SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended OctoberJanuary 31, 20002001 Commission file number 0-11306
----------------
VALUE LINE, INC.
----------------
(Exact name of registrant as specified in its charter)
New York 13-3139843
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 East 42nd Street, New York, New York 10017-5891
- --------------------------------------------------------------------------------
(address of principal executive offices) (zip code)
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 OCTOBERClass Outstanding at January 31, 20002001
----- -------------------------------
Common 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)
Oct.Jan. 31, April 30,
Assets 2001 2000
2000
--------- ------------------- ----------
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $70,105$49,605 and $47,456, respectively) $ 70,460 $ 47,933$49,897 $47,933
Trading securities 18,57423,014 19,044
Accounts receivable, net of allowance for doubtful
accounts of $138$144 and $133, respectively 1,8872,266 2,495
Receivable from affiliates 3,5993,264 3,061
Prepaid expenses and other current assets 1,2331,243 1,115
Deferred income taxes 139 139
--------- ------------------- ----------
Total current assets 95,89279,823 73,787
Long term securities available for sale 187,905193,435 210,468
Property and equipment, net 10,1029,664 10,402
Capitalized software and other intangible assets, net 3,4913,091 3,541
--------- ------------------- ----------
Total assets $ 297,390 $ 298,198
========= =========$286,013 $298,198
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 6,844 $ 7,162$6,194 $7,162
Accrued salaries 1,6681,888 2,063
Dividends payable 2,495 2,495
Accrued taxes payable --2,936 1,041
--------- ------------------- ----------
Total current liabilities 11,00713,513 12,761
Unearned revenue 36,72038,107 41,116
Deferred income taxes 32,24823,674 33,036
Deferred charges 281211 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 157,036166,334 149,304
Treasury stock, at cost (21,375 shares on 10/1/31/00,01,
and 4/30/00) (411) (411)
Accumulated other comprehensive income, net of tax 58,55042,626 60,014
--------- ------------------- ----------
Total shareholders' equity 217,134210,508 210,866
--------- ------------------- ----------
Total liabilities and shareholders' equity $ 297,390 $ 298,198
========= =========$286,013 $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)
Three months ended SixNine months ended
OctoberJan. 31, OctoberJan. 31,
2001 2000 19992001 2000
1999
------- ------- ------- --------------- -------- -------- --------
Revenues:
Investment periodicals and
related publications $13,812 $14,430 $27,871 $29,400$14,189 $14,421 $42,060 $43,821
Investment management fees & svcs 11,861 8,985 22,357 17,846
------- ------- ------- -------10,767 9,644 33,124 27,490
-------- -------- -------- --------
Total revenues 25,673 23,415 50,228 47,246
------- ------- ------- -------24,956 24,065 75,184 71,311
-------- -------- -------- --------
Expenses:
Advertising and promotion 5,557 4,368 10,709 7,9086,591 6,760 17,300 14,668
Salaries and employee benefits 6,072 5,729 12,091 11,7955,975 6,161 18,066 17,956
Production and distribution 1,881 1,566 3,689 3,3121,979 1,661 5,668 4,973
Office and administration 2,161 1,927 4,371 4,114
------- ------- ------- -------2,275 2,397 6,646 6,511
-------- -------- -------- --------
Total expenses 15,671 13,590 30,860 27,129
------- ------- ------- -------16,820 16,979 47,680 44,108
-------- -------- -------- --------
Income from operations 10,002 9,825 19,368 20,1178,136 7,086 27,504 27,203
Income from securities transactions, net 1,023 1,211 2,214 2,396
------- ------- ------- -------10,803 14,976 13,017 17,372
-------- -------- -------- --------
Income before income taxes 11,025 11,036 21,582 22,51318,939 22,062 40,521 44,575
Provision for income taxes 4,528 4,650 8,860 9,213
------- ------- ------- -------7,146 7,969 16,006 17,182
-------- -------- -------- --------
Net income $ 6,497 $ 6,386 $12,722 $13,300
======= ======= ======= =======$11,793 $14,093 $24,515 $27,393
======== ======== ======== ========
Earnings per share, basic & fully diluted $ 0.65 $ 0.64 $ 1.27 $ 1.33
======= ======= ======= =======$1.19 $1.41 $2.46 $2.75
