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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended OctoberJanuary 31, 20022003 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 OCTOBERJANUARY 31, 2002
-----2003
- -------------------------------- --------------------------------
Common stock, $.10 par value 9,980,8009,981,600 Shares
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PART I --- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
OCT.JAN. 31, APRIL 30,
20022003 2002
------------ ------------
Assets
Current Assets:
Cash and cash equivalents (including short term investments
of $63,247$42,899 and $117,177, respectively) ....................... $ 63,67343,384 $117,401
Trading securities ............................................ 9041,093 3,624
Accounts receivable, net of allowance for doubtful accounts
of $83$89 and $73, respectively ................................. 2,4852,674 2,072
Receivable from affiliates .................................... 2,6042,567 2,467
Prepaid expenses and other current assets ..................... 1,2801,161 1,204
Deferred income taxes ......................................... 575 575
-------- --------
Total current assets ......................................... 71,52151,454 127,343
Long term securities available for sale ....................... 159,154.......................................... 182,090 129,044
Property and equipment, net ................................... 7,9467,636 8,491
Capitalized software and other intangible assets, net ......... 3,2893,041 3,857
-------- --------
Total assets ................................................. $241,910................................................... $244,221 $268,735
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities ...................... $ 2,3783,666 $ 3,681
Payable to clearing broker .................................... -- 10,803
Accrued salaries .............................................. 1,8061,605 1,859
Dividends payable ............................................. 2,495 2,495
Accrued taxes payable ......................................... 8411 28
-------- --------
Total current liabilities .................................... 6,7637,777 18,866
Unearned revenue .............................................. 38,00339,731 40,639
Deferred income taxes ......................................... 8,1006,488 13,225
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 .................................... 982991 975
Retained earnings ............................................. 176,294179,470 173,760
Treasury stock, at cost (19,200(18,400 shares on 10/1/31/02,03,
and 19,875 on 4/30/02) ...................................... (369)....................................... (354) (383)
Accumulated other comprehensive income, net of tax ............ 11,1379,118 20,653
-------- --------
Total shareholders' equity ................................... 189,044190,225 196,005
-------- --------
Total liabilities and shareholders' equity ................... $241,910..................... $244,221 $268,735
======== ========
The accompanying notes and independent auditor's review report 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)
(UNAUDITED)
THREE MONTHS ENDED SIXNINE MONTHS ENDED
OCTOBERJANUARY 31, OCTOBERJANUARY 31,
--------------------------- ---------------------------
2003 2002 20012003 2002 2001
------------ ------------ ------------ ------------
Revenues:
Investment periodicals and related
publications .................................... $ 13,13913,352 $ 13,17813,189 $ 26,24339,595 $ 26,50839,697
Investment management fees & svcs ................ 7,247 8,599 14,648 18,1097,801 8,431 22,449 26,540
-------- -------- -------- --------
Total revenues .................................. 20,386 21,777 40,891 44,61721,153 21,620 62,044 66,237
-------- -------- -------- --------
Expenses:
Advertising and promotion ........................ 4,647 4,496 10,002 10,0875,483 5,438 15,485 15,525
Salaries and employee benefits ................... 4,973 5,886 10,675 11,7705,274 5,771 15,949 17,541
Production and distribution ...................... 2,437 2,185 4,837 4,2642,299 2,088 7,136 6,352
Office and administration ........................ 1,950 1,920 4,023 3,9192,199 2,008 6,222 5,927
-------- -------- -------- --------
Total expenses .................................. 14,007 14,487 29,537 30,04015,255 15,305 44,792 45,345
-------- -------- -------- --------
Income from operations ............................ 6,379 7,290 11,354 14,5775,898 6,315 17,252 20,892
Income from securities transactions, net .......... 1,459 2,169 1,518 2,4351,810 3,074 3,328 5,509
-------- -------- -------- --------
Income before income taxes ........................ 7,838 9,459 12,872 17,0127,708 9,389 20,580 26,401
Provision for income taxes ........................ 3,314 3,944 5,348 6,8982,037 3,771 7,385 10,669
-------- -------- -------- --------
Net income ...................................... $ 4,5245,671 $ 5,5155,618 $ 7,52413,195 $ 10,11415,732
======== ======== ======== ========
