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 JanuaryJuly 31, 2001 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/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 JanuaryJuly 31, 2001
----- -----------------------------------------------------------
Common stock, $.10 par value 9,978,6259,979,325 Shares
----------------
PARTPart I - FINANCIAL INFORMATION
ITEMFinancial Information
Item 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)Financial Statements
Value Line, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
(unaudited)
Jan.July 31, April 30,
Assets 2001 2000
---------- ----------2001
--------- ---------
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $49,605$71,353 and $47,456,$86,094, respectively) $49,897 $47,933$ 71,883 $ 86,424
Trading securities 23,014 19,04432,318 15,360
Accounts receivable, net of allowance for doubtful
accounts of $144$120 and $133,$131, respectively 2,266 2,4951,879 2,216
Receivable from affiliates 3,264 3,0613,026 2,821
Prepaid expenses and other current assets 1,243 1,115569 1,274
Deferred income taxes 139 139
---------- ----------742 742
--------- ---------
Total current assets 79,823 73,787110,417 108,837
Long term securities available for sale 193,435 210,468149,009 148,784
Property and equipment, net 9,664 10,4029,105 9,423
Capitalized software and other intangible assets, net 3,091 3,541
---------- ----------3,622 3,948
--------- ---------
Total assets $286,013 $298,198
========== ==========$ 272,153 $ 270,992
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $6,194 $7,162$ 4,421 $ 5,716
Accrued salaries 1,888 2,0631,415 2,291
Dividends payable 2,495 2,4952,494
Accrued taxes payable 2,936 1,041
---------- ----------2,041 423
--------- ---------
Total current liabilities 13,513 12,76110,372 10,924
Unearned revenue 38,107 41,11639,010 39,526
Deferred income taxes 23,674 33,03620,258 20,194
Deferred charges 211 41972 142
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 959967 963
Retained earnings 166,334 149,304165,520 163,416
Treasury stock, at cost (21,375(20,675 shares on 1/7/31/01,
and 21,075 on 4/30/00) (411) (411)01) (398) (406)
Accumulated other comprehensive income, net of tax 42,626 60,014
---------- ----------35,352 35,233
--------- ---------
Total shareholders' equity 210,508 210,866
---------- ----------202,441 200,206
--------- ---------
Total liabilities and shareholders' equity $286,013 $298,198
========== ==========$ 272,153 $ 270,992
========= =========
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
2
PARTPart I - FINANCIAL INFORMATION
ITEMFinancial Information
Item 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)
ThreeFor the three months
ended
Nine months ended
Jan.July 31, Jan.July 31,
2001 2000
2001 2000
-------- -------- -------- --------------- -------
Revenues:
Investment periodicals and
related publications $14,189 $14,421 $42,060 $43,821$13,330 $14,059
Investment management fees & svcs 10,767 9,644 33,124 27,490
-------- -------- -------- --------9,510 10,496
------- -------
Total revenues 24,956 24,065 75,184 71,311
-------- -------- -------- --------22,840 24,555
------- -------
Expenses:
Advertising and promotion 6,591 6,760 17,300 14,6685,591 5,152
Salaries and employee benefits 5,975 6,161 18,066 17,9565,884 6,019
Production and distribution 1,979 1,661 5,668 4,9732,079 1,808
Office and administration 2,275 2,397 6,646 6,511
-------- -------- -------- --------1,999 2,210
------- -------
Total expenses 16,820 16,979 47,680 44,108
-------- -------- -------- --------15,553 15,189
------- -------
Income from operations 8,136 7,086 27,504 27,2037,287 9,366
Income from securities transactions,trans., net 10,803 14,976 13,017 17,372
-------- -------- -------- --------266 1,191
------- -------
Income before income taxes 18,939 22,062 40,521 44,5757,553 10,557
Provision for income taxes 7,146 7,969 16,006 17,182
-------- -------- -------- --------2,954 4,332
------- -------
Net income $11,793 $14,093 $24,515 $27,393
======== ======== ======== ========$ 4,599 $ 6,225
======= =======
Earnings per share, basic & fully diluted $1.19 $1.41 $2.46 $2.75
======== ======== ======== ========$ 0.46 $ 0.62
======= =======
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
3
PARTPart I - FINANCIAL INFORMATION
ITEMFinancial Information
Item 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)Financial Statements