======== ======== ======== ========
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)
For the sixnine months
ended
Oct.Jan 31, Oct.Jan. 31,
2001 2000
1999
-------- ----------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:Cash flows from operating activities:
Net income $ 12,722 $ 13,300$24,515 $27,393
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,515 1,1592,416 1,828
Gains on sales of trading securities and securities held for sale (1,134) (420)(10,600) (12,964)
Unrealized losses/(gains) on trading securities 1,179 (495)1,647 (1,327)
Writedown of equipment 161 3
Changes in assets and liabilities:
Decrease in unearned revenue (4,396) (5,489)(3,009) (4,478)
Decrease in deferred charges (138) (139)
Decrease(208) (208)
(Decrease)/increase in accounts payable and accrued expenses (318) (1,020)(968) 2,869
Decrease in accrued salaries (395) (492)
Decrease(175) (317)
Increase in accrued taxes payable (1,041) (356)
(Increase)/decrease1,895 3,813
Increase in prepaid expenses and other current assets (118) 8
Decrease(128) (1,004)
Decrease/(increase) in accounts receivable 608 154229 (157)
Increase in receivable from affiliates (538) (560)
-------- --------(203) (557)
--------- ---------
Total adjustments (4,776) (7,650)
-------- --------
NET CASH PROVIDED BY OPERATIONS 7,946 5,650
CASH FLOWS FROM INVESTING ACTIVITIES:(8,943) (12,499)
--------- ---------
Net cash provided by operations 15,572 14,894
Cash flows from investing activities:
Proceeds from sales of long term securities 24,572 50035,075 11,528
Purchases of long term securities (4,321) (2,374)(34,348) (14,416)
Proceeds from sales of trading securities 22,476 11,85730,543 20,870
Purchases of trading securities (21,991) (13,456)
Acquisition(36,004) (22,019)
Acquisitions of property, and equipment (524) (436)(580) (553)
Expenditures for capitalized software (641) (862)
-------- --------
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 19,571 (4,771)
CASH FLOWS FROM FINANCING ACTIVITIES:(809) (979)
--------- ---------
Net cash used in investing activities (6,123) (5,569)
Cash flows from financing activities:
Dividends paid (4,990) (4,990)
-------- --------
NET CASH (USED IN) FINANCING ACTIVITIES (4,990) (4,990)
-------- --------(7,485) (7,484)
--------- ---------
Net increase/(decrease)cash used in financing activities (7,485) (7,484)
--------- ---------
Net increase in cash and cash equivalents 22,527 (4,111)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR1,964 1,841
Cash and cash equivalents at beginning of period 47,933 41,826
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,460 $ 37,715
======== ========--------- ---------
Cash and cash equivalents at end of period $49,897 $43,667
========= =========
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'SHAREHOLDERS' EQUITY
FOR THE SIXNINE MONTHS ENDED OCTOBERJANUARY 31, 2000
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)(in thousands, except share amounts)
(UNAUDITED)
Common stock
Accumulated
Number Additional Other Total
of paid-in Treasury Comprehensive Retained Comprehensive Shareholders'
shares Amount capital Stock income earnings income Total
----------- ------- -------Equity
--------- ------ ---------- -------- ------------- -------- ------------- ---------------------
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 $12,722 12,722 12,722$24,515 24,515 24,515
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities (1,464) (1,464) (1,464)
-------(17,388) (17,388) (17,388)
-------------
Comprehensive income $11,258
=======$7,127
=============
Dividends declared (4,990) (4,990)
----------- ------- ------- -----(7,485) (7,485)
--------- ------ ---------- -------- ------- -------- ------------- -------------
Balance at OctoberJanuary 31, 20002001 9,978,625 $ 1,000 $ 959$1,000 $959 ($411) $157,036 $58,550 $217,134
=========== ======= ======= =====$166,334 $42,626 $210,508
========= ====== ========== ======== ======= ======== ============= =============
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'SHAREHOLDERS' EQUITY
FOR THE SIXNINE MONTHS ENDED OCTOBERJANUARY 31, 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)2000
(in thousands, except share amounts)
(UNAUDITED)
Common stock
Accumulated
Number Additional Other Total