Earnings per share, basic & fully diluted ......... $ 0.450.57 $ 0.550.56 $ 0.751.32 $ 1.011.58
======== ======== ======== ========
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
FOR THE SIXNINE MONTHS ENDED
--------------------------
OCT.---------------------------
JAN. 31, OCT.JAN. 31,
2003 2002
2001
------------------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................... $ 7,52413,195 $ 10,11415,732
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .......................................... 1,629 1,527......................................... 2,372 2,263
Amortization of bond premiumspremium .......................................... 2352 --
Losses/(gains)Gains on sales of trading securities and securities held for sale ......................................................... 291 (1,365)..... (379) (3,641)
Unrealized losses on trading securities ................................ 125 386
Loss on disposal of equipment ......................................................................... 129 398
Deferred income taxes ................................................. (525) --
Other ................................................................. -- 6
Changes in assets and liabilities:
Decrease in unearned revenue ........................................... (2,636) (3,071).......................................... (908) (398)
Decrease in deferred charges ........................................... (139) (139)
Decrease.......................................... (207) (207)
Increase/(decrease) in accounts payable and accrued expenses ...................... (1,164) (830).......... 192 (730)
Decrease in accrued salaries ........................................... (53) (534)
Increase.......................................... (254) (312)
Decrease in accrued taxes payable ...................................... 56 2,541
(Increase)/decreasein..................................... (17) (171)
Decrease in prepaid expenses and other current assets ........ (76) 618................. 43 468
(Increase)/decrease in accounts receivable ............................. (413) 677............................ (602) 487
(Increase)/decrease in receivable from affiliates ...................... (137) 170
---------..................... (100) 166
---------- ---------
Total adjustments ...................................................... (2,494) (14)
---------.................................................. (204) (1,671)
---------- ---------
NET CASH PROVIDED BY OPERATIONS .......................................... 5,030 10,10012,991 14,061
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of long term securities ............................. 40,169 49,90319,595 52,191
Purchases of long term securities ....................................... (4,108) (82)
Purchases(4,772) (28,792)
Proceeds from sales of securities held to maturity ................................ (91,109)...................... 50,526 --
Purchase of securities held to maturity ................................. (145,717) --
Proceeds from sales of trading securities ............................... 2,935 31,7253,536 31,726
Purchases of trading securities ......................................... (1,160) (22,436)
Acquisition(2,035) (29,479)
Acquisitions of property, and equipment ................................... (146) (103)................................. (160) (362)
Expenditures for capitalized software ................................... (370) (232)
---------(541) (470)
---------- ---------
NET CASH (USEDPROVIDED BY/(USED IN)/PROVIDED BY INVESTING ACTIVITIES ...................... (53,789) 58,775(79,568) 24,814
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of treasury stock ................................... 45 21 12
Dividends paid .......................................................... (4,990) (4,989)
---------(7,485) (7,484)
---------- ---------
NET CASH USED IN FINANCING ACTIVITIES .................................... (4,969) (4,977)
---------(7,440) (7,463)
---------- ---------
Net (decrease)/increase in cash and cash equivalents ..................... (53,728) 63,898.................... (74,017) 31,412
Cash and cash equivalents at beginning of year ...........................period ........................ 117,401 86,424
------------------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................... $ 63,67343,384 $ 150,322
=========117,836
========== =========
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
4
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS'SHAREHOLDERS' EQUITY
FOR THE SIXNINE MONTHS ENDED OCTOBERJANUARY 31, 2003
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
COMMON STOCK
--------------------
NUMBER ADDITIONAL
OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL STOCK
----------- -------- ------------ ----------
Balance at May 1, 2002 .............. 9,980,125 $1,000 $975 ($ 383)
Comprehensive income
Net income .........................
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities ............
Comprehensive income ................
Exercise of stock options ........... 1,475 16 29
Dividends declared ..................