Value Line, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the ninethree months
ended
JanJuly 31, Jan.July 31,
2001 2000
--------- ----------------- --------
Cash flows from operating activities:
Net income $24,515 $27,393$ 4,599 $ 6,225
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,416 1,828761 802
Gains on sales of trading securities and
securities held for sale (10,600) (12,964)(215) (716)
Unrealized losses/(gains)losses on trading securities 1,647 (1,327)
Writedown of equipment 161 3703 647
Changes in assets and liabilities:
Decrease in unearned revenue (3,009) (4,478)(516) (1,964)
Decrease in deferred charges (208) (208)
(Decrease)/increase(70) (69)
Decrease in accounts payable and accrued expenses (968) 2,869(1,295) (917)
Decrease in accrued salaries (175) (317)(876) (808)
Increase in accrued taxes payable 1,895 3,813
Increase1,618 3,059
Decrease in prepaid expenses and other current assets (128) (1,004)
Decrease/(increase)705 90
Decrease in accounts receivable 229 (157)337 312
Increase in receivable from affiliates (203) (557)
--------- ---------(205) (712)
-------- --------
Total adjustments (8,943) (12,499)
--------- ---------947 (276)
-------- --------
Net cash provided by operations 15,572 14,8945,546 5,949
Cash flows from investing activities:
Proceeds from sales of long term securities 35,075 11,528-- 24,572
Purchases of long term securities (34,348) (14,416)(42) (1,267)
Proceeds from sales of trading securities 30,543 20,8702,954 11,113
Purchases of trading securities (36,004) (22,019)
Acquisitions(20,400) (11,111)
Acquisition of property, and equipment (580) (553)(18) (91)
Expenditures for capitalized software (809) (979)
--------- ---------(99) (411)
-------- --------
Net cash used in(used in)/provided by investing activities (6,123) (5,569)(17,605) 22,805
Cash flows from financing activities:
Proceeds from sales of treasury stock 12 --
Dividends paid (7,485) (7,484)
--------- ---------(2,494) (2,495)
-------- --------
Net cash used in financing activities (7,485) (7,484)
--------- ---------(2,482) (2,495)
-------- --------
Net (decrease)/increase in cash and cash equivalents 1,964 1,841(14,541) 26,259
Cash and cash equivalents at beginning of periodyear 86,424 47,933
41,826
--------- ----------------- --------
Cash and cash equivalents at end of period $49,897 $43,667
========= =========$ 71,883 $ 74,192
======== ========
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
4
PARTPart I - FINANCIAL INFORMATION
ITEMFinancial Information
Item 1. FINANCIAL STATEMENTSFinancial Statements
VALUE LINE, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS'STOCKHOLDERS' EQUITY
FOR THE NINETHREE MONTHS ENDED JANUARYJULY 31, 20002001
(in thousands, except share amounts)
(UNAUDITED)(unaudited)
Common stock
Accumulated
Number Additional Other
Total
of paid-in Treasury Comprehensive Retained Comprehensive Shareholders'
shares Amount capital Stock income earnings income EquityTotal
--------- ------ ---------- -------- ------------- -------- ------------- ---------------------- --------- --------- --------- --------- --------- ---------
Balance at May 1, 2001 9,978,925 $ 1,000 $ 963 ($ 406) $ 163,416 $ 35,233 $ 200,206
Comprehensive income
Net income $ 4,599 4,599 4,599
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities 119 119 119
---------
Comprehensive income $ 4,718
=========
Exercise of stock options 400 4 8 12
Dividends declared (2,495) (2,495)
--------- --------- --------- --------- --------- --------- ---------
Balance at July 31, 2001 9,979,325 $ 1,000 $ 967 ($ 398) $ 165,520 $ 35,352 $ 202,441
========= ========= ========= ========= ========= ========= =========
The accompanying notes 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 THREE MONTHS ENDED JULY 31, 2000
(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 $210,866$ 149,304 $ 60,014 $ 210,866
Comprehensive income
Net income $24,515 24,515 24,515$ 6,225 6,225 6,225
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities (17,388) (17,388) (17,388)
-------------(1,413) (1,413) (1,413)
---------
Comprehensive income $7,127
=============$ 4,812
=========
Dividends declared (7,485) (7,485)(2,495) (2,495)
--------- ------ ---------- -------- -------- ------------- ---------------------- --------- --------- --------- --------- ---------