of paid-in Treasury Comprehensive Retained Comprehensive Shareholders'
shares Amount capital Stock income earnings income Total
-----------Equity
--------- ------ ---------- -------- ------------- ---------- -------------- ------------- ------------- -------------
Balance at May 1, 1999 9,978,625 $ 1,000 $ 959$1,000 $959 ($411) $ 125,585 $ 39,770$125,585 $39,770 $166,903
Comprehensive income
Net income $13,300 13,300 13,300$27,393 27,393 27,393
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities 9,069 9,069 9,069
---------14,020 14,020 14,020
-------------
Comprehensive income $22,369
=========$41,413
=============
Dividends declared (4,990) (4,990)
-----------(7,484) (7,484)
--------- ------ ---------- -------- -------- ------ --------- -------- --------------------- -------------
Balance at OctoberJanuary 31, 19992000 9,978,625 $ 1,000 $ 959$1,000 $959 ($411) $ 133,895 $ 48,839 $184,282
===========$145,494 $53,790 $200,832
========= ====== ========== ======== ======== ====== ========= ======== ===================== =============
The accompanying notes and independent auditor's review report are an integral
part of these financial statements.
6
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED CONDENSED 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 OctoberJanuary 31, 20002001 and April 30, 2000, cash
equivalents included $69,894,000$49,314,000 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,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.
7
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 $16,533,000$21,441,000 and $15,821,000 and a market value of $18,574,000$23,014,000
and $19,044,000 at OctoberJanuary 31, 20002001 and April 30, 2000, respectively.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $97,825,000$127,857,000 and $118,135,000
and the market value was $187,905,000$193,435,000 and $210,468,000 at OctoberJanuary 31, 20002001 and
April 30, 2000, respectively. At OctoberJanuary 31, 2000,2001, the decrease in gross
unrealized appreciation on these securities of $2,252,000,$26,751,000, net of deferred
taxes of $788,000,$9,363,000, was included in shareholders' equity. Supplemental DisclosureThe Company received
gross proceeds of Cash Flow Information$35,075,000 and $11,528,000 from sales of long term securities
during the nine months of fiscal 2001 and 2000, respectively.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NoteNOTE 3:
Cash payments for income taxes were $9,910,000$14,111,000 and $10,028,000$13,827,000 during the sixnine
months ended OctoberJanuary 31, 2001 and 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 sixnine months
ended OctoberJanuary 31, 2001 and 2000, was $1,035,000 and 1999, was $690,000 and $534,000,$879,000, respectively.
8
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Comprehensive IncomeCOMPREHENSIVE INCOME - NoteNOTE 5:
Statement no.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 OctoberJanuary 31, 20002001 and 1999,2000, the Company held long term securities classified
as available-for-sale. The decrease in gross unrealized gains on these
securities during the first sixnine months ended OctoberJanuary 31, 20002001 and the related
deferred taxes was $2,252,000$26,751,000 and $788,000,$9,363,000, respectively. The increase during
the first sixnine months of fiscal 2000 in gross unrealized gains on these
securities and the related deferred taxes was $13,951,000$21,570,000 and $4,882,000,$7,550,000,
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
all but three of the fifteen mutual funds for which Value Line 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 sixnine months ended OctoberJanuary 31, 20002001 and OctoberJanuary 31, 19992000
investment management fees, 12b-1 service and distribution fees and brokerage
commission income, net of clearing fees, amounted to $20,609,000$30,682,000 and
$15,952,000,$24,656,000, respectively. These amounts include service and distribution fees
of $2,900,000$4,742,000 and $337,000,$556,000, respectively. The related receivables from the funds
for management advisory fees and 12b-1 service fees included in Receivable from
affiliates were $3,478,000$3,170,000 and $2,972,000 at OctoberJanuary 31, 20002001 and April 30,
2000, respectively.