--------- ------ --- -----
Balance at January 31, 2003 ......... 9,981,600 $1,000 $991 ($ 354)
========= ====== ==== =====
[WIDE TABLE CONTINUED FROM ABOVE]
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE RETAINED COMPREHENSIVE SHAREHOLDERS'
INCOME EARNINGS INCOME EQUITY
--------------- ------------ --------------- --------------
Balance at May 1, 2002 .............. $173,760 $20,653 $ 196,005
Comprehensive income
Net income ......................... $ 13,195 13,195 13,195
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities ............. (11,535) (11,535) (11,535)
----------
Comprehensive income ................ $ 1,660
==========
Exercise of stock options ........... 45
Dividends declared .................. (7,485) (7,485)
-------- ---------- ---------
Balance at January 31, 2003 ......... $179,470 $9,118 $ 190,225
======== ========== =========
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 SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JANUARY 31, 2002
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
COMMON STOCK
--------------------
NUMBER ADDITIONAL
OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL STOCK
----------- -------- ------------ ----------
Balance at April 30, 2002 ........... 9,980,125 $1,000 $975 ($ 383)
Comprehensive income
Net income .........................
Other comprehensive income,
net of tax:
Change in unrealized gains on
securities ......................
Comprehensive income ................
Exercise of stock options ........... 675 7 14
Dividends declared .................. --------- ------ ---- ------
Balance at October 31, 2002 ......... 9,980,800 $1,000 $982 ($ 369)
========= ====== ==== =====
[WIDE TABLE CONTINUED FROM ABOVE]
ACCUMULATED
OTHER
COMPREHENSIVE RETAINED COMPREHENSIVE
INCOME EARNINGS INCOME TOTAL
--------------- ------------ -------------- -----------
Balance at April 30, 2002 ........... $173,760 $ 20,653 $196,005
Comprehensive income
Net income ......................... $ 7,524 7,524 7,524
Other comprehensive income,
net of tax:
Change in unrealized gains on
securities ...................... (9,516) (9,516) (9,516)
-------
Comprehensive income ................ ($ 1,992)
=======
Exercise of stock options ........... 21
Dividends declared .................. (4,990) (4,990)
-------- -------- --------
Balance at October 31, 2002 ......... $176,294 $ 11,137 $189,044
======== ======== ========
The accompanying notes and independent auditor's review report are an
integral part of these financial statements.
5
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VALUE LINE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED OCTOBER 31, 2001
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
COMMON STOCK
--------------------
NUMBER ADDITIONAL
OF PAID-IN TREASURY
SHARES AMOUNT CAPITAL STOCK
----------- -------- ------------ ----------
Balance at April 30,May 1, 2001 ......................... 9,978,925 $1,000 $963 ($ 406)
Comprehensive income
Net income .........................
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities ...................................
Comprehensive income ................
Exercise of stock options ........... 400 4 8700 7 14
Dividends declared ..................
--------- ------ ---- -----------
Balance at OctoberJanuary 31, 20012002 ......... 9,979,3259,979,625 $1,000 $967$970 ($ 398)392)
========= ====== ==== =====
[WIDE TABLE CONTINUED FROM ABOVE]
ACCUMULATED
OTHER TOTAL
COMPREHENSIVE RETAINED COMPREHENSIVE SHAREHOLDERS'
INCOME EARNINGS INCOME TOTALEQUITY
--------------- ------------ --------------- -------------- -----------
Balance at April 30,May 1, 2001 ......................... $163,416 $ 35,233$35,233 $ 200,206
Comprehensive income
Net income ......................... $ 10,114 10,114 10,11415,732 15,732 15,732
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities ...................... (17,493) (17,493) (17,493)
--------............. (14,913) (14,913) (14,913)
----------
Comprehensive income ................ ($ 7,379)
========$ 819
==========
Exercise of stock options ........... 1221
Dividends declared .................. (4,990) (4,990)(7,485) (7,485)
-------- ---------- ---------
Balance at OctoberJanuary 31, 20012002 ......... $168,540$171,663 $20,320 $ 17,740 $ 187,849193,561
======== ========== =========
The accompanying notes and independent auditor's review report are an integral part of these financial statements.
6
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED 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 26, 2002 for the fiscal year ended April 30, 2002. Results of
operations covered by this report may not be indicative of the results of
operations for the entire year.
CASH AND CASH EQUIVALENTS:
The Company considers all cash held at banks and invested in the Value
Line money market funds with an original maturity of less than three months to
be cash and cash equivalents. As of OctoberJanuary 31, 20022003 and April 30, 2002, cash
equivalents included $62,825,000$41,059,000 and $116,885,000, respectively, invested in
the Value Line money market funds.