Balance at JanuaryJuly 31, 20012000 9,978,625 $1,000 $959$ 1,000 $ 959 ($411) $166,334 $42,626 $210,508$ 153,034 $ 58,601 $ 213,183
========= ====== ========== ======== ======== ============= ====================== ========= ========= ========= ========= =========
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 SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 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 Equity
--------- ------ ---------- -------- ------------- -------- ------------- -------------
Balance at May 1, 1999 9,978,625 $1,000 $959 ($411) $125,585 $39,770 $166,903
Comprehensive income
Net income $27,393 27,393 27,393
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities 14,020 14,020 14,020
-------------
Comprehensive income $41,413
=============
Dividends declared (7,484) (7,484)
--------- ------ ---------- -------- -------- ------------- -------------
Balance at January 31, 2000 9,978,625 $1,000 $959 ($411) $145,494 $53,790 $200,832
========= ====== ========== ======== ======== ============= =============
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
275 Madison Avenue
New York, NY 10016
Telephone: (212) 532-3736
Facsimile: (212) 545-8997
E-mail: cpaz@horowitz-ullmann.com
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Value Line, Inc.
New York, New York
We have reviewed the accompanying consolidated balance sheet of Value Line, Inc.
and its subsidiaries as of July 31, 2001 and the related consolidated statements
of income, changes in stockholders' equity, and cash flows for the three month
periods ended July 31, 2001 and 2000. 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, 2001 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 12, 2001, 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, 2001 is fairly stated in
all material respects.
September 14, 2001
7
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES - NOTE 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,
200030,
2001 for the fiscal year ended April 30, 2000.2001. 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 heldhold 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 JanuaryJuly 31, 2001 and April 30, 2000,2001, cash
equivalents included $49,314,000$71,122,000 and $46,726,000,$86,011,000, 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.
78
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARKETABLE SECURITIES - NOTE 2:
Trading Securities:
Securities held by the Company and by Value Line Securities, Inc. had an
aggregate cost of $21,441,000$32,770,000 and $15,821,000$14,981,000 and a market value of $23,014,000$32,318,000
and $19,044,000$15,360,000 at JanuaryJuly 31, 2001 and April 30, 2000,2001, respectively.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $127,857,000$94,617,000 and $118,135,000$94,579,000
and the market value was $193,435,000$149,009,000 and $210,468,000$148,784,000 at JanuaryJuly 31, 2001 and
April 30, 2000,2001, respectively. At JanuaryJuly 31, 2001, the decreaseincrease in gross
unrealized appreciation on these securities of $26,751,000,$183,000, net of deferred taxes
of $9,363,000,$64,000, was included in shareholders' equity. The Company received
gross proceeds of $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 - NOTE 3:
Cash payments for income taxes were $14,111,000$1,330,000 and $13,827,000$1,273,000 during the ninethree
months ended JanuaryJuly 31, 2001 and 2000, respectively.
EMPLOYEES' PROFIT SHARING AND SAVINGS PLAN - NOTE 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 was $345,000, for
each of the nine monthsthree month periods ended JanuaryJuly 31, 2001 and 2000, was $1,035,000 and $879,000, respectively.
89
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
COMPREHENSIVE INCOME - NOTE 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 JanuaryJuly 31, 2001 and 2000, the Company held long term securities classified
as available-for-sale. The decrease during the first three months ended July
31, 2001 in gross unrealized gains on these securities during the nine months ended January 31, 2001 and the related
deferred taxes was $26,751,000$183,000 and $9,363,000,$64,000, respectively. The increasedecrease during
the first nine monthsquarter of fiscal 2000 in gross unrealized gains on these
securities and the related deferred taxes was $21,570,000$2,173,000 and $7,550,000,$760,000,
respectively.
