-----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, LfzeXn81ptmdNsPLpY18Py3qEDj9lgOo15FBAd8pjnzslHxppFtIXQjh96o1KAwH QlXERR8PxDU+HixKj8znMQ== 0001047469-98-034464.txt : 19980915 0001047469-98-034464.hdr.sgml : 19980915 ACCESSION NUMBER: 0001047469-98-034464 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19980914 SROS: NASD 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: 98708766 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 JULY 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 July 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)
July 31, April 30, 1998 1998 ---------- ---------- Assets Current Assets: Cash and cash equivalents (including short term investments of $34,430 and $29,072, respectively) $35,073 $29,937 Trading securities 7,815 8,861 Accounts receivable, net of allowance for doubtful accounts of $540 and $507, respectively 2,318 1,287 Receivable from affiliates 2,480 2,339 Prepaid expenses and other current assets 1,457 1,688 Deferred income taxes 1,444 1,444 ---------- ---------- Total current assets 50,587 45,556 Long term securities available for sale 146,368 149,277 Property and equipment, net 12,470 12,651 Goodwill 40 41 ---------- ---------- Total assets $209,465 $207,525 ---------- ---------- ---------- ---------- Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $5,758 $7,170 Accrued salaries 984 1,764 Dividends payable 2,495 2,495 Accrued taxes payable 3,959 347 ---------- ---------- Total current liabilities 13,196 11,776 Unearned revenue 43,322 42,543 Deferred income taxes 13,823 15,294 Deferred charges 906 975 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 112,406 108,392 Treasury stock, at cost (21,375 shares on 7/31/98, and 4/30/98) (411) (411) Unrealized gain on securities, net of taxes 24,264 26,997 ---------- ---------- Total shareholders' equity 138,218 136,937 ---------- ---------- Total liabilities and shareholders' equity $209,465 $207,525 ---------- ---------- ---------- ----------
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 (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
For the three months ended July 31, July 31, 1998 1997 ---------- ---------- Revenues: Investment periodicals and related publications $15,597 $15,433 Investment management fees & svcs 8,541 7,737 Gain on disposal of operating facility 518 --- ---------- ---------- Total revenues 24,656 23,170 ---------- ---------- Expenses: Advertising and promotion 3,531 3,154 Salaries and employee benefits 5,973 5,321 Printing, paper and distribution 1,871 1,776 Office and administration 2,246 1,944 ---------- ---------- Total expenses 13,621 12,195 ---------- ---------- Income from operations 11,035 10,975 Income from securities trans., net 142 1,903 ---------- ---------- Income before income taxes 11,177 12,878 Provision for income taxes 4,668 5,067 ---------- ---------- Net income $6,509 $7,811 ---------- ---------- ---------- ---------- Earnings per share, basic & fully diluted $0.65 $0.78 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these financial statements. 3 VALUE LINE, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE THREE MONTHS ENDED JULY 31, 1998 (in thousands, except share amounts)
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, 1998 9,978,625 $1,000 $959 ($411) $108,392 $26,997 $136,937 Comprehensive income Net income $6,509 6,509 6,509 Other comprehensive income, net of tax: Change in unrealized gains on securities (2,733) (2,733) (2,733) ------------- Comprehensive income $3,776 ------------- ------------- Dividends declared (2,495) (2,495) ----------- -------- ---------- ---------- ---------- ------------- ---------- Balance at July 31, 1998 9,978,625 $1,000 $959 ($411) $112,406 $24,264 $138,218 ----------- -------- ---------- ---------- ---------- ------------- ---------- ----------- -------- ---------- ---------- ---------- ------------- ----------
The accompanying notes are an integral part of these financial statements. 4 VALUE LINE, INC. STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY FOR THE THREE MONTHS ENDED JULY 31, 1997 (in thousands, except share amounts)
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, 1997 9,978,125 $1,000 $954 ($421) $83,194 $11,637 $96,364 Comprehensive income Net income $7,811 7,811 7,811 Other comprehensive income, net of tax: Change in unrealized gains on securities 12,612 12,612 12,612 ------------- Comprehensive income $20,423 ------------- ------------- Exercise of stock options 500 5 10 15 Dividends declared (2,495) (2,495) ----------- -------- ---------- ---------- ---------- ------------- ---------- Balance at July 31, 1997 9,978,625 $1,000 $959 ($411) $88,510 $24,249 $114,307 ----------- -------- ---------- ---------- ---------- ------------- ---------- ----------- -------- ---------- ---------- ---------- ------------- ----------
The accompanying notes are an integral part of these financial statements. 5 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
