-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jfeuhv/AvtjTHVxBKlFoL13m4cUMqcbLXbFN5mOcnqx5ap7EQ+6rg8oNJ/g47cjE 0tY3eVk0lXgVmHLAktW1Qg== 0001047469-98-010058.txt : 19980317 0001047469-98-010058.hdr.sgml : 19980317 ACCESSION NUMBER: 0001047469-98-010058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980316 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALUE LINE INC CENTRAL INDEX KEY: 0000717720 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 133139843 STATE OF INCORPORATION: NY FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11306 FILM NUMBER: 98566572 BUSINESS ADDRESS: STREET 1: 220 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129071500 10-Q 1 10-Q 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 JANUARY 31, 1998 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 January 31, 1998 ----- ------------------------------- Common stock, $.10 par value 9,978,625 Shares
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) JAN. 31, APR. 30, ASSETS 1998 1997 CURRENT ASSETS: -------- -------- CASH AND CASH EQUIVALENTS (INCLUDING SHORT TERM INVESTMENTS OF $25,124 AND $15,476, RESPECTIVELY) $25,758 $16,083 TRADING SECURITIES 13,843 15,217 ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF $495 AND $593, RESPECTIVELY 1,350 2,603 RECEIVABLE FROM AFFILIATES 2,268 1,849 PREPAID EXPENSES AND OTHER CURRENT ASSETS 1,667 1,824 DEFERRED INCOME TAXES 1,205 1,205 -------- -------- TOTAL CURRENT ASSETS 46,091 38,781 LONG TERM SECURITIES AVAILABLE FOR SALE 129,399 108,115 PROPERTY AND EQUIPMENT, NET 12,800 13,370 GOODWILL 41 44 -------- -------- TOTAL ASSETS $188,331 $160,310 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES $5,908 $8,009 ACCRUED SALARIES 1,601 2,208 DIVIDENDS PAYABLE 2,495 2,495 ACCRUED TAXES PAYABLE 5,437 808 -------- -------- TOTAL CURRENT LIABILITIES 15,441 13,520 UNEARNED REVENUE 38,971 42,191 DEFERRED INCOME TAXES 9,711 6,982 DEFERRED CHARGES 1,044 1,253 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 959 954 RETAINED EARNINGS 104,910 83,194 TREASURY STOCK, AT COST (21,375 SHARES ON 1/31/98, 21,875 SHARES ON 4/30/97) (411) (421) UNREALIZED GAIN ON SECURITIES, NET OF TAXES 16,706 11,637 -------- -------- TOTAL SHAREHOLDERS' EQUITY 123,164 96,364 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $188,331 $160,310 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) THREE MONTHS ENDED NINE MONTHS ENDED JAN. 31, JAN. 31, 1998 1997 1998 1997 -------- -------- -------- -------- REVENUES: INVESTMENT PERIODICALS AND RELATED PUBLICATIONS $15,394 $15,872 $46,136 $46,478 INVESTMENT MANAGEMENT FEES & SVCS 8,130 7,699 24,279 21,897 SETTLEMENT OF DISPUTED SECURITIES TRANSACTIONS --- 196 --- 196 -------- -------- -------- -------- TOTAL REVENUES 23,524 23,767 70,415 68,571 -------- -------- -------- -------- EXPENSES: ADVERTISING AND PROMOTION 4,094 4,769 10,964 11,725 SALARIES AND EMPLOYEE BENEFITS 5,521 5,517 16,518 16,416 PRINTING, PAPER AND DISTRIBUTION 1,955 2,099 5,641 6,455 OFFICE AND ADMINISTRATION 2,070 2,967 5,966 7,115 -------- -------- -------- -------- TOTAL EXPENSES 13,640 15,352 39,089 41,711 -------- -------- -------- -------- INCOME FROM OPERATIONS 9,884 8,415 31,326 26,860 INCOME FROM SECURITIES TRANSACTIONS, NET 13,372 31,746 16,437 37,244 -------- -------- -------- -------- INCOME BEFORE INCOME TAXES 23,256 40,161 47,763 64,104 PROVISION FOR INCOME TAXES 8,930 15,048 18,563 24,626 -------- -------- -------- -------- NET INCOME $14,326 $25,113 $29,200 $39,478 RETAINED EARNINGS, AT BEGINNING OF PERIOD 93,078 206,707 83,194 196,834 DIVIDENDS DECLARED (2,494) (152,164) (7,484) (156,656) -------- -------- -------- -------- RETAINED EARNINGS, AT END OF PERIOD $104,910 $79,656 $104,910 $79,656 -------- -------- -------- -------- -------- -------- -------- -------- EARNINGS PER SHARE $1.44 $2.52 $2.93 $3.96 -------- -------- -------- -------- -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 3
