x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
New York | 13-3139843 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
220 East 42nd Street, New York, New York | 10017-5891 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | Accelerated filer | Non-accelerated filer x | Smaller reporting company | |
(Do not check if a smaller reporting company) | ||||
Outstanding at | ||
Common stock, $.10 par value | 9,981,600 Shares |
Page No. | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | Condensed Consolidated Financial Statements: | |
Consolidated Condensed Balance Sheets as of October 31, 2008 and April 30, 2008 | 3 | |
Consolidated Condensed Statements of Income for the three and six months ended October 31, 2008 and 2007 | 4 | |
Consolidated Condensed Statements of Cash Flows for the three and six months ended October 31, 2008 and 2007 | 5 | |
Consolidated Condensed Statement of Changes in Shareholders’ Equity for the six months ended October 31, 2008 | 6 | |
Consolidated Condensed Statement of Changes in Shareholders’ Equity for the six months ended October 31, 2007 | 7 | |
Notes to Consolidated Condensed Financial Statements | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 21 |
Item 4. | Controls and Procedures | 22 |
PART II. OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 23 |
Item 1A. | Risk Factors | 23 |
Item 6. | Exhibits | 23 |
Signatures | 24 |
EX-31.1 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002) |
EX-31.2 (Certifications required under Section 302 of the Sarbanes-Oxley Act of 2002) |
EX-32.1 (Certifications required under Section 906 of the Sarbanes-Oxley Act of 2002) |
July 31, | Apr. 30, | ||||||
2008 | 2008 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents (including short term investments of $14,740 and $8,159, respectively) | $ | 15,300 | $ | 8,955 | |||
Trading securities | 16,608 | 19,857 | |||||
Securities available for sale | 91,945 | 97,043 | |||||
Accounts receivable, net of allowance for doubtful accounts of $49 and $107, respectively | 3,505 | 2,733 | |||||
Receivable from affiliates | 2,653 | 2,445 | |||||
Prepaid expenses and other current assets | 979 | 1,048 | |||||
Deferred income taxes | 155 | 155 | |||||
Total current assets | 131,145 | 132,236 | |||||
Long term assets | |||||||
Property and equipment, net | 4,596 | 4,709 | |||||
Capitalized software and other intangible assets, net | 769 | 1,008 | |||||
Total long term assets | 5,365 | 5,717 | |||||
Total assets | $ | 136,510 | $ | 137,953 | |||
Liabilities and Shareholders' Equity | |||||||
Current Liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 3,238 | $ | 5,135 | |||
Accrued salaries | 1,444 | 1,471 | |||||
Dividends payable | 3,993 | 2,995 | |||||
Accrued taxes payable | 2,763 | 129 | |||||
Unearned revenue | 24,353 | 26,610 | |||||
Deferred income taxes | 7,181 | 7,839 | |||||
Total current liabilities | 42,972 | 44,179 | |||||
Long term liabilities | |||||||
Unearned revenue | 5,827 | 5,920 | |||||
Total long term liabilities | 5,827 | 5,920 | |||||
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 | 72,023 | 70,954 | |||||
Treasury stock, at cost (18,400 shares on 7/31/08 and 4/30/08) | (354 | ) | (354 | ) | |||
Accumulated other comprehensive income, net of tax | 14,051 | 15,263 | |||||
Total shareholders' equity | 87,711 | 87,854 | |||||
Total liabilities and shareholders' equity | $ | 136,510 | $ | 137,953 |