For the sixnine months ended OctoberJanuary 31, 20002001 and 1999,2000, the Company was reimbursed
$263,000$389,000 and $274,000,$387,000, respectively, for payments it made on behalf of and
services it provided to Arnold Bernhard and Company, Inc. (the "Parent"("Parent"). At OctoberJanuary
31, 20002001 and April 30, 2000, Receivable from Affiliates included a receivable
from the Parent of $51,000 and $44,000, at the end of both periods, respectively. For the sixnine months ended
OctoberJanuary 31, 20002001 and 1999,2000, the Company made federal income tax payments to the
Parent amounting to $7,950,000$11,450,000 and $7,900,000,$10,900,000, respectively.
9
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:
SixNine months ended OctoberJanuary 31,
2001 2000
1999
---------------------------------------------------------
(in thousands)
Current:
Federal $ 7,455 $ 7,360$14,004 $14,036
State and local 1,774 1,416
------- -------
9,229 8,7762,537 2,501
-----------------------------
16,541 16,537
Deferred:
Federal (357) 388(519) 680
State and local (12) 49
------- -------
(369) 437
------- -------
$ 8,860 $ 9,213
======= =======(16) (35)
-----------------------------
(535) 645
-----------------------------
$16,006 $17,182
=============================
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.
10
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Disclosure of Reportable Segment Profit and Segment Assets (in thousands)
SixNine months ended OctoberJanuary 31, 2001
Publishing Investment Total
Management
Services
Revenues from external customers $42,060 $33,124 $75,184
Intersegment revenues 101 -- 101
Income from securities transactions 216 12,801 13,017
Depreciation and amortization 2,308 61 2,369
Segment profit 11,652 15,900 27,552
Segment assets 20,007 265,388 285,395
Expenditures for
segment assets 1,280 100 1,380
Nine months ended January 31, 2000
Publishing Investment Total
Management
Services
Revenues from external customers $ 27,871 $ 22,357 $ 50,228$43,821 $27,490 $71,311
Intersegment revenues 5435 -- 5435
Income from securities transactions 138 2,076 2,214188 17,184 17,372
Depreciation and amortization 1,457 29 1,4861,725 50 1,775
Segment profit 8,039 11,358 19,39714,468 12,788 27,256
Segment assets 20,589 276,161 296,75020,940 264,952 285,892
Expenditures for
segment assets 1,064 90 1,154
Six months ended October 31, 1999
Publishing Investment Total
Management
Services
Revenues from external customers $ 29,400 $ 17,846 $ 47,246
Intersegment revenues 23 -- 23
Income from securities transactions 125 2,271 2,396
Depreciation and amortization 1,113 15 1,128
Segment profit 10,534 9,614 20,148
Segment assets 20,064 237,345 257,409
Expenditures for segment assets 4341,530 2 4361,532
11
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of Reportable Segment Revenues,
Operating Profit and Assets (in thousands)
SixNine months ended OctoberJanuary 31,
2001 2000
1999-----------------------------
Revenues
Total revenues for reportable segments $ 50,282 $ 47,269$75,285 $71,346
Elimination of intersegment revenues (54) (23)
--------- ---------(101) (35)
-----------------------------
Total consolidated revenues $ 50,228 $ 47,246
========= =========$75,184 $71,311
=============================
Segment profit
Total profit for reportable segments $ 21,611 $ 22,544$40,569 $44,628
Less: Depreciation related to corporate assets (29) (31)
--------- ---------(48) (53)
-----------------------------
Income before income taxes $ 21,582 $ 22,513
========= =========$40,521 $44,575
=============================
Assets
Total assets for reportable segments $ 296,750 $ 257,409$285,395 $285,892
Corporate assets 640 1,164
--------- ---------618 1,073
-----------------------------
Consolidated total assets $ 297,390 $ 258,573
========= =========$286,013 $286,965
=============================
12
[LETTERHEAD OF
HOROWITZ & ULLMANN, P.C.
HOROWITZ & ULLMANN, P.C.