PART I - FINANCIAL INFORMATION VALUE LINE, INC. ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) FOR THE NINE MONTHS ENDED JAN. 31, JAN. 31, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: -------- -------- NET INCOME $29,200 $39,478 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 1,186 1,064 ACCRETION OF DISCOUNT --- (224) GAINS ON SALES OF TRADING SECURITIES, SECURITIES HELD FOR SALE AND FUTURES CONTRACTS (13,919) (46,783) UNREALIZED (GAINS)/LOSSES ON TRADING SECURITIES (260) 14,348 WRITEDOWN OF GOODWILL --- 328 CHANGES IN ASSETS AND LIABILITIES: DECREASE IN UNEARNED REVENUE (3,220) (2,489) INCREASE IN DEFERRED CHARGES (209) (208) INCREASE/(DECREASE) IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES (2,027) 1,084 DECREASE IN ACCRUED SALARIES (607) (42) INCREASE IN INTEREST PAYABLE --- (63) DECREASE IN ACCRUED TAXES PAYABLE 4,629 8,933 DECREASE IN PREPAID EXPENSES AND OTHER CURRENT ASSETS 157 1,152 DECREASE IN ACCOUNTS RECEIVABLE 1,719 990 INCREASE IN RECEIVABLE FROM AFFILIATES (419) 36 -------- -------- TOTAL ADJUSTMENTS (12,970) (21,874) -------- -------- NET CASH PROVIDED BY OPERATIONS 16,230 17,604 CASH FLOWS FROM INVESTING ACTIVITIES: PROCEEDS FROM SALES OF SECURITIES 9,783 147,505 PURCHASES OF SECURITIES (11,289) (24,342) PROCEEDS FROM SALES OF TRADING SECURITIES 30,428 107,425 PURCHASES OF TRADING SECURITIES (27,395) (58,314) ACQUISITION OF PROPERTY, AND EQUIPMENT, NET (613) (2,061) -------- -------- NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 914 170,213 CASH FLOWS FROM FINANCING ACTIVITIES: PROCEEDS FROM SALES OF TREASURY STOCK 15 32 DIVIDENDS PAID (7,484) (156,156) REPAYMENT OF OBLIGATION UNDER REPURCHASE AGREEMENT --- (36,994) -------- -------- NET CASH (USED IN) FINANCING ACTIVITIES (7,469) (193,118) -------- -------- NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS 9,675 (5,301) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,083 31,752 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $25,758 $26,451 -------- -------- -------- --------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. 4 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 15, 1997 for the fiscal year ended April 30, 1997. 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 January 31, 1998 and April 30, 1997, cash equivalents included $23,663,000 and $13,815,000, 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. Financial Instruments with Off-Balance-Sheet Risk: In the normal course of business, the Company enters into exchange traded financial futures contracts as part of its trading securities portfolio. These contracts are intended to effectively manage the Company's financial equity holdings in accordance with its asset allocation model. The Company accounts for these instruments at market value, with gains and losses included in the Consolidated Statements of Income and Retained Earnings. 5 VALUE LINE, INC. NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARKETABLE SECURITIES - NOTE 2: - ------------------------------------ Trading Securities: Securities held by Value Line Securities, Inc. Had an aggregate cost of $12,067,000 and $13,702,000 and a market value of $13,843,000 and $15,217,000 at January 31, 1998 and April 30, 1997, respectively. Long-Term Securities Available for Sale: The aggregate cost of the long-term securities portfolio was $103,698,000 and $90,211,000 and the market value was $129,399,000 and $108,115,000 at January 31, 1998 and April 30, 1997, respectively. At January 31, 1998, the increase in gross unrealized appreciation on these securities of $7,798,000, net of the increase in deferred taxes of $2,729,000, was included in shareholders' equity. Supplemental Disclosure of Cash Flow Information - Note 3: - ------------------------------------------------------------------- Cash payments for income taxes were $13,934,000 and $9,971,000 during the nine months ended January 31, 1998 and 1997, respectively. Interest payments of $705,000 were remitted during the nine months of fiscal 1997. Financial Instruments with Off-Balance-Sheet Risk and Concentration of Credit Risk - Note 4: - -------------------------------------------------------------------- In the normal course of business, the Company enters into contractual commitments, principally financial futures contracts for securities indices. Financial futures contracts provide for the delayed delivery of financial instruments for which the seller agrees to make delivery at a specified future date, at a specified price or yield. The contract or notional amount of these contracts reflects the extent of involvement the Company has in these contracts. At January 31, 1998, the underlying notional value of such commitments was $1,868,000. The Company limits its credit risk associated with such instruments by entering exclusively into highly liquid, exchange traded futures contracts. 