October 31, | Apr. 30, | |||||||
2008 | 2008 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents (including short term investments of $38,405 and $8,159, respectively) | $ | 39,082 | $ | 8,955 | ||||
Trading securities | 17,091 | 19,857 | ||||||
Securities available for sale | 50,589 | 97,043 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $49, and $107, respectively | 2,527 | 2,733 | ||||||
Receivable from affiliates | 1,941 | 2,445 | ||||||
Prepaid expenses and other current assets | 992 | 1,048 | ||||||
Deferred income taxes | 759 | 155 | ||||||
Total current assets | 112,981 | 132,236 | ||||||
Long term assets | ||||||||
Property and equipment, net | 4,616 | 4,709 | ||||||
Capitalized software and other intangible assets, net | 807 | 1,008 | ||||||
Total long term assets | 5,423 | 5,717 | ||||||
Total assets | $ | 118,404 | $ | 137,953 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 4,002 | $ | 5,135 | ||||
Accrued salaries | 1,461 | 1,471 | ||||||
Dividends payable | 3,993 | 2,995 | ||||||
Accrued taxes payable | 26 | 129 | ||||||
Unearned revenue | 23,185 | 26,610 | ||||||
Deferred income taxes | 0 | 7,839 | ||||||
Total current liabilities | 32,667 | 44,179 | ||||||
Long term liabilities | ||||||||
Unearned revenue | 5,974 | 5,920 | ||||||
Total long term liabilities | 5,974 | 5,920 | ||||||
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 | 78,572 | 70,954 | ||||||
Treasury stock, at cost (18,400 shares on 10/31/08 and 4/30/08) | (354 | ) | (354 | ) | ||||
Accumulated other comprehensive income, net of tax | (446 | ) | 15,263 | |||||
Total shareholders' equity | 79,763 | 87,854 | ||||||
Total liabilities and shareholders' equity | $ | 118,404 | $ | 137,953 |
Three months ended October 31, | Six months ended October 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Revenues: | ||||||||||||||||
Investment periodicals and related publications | $ | 9,956 | $ | 10,860 | $ | 20,293 | $ | 21,823 | ||||||||
Licensing fees | 1,239 | 1,792 | 2,920 | 3,445 | ||||||||||||
Investment management fees & services | 7,132 | 8,458 | 15,327 | 16,643 | ||||||||||||
Total revenues | 18,327 | 21,110 | 38,540 | 41,911 | ||||||||||||
Expenses: | ||||||||||||||||
Advertising and promotion | 3,328 | 3,478 | 6,569 | 7,074 | ||||||||||||
Salaries and employee benefits | 4,809 | 4,524 | 9,666 | 9,133 | ||||||||||||
Production and distribution | 1,459 | 1,611 | 2,989 | 3,274 | ||||||||||||
Office and administration | 2,465 | 2,081 | 5,585 | 4,049 | ||||||||||||
Total expenses | 12,061 | 11,694 | 24,809 | 23,530 | ||||||||||||
Income from operations | 6,266 | 9,416 | 13,731 | 18,381 | ||||||||||||
Income from securities transactions, net | 10,084 | 885 | 10,716 | 1,586 | ||||||||||||
Income before income taxes | 16,350 | 10,301 | 24,447 | 19,967 | ||||||||||||
Provision for income taxes | 5,808 | 3,942 | 8,843 | 7,665 | ||||||||||||
Net income | $ | 10,542 | $ | 6,359 | $ | 15,604 | $ | 12,302 | ||||||||
Earnings per share, basic & fully diluted | $ | 1.05 | $ | 0.64 | $ | 1.56 | $ | 1.23 | ||||||||
Weighted average number of common shares | 9,981,600 | 9,981,600 | 9,981,600 | 9,981,600 |
For the six months ended | ||||||||
October 31, 2008 | October 31, 2007 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 15,604 | $ | 12,302 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 621 | 901 | ||||||
Gains on sales of trading securities and securities available for sale | (9,389 | ) | (7 | ) | ||||