RELATED PARTY TRANSACTIONS - NOTE 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 threethirteen 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 ninethree months ended JanuaryJuly 31, 2001 and January 31, 2000 investment
management fees, 12b-1 service and distribution fees and brokerage commission
income, net of clearing fees, amounted to $30,682,000$8,925,000 and $24,656,000,$9,554,000,
respectively. These amounts include service and distribution fees of
$4,742,000$1,693,000 and $556,000,$860,000, respectively. The related receivables from the funds
for management advisory fees and 12b-1 service fees included in Receivablereceivable
from affiliates were $3,170,000$2,812,000 and $2,972,000$2,697,000 at JanuaryJuly 31, 2001 and April 30,
2000,2001, respectively.
For the ninethree months ended JanuaryJuly 31, 2001 and 2000, the Company was reimbursed
$389,000$146,324 and $387,000,$143,508 respectively, for payments it made on behalf of and
services it provided to Arnold Bernhard and Company, Inc. ("Parent"). At JanuaryJuly
31, 2001 and April 30, 2000, Receivable2001, receivable from Affiliatesaffiliates included a receivable
from the Parent of $51,000$45,000 and $44,000,$46,000, respectively. For the ninethree months ended
JanuaryJuly 31, 2001 and July 31, 2000, the Company made federal income tax payments to
the Parent amounting to $11,450,000$250,000 and $10,900,000,$300,000, respectively.
910
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FEDERAL, STATE AND LOCAL INCOME TAXES - NOTE 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:
NineThree months ended JanuaryJuly 31,
2001 2000
------------------------------------------------------------
(in thousands)
Current:
Federal $14,004 $14,036$2,692 $ 3,662
State and local 2,537 2,501
-----------------------------
16,541 16,537507 883
-------------------------------
3,199 4,545
Deferred:
Federal (519) 680(246) (215)
State and local (16) (35)
-----------------------------
(535) 645
-----------------------------
$16,006 $17,182
=============================1 2
-------------------------------
(245) (213)
-------------------------------
$ 2,954 $ 4,332
===============================
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 SEGMENTS - NOTE 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.
1011
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Disclosure of Reportable Segment Profit and Segment Assets
(in thousands)
Nine months ended JanuaryJuly 31, 2001
Publishing Investment Total
Management
Services
Revenues from external customers $42,060 $33,124 $75,184$ 13,330 $ 9,510 $ 22,840
Intersegment revenues 10117 -- 10117
Income from securities transactions 216 12,801 13,01741 225 266
Depreciation andend amortization 2,308 61 2,369731 16 747
Segment profit 11,652 15,900 27,5523,511 3,790 7,301
Segment assets 20,007 265,388 285,39519,143 251,876 271,019
Expenditures for segment assets 1,280 100 1,380112 5 117
Nine months ended JanuaryJuly 31, 2000
Publishing Investment Total
Management
Services
Revenues from external customers $43,821 $27,490 $71,311$14,059 $ 10,496 $ 24,555
Intersegment revenues 3515 -- 3515
Income from securities transactions 188 17,184 17,37265 1,126 1,191
Depreciation and amortization 1,725 50 1,775770 17 787
Segment profit 14,468 12,788 27,2564,112 5,269 9,381
Segment assets 20,940 264,952 285,89220,891 277,507 298,398
Expenditures for segment assets 1,530 2 1,532311 90 401
1112
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reconciliation of Reportable Segment Revenues,
Operating Profit and Assets
(in thousands)
Nine months ended January 31,
2001 2000
-----------------------------
Revenues
Total revenues for reportable segments $75,285 $71,346$ 22,957 $ 24,570
Elimination of intersegment revenues (101) (35)
-----------------------------(17) (15)
-------------------------
Total consolidated revenues $75,184 $71,311
=============================$ 22,840 $ 24,555
=========================
Segment profit
Total profit for reportable segments $40,569 $44,628$ 7,567 $ 10,572
Less: Depreciation related to corporate assets (48) (53)
-----------------------------(14) (15)
-------------------------
Income before income taxes $40,521 $44,575
=============================$ 7,553 $ 10,557
=========================
Assets
Total assets for reportable segments $285,395 $285,892$ 271,019 $ 298,398
Corporate assets 618 1,073
-----------------------------1,134 658
-------------------------
Consolidated total assets $286,013 $286,965
=============================$ 272,153 $ 299,056
=========================
12
HOROWITZ & ULLMANN, P.C.