VALUATION OF SECURITIES:
The Company's long-term securities portfolio, which consists of shares in
various Value Line Mutual Funds and government debt securities, is accounted
for in accordance with Statement of Financial Accounting Standards No. 115,No.115,
"Accounting for Certain Investments in Debt and Equity Securities". The Value
Line Mutual Funds are valued at market with unrealized gains and losses on
these securities reported, net of applicable taxes, as a separate component of
Shareholders' Equity. Investments in government debt securities that are held
to maturity are carried at amortized cost. Realized gains and losses on sales
of the long termlong-term securities are recorded in earnings as of the trade date and
are determined on the identified cost method.
Trading securities, which consist of all other securities held by the
Company, 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.
MARKETABLE SECURITIES -- NOTE 2:
- --------------------------------
TRADING SECURITIES:
Securities held by the Company had an aggregate cost of $914,000$1,107,000 and a
market value of $904,000$1,093,000 at OctoberJanuary 31, 2002,2003, and an aggregate cost of
$3,508,000 and a market value of $3,624,000 at April 30, 2002.
LONG-TERM SECURITIES:
EQUITY SECURITIES AVAILABLE FOR SALE:
The aggregate cost of the long-term equity securities was $46,693,000$47,358,000 and
the market value was $63,826,000$61,385,000 at OctoberJanuary 31, 2002.2003. The aggregate cost of the
long-term equity securities at April 30, 2002 was $61,451,000 and the market
value was $93,226,000. For the sixnine months ended OctoberJanuary 31, 2002,2003, the decrease
in gross unrealized appreciation on these securities of $14,640,000,$17,747,000, net of
deferred taxes of $5,124,000,$6,212,000, was included in shareholders' equity. During the
first sixnine months of fiscal 2003, the Company sold various securities from its
long termlong-term equity securities portfolio. The proceeds from sales of equity
7
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARKETABLE SECURITIES -- NOTE 22: (CONTINUED):
- ---------------------------------------------
of equity securities were $18,984,000$19,595,000 and the related gain on these sales was
$123,000.$734,000 including $611,000 of capital gain distributions from the Value Line
family of mutual funds. This compares to proceeds of $ 49,903,000$52,191,000 and the
related gain of $6,472,000$8,748,000 on
these sales from sales of long termthe long-term equity securities
portfolio including capital gain distributions from the Value Line mutual funds
of $2,276,000 for the sixnine months ended OctoberJanuary 31, 2001.2002.
GOVERNMENT DEBT SECURITIES HELD TO MATURITY:
It is anticipated that the Company's investments in debt securities will
be held to maturity and are valued at amortized cost. The amortized cost and
aggregate fair value at OctoberJanuary 31, 20022003 were $95,328,000$120,705,000 and $97,530,000$124,293,000 for
U.S. government debt securities, which mature as follows:
(IN THOUSANDS)
AMORTIZED GROSS UNREALIZED
COST FAIR VALUE HOLDING GAINS
- -------------------------------------------------------------------------------------------------------- ------------ -----------------
Due in 1-2 years ............................ 4,402 4,429 27$ 48,864 $ 49,080 $ 216
Due in 2-5 years ............................ 90,926 93,101 2,175
---------------------------------------71,841 75,213 3,372
-------- -------- ------
Total investment in debt securities ......... $95,328 $97,530 $2,202
=======================================$120,705 $124,293 $3,588
======== ======== ======
The average yield on the long termlong-term debt securities held at OctoberJanuary 31, 20022003 was
3.79%3.39%. Proceeds from sales of long termlong-term fixed income securities during the sixnine
months ended OctoberJanuary 31, 20022003 were $21,185,000$50,526,000 and the related gain on sales
was $406,000.$544,000. There were no sales of long termlong-term fixed income securities during
fiscal 2002.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -- NOTE 3:
- -----------------------------------------------------------
Cash payments for income taxes were $5,292,000$7,504,000 and $4,352,000$10,837,000 during the
sixnine months ended OctoberJanuary 31, 20022003 and 2001,2002, 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 for the sixnine months ended OctoberJanuary 31,
2003 and 2002, was $805,000 and 2001, was $445,000 and $750,000,$954,000, respectively.
