-----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, AAdMTXwMCtth/3Ozcrm4jGJ3LbPLb4hpBbaRkExHxgiF6qsQaR+7Nk/eIvAHhCo/ hY4DcP9wlOcRPcCFnVnBsA== 0001047469-04-028727.txt : 20040914 0001047469-04-028727.hdr.sgml : 20040914 20040914171205 ACCESSION NUMBER: 0001047469-04-028727 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040731 FILED AS OF DATE: 20040914 DATE AS OF CHANGE: 20040914 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: 1934 Act SEC FILE NUMBER: 000-11306 FILM NUMBER: 041030222 BUSINESS ADDRESS: STREET 1: 220 E 42ND ST CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2129071500 10-Q 1 a2143329z10-q.txt 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, 2004 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, 2004 ----- ---------------------------- Common stock, $.10 par value 9,981,600 Shares ----------------
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
JULY 31, APRIL 30, 2004 2004 ------------ ------------ Assets Current Assets: Cash and cash equivalents (including short term investments of $15,952 and $177,682, respectively) $16,595 $178,108 Trading securities 12,244 19,981 Receivable from clearing brokers -- 5,356 Accounts receivable, net of allowance for doubtful accounts of $39 and $40, respectively 2,238 1,842 Receivable from affiliates 2,577 2,920 Prepaid expenses and other current assets 1,642 1,911 Deferred income taxes 104 104 ------------ ------------ Total current assets 35,400 210,222 Long term securities available for sale 46,032 46,357 Property and equipment, net 6,418 6,545 Capitalized software and other intangible assets, net 3,593 3,800 ------------ ------------ TOTAL ASSETS $91,443 $266,924 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable, accrued expenses and other liabilities $2,418 $3,619 Accrued salaries 1,507 1,576 Dividends payable 2,495 177,172 Accrued taxes payable 3,028 422 ------------ ------------ Total current liabilities 9,448 182,789 Unearned revenue 39,155 40,871 Deferred income taxes 6,329 7,684 Deferred charges 282 282 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 991 991 Retained earnings 22,905 19,459 Treasury stock, at cost (18,400 shares on 7/31/04 and 4/30/04) (354) (354) Unrealized gain on securities, net of taxes 11,687 14,202 ------------ ------------ Total shareholders' equity 36,229 35,298 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $91,443 $266,924 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 31, JULY 31, 2004 2003 ------------ ------------ Revenues: Investment periodicals and related publications $13,146 $13,004 Investment management fees & svcs 8,095 7,914 ------------ ------------ Total revenues 21,241 20,918 ------------ ------------ Expenses: Advertising and promotion 5,366 5,597 Salaries and employee benefits 5,333 5,554 Production and distribution 2,172 2,220 Office and administration 2,125 1,975 ------------ ------------ Total expenses 14,996 15,346 ------------ ------------ Income from operations 6,245 5,572 Income from securities trans., net 3,360 2,539 ------------ ------------ Income before income taxes 9,605 8,111 Provision for income taxes 3,664 3,113 ------------ ------------ Net income $5,941 $4,998 ============ ============ Earnings per share, basic & fully diluted $0.60 $0.50 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE THREE MONTHS ENDED JULY 31, JULY 31, 2004 2003 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $5,941 $4,998 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 619 706 Gains on sales of trading securities and securities available for sale (4,038) (609) Unrealized (gains)/losses on trading securities 740 (726) Deferred income taxes (259) 254 Changes in assets and liabilities: Decrease in unearned revenue (1,716) (921) Decrease in deferred charges (21) (69) Decrease in accounts payable and accrued expenses (1,180) (36) Decrease in accrued salaries (69) (19) Increase in accrued taxes payable 2,865 1,706 Decrease in prepaid expenses and other current assets 269 332 (Increase)/decrease in accounts receivable (59) 115 (Increase)/decrease in receivable from affiliates 343 (190) ------------ ------------ Total adjustments (2,506) 543 ------------ ------------ NET CASH PROVIDED BY OPERATIONS 3,435 5,541 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of long term securities 6,500 2,094 Purchases of long term securities -- (1,033) Proceeds from sales of fixed income securities 5,019 44,178 Purchases of fixed income securities (6,475) (38,182) Proceeds from sales of trading securities 17,451 3,787 Purchases of trading securities (9,986) (10,144) Acquisition of property and equipment (66) (20) Expenditures for capitalized software (219) (181) ------------ ------------ NET CASH PROVIDED BY INVESTING ACTIVITIES 12,224 499 CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (177,172) (2,495) ------------ ------------ NET CASH USED IN FINANCING ACTIVITIES (177,172) (2,495) ------------ ------------ Net increase/(decrease) in cash and cash equivalents (161,513) 3,545 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 178,108 10,217 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $16,595 $13,762 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 4 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VALUE LINE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED JULY 31, 2004 (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 April 30, 2004 9,981,600 $1,000 $991 $(354) $19,459 $14,202 $35,298 Comprehensive income Net income $5,941 5,941 5,941 Other comprehensive income, net of tax: Change in unrealized gains on securities (2,515) (2,515) (2,515) --------------- Comprehensive income $3,426 =============== Dividends declared (2,495) (2,495) ----------- -------- ------------ ---------- ---------- --------------- --------- Balance at July 31, 2004 9,981,600 $1,000 $991 $(354) $22,905 $11,687 $36,229 =========== ======== ============ ========== ========== =============== =========