For the three months ended July 31, July 31, 1998 1997 ---------- ---------- Cash flows from operating activities: Net income $6,509 $7,811 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 407 404 Losses on sales of trading securities 295 1,143 Unrealized (gains)/losses on trading securities 235 (2,578) Gain on sale of operating facility (518) -- Changes in assets and liabilities: Increase/(decrease) in unearned revenue 779 (1,867) Decrease in deferred charges (69) (70) Decrease in accounts payable and accrued expenses (1,412) (1,003) Increase/(decrease) in accrued salaries (780) 521 Increase in accrued taxes payable 3,612 4,062 (Increase)/decrease in prepaid expenses and other current assets 231 (79) (Increase)/decrease in accounts receivable (1,031) 391 Increase in receivable from affiliates (141) (261) ---------- ---------- Total adjustments 1,608 663 ---------- ---------- Net cash provided by operations 8,117 8,474 Cash flows from investing activities: Purchases of long term securities (1,295) (213) Proceeds from sales of trading securities 2,461 8,713 Purchases of trading securities (1,945) (10,616) Acquisitions of property, and equipment, net (284) (254) Proceeds from sale of operating facility 577 -- ---------- ---------- Net cash (used in) investing activities (486) (2,370) Cash flows from financing activities: Proceeds from sale of treasury stock -- 15 Dividends paid (2,495) (2,495) ---------- ---------- Net cash (used in) financing activities (2,495) (2,480) ---------- ---------- Net increase in cash and cash equivalents 5,136 3,624 Cash and cash equivalents at beginning of period 29,937 16,083 ---------- ---------- Cash and cash equivalents at end of period $35,073 $19,707 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these financial statements. 6 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, 1998 for the fiscal year ended April 30, 1998. 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 July 31, 1998 and April 30, 1998, cash equivalents included $33,124,000 and $28,283,000, 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. 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 CONDENSED FINANCIAL STATEMENTS MARKETABLE SECURITIES - Note 2: Trading Securities: Securities held by Value Line Securities, Inc. had an aggregate cost of $7,103,000 and $7,914,000 and a market value of $7,815,000 and $8,861,000 at July 31, 1998 and April 30, 1998, respectively. Long-Term Securities Available for Sale: The aggregate cost of the long-term securities was $109,038,000 and $107,743,000 and the market value was $146,368,000 and $149,277,000 at July 31, 1998 and April 30, 1998, respectively. At July 31, 1998, the decrease in gross unrealized appreciation on these securities of $4,204,000, net of deferred taxes of $1,471,000, was included in shareholders' equity. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NOTE 3: Cash payments for income taxes were $922,000 and $1,095,000 during the three months ended July 31, 1998 and 1997, respectively. OFF-BALANCE-SHEET RISK - NOTE 4: The Company executes, as agent, securities transactions on behalf of the Value Line mutual funds. If either the mutual funds or a counterparty fail to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the market value of the security is different from the contract value of the transaction. No single customer accounted for a significant portion of the Company's sales nor accounts receivables in fiscal 1999 or fiscal 1998. COMPREHENSIVE INCOME - NOTE 5: During the fiscal year 1999, the Company adopted FASB statement no. 130, Reporting Comprehensive Income. Statement no.130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. At July 31, 1998 and 1997, the Company held long term securities classified as available-for-sale. The decrease during the first quarter of fiscal 1999 in gross unrealized gains on these securities and the related deferred taxes was $4,204,000 and $1,471,000, respectively. The increase during the first three months of fiscal 1998 in gross unrealized gains on these securities and the related deferred taxes was $19,403,000 and $6,791,000, respectively. 8 VALUE LINE, INC. NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ESTIMATED FAIR VALUE OF FINANCIAL AND DERIVATIVE INSTRUMENTS - NOTE 6: 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. At July 31, 1998 and April 30, 1998, the Company held no financial derivative instruments. Net realized and unrealized trading losses related to equity securities aggregated $295,000 and $235,000, respectively, for the three months ended July 31, 1998. Income from securities transactions of $142,000 are reflected net of securities trading activity. GAIN ON SALE OF OPERATING FACILITY - NOTE 7: Pursuant to the Company's restructuring plan, the Company sold its idle North Bergen, New Jersey operating facility during May 1998 for which it received gross proceeds of $577,000. The gain on the sale of the operating facility is included in revenues in the Consolidated Statements of Income. 9 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: LIQUIDITY AND CAPITAL RESOURCES: Value Line, Inc. (the Company) has liquid resources which are used in its business of $183,759,000 at July 31, 1998. In addition to $37,391,000 in working capital, the Company has long-term securities available for sale with a market value of $146,368,000, that, although classified as non-current assets, are also readily marketable should the need arise. The Company's cash flow from operations of $8,474,000 for fiscal 1998 was $357,000 higher than fiscal 1999's primarily as a result of the timing of incentive compensation payments. Also, the net increase of unearned revenues from new business offset by the increase in accounts receivable that resulted from the efficiencies in order processing in the new fulfillment system during fiscal 1999 generated $1,224,000 in additional cash flow as compared to the change in these items in fiscal 1998. Cash outflows from investing activities during fiscal 1999 were $1,884,000 less than fiscal 1998's results due primarily to the receipt of $577,000 of proceeds from the sale of the Company's idle operating facility and a reduction in the Company's short term trading portfolio volume due to a re-deployment of certain trading portfolio assets to the long term securities portfolio during the latter part of fiscal 1998. The Company recognizes the need to ensure its computer systems and software applications are converted to a year 2000 date with no disruption to business operations. In light of this, the Company has established a central committee to coordinate, evaluate and implement changes necessary for