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 OctoberJanuary 31, 20022003 and 2001,2002, the Company held long termlong-term equity securities
classified as available-for-sale. For the sixnine months ended OctoberJanuary 31, 20022003
decreases in gross unrealized gains on these securities were $14,640,000$17,747,000 and
the decreases in related deferred taxes were $5,124,000.$6,212,000. The increasedecreases during
the first sixnine months of fiscal 20012002 in gross unrealized gains on these
securities and the related deferred taxes was $26,912,000were $22,990,000 and $9,419,000,$8,077,000,
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 October 1, 2000, the Company received
8
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RELATED PARTY TRANSACTIONS -- NOTE 66: (CONTINUED):
- --------------------------------------------------
average daily net asset values of the respective funds. Effective January 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 fifteen
mutual funds for which Value Line is the adviser. Effective September 18, 2002,
the Company began receiving service and distibutiondistribution 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 sixnine months ended OctoberJanuary 31, 20022003 and 2001,2002, investment management fees,
12b-1 service and distribution fees and brokerage commission income, net of
clearing feefees, amounted to $13,802,000$21,244,000 and $17,035,000,$24,976,000, respectively. These
amounts include service and distribution fees of $3,242,000$5,658,000 and $3,259,000,$4,809,000,
respectively. The related receivables from the funds for management advisory
fees and 12b-1 service fees included in Receivable from affiliates were
$2,464,000$2,409,000 and $2,417,000 at OctoberJanuary 31, 20022003 and April 30, 2002, respectively.
For the sixnine months ended OctoberJanuary 31, 20022003 and 2001,2002, the Company was
reimbursed $256,000$371,000 and $272,000,$390,000, respectively, for payments it made on behalf
of and services it provided to Arnold Bernhard and Company, Inc. ("Parent"). At
OctoberJanuary 31, 20022003 and April 30, 2002, Receivablereceivable from Affiliatesaffiliates included a
receivable from the Parent of $45,000$52,000 and $47,000 respectively.
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:
SIXNINE MONTHS ENDED
OCTOBERJANUARY 31,
2003 2002
2001
--------- --------------------
(IN THOUSANDS)
Current:
Federal ................. $4,427 $5,925............................................. $5,844 $8,841
State and local ......... 1,056 1,108..................................... 1,569 1,958
------ ------
5,483 7,033-------
7,413 10,799
Deferred:
Federal ................. (181) (135)............................................. (126) (119)
State and local ......... 46 --..................................... 98 (11)
------ -------
(28) (130)
------ (135) (135)
------ ------
$5,348 $6,898-------
$7,385 $10,669
====== =============
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 termlong-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.
9
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
BUSINESS SEGMENTS -- NOTE 88: (CONTINUED):
- -----------------------------------------
DISCLOSURE OF REPORTABLE SEGMENT PROFIT AND SEGMENT ASSETS
(IN THOUSANDS)
SIXNINE MONTHS ENDED OCTOBERJANUARY 31, 2003
---------------------------------------
INVESTMENT
MANAGEMENT
PUBLISHING SERVICES TOTAL
------------ ----------- ----------
Revenues from external customers ............ $39,595 $22,449 $62,044
Intersegment revenues ....................... 150 -- 150
Income from securities transactions ......... 38 3,290 3,328
Depreciation and amortization ............... 2,275 60 2,335
Segment operating profit .................... 9,719 7,570 17,289
Segment assets .............................. 18,209 225,126 243,335
Expenditures for segment assets ............. 666 35 701
NINE MONTHS ENDED JANUARY 31, 2002
---------------------------------------
INVESTMENT
MANAGEMENT
PUBLISHING SERVICES TOTAL
------------ ----------- ----------
Revenues from external customers ............ $26,243 $ 14,648 $ 40,891$39,697 $26,540 $66,237
Intersegment revenues ....................... 88163 -- 88163
Income from securities transactions ......... 74 1,444 1,51875 5,434 5,509
Depreciation and amortization ............... 1,547 46 1,5932,184 43 2,227
Segment operating profit .................... 7,057 4,333 11,39011,072 9,856 20,928
Segment assets .............................. 18,528 222,474 241,00218,535 235,832 254,367
Expenditures for segment assets ............. 481 35 516
SIX MONTHS ENDED OCTOBER 31, 2001
---------------------------------------
INVESTMENT
MANAGEMENT
PUBLISHING SERVICES TOTAL
------------ ----------- ----------
Revenues from external customers ............ $26,508 $ 18,109 $ 44,617
Intersegment revenues ....................... 111 -- 111