Certified Public Accountants
275 Madison Avenue
A member of the New York, NY 10016
AICPA SEC Practice Section Telephone: (212) 532-3736
New York State Society of CPA's Facsimile: (212) 545-8997
E-mail: cpas@horowitz-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 January 31, 2001 and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
nine month periods ended January 31, 2001 and 2000. 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.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")The Company had liquid resources, which are used in its business, of
$259,745,000$249,054,000 at JanuaryJuly 31, 2001. In addition to $66,310,000$100,045,000 of working capital,
the Company had long-term securities available for sale with a market value of
$193,435,000,$149,009,000, that, although classified as non-current assets, are also readily
marketable should the need arise.
The Company's cash flow from operations of $15,572,000$5,546,000 for the ninethree months ended
JanuaryJuly 31, 2001 was 5% higher7% lower than fiscal 2000's2001's cash flow of $14,894,000.$5,949,000. The
increasedecrease was primarily due to a 38% increasethe decline in operating income that resulted from
the substantial decline in the financial markets offset partially by the slow
down in the unearned revenue decline that resulted from new full term subscription sales
orders. Net cash outflows from investing activities during the first ninethree
months of fiscal 20012002 were $554,000 higher than net cash outflows for the first nine
months$17,605,000 primarily as a result of fiscal 2000 due largely to the Company's
decision to realignre-deploy its long-term securitiescash holdings and invest additional funds in itsinto the Company's trading portfolio.portfolio
utilizing varied investment strategies.
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 2001.2002.
RESULTS OF OPERATIONS:
Revenues of $75,184,000 and $24,956,000$22,840,000 for the three months ended July 31, 2001 ranked the
fifth highest during any first nine monthsquarter period and third
quarter ofwere 7% below those during the
same period last fiscal year 2001 set new record highsyear. Net income for the Company and exceeded
last year's revenues by 5% and 4%, respectively.three months ended July 31,
2001 of $4,599,000, or $.46 per share compares to net income of $6,225,000, or
$.62 per share for the three months ended July 31, 2000. Operating income of
$27,504,000$7,287,000 for the ninethree months ended JanuaryJuly 31, 2001, was 1% higher thancompares to operating
income of $27,203,000$9,366,000 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 net income of $27,393,000, or $2.75 per share.
Total assets at January 31, 2001 of $286,013,000 were approximately equal to the
total assets at January 31, 2000. However, shareholders' equity increased 5% to
$210,508,000 during the same period.
Subscription revenues of $42,060,000$13,330,000 were 4%5% below revenues of the same
period of the prior fiscal year. The decrease in subscription revenues
compared to the prior year is due
primarily to a 5% net decreaseresult of a 6% combined decline in revenues
from THE VALUE LINE INVESTMENT SURVEY and related products, which includes THE VALUE LINE INVESTMENT SURVEY FOR
WINDOWS, CONDENSED, EXPANDED EDITION AND V.L. SELECT. The decreasechange in
publicationsubscription revenues is largelyprimarily attributable to the continued difficult
financial market conditions that investors face, with the NASDAQ index
falling 46% during the past 12 months. In turn, demand for the Company's
investment publications has been restrained. Recently, the Company
experienced a resultmarked turnaround in subscription activity as our promotional
campaigns have been well received, with total new subscription orders
increasing over 24% from the first quarter of the reduced level of advertising
during lastprior 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 is believed to have had a negative impact on
revenue growth.year.
Investment management fees and services revenues of $33,124,000$9,510,000 for the ninethree
months ended JanuaryJuly 31, 2001, were 20% above9% below the prior fiscal year's revenues.
The increasedecline in revenues fromthe financial markets is also the primary reason for the lower
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 two
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 netservices. Average assets under management in
the Company's mutual funds contributed towere 9% below the higher investment
advisory fees.prior year's average net assets.