Unrealized losses on trading securities | 197 | 41 | ||||||
Deferred income taxes | (69 | ) | (14 | ) | ||||
Changes in assets and liabilities: | ||||||||
Proceeds from sales of trading securities | 9,026 | - | ||||||
Purchases of trading securities | (6,583 | ) | (3,926 | ) | ||||
(Decrease) in unearned revenue | (3,371 | ) | (2,570 | ) | ||||
Increase/(decrease) in deferred charges | 110 | (12 | ) | |||||
(Decrease) in accounts payable and accrued expenses | (1,243 | ) | (1,341 | ) | ||||
Decrease in accrued salaries | (10 | ) | (220 | ) | ||||
Decrease in accrued taxes payable | (103 | ) | - | |||||
Decrease in prepaid expenses and other current assets | 125 | 244 | ||||||
Decrease/(increase) in accounts receivable | 206 | (341 | ) | |||||
Decrease/(increase) in receivable from affiliates | 504 | (163 | ) | |||||
Total adjustments | (9,979 | ) | (7,408 | ) | ||||
Net cash provided by operations | 5,625 | 4,894 | ||||||
Cash flows from investing activities: | ||||||||
Purchases and sales of securities classified as available for sale: | ||||||||
Proceeds from sales of fixed income securities | 14,669 | 5,137 | ||||||
Proceeds from sales of equity securities | 37,755 | - | ||||||
Purchase of fixed income securities | (20,598 | ) | (9,270 | ) | ||||
Purchases of equity securities | (9 | ) | (8 | ) | ||||
Acquisition of property and equipment | (150 | ) | (176 | ) | ||||
Expenditures for capitalized software | (177 | ) | (32 | ) | ||||
Net cash provided by/(used in) investing activities | 31,490 | (4,349 | ) | |||||
Cash flows from financing activities: | ||||||||
Dividends paid | (6,988 | ) | (5,989 | ) | ||||
Net cash used in financing activities | (6,988 | ) | (5,989 | ) | ||||
Net increase/(decrease) in cash and cash equivalents | 30,127 | (5,444 | ) | |||||
Cash and cash equivalents at beginning of year | 8,955 | 20,605 | ||||||
Cash and cash equivalents at end of period | $ | 39,082 | $ | 15,161 |
Three months ended | |||||||
July 31, | |||||||
2008 | 2007 | ||||||
Revenues: | |||||||
Investment periodicals and related publications | $ | 10,337 | $ | 10,963 | |||
Licensing fees | 1,681 | 1,653 | |||||
Investment management fees & services | 8,195 | 8,185 | |||||
Total revenues | 20,213 | 20,801 | |||||
Expenses: | |||||||
Advertising and promotion | 3,241 | 3,596 | |||||
Salaries and employee benefits | 4,857 | 4,609 | |||||
Production and distribution | 1,530 | 1,663 | |||||
Office and administration | 3,120 | 1,968 | |||||
Total expenses | 12,748 | 11,836 | |||||
Income from operations | 7,465 | 8,965 | |||||
Income from securities transactions, net | 632 | 701 | |||||
Income before income taxes | 8,097 | 9,666 | |||||
Provision for income taxes | 3,035 | 3,723 | |||||
Net income | $ | 5,062 | $ | 5,943 | |||
Earnings per share, basic & fully diluted | $ | 0.51 | $ | 0.60 | |||
Weighted average number of common shares | 9,981,600 | 9,981,600 |
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, 2008 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 70,954 | $ | 15,263 | $ | 87,854 | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||
Net income | $ | 15,604 | 15,604 | 15,604 | ||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | (15,709 | ) | (15,709 | ) | (15,709 | ) | ||||||||||||||||||||||||||
Comprehensive income | $ | (105 | ) | |||||||||||||||||||||||||||||
Dividends declared | (7,986 | ) | (7,986 | ) | ||||||||||||||||||||||||||||