Income from securities transactions ......... 74 2,361 2,435
Depreciation and amortization ............... 1,490 20 1,510
Segment operating profit .................... 7,928 6,666 14,594
Segment assets .............................. 18,599 227,420 246,019
Expenditures for segment assets ............. 322819 13 335832
RECONCILIATION OF REPORTABLE SEGMENT REVENUES,
OPERATING PROFIT AND ASSETS (IN THOUSANDS)
SIXNINE MONTHS ENDED OCTOBERJANUARY
31,
2003 2002 2001
----------- ------------
Revenues
Total revenues for reportable segments ................. $ 40,979 $ 44,728$62,194 $66,400
Elimination of intersegment revenues ................... (88) (111)(150) (163)
-------- --------
Total consolidated revenues ........................... $ 40,891 $ 44,617$62,044 $66,237
======== ========
Segment profit
Total profit for reportable segments ................... $ 12,908 $ 17,029$20,617 $26,437
Less: Depreciation related to corporate assets ......... (37) (36) (17)
-------- --------
Income before income taxes ............................ $ 12,872 $ 17,012............................. $20,580 $26,401
======== ========
Assets
Total assets for reportable segments ................... $241,002 $246,019$243,335 $254,367
Corporate assets ....................................... 908 1,165886 1,084
-------- --------
Consolidated total assets ............................. $241,910 $247,184.............................. $244,221 $255,451
======== ========
10
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 October 31, 2002 and the related consolidated
statements of income for the three month and six month periods ended October 31,
2002 and October 31, 2001 and the consolidated statement of changes in
stockholders' equity, and consolidated statement of cash flows for the six month
periods ended October 31, 2002 and 2001. 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, 2002 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 18, 2002, 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, 2002 is fairly stated in
all material respects.
December 13, 2002
New York, NY
11
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
$223,912,000 at October$225,767,000 on January 31, 2002.2003. In addition to $64,758,000$43,677,000 of working capital,
the Company had long-term securities with a market value of $159,154,000,$182,090,000, that,
although classified as non-current assets, are also readily marketable should
the need arise.
The Company's cash flow from operations of $5,030,000$12,991,000 for the first sixnine
months of fiscalended January 31, 2003 was lower than cash flow of $10,100,000$14,061,000 for the
same period of last fiscal year. The decrease in cash flow from operations was
largely attributable to lower net earnings that resulted primarily from a
decrease in investment management fees and services revenues. In addition, the
cash provided by operations for the first sixnine months of last fiscal year was approximately
$2.5 million higher2003
declined from last year's as a result of an increase in accounts receivable that
resulted from the postponementtiming of the Company's estimated
federalreceipt of interest on U.S. Government fixed income
tax payment for the second quarter of fiscal 2002 in accordance
with the Internal Revenue Service's disaster relief due to the September 11,
2001 terrorists' attacks.securities. Net cash outflows from investing activities during the first sixnine months
of fiscal 2003 were $53,789,000$79,568,000 due largely to the Company's decision to
re-deploy its cash holdings into government securities with higher yields than the
cash instruments.
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. The Company understands 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 2003.
OPERATING RESULTS
While the financial markets remain uncertain and with the economic
outlook being cautious, investors have recognized that Value Line is the premier
source of high quality, honest and independent research. In a recent column the
well-known newsletter pundit, Mark Hulbert, reported that "The Value Line
Investment Survey is in first place, on a risk adjusted basis among all the
investment letters tracked by the Hulbert Financial Digest since mid-1980.
....Since January 1989, when the Hulbert Financial Digest started monitoring the
performance of S&P's STAR ranking system, it has lagged Value Line's." Hulbert
goes on to say that the average Value Line top ranked stock has outperformed the
average S&P top-ranked stock by more than 3 percentage points per year on an
annualized basis. On another front, Bloomberg Personal Finance Magazine selected
the Special Situations and Emerging Opportunity funds as among the 21 best in
the entire fund industry. We are proud of these accomplishments and will
continue to work hard to earn our clients' trust and confidence.