The accompanying notes are an integral part of these consolidated 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, 2003 (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 April 30, 2003 9,981,600 $1,000 $991 $(354) $183,768 $9,973 $195,378 Comprehensive income Net income $4,998 4,998 4,998 Other comprehensive income, net of tax: Change in unrealized gains on securities 1,052 1,052 1,052 --------------- Comprehensive income $6,050 =============== Dividends declared (2,495) (2,495) ----------- -------- ------------ ---------- ---------- --------------- --------- Balance at July 31, 2003 9,981,600 $1,000 $991 $(354) $186,271 $11,025 $198,933 =========== ======== ============ ========== ========== =============== =========
The accompanying notes are an integral part of these consolidated financial statements. 6 VALUE LINE, INC. NOTES TO THE CONSOLIDATED 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, 2004 for the fiscal year ended April 30, 2004. Results of operations covered by this report may not be indicative of the results of operations for the entire year. Cash and Cash Equivalents: For purposes of the Consolidated Statements of Cash Flows, the Company considers all cash held at banks and short term liquid investments with an original maturity of less than three months to be cash and cash equivalents. As of July 31, 2004 and April 30, 2004, cash equivalents included $14,252,000 and $122,319,000 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 and government debt securities, is accounted for in accordance with Statement of Financial Accounting Standards No.115, "Accounting for Certain Investments in Debt and Equity Securities". The securities are valued at market with unrealized gains and losses on these securities reported, net of applicable taxes, as a separate component of Shareholders' Equity. Realized gains and losses on sales of the long term securities are recorded in earnings on trade date and are determined on the identified cost method. Trading securities held by the Company are valued at market with 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 and common stock equivalents 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 Securities - Note 2: - ------------------------------------- Trading Securities: Securities held by the Company had an aggregate cost of $11,856,000 and a fair market value of $12,244,000 at July 31, 2004, and an aggregate cost of $18,854,000 and a fair market value of $19,981,000 at April 30, 2004. The proceeds from sales of trading securities during the first quarter of fiscal 2005, were $17,451,000 and the related gain on these sales was $468,000. The proceeds from sales of trading securities during the three months ended July 31, 2003 were $3,787,000 and the related gain on these sales was $209,000. Long-Term Securities: Equity Securities Available for Sale: The aggregate cost of the long term equity securities, which are primarily invested in the Value Line mutual funds, was $21,572,000 and the fair market value was $39,556,000 at July 31, 2004. The aggregate cost of the long term equity securities at April 30, 2004 was $24,502,000 and the fair market value was $46,356,000. For the three months ended July 31, 2004, the decrease in gross unrealized appreciation on these securities of $3,870,000, net of deferred taxes of $1,355,000, was included in shareholders' equity. During the first three months of fiscal 2005, the Company sold various securities from its long term equity securities portfolio. The proceeds from sales of equity securities were $6,500,000 and the related gain on these sales was $3,570,000. This compares to proceeds of $2,094,000 and the related loss of $6,000 on sales from the long term equity securities portfolio for the three months ended July 31, 2003. Government Debt Securities: The Company's investments in debt securities are available for sale and valued at fair market value. The aggregate cost and fair market value at July 31, 2004 for U.S. government debt securities portfolio classified as available for sale were as follows:
(IN THOUSANDS) HISTORICAL FAIR GROSS UNREALIZED MATURITY COST MARKET VALUE HOLDING LOSSES - ------------------------------------------------------------------------------------ Due in 1-2 years $6,476 $6,476 $0 ------------------------------------------------ Total investment in debt securities $6,476 $6,476 $0 ================================================