Balance at October 31, 2008 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 78,572 | $ | (446 | ) | $ | 79,763 |
For the three months | |||||||
ended | |||||||
July 31, | July 31, | ||||||
2008 | 2007 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 5,062 | $ | 5,943 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 306 | 436 | |||||
Losses on sales of trading securities and securities available for sale | 191 | - | |||||
Unrealized losses/(gains) on trading securities | (31 | ) | 104 | ||||
Deferred income taxes | 11 | (36 | ) | ||||
Other | 69 | - | |||||
Changes in assets and liabilities: | |||||||
Proceeds from sales/(purchases) of trading securities | 3,155 | (1,411 | ) | ||||
Decrease in unearned revenue | (2,350 | ) | (1,001 | ) | |||
Increase/(decrease) in deferred charges | 110 | (6 | ) | ||||
Decrease in accounts payable and accrued expenses | (2,007 | ) | (1,390 | ) | |||
Decrease in accrued salaries | (27 | ) | (135 | ) | |||
Increase in accrued taxes payable | 2,634 | 2,455 | |||||
Decrease in prepaid expenses and other current assets | 58 | 626 | |||||
(Increase)/decrease in accounts receivable | (772 | ) | 478 | ||||
Increase in receivable from affiliates | (208 | ) | (47 | ) | |||
Total adjustments | 1,139 | 73 | |||||
Net cash provided by operations | 6,201 | 6,016 | |||||
Cash flows from investing activities: | |||||||
Purchases and sales of securities classified as available for sale: | |||||||
Proceeds from sales of fixed income securities | 3,165 | 683 | |||||
Purchase of fixed income securities | - | (2,824 | ) | ||||
Purchases of equity securities | (3 | ) | (4 | ) | |||
Acquisition of property and equipment | (7 | ) | (2 | ) | |||
Expenditures for capitalized software | (16 | ) | (13 | ) | |||
Net cash provided by/(used in) investing activities | 3,139 | (2,160 | ) | ||||
Cash flows from financing activities: | |||||||
Dividends paid | (2,995 | ) | (2,995 | ) | |||
Net cash used in financing activities | (2,995 | ) | (2,995 | ) | |||
Net increase in cash and cash equivalents | 6,345 | 861 | |||||
Cash and cash equivalents at beginning of year | 8,955 | 20,605 | |||||
Cash and cash equivalents at end of period | $ | 15,300 | $ | 21,466 |
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, 2007 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 57,383 | $ | 16,552 | $ | 75,572 | ||||||||||||||||||
Comprehensive income | ||||||||||||||||||||||||||||||||
Net income | $ | 12,302 | 12,302 | 12,302 | ||||||||||||||||||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | 3,444 | 3,444 | 3,444 | |||||||||||||||||||||||||||||
Comprehensive income | $ | 15,746 | ||||||||||||||||||||||||||||||
Dividends declared | (5,989 | ) | (5,989 | ) | ||||||||||||||||||||||||||||
Balance at October 31, 2007 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 63,696 | $ | 19,996 | $ | 85,329 |
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, 2008 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 70,954 | $ | 15,263 | $ | 87,854 | |||||||||||
Comprehensive income | |||||||||||||||||||||||||
Net income | $ | 5,062 | 5,062 | 5,062 | |||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | (1,212 | ) | (1,212 | ) | (1,212 | ) | |||||||||||||||||||
Comprehensive income | $ | 3,850 | |||||||||||||||||||||||
Dividends declared | (3,993 | ) | (3,993 | ) | |||||||||||||||||||||