Operating expenses for the ninethree months ended JanuaryJuly 31, 2001 of $47,680,000$15,553,000 were
8%2% higher than last year's expenses of $44,108,000. Total company-wide
advertising and promotional$15,189,000. The increase in expenses
of $17,300,000 were 18% aboveover the prior year's expenses. When comparedyear was primarily attributable to additional advertising
expenses for the prior year,mutual funds which Value Line is the advisor. The increase in
mutual fund marketing expenses was partially offset by a significant decrease in
media advertising,
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ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS:
expenses increased 3% for THE VALUE LINE INVESTMENT SURVEY and related products,
and a 42% increase inincluding television advertising expenses for the Value Line mutual funds,
includingCompany's publications. The United
States Postal Service raised postage rates approximately 10% and 2% effective
January 1, 2001 and July 1, 2001, respectively, which has increased both direct
mail marketing and product distribution expenses relating to a selling arrangement for two ofduring the Company's
equity mutual funds. Additionally, promotion fees to discount brokers for
attracting additional investments in the Value Line mutual funds increased
$400,000 based on the higher level of invested assets the mutual funds
experienced through these brokers.fiscal 2002.
Salaries and employee benefit expenses of $18,066,000$5,884,000 were 1% above2% below expenses of
$17,956,000$6,019,000 recorded in the prior fiscal year. The increase in salaries and employee benefit expenses is primarily
attributable to higher employee benefit expenses as compared to last fiscal
year. The increase is partially offset by lower expenses due to the outsourcing
of the Customer Service division and staff reductions in the Asset Management,
Y2K and data collection divisions. Production and distribution costs
for the first ninethree months of fiscalended July 31, 2001 of $5,668,000$2,079,000 were 14%15% above expenses
of $4,973,000$1,808,000 for the ninethree months ended JanuaryJuly 31, 2000. The increase in
production expenses resulted from thea reclassification, from administrative
expenses, of maintenance costs and amortization of new product development
costsexpenditures for THE
VALUE LINE INVESTMENT SURVEY FOR WINDOWS Version 3 and Version 2 of the Company's WebsiteWebsite. Additionally, expenses
associated with outsourcing a portion of the Company's stock and higher outsidemutual fund
data collection expensesservices and amortization of previously deferred costs for THE VALUE LINE
MUTUAL FUND SURVEY. These increases were partly offset by lower paper, printing
and distribution expenses relatedthe
development of computer software for internal use contributed to lowerthe higher
production runs for print
publications.expenses. Office and administrationadministrative expenses of $6,646,000$1,999,000 were 2% above10%
below last year's expenses of $6,511,000.$2,210,000. The increasenet decrease in administrative
expenses primarily resulted from the prior year is
primarily attributable toaforementioned reclassification of
maintenance expenses and amortization of software development costsexpenditures for
Value Line's Internet enhancements and maintenance and for the electronic subscription fulfillment
operation.site to production expenses.
The Company's securities portfolios produced income of $13,017,000$266,000 for the ninethree
months ended JanuaryJuly 31, 2001 compared to income of $17,372,000$1,191,000 during last fiscal year. The
Value Line trading portfolio produced a return similar to the
weighted average benchmark indices. However, thesteady decline in these financial
markets indicesthe valuation of equity securities that started at the
beginning of fiscal year 2001 and accelerated dramatically during the latter part of the third
quarter of fiscal 2001 as
compared to last fiscal year has continued during the first quarter of fiscal
2002. The decline in the financial markets resulted in trading losses that accounted for most
of the decrease in the income from securities transactions.Company's
trading portfolio of $488,000 during the three months ended July 31, 2001,
versus a gain of $128,000 during the same period of last fiscal year. Dividend
income from the Value Line mutual funds increased 38% fromwas 37% lower than the level during the
first ninethree months of fiscal 2000.2001.
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 JanuaryJuly 31,
2001 to be signed on its behalf by the undersigned thereunto duly authorized.
Value Line, Inc.
(Registrant)
Date: March 19,September 14, 2001 By: /s/s/ Jean Bernhard Buttner
--------------------------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: March 19,September 14, 2001 By: /s/s/ Stephen R. Anastasio
---------------------------------------------------------------
Stephen R. Anastasio
Chief Accounting Officer
Date: September 14, 2001 By: s/ David T. Henigson
----------------------------
David T. Henigson
Vice President and Treasurer
16