CERTIFIED PUBLIC ACCOUNTANTSCertified Public Accountants
275 Madison Avenue
A member of the 275 Madison Avenue
AICPA SEC Pratice Section New York, NY 10016
AICPA SEC Practice Section Telephone: (212) 532-3736
New York State Society of CPAs Telephone (212) 532-3736
FacsimileCPA's Facsimile: (212) 545-8997
E-mail cpas@h-ullmann.comE-mail: cpas@horowitz-ullmann.com
REPORT OF INDEPENDENT ACCOUTANTSACCOUNTANTS
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 OctoberJanuary 31, 20002001 and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
sixnine month periods ended OctoberJanuary 31, 20002001 and 1999.2000. All information included in
these financial statements is the representation of the Company's management.
We conducted our review in accordance with standardswith-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/ HOROWITZHorowitz & ULLMANN, P.C.
December 14, 2000Ullmann, P.A.
March 15, 2001
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 $272,790,000$259,745,000 at OctoberJanuary 31, 2000.2001. In addition to $84,885,000$66,310,000 of
working capital, the Company had long-term securities available for sale with a
market value of $187,905,000,$193,435,000, that, although classified as non-current assets,
are also readily marketable should the need arise.
The Company's cash flow from operations of $7,946,000$15,572,000 for the sixnine months ended
OctoberJanuary 31, 20002001 was 40%5% higher than fiscal 2000's cash flow of $5,650,000.$14,894,000. The
increase was primarily due to a 26%38% increase in new full term subscription
orders. Net cash inflowsoutflows from investing activities during the first sixnine months
of fiscal 2001 were $24,342,000$554,000 higher than net cash flowsoutflows for the first sixnine
months of fiscal 2000 due largely to the Company's decision to realign its
long-term securities holdings.holdings and invest additional funds in its trading
portfolio.
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 of $75,184,000 and $24,956,000 for the secondfirst nine months and third
quarter and first six months of fiscal year 2001 set new record highs for the Company and exceeded
last year's revenues by 5% and 4%, respectively. Operating income of $27,504,000
for the nine months ended January 31, 2001, was 1% higher than operating income
of $27,203,000 for the same period of last fiscal year. Operating income for the
third quarter was 15% higher than the previous year's. Net income for the nine
months ended January 31, 2001 of $24,515,000, or $2.46 per share, compares to
the prior year's results by 10% and 6%, respectively and reached record
high levels. Net earnings for the second quarter ended October 31, 2000 were
$6,497,000net income of $27,393,000, or $.65$2.75 per share, a 2% increase when compared to net earnings of
$6,386,000 or $.64 per share for the three months ended October 31, 1999. The
Company's net earnings for the six months ended October 31, 2000 of $12,722,000
or $1.27 per share compared to net earnings of $13,300,000 or $1.33 per share
during fiscal 2000. The decline in the six months' net earnings was largely
attributable to a substantial increase in advertising for the Company's mutual
funds and publications.share.
Total assets at OctoberJanuary 31, 20002001 of $297,390,000$286,013,000 were approximately equal to the
total assets at January 31, 2000. However, shareholders' equity increased 15% from5% to
$210,508,000 during the balance
at October 31, 1999.same period.
Subscription revenues of $27,871,000$42,060,000 were 6%4% below revenues fromof the prior fiscal
year. The decrease in subscription revenues compared to the prior year is due
primarily to a 6%5% net decrease in revenues from the Value Line Investment
SurveyTHE 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 VALUE LINE INVESTMENT SURVEY FOR
WINDOWS, CONDENSED, EXPANDED EDITION AND V.L. 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 alsois believed to have had a negative impact on
revenue growth. Investment management fees and services revenues of $22,357,000$33,124,000
for the sixnine months ended OctoberJanuary 31, 2000,2001, were 25%20% above the prior fiscal
year's revenues. The higherincrease in revenues from investment management fees and
services, compared to the prior year, resulted primarily from the receipt of
higher service and distribution fees and higher investment advisory fees from
the Value Line Mutual Funds. The increase in service and distribution fees
resulted from the additional revenues received during fiscal 2001 from a plan
adopted under Rule 12b-1 of the Investment Company Act of 1940 for all but threetwo
of the fifteen mutual funds for which Value Line is the adviser, effective July
1, 2000. The increase of 5% in the year-over-year average net assets under
management in the Company's mutual funds also contributed to the higher revenues. Assets under management ininvestment
advisory fees.