As of January 31, 2003, total circulation of all the Company's
investment publications rose 6% above circulation on January 31, 2002. Combined
circulation of THE VALUE INVESTMENT SURVEY, THE VALUE LINE INVESTMENT SURVEY FOR
WINDOWS, THE VALUE LINE SMALL AND MID CAP EDITION, THE VALUE LINE 600, AND VALUE
LINE SELECT was 3% higher than the prior year's circulation. Combined
circulation of the MUTUAL FUND SURVEY, MUTUAL FUND SURVEY FOR WINDOWS and
related products including the NO LOAD FUND ADVISOR, VALUE LINE INSIGHT
NEWSLETTER, and VALUE LINE INDUSTRY WATCH represented 3% of the total increase
in circulation above last fiscal year's level. Total revenues of $62,044,000 for
the nine months ended January 31, 2003 were 6% below revenues of $66,237,000 in
fiscal 2002. Subscription revenues of $13,352,000 for the third quarter of
fiscal 2003 were 1% above subscription revenues of $13,189,000 for the prior
fiscal year, which is the first time that revenues exceeded the prior fiscal
third quarter period since January 1999. Subscription revenues of $39,595,000
for the nine months ended January 31, 2003 were comparable to revenues of
$39,697,000 for the same period of the prior fiscal year. Investment management
fees and services revenues of $22,449,000 for the nine months ended January 31,
2003 were 15% below the prior fiscal year's revenues of $26,540,000. The change
in total revenues was primarily
11
attributable to the continued difficult financial market conditions impacting
severely on investment management fees and services revenues, with stable
subscription revenue moderating the overall effect.
Net income of $7,524,000$13,195,000 or $0.75$1.32 per share for the first sixnine months of
fiscal 2003 compared to net income of $10,114,000$15,732,000 or $1.01$1.58 per share for the
same period of last fiscal year. NetFor the first time since the third quarter
ended January 31, 2000, net income of $5,671,000 or $.57 per share for the third
quarter of fiscal 2003 exceeded net income of $5,618,000 or $0.56 per share for
the third quarter of the prior fiscal year. Although total revenues of
$21,153,000 for the third quarter of fiscal 2003 were 2% below revenues for the
three months ended January 31, 2002, net income for the secondthird quarter of fiscal
2003 was $4,524,000 or $.45 per share as compared to $5,515,000 or $.55 per share1% above net income for the three months ended October 31, 2001. Revenuessame period of $40,891,000 forlast fiscal year due
primarily to a lower income tax rate. The lower income tax rate was the six
months ended October 31, 2002 were 8% below revenuesresult
of $44,617,000 in fiscal
2002.a favorable tax determination from a local tax jurisdiction regarding the
Company's income allocation method. The decline in net income during the sixnine
months ended OctoberJanuary 31, 20022003 was largely the result of the lower level of
revenues, primarily resulting from a 19%15% decline in investment management fees and services
revenues that resulted mostly from a decrease in average net asset values in the
Value Line mutual funds. The change in net asset values in the Value Line mutual
funds was largely attributable to the overall decline in the financial markets
with the NASDAQ index falling 21%32% during the sixtwelve months ended OctoberJanuary 31,
2002,2003, representing a 74% decline from its all time high.
AsOperating expenses of October 31, 2002, total circulation$44,792,000 for the Company's investment
publications rose 13% above the level at October 31, 2001. Combined circulation
of The Value Investment Survey, THE VALUE LINE INVESTMENT SURVEY FOR WINDOWS,
THE VALUE LINE RESEARCH CENTER, AND THE VALUE LINE 600 was 8% higher than the
prior year's circulation. Subscription revenues of $26,243,000 for the sixnine months ended OctoberJanuary 31,
20022003 were 1% below revenues for the same period of the
prior fiscal year. Subscription revenues of $13,139,000 for the second quarter
of fiscal 2003 were approximately equal to last year's revenues for the three
months ended October 31, 2001. Investment management fees and services revenues
of $14,648,000 for the six months ended October 31, 2002 were 19% below the
prior fiscal year's revenues of $18,109,000. The change in total subscription
and investment management fees and services revenues was primarily attributable
to the continued difficult financial market conditions.