The aggregate cost and fair market value at April 30, 2004 for U.S. government debt securities portfolio classified as available for sale were as follows:
(IN THOUSANDS) HISTORICAL FAIR GROSS UNREALIZED MATURITY COST MARKET VALUE HOLDING GAINS - ------------------------------------------------------------------------------------ Due in 1-2 years $1 $1 $0 ------------------------------------------------ Total investment in debt securities $1 $1 $0 ================================================
The average yield on the U.S. Government debt securities held to maturity at July 31, 2004 and April 30, 2004 was 1.24% and 2.59%, respectively. Proceeds received from settlement of long-term fixed income securities sales of $5,019,000 during the first quarter ended July 31, 2004 were equal to the cost of the securities. Proceeds from sales of long-term fixed income securities during the three months ended July 31, 2003 were $44,178,000 and the related gain on sales was $406,000. 8 VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Supplemental Disclosure of Cash Flow Information - Note 3: - --------------------------------------------------------------------------- Cash payments for income taxes were $1,056,000 and $1,152,000 during the three months ended July 31, 2004 and 2003, 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. The estimated profit sharing plan contribution, which is included as an expense in salaries and employee benefits in the Consolidated Statement of Income was $360,000 for the three months ended July 31, 2004 and 2003. Comprehensive Income - Note 5: - ---------------------------------------------------- Statement no. 130 requires the reporting of comprehensive income in addition to net income from operations Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. At July 31, 2004 and 2003, the Company held long term equity and long term fixed income securities classified as available for sale. The change in valuation of these securities, net of deferred taxes has been recorded in the Company's Consolidated Balance Sheets. For the three months ended July 31, 2004, decreases in gross unrealized gains on these securities were $3,870,000 and the decreases in related deferred taxes were $1,355,000. The increases during the first three months of fiscal 2004 in gross unrealized gains on these securities and the related deferred taxes were $1,616,000 and $564,000, respectively. Related Party Transactions - Note 6: - ------------------------------------------- The Company acts as investment adviser and manager for fourteen 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 (rule 12b-1) from all but two of the fourteen mutual funds for which Value Line is the adviser. Effective September 18, 2002, the Company began receiving service and distribution fees under rule 12b-1 from the remaining two funds, for which Value Line, Inc. 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 three months ended July 31, 2004 and 2003, investment management fees, 12b-1 service and distribution fees and brokerage commission income, net of clearing fees, amounted to $7,777,000 and $7,527,000, respectively. These amounts include service and distribution fees of $2,417,000 and $2,362,000, respectively. The related receivables from the funds for management advisory fees and 12b-1 service fees included in Receivable from affiliates were $2,399,000 and $2,448,000 at July 31, 2004 and April 30, 2004, respectively. For the three months ended July 31, 2004 and 2003, the Company was reimbursed $159,000 and $134,000, respectively, for payments it made on behalf of and services it provided to Arnold Bernhard and Company, Inc. ("Parent"). At July 31, 2004 and April 30, 2004, Receivable from affiliates included a receivable from the Parent of $43,000 and $70,000 respectively. 9 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:
THREE MONTHS ENDED JULY 31, 2004 2003 ------------------------------- (IN THOUSANDS) Current: Federal $3,397 $2,364 State and local 526 495 ------------------------------- 3,923 2,859 Deferred: Federal (259) 265 State and local - (11) ------------------------------- (259) 254 ------------------------------- $3,664 $3,113 ===============================
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 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. 10 VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Disclosure of Reportable Segment Profit and Segment Assets (in thousands)
THREE MONTHS ENDED JULY 31, 2004 INVESTMENT MANAGEMENT PUBLISHING SERVICES TOTAL Revenues from external customers $13,146 $8,095 $21,241 Intersegment revenues 63 -- 63 Income from securities transactions 4 3,356 3,360 Depreciation and amortization 593 23 616 Segment operating profit 3,855 2,394 6,249 Segment assets 15,749 67,881 83,630 Expenditures for segment assets 285 -- 285
THREE MONTHS ENDED JULY 31, 2003 INVESTMENT MANAGEMENT PUBLISHING SERVICES TOTAL Revenues from external customers $13,004 $7,914 $20,918 Intersegment revenues 52 -- 52 Income from securities transactions 6 2,533 2,539 Depreciation and amortization 678 19 697 Segment operating profit 3,401 2,180 5,581 Segment assets 18,300 233,230 251,530 Expenditures for segment assets 201 -- 201