compliance. Additionally, the Company is communicating with suppliers, financial institutions, and others with which it does business to ensure they are also compliant with the year 2000 date. Significant areas of operations which will be impacted have already been identified and conversion efforts are underway. The total cost of compliance and its effect on the Company's future results of operations are being determined as part of the detailed conversion planning. The cost, including routine hardware enhancements and modifications to software applications, is not expected to exceed $1,000,000. The Accounting Standards Committee of the AICPA recently issued Statement of Position ("SOP") 98-1 which requires entities to adopt uniform rules in their financial statements in accounting for the cost of computer software developed or obtained for internal use. The SOP requires companies to capitalize as long-lived assets many of the cost associated with developing or obtaining software for internal use and amortize those costs over the software's estimated useful life in a systematic and rational manner. Management estimates that the Company currently expenses approximately $2,000,000 of expenses each fiscal year that would qualify for amortization under the new statement. 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 the remainder of fiscal 1999. RESULTS OF OPERATIONS: Net earnings for the three months ended July 31, 1998, were $6,509,000, $.65 per share, compared to net earnings of $7,811,000, $.78 per share, for the three months ended July 31, 1997. Revenues exceeded the prior year's amounts by 6% and were the highest during any first quarter period in the history of the Company. Operating income for the first quarter of the 1999 fiscal year improved 1% from the similar period in the 1998 fiscal year and was also the highest level achieved during this period. Revenues of $24,656,000 for the three months of fiscal year 1999 were $1,486,000 above the comparable figures in fiscal year 1998. Subscription revenues of $15,597,000 through July 1998 were 1% above revenues of $15,433,000 in the comparable prior year period. The increase from the prior year is due primarily to a 2% increase in revenues from the Value Line Investment Survey and related products, including revenues from Value Line Select, which was introduced during March 1998. Investment management fees of $8,541,000 for the three months ended July 31, 1998, were $804,000, or 10%, above the prior year's revenues. The increase in revenues resulted primarily from an 13% increase in the average total net assets in the Company's mutual funds. Total net assets in the Company's mutual funds at 10 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: July 31, 1998, were 2% higher than the net asset balance at July 31, 1997. The Company also recorded revenues of $518,000 from the sale of its North Bergen, New Jersey, idle operating facility. Expenses for the first quarter of the 1999 fiscal year were $13,621,000, $1,426,000, or 12%, above last year's total costs of $12,195,000. Total advertising and promotional expenses of $3,531,000 were $377,000, or 12%, above the prior year's expenses. Promotional expenses for the Value Line Mutual Funds, including expenses relating to a selling arrangement for two of the equity mutual funds for which the Company is the advisor, were $315,000 above the prior year expenses. Salaries and employee benefit expenses of $5,973,000 compare to expenses of $5,321,000 recorded in the prior fiscal year period. The increase resulted primarily from increases in salaries and incentive compensation, revisions to the salary structure in the certain production departments, and increases in expenses for employee benefits. Printing, paper, and distribution costs of $1,871,000 increased 5% from the July 1997 fiscal year-to-date due primarily to increased Internet and other software development costs. Office and administration expenses of $2,246,000 increased $302,000, or 16%, from the prior year's expenses primarily as a result of increased fees for professional services and higher expenses for property rent and utilities. The Company's securities portfolios produced a net gain for the three months ended July 31, 1998, of $142,000, a decrease of $1,761,000 from last year's net income of $1,903,000. The net decline in earnings from the prior year was primarily due to the reduction in the size of the Company's trading portfolio during the latter part of fiscal 1998 and a general decline in the fair market value of the Company's securities portfolio versus the prior year, due to recent equity market volatility. 11 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 July 31, 1998 to be signed on its behalf by the undersigned thereunto duly authorized. Value Line, Inc. (Registrant) Date: September 14, 1998 By: /s/ Jean Bernhard Buttner ----------------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer Date: September 14, 1998 By: /s/ Stephen R. Anastasio ----------------------------------- Stephen R. Anastasio Chief Accounting Officer 12 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 July 31, 1998 to be signed on its behalf by the undersigned thereunto duly authorized. Value Line, Inc. (Registrant) Date: September 14, 1998 By: ----------------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer Date: September 14, 1998 By: ----------------------------------- Stephen R. Anastasio Chief Accounting Officer 13 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENT OF NET INCOME AND CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS APR-30-1999 JUL-31-1998 35,073 7,815 2,858 (540) 0 50,587 19,690 (7,220) 209,465 13,196 0 0 0 1,000 137,218 209,465 15,597 24,656 0 13,621 0 0 0 11,177 4,668 6,509 0 0 0 6,509 6,509 6,509
-----END PRIVACY-ENHANCED MESSAGE-----