Operating expenses of $29,537,000 for the six months ended October 31, 2002
were comparable to last year's expenses of $30,040,000.expenses. Total advertising and promotional
expenses of $10,002,000$15,485,000 were approximately 1% belowcomparable to the prior year's expenses.expenses of
$15,525,000. Salaries and employee benefits expenses of 12
$10,675,000$15,949,000 were 9%
below expenses of $11,770,000$17,541,000 recorded in the prior fiscal year. Production and
distribution costs of $4,837,000$7,136,000 for the sixnine months ended OctoberJanuary 31, 20022003 were
13%12% above last year's expenses of $4,264,000.$6,352,000. The increase in production and
distribution expenses resulted from an increase in subscription circulation and
an increase in U.S. postal rates, amortization costs
for new product development expenditures, and expenses related to restocking
product user guides.rates. Office and administrative expenses of
$4,023,000$6,222,000 were 3%5% higher than last year's expenses of $3,919,000.$5,927,000. The net
increase in administrative expenses compared to last year's resulted primarily
from higher insurance premiums, increases in professional fees and depreciation
and amortization expenses offset in part by a decline in rent expenses.
The Company's securities portfolios produced a gain of $1,518,000$3,328,000 for
the first sixnine months of fiscal 2003, versus awhich was 40% below the gain of $2,435,000$5,509,000 for
the same period of last fiscal year. The Company's trading portfolio produced
losses of $945,000$1,079,000 during the sixnine months ended OctoberJanuary 31, 20022003 versus losses
of $5,140,000$5,505,000 during the same period of last fiscal year. The value of the
Company's securities portfolios has been negatively impacted by the declining
financial market with the NASDAQ down 22% during the nine months ended January
31, 2003. Income from securities transactions for the sixnine months ended OctoberJanuary
31, 20022003 also included dividend and interest income of $1,947,000$3,135,000 and capital
gains of $529,000$1,280,000 from sales of securities from the Company's long-term
portfolio. This compares to dividend and interest income of $1,470,000$2,282,000 and
capital gains of $6,472,000$8,748,000 from sales of securities from the Company's
long-term portfolio for the same period of last fiscal year.
13
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 October 31,
2002 to be signed on its behalf by the undersigned thereunto duly authorized.
VALUE LINE, INC.
(REGISTRANT)
Date: December 16, 2002 By: /S/ JEAN BERNHARD BUTTNER
-----------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: December 16, 2002 By: /S/ STEPHEN R. ANASTASIO
-----------------------------------
Stephen R. Anastasio
Chief Accounting Officer
Date: December 16, 2002 By: /S/ DAVID T. HENIGSON
-----------------------------------
David T. Henigson
Vice President and Treasurer
1412
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURES PURSUANT TO RULE 307
(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 --- 14(c)), based on their
evaluation of these controls and procedures as of a date within 90 days of
the filing date of 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 significant changes in the
registrant's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
1513
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, 2003 to be signed on its behalf by the undersigned thereunto duly
authorized.
VALUE LINE, INC.
(REGISTRANT)
Date: March 17, 2003 By: /S/ JEAN BERNHARD BUTTNER
-----------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: March 17, 2003 By: /S/ STEPHEN R. ANASTASIO
-----------------------------------
Stephen R. Anastasio
Chief Accounting Officer
Date: March 17, 2003 By: /S/ DAVID T. HENIGSON
-----------------------------------
David T. Henigson
Vice President and Treasurer
14
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-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: December 16, 2002March 17, 2003 By: /S/ JEAN BERNHARD BUTTNER
---------------------------------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
1615
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-14 and 15d-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: December 16, 2002March 17, 2003 By: /S/ DAVID T. HENIGSON
-------------------------------------------------------
David T. Henigson
Vice President and& Treasurer
17
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18
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1916
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 OctoberJanuary 31, 20022003 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: December 16, 2002March 17, 2003 By: /S/ JEAN BERNHARD BUTTNER
---------------------------------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Date: December 16, 2002March 17, 2003 By: /S/ DAVID T. HENIGSON
---------------------------------------------------------------------
David T. Henigson
Vice President and& Treasurer
17
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