11 VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Reconciliation of Reportable Segment Revenues, Operating Profit and Assets (in thousands)
THREE MONTHS ENDED JULY 31, 2004 2003 Revenues Total revenues for reportable segments $21,304 $20,970 Elimination of intersegment revenues (63) (52) ------------------------------- Total consolidated revenues $21,241 $20,918 =============================== Segment profit Total profit for reportable segments $9,609 $8,120 Less: Depreciation related to corporate assets (4) (9) ------------------------------- Income before income taxes $9,605 $8,111 =============================== Assets Total assets for reportable segments $83,630 $251,530 Corporate assets 7,813 322 ------------------------------- Consolidated total assets $91,443 $251,852 ===============================
Contingencies - Note 9: - ----------------------- The Company commenced an action in New York Supreme Court against a small mutual fund company pertaining to a contemplated transaction. The Company is seeking damages in an unspecified amount. The Company was countersued for alleged damages in excess of $5,000,000. A related entity of the defendant in the New York action brought suit against the Company and certain Directors in Federal Court in Texas based on the same transaction. Although the ultimate outcome of the litigation is subject to the inherent uncertainties of any legal proceeding, based upon Counsel's analysis of the factual and legal issues and the Company's meritorious defenses, it is management's belief that the expected outcome of this matter will not have a material adverse effect on the Company's consolidated results of operations and financial condition. Special Dividend - Note 10: - --------------------------- On April 23, 2004, the Board of Directors of the Company declared a distribution from its Retained Earnings in the form of a special dividend of $17.50 per share or $174,678,000 to all shareholders of record as of May 7, 2004, which was paid on May 19, 2004. The purpose of the dividend was to return to all shareholders, in the form of cash, a significant portion of the earnings of the Company from its successful operations over the past number of years, at a time when shareholders could enjoy the present favorable tax rates on dividends. 12 Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES The Company had liquid resources, which were used in its business, of $71,984,000 at July 31, 2004. In addition to $25,952,000 of working capital, the Company has long-term securities with a market value of $46,032,000, that, although classified as non-current assets, are also readily marketable should the need arise. The Company's cash flow from operations of $3,435,000 for the three months ended July 31, 2004 was 38% lower than fiscal 2004's cash flow of $5,541,000. The decrease in cash flow from operations during the first quarter of fiscal 2005 was primarily a result of the timing of payments for certain marketing expenses, a decline in new publication orders, which resulted during volatile financial market and geopolitical conditions, and the contribution to the Company's profit sharing plan. Net cash inflows of $12,224,000 from investing activities during the first three months of fiscal 2005 resulted primarily from the redeployment of holdings in long term and trading equity securities to fixed income and cash securities. Cash outflows from financing activities of $177,172,000 reflect the Company's normal quarterly dividend of $.25 per share as well as a special $17.50 dividend paid to all shareholders on May 19, 2004. From time to time, the Company's Parent has purchased additional shares of Value Line, Inc. in the market when and as the Parent has determined it to be appropriate. As stated numerous times in the past, the public is reminded that the Parent may make additional purchases from time to time in the future. 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 2005. OPERATING RESULTS Net income for the three months ended July 31, 2004 of $5,941,000 or $0.60 per share was 19% above income of $4,998,000 or $0.50 per share in fiscal 2004. Operating income of $6,245,000 for the three months ended July 31, 2004 was 12% above operating income of $5,572,000 for the same period of the last fiscal year. Income from securities transactions for the first three months of fiscal 2005 was 32% above income for the same period of fiscal 2004. Revenues of $21,241,000 for the three months ended July 31, 2004 were 1.5% higher than revenues of $20,918,000 in the prior fiscal year. 13 Subscription revenues of $13,146,000 for the three months ended July 31, 2004 were 1% higher than revenues of $13,004,000 for the same period of the prior fiscal year. Revenues from all electronic publications as well as licensing fees were up 32% for the three months ended July 31, 2004 while revenues from all print products were down 6% compared to the last fiscal year. Investment management fees and services revenues of $8,095,000 for the three months ended July 31, 2004 were 2% above the prior fiscal year's revenues of $7,914,000. Operating expenses for the three months ended July 31, 2004 of $14,996,000 were 2% below the last fiscal year's expenses of $15,346,000. Total advertising and promotional