Balance at July 31, 2008 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 72,023 | $ | 14,051 | $ | 87,711 |
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, 2007 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 57,383 | $ | 16,552 | $ | 75,572 | |||||||||||
Comprehensive income | |||||||||||||||||||||||||
Net income | $ | 5,943 | 5,943 | 5,943 | |||||||||||||||||||||
Other comprehensive income, net of tax: | |||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | 547 | 547 | 547 | ||||||||||||||||||||||
Comprehensive income | $ | 6,490 | |||||||||||||||||||||||
Dividends declared | (2,995 | ) | (2,995 | ) | |||||||||||||||||||||
Balance at July 31, 2007 | 9,981,600 | $ | 1,000 | $ | 991 | $ | (354 | ) | $ | 60,331 | $ | 17,099 | $ | 79,067 |
Level 1 – quoted prices in active markets for identical investments Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments) The valuation techniques used by the Company to measure fair value during the six months ended October 31, 2008 consisted exclusively of quoted prices and other observable |
(In Thousands) | ||||||||||
Valuation Inputs | Cash Equivalents | Investments in Trading Securities | Investments in Securities Available for Sale | |||||||
Level 1 - Quoted Prices | $ | 14,740 | - | $ | 50,183 | |||||
Level 2 - Other Significant Observable Inputs | $ | 16,608 | 41,762 | |||||||
Level 3 - Significant Unobservable Inputs | - | - | - | |||||||
Total | $ | 14,740 | $ | 16,608 | $ | 91,945 | ||||
The Company had no other financial instruments including futures, forwards and swap contracts. | ||||||||||
For the period ended 7/31/08, there were no Level 3 investments. |
(In Thousands) | ||||||||||||||||
Valuation Inputs | Total Investments | Cash Equivalents | Investments in Trading Securities | Investments in Securities Available for Sale | ||||||||||||
Level 1 - Quoted Prices | $ | 38,405 | $ | 38,405 | - | $ | 0 | |||||||||
Level 2 - Other Significant Observable Inputs | $ | 67,680 | $ | 17,091 | 50,589 | |||||||||||
Level 3 - Significant Unobservable Inputs | - | - | - | - | ||||||||||||
Total | $ | 106,085 | $ | 38,405 | $ | 17,091 | $ | 50,589 |
(In Thousands) | ||||||||||
Historical | Gross Unrealized | |||||||||
Maturity | Cost | Fair Value | Holding Losses | |||||||
Due in less than 2 years | $ | 24,247 | $ | 23,820 | $ | (427 | ) | |||
Due in 2 years or more | 17,862 | 17,942 | 80 | |||||||
Total investment in government debt securities | $ | 42,109 | $ | 41,762 | $ | (347 | ) |
(In Thousands) | ||||||||||||
Historical | Gross Unrealized | |||||||||||
Maturity | Cost | Fair Value | Holding Losses | |||||||||
Due in less than 2 years | $ | 41,164 | $ | 40,633 | $ | (531 | ) | |||||
Due in 2 - 5 years | 10,023 | 9,956 | (67 | ) | ||||||||
Total investment in government debt securities | $ | 51,187 | $ | 50,589 | $ | (598 | ) |
(In Thousands) | ||||||||||
Historical | Gross Unrealized | |||||||||
Maturity | Cost | Fair Value | Holding Losses | |||||||
Due in less than 2 years | $ | 24,261 | $ | 23,921 | $ | (340 | ) | |||
Due in 2 years or more | 21,079 | 21,252 | 173 | |||||||
Total investment in government debt securities | $ | 45,340 | $ | 45,173 | $ | (167 | ) |
(In Thousands) | ||||||||||||
Historical | Gross Unrealized | |||||||||||
Maturity | Cost | Fair Value | Holding Losses | |||||||||
Due in less than 2 years | $ | 24,261 | $ | 23,921 | $ | (340 | ) | |||||
Due in 2 - 5 years | 21,079 | 21,252 | 173 | |||||||||
Total investment in government debt securities | $ | 45,340 | $ | 45,173 | $ | (167 | ) |
(in thousands) | ||||||||||
Before | Tax | Net of | ||||||||
Tax | (Expense) | Tax | ||||||||
Amount | or Benefit | Amount | ||||||||
Three months ended July 31, 2008 | ||||||||||
Unrealized Gains on Securities: | ||||||||||
Decrease in Unrealized Holding Gains arising during the period | $ | (2,061 | ) | $ | 725 | $ | (1,336 | ) | ||
Add: Reclassification adjustments for losses realized in net income | 205 | (72 | ) | 133 | ||||||
Less: Reclassification adjustments for gains realized in net income | (14 | ) | 5 | (9 | ) | |||||
Change in Other Comprehensive Income | $ | (1,870 | ) | $ | 658 | $ | (1,212 | ) |
(in thousands) | ||||||||||||
Before | Tax | Net of | ||||||||||
Tax | (Expense) | Tax | ||||||||||
Amount | or Benefit | Amount | ||||||||||
Six months ended October 31, 2008 | ||||||||||||
Unrealized Gains on Securities: | ||||||||||||
Decrease in Unrealized Holding Gains arising during the period | $ | (14,637 | ) | $ | 5,153 | $ | (9,484 | ) | ||||
Add: Reclassification adjustments for losses realized in net income | 99 | (35 | ) | 64 | ||||||||
Less: Reclassification adjustments for gains realized in net income | (9,614 | ) | 3,325 | (6,289 | ) | |||||||
Change in Other Comprehensive Income | $ | (24,152 | ) | $ | 8,443 | $ | (15,709 | ) | ||||
Six months ended October 31, 2007 | ||||||||||||
Unrealized Gains on Securities: | ||||||||||||
Increase in Unrealized Holding Gains arising during the period | $ | 5,314 | $ | (1,870 | ) | $ | 3,444 | |||||
Change in Other Comprehensive Income | $ | 5,314 | $ | (1,870 | ) | $ | 3,444 |
Three months ended July 31, 2007 | ||||||||||
Unrealized Gains on Securities: | ||||||||||
Increase in Unrealized Holding Gains arising during the period | $ | 843 | $ | (296 | ) | $ | 547 | |||
Change in Other Comprehensive Income | $ | 843 | $ | (296 | ) | $ | 547 |
Three months ended July 31, | |||||||
2008 | 2007 | ||||||
(in thousands) | |||||||
Current: | |||||||
Federal | $ | 2,508 | $ | 3,005 | |||
State and local | 565 | 833 | |||||
3,073 | 3,838 | ||||||
Deferred: | |||||||
Federal | (24 | ) | (114 | ) | |||
State and local | (14 | ) | (1 | ) | |||
(38 | ) | (115 | ) | ||||
Provision for income taxes | $ | 3,035 | $ | 3,723 |
Six months ended October 31, | ||||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Current: | ||||||||
Federal | $ | 7,945 | $ | 5,964 | ||||
State and local | 1,048 | 1,733 | ||||||
8,993 | 7,697 | |||||||
Deferred: | ||||||||
Federal | (126 | ) | (30 | ) | ||||
State and local | (24 | ) | (2 | ) | ||||
(150 | ) | (32 | ) | |||||
Provision for income taxes | $ | 8,843 | $ | 7,665 |
Six months ended October 31, | ||||||||
2008 | 2007 | |||||||
(in thousands) | ||||||||
Tax expense at the U.S. statutory rate | $ | 8,556 | $ | 6,988 | ||||
Increase (decrease) in tax expense from: | ||||||||
State and local income taxes, net of federal income tax benefit | 666 | 1,125 | ||||||
Effect of tax exempt income and dividend exclusion | (383 | ) | (365 | ) | ||||
Other, net | 4 | �� | (83 | ) | ||||
Provision for income taxes | $ | 8,843 | $ | 7,665 |
Three months ended July 31, | |||||||
2008 | 2007 | ||||||
(in thousands) | |||||||
Tax expense at the U.S. statutory rate | $ | 2,834 | $ | 3,383 | |||
Increase (decrease) in tax expense from: | |||||||
State and local income taxes, net of federal income tax benefit | 358 | 541 | |||||
Effect of tax exempt income and dividend exclusion | (206 | ) | (166 | ) | |||
Other, net | 49 | (35 | ) | ||||
Provision for income taxes | $ | 3,035 | $ | 3,723 |
Disclosure of Reportable Segment Profit and Segment Assets (in thousands) | ||||||||||
Three months ended July 31, 2008 | ||||||||||
Investment | ||||||||||
Periodicals, | ||||||||||
Publishing & | Investment | |||||||||
Licensing | Management | Total | ||||||||
Revenues from external customers | $ | 12,018 | $ | 8,195 | $ | 20,213 | ||||
Intersegment revenues | 6 | - | 6 | |||||||
Income from securities transactions | 5 | 149 | 154 | |||||||
Depreciation and amortization | 291 | 11 | 302 | |||||||
Segment profit from operations | 4,743 | 2,726 | 7,469 | |||||||
Segment assets | 9,829 | 79,132 | 88,961 | |||||||
Expenditures for segment assets | 23 | - | 23 |
Three months ended July 31, 2007 | ||||||||||
Investment | ||||||||||
Periodicals, | ||||||||||
Publishing & | Investment | |||||||||
Licensing | Management | Total | ||||||||
Revenues from external customers | $ | 12,616 | $ | 8,185 | $ | 20,801 | ||||
Intersegment revenues | 9 | - | 9 | |||||||
Income from securities transactions | 95 | 239 | 334 | |||||||
Depreciation and amortization | 414 | 18 | 432 | |||||||
Segment profit from operations | 5,247 | 3,722 | 8,969 | |||||||
Segment assets | 18,724 | 81,371 | 100,095 | |||||||
Expenditures for segment assets | 15 | - | 15 |
Six months ended October 31, 2008 | ||||||||||||
Investment | ||||||||||||
Periodicals, | Investment | Total | ||||||||||
Publishing & | Management | |||||||||||
Licensing | ||||||||||||
Revenues from external customers | $ | 23,213 | $ | 15,327 | $ | 38,540 | ||||||
Intersegment revenues | 8 | - | 8 | |||||||||
Income from securities transactions | (11 | ) | 175 | 164 | ||||||||
Depreciation and amortization | 594 | 23 | 617 | |||||||||
Segment profit from operations | 8,535 | 5,200 | 13,735 | |||||||||
Segment assets | 9,881 | 26,681 | 36,562 | |||||||||
Expenditures for segment assets | 327 | - | 327 |
Six months ended October 31, 2007 | ||||||||||||
Investment | ||||||||||||
Periodicals, | Investment | Total | ||||||||||
Publishing & | Management | |||||||||||
Licensing | ||||||||||||
Revenues from external customers | $ | 25,268 | $ | 16,643 | $ | 41,911 | ||||||
Intersegment revenues | 50 | - | 50 | |||||||||
Income from securities transactions | 165 | 645 | 810 | |||||||||
Depreciation and amortization | 857 | 36 | 893 | |||||||||
Segment profit from operations | 10,603 | 7,786 | 18,389 | |||||||||
Segment assets | 16,737 | 86,403 | 103,140 | |||||||||
Expenditures for segment assets | 208 | - | 208 |
(in thousands) | |||||||
2008 | 2007 | ||||||
Revenues | |||||||
Total revenues for reportable segments | $ | 20,219 | $ | 20,810 | |||
Elimination of intersegment revenues | (6 | ) | (9 | ) | |||
Total consolidated revenues | $ | 20,213 | $ | 20,801 | |||
Segment profit | |||||||
Total profit for reportable segments | 7,623 | 9,303 | |||||
Add: Income from securities transactions related to corporate assets | 478 | 367 | |||||
Less: Depreciation related to corporate assets | (4 | ) | (4 | ) | |||
Income before income taxes | $ | 8,097 | $ | 9,666 | |||
Assets | |||||||
Total assets for reportable segments | 88,961 | 100,095 | |||||
Corporate assets | 47,549 | 32,583 | |||||
Consolidated total assets | $ | 136,510 | $ | 132,678 |
(in thousands) | ||||||||
2008 | 2007 | |||||||
Revenues | ||||||||
