 "Accountingand higher outside data collection expenses for the Costs of Computer Software Developed
for Internal Use" which the Company adopted in the latter half of 1999.The
Value Line Mutual Fund Survey. These increases were partly offset in part by lower
paper, printing and distribution expenses
directly related to lower production runs
for print publications. Office and administration expenses of $2,210,000$4,371,000 were
1%6% above last year's expenses of $2,187,000.$4,114,000. The increase from the prior year
is primarily attributable to amortization of software for Internet
enhancements and maintenance and for the Compupower Corporation's electronic
fulfillment operation.
The Company's securities portfolios produced income of $1,191,000$2,214,000 for the threesix
months ended JulyOctober 31, 2000 compared to income of $1,185,000$2,396,000 during last
fiscal year. 14The Value Line trading portfolio outperformed the Standard and
Poor's 500 Market Index by 2% during the six month period ended October 31,
2000, compared to 6% during the same period last year. As a result of the higher
invested cash position of the Company, dividend income from the Value Line
mutual funds increased 56% from the level during the first six months of fiscal
2000.
15
VALUE LINE, INC.
SIGNATURESSignatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q10Q report for the period ended JulyOctober 31,
2000 to be signed on its behalf by the undersigned thereunto duly authorized.
Value Line, Inc.
(Registrant)
Date: September 14,December 15, 2000 By: /s/s/ Jean Bernhard Buttner
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Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: September 14,December 15, 2000 By: /s/ s/Stephen R. Anastasio
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Stephen R. Anastasio
Chief Accounting Officer
16