Operating expenses for the Company's mutual funds at
Octobernine months ended January 31, 2000 increased 5% from2001 of $47,680,000
were 8% higher than last year's expenses of $44,108,000. Total company-wide
advertising and promotional expenses of $17,300,000 were 18% above the level at October 31, 1999.prior
year's expenses. When compared to the prior year, advertising
14
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
Operating expenses increased 3% for the six months ended October 31, 2000 of $30,860,000
were 14% above last year's expenses of $27,129,000. Total advertisingTHE VALUE LINE INVESTMENT SURVEY and promotional expenses of $10,709,000 were 35% above the prior year's expenses.
The Company 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 ofrelated products,
and a 42% increase in advertising expenses during 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,mutual funds,
including expenses relatedrelating to a selling arrangement for two of the Company's
equity mutual funds. Additionally, promotion fees to discount brokers for
attracting additional investments in the Value Line mutual funds increased
$414,000$400,000 based on the higher level of invested assets in
the Value Line mutual funds
experienced through these brokers. Salaries and employee benefit expenses of
$12,091,000$18,066,000 were 3%1% above expenses of $11,795,000$17,956,000 recorded in the prior fiscal
year. The increase in salaries and employee benefit expenses is primarily
attributable to higher anticipated employee benefit expenses as compared to last year's.fiscal
year. The increase is partially offset by lower expenses due to the outsourcing
of the Customer Service division at
Compupower and staff reductions in the Asset Management,
Y2K and Y2Kdata collection divisions. Production and distribution costs for the
first nine months of $3,689,000fiscal 2001 of $5,668,000 were 11%14% above expenses of
$3,312,000$4,973,000 for the sixnine months ended OctoberJanuary 31, 1999.2000. The additionalincrease in
production expenses resulted from the amortization of development costs for The Value Line Investment Survey for WindowsTHE
VALUE LINE INVESTMENT SURVEY FOR WINDOWS Version 3 and for Version 2 of the
Company's Website and higher outside data collection expenses for The
Value Line Mutual Fund Survey.THE VALUE LINE
MUTUAL FUND SURVEY. These increases were partly offset by lower paper, printing
and distribution expenses related to lower production runs for print
publications. Office and administration expenses of $4,371,000$6,646,000 were 6%2% above
last year's expenses of $4,114,000.$6,511,000. The increase from the prior year is
primarily attributable to amortization of softwaredevelopment costs for Internet
enhancements and maintenance and for the Compupower Corporation's electronic subscription fulfillment
operation.
The Company's securities portfolios produced income of $2,214,000$13,017,000 for the sixnine
months ended OctoberJanuary 31, 20002001 compared to income of $2,396,000$17,372,000 during last
fiscal year. The Value Line trading portfolio outperformedproduced a return similar to the
Standard and
Poor's 500 Market Index by 2%weighted average benchmark indices. However, the decline in these financial
markets indices during the six month period ended October 31,
2000,latter part of the third quarter of fiscal 2001 as
compared to 6% during the same period last year. As a resultfiscal year, resulted in trading losses that accounted for most
of the higher
invested cash position ofdecrease in the Company, dividendincome from securities transactions. Dividend income from
the Value Line mutual funds increased 56%38% from the level during the first sixnine
months of fiscal 2000.
15
VALUE LINE, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10Q report for the period ended OctoberJanuary 31,
20002001 to be signed on its behalf by the undersigned thereunto duly authorized.
Value Line, Inc.
(Registrant)
Date: December 15, 2000March 19, 2001 By: s/ /s/Jean Bernhard Buttner
---------------------------------------------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: December 15, 2000March 19, 2001 By: s//s/Stephen R. Anastasio
----------------------------------------------------------------------------------
Stephen R. Anastasio
Chief Accounting Officer
16