expenses of $5,366,000 were 4% below the prior year's expenses of $5,597,000. Salaries and employee benefit expenses of $5,333,000 were 4% below expenses of $5,554,000 recorded in the prior fiscal year as a result of staff reductions primarily in the Asset Management and Mutual Fund Survey divisions. Production and distribution costs for the three months ended July 31, 2004 of $2,172,000 were 2% below expenses of $2,220,000 at July 31, 2003. The decline in expenses was primarily due to lower paper, printing and distribution costs that resulted from a migration in circulation from print to electronic versions of our products and management's decision to discontinue issuing print copies of the Reference Library to trial subscribers of THE VALUE LINE INVESTMENT SURVEY and THE VLIS SMALL AND MID-CAP STOCK EDITION. Office and administrative expenses of $2,125,000 were 8% above the prior fiscal year's expenses of $1,975,000. The net increase in administrative expenses was primarily due to higher rent expenses resulting from scheduled lease increases and increases in professional fees. These increases were partially offset by lower software licensing and hardware maintenance fees that resulted from renegotiating the vendors' pricing. The Company's securities portfolios produced a gain of $3,360,000 for the three months ended July 31, 2004 versus a gain of $2,539,000 for the same period of the last fiscal year. The Company's trading portfolio produced a loss of $279,000 during the three months ended July 31, 2004 versus gains of $934,000 during the same period of the last fiscal year. Income from securities transactions for the three months ended July 31, 2004 also included dividend and interest income of $66,000 and capital gains of $3,570,000 from sales of equity securities from the Company's long-term portfolio. This compares to dividend and interest income of $1,197,000 and capital gains of $401,000 from sales of securities from the Company's long-term portfolio for the same period of the last fiscal year. 14 Item 4. Disclosure Controls and Procedures (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Exchange Act Rule 13a - 15(e)), based on their evaluation of these controls and procedures as of the end of the period covered by this report, are appropriately designed to ensure that material information relating to the registrant is made known to such officers and are operating effectively. (b) The registrant's principal executive officer and principal financial officer have determined that there have been no changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 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 July 31, 2004 to be signed on its behalf by the undersigned thereunto duly authorized. Value Line, Inc. (Registrant) Date: September 14, 2004 By: s/Jean Bernhard Buttner ------------------------ Jean Bernhard Buttner Chairman & Chief Executive Officer Date: September 14, 2004 By: s/Stephen R. Anastasio ------------------------ Stephen R. Anastasio Chief Financial Officer Date: September 14, 2004 By: s/ David T. Henigson ------------------------ David T. Henigson Vice President and Treasurer 16 EX-31.(A) 2 a2143329zex-31_a.txt EX-31.(A) Exhibit 31 (a) CERTIFICATIONS I, Jean Bernhard Buttner, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Value Line, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 14, 2004 By: s/ Jean Bernhard Buttner ---------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer 1 EX-31.(B) 3 a2143329zex-31_b.txt EX-31.(B) Exhibit 31 (b) CERTIFICATIONS I, David T. Henigson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Value Line, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 14, 2004 By: s/David T. Henigson ---------------------------- David T. Henigson Vice President & Treasurer 1 EX-31.(C) 4 a2143329zex-31_c.txt EX-31.(C) Exhibit 31 (c) CERTIFICATIONS I, Stephen Anastasio, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Value Line, Inc; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 14, 2004 By: s/Stephen R. Anastasio ---------------------------- Stephen R. Anastasio Chief Financial Officer 1 EX-32 5 a2143329zex-32.txt EX-32 Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 In accordance with 18 U.S.C. Section 1350, the undersigned hereby certify, in the indicated capacities with respect to Value Line, Inc. (the "Issuer"), that the quarterly report on Form 10-Q for the quarter ended July 31, 2004 of the issuer fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the quarterly report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the issuer. This certification is not to be deemed to be filed pursuant to the Securities Exchange Act of 1934 and does not constitute a part of the quarterly report on Form 10-Q of the issuer accompanying this certification. Date: September 14, 2004 By: s/ Jean Bernhard Buttner ----------------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer Date: September 14, 2004 By: s/ David T. Henigson ----------------------------------- David T. Henigson Vice President & Treasurer Date: September 14, 2004 By: s/ Stephen R. Anastasio ----------------------------------- Stephen R. Anastasio Chief Financial Officer 1 -----END PRIVACY-ENHANCED MESSAGE-----