6 VALUE LINE, INC. NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS Estimated Fair Value of Financial and Derivative Instruments - Note 5: - ---------------------------------------------------------------------------- Statement of Accounting Standards No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments," requires disclosure of information regarding derivative instruments, which include financial index futures contracts. Derivative financial instruments held for trading purposes are reflected at fair value at January 31, 1998 and recorded as an asset or liability in the Consolidated Balance Sheets. The fair value of the asset at January 31, 1998 was $6,000 and the average fair value for the nine months ended January 31, 1998 was a liability of $312,000, respectively. Net realized and unrealized trading gains related to equity securities and mutual fund shares held aggregated $16,833,000 and $260,000, respectively, for the nine months ended January 31, 1998. Net trading losses related to derivative financial instruments used to reduce financial market exposure from the Company's equities securities holdings, amounted to $2,805,000 for the nine months ended January 31, 1998. Income from securities transactions of $16,437,000 is reflected net of derivative trading activity. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS: LIQUIDITY AND CAPITAL RESOURCES: Value Line, Inc. (the Company) has liquid resources which are used in its business of $160,049,000 at January 31, 1998. In addition to $30,650,000 in working capital, the Company has long-term securities available for sale with a market value of $129,399,000, that, although classified as non-current assets, are also readily marketable should the need arise. The Company's cash flow from operations of $16,230,000 decreased $1,374,000 from last year's level primarily as a result of the timing of the payment of invoices related to advertising and promotional expenses. Furthermore, cash flows from investing activities were $169,299,000 higher in the fiscal 1997 as a direct result of the receipt of proceeds from sales of mutual fund holdings in preparation of the special dividend paid in January 1997. 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 significant borrowing requirements during fiscal 1998. RESULTS OF OPERATIONS: Net income for the nine months ended January 31, 1998 of $29,200,000 or $2.93 per share was the third highest in the Company's history and compares to net income of $39,478,000 or $3.96 per share for the first nine months of fiscal 1997. Net income for the third quarter of fiscal 1998 of $14,326,000 or $1.44 per share was the second highest in the Company's history and compares to net income of $25,113,000 or $2.52 per share for the three months ended January 31, 1997. Both revenues and operating income for the nine months ended January 31, 1998 set new record highs for the Company. Revenues and operating income for the nine months ended January 31, 1998 exceeded the prior year's levels by 3% and 17%, respectively. Operating income for the three months ended January 31, 1998 also set a new record high for the Company and exceeded the prior year's level by 17%. Revenues of $70,415,000 for the nine months ended January 31, 1998 were $1,844,000 or 3% above the comparable results for fiscal 1997. Subscription revenues for the first nine months of fiscal 1998 of $46,136,000 were 1% below revenues for the comparable period of fiscal 1997, primarily a result of the reduction in fulfillment revenues from former third party clients of the Compupower Corporation. Revenues from The Value Line Investment Survey, including a 9% price increase that went into effect February 1, 1996 and revenues from related publications increased 3% from fiscal 1997's level. Revenues derived from investment management fees and services for the nine months ended January 31, 1998 of $24,279,000 were $2,382,000 or 11% above the level for the comparable period of fiscal 1997. The increase in revenues resulted primarily from an 8% increase in the average annual net assets under management in the Company's mutual funds. A portion of the appreciation in the value of the portfolios under management resulted from the rise in the financial markets. Assets under management in the Company's mutual funds at January 31, 1998 increased 7% from the levels at January 31, 1997. Expenses for the nine months ended January 31, 1998 were $39,089,000, 6% below last year's comparable level of $41,711,000. Advertising expenses of $10,764,000 were 6% below the prior year's level as a result of reduced levels of advertising for new products. Advertising for The Value Line Investment Survey family of products decreased 12% from the prior year's level because of a strategic reduction in advertising campaigns during uncertain financial market conditions. Promotional expenses for the Value Line Mutual Funds increased $971,000 from fiscal 1997's level. The increase in expenses relates primarily to a selling arrangement that became effective July 1, 1996 for two of the equity funds for which the Company is the advisor. Salary and employee benefit expenses of $16,518,000 were less than 1% above the prior year's level of $16,416,000 for the first nine months of fiscal 1998. The reduction in Compupower's staff as a result of the termination of services to third parties contributed to the stable level of expenses. Printing, paper and distribution expenses of $5,641,000 at January 31, 1998 declined $814,000 or 13% from expenses of $6,455,000 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS: for the comparable period of fiscal 1997 primarily due to the lower costs associated with production and distribution of the electronic products as compared with the print publications, an approximate 10% reduction in the cost of paper and the utilization of new technology that maximizes 2nd class discounts offered by the U.S. Postal Service. Office and administration expenses of $5,966,000 decreased $1,149,000 or 16% from the prior year's level. Part of the prior year's office and administrative expenses include professional fees relating to a lawsuit from which the Company won a $558,000 award during the fourth quarter of fiscal 1997 and non-recurring professional fees. Additionally, expenses for fiscal 1997 include a charge of $328,000 for the writedown of goodwill at the Company's fulfillment subsidiary resulting from a decision to restructure these operations. Administrative expenses for fiscal 1997 also include a negotiated settlement with the former landlord of the Company's headquarters' facility in which the Company received proceeds of $906,000. The Company's securities portfolios produced income from securities transactions for the nine months ended January 31, 1998 of $16,437,000 compared with $37,244,000 during the same period of last fiscal year. The primary cause for the decrease was the reduced levels of capital gains and dividend income from the Company's mutual fund holdings that resulted from the smaller size of those securities portfolios. The reduction in the portfolios resulted from the $15.00 per share special dividend distributed to all shareholders in January 1997 following the Company's achievement of record earnings during six of the last eight fiscal years. Also, the nine months of fiscal 1997 include $32,435,000 of capital gains of which $17,299,000 resulted from sales of the Company's long term mutual fund holdings in connection with the special dividend. 9 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 January 31, 1998 to be signed on its behalf by the undersigned thereunto duly authorized. VALUE LINE, INC. (Registrant) Date: March 16, 1998 By: /s/ Jean Bernhard Buttner ------------------------------ Jean Bernhard Buttner Chairman & Chief Executive Officer Date: March 16, 1998 By: /s/ Stephen R. Anastasio ------------------------------ Stephen R. Anastasio Chief Accounting Officer -10- EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND RETAINED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS APR-30-1998 MAY-01-1997 JAN-31-1998 25,758 13,843 4,113 (495) 0 46,091 19,536 (6,736) 188,331 15,441 0 0 0 1,000 122,164 188,331 46,136 70,415 0 39,089 0 0 0 47,763 18,563 29,200 0 0 0 29,200 2.93 2.93
-----END PRIVACY-ENHANCED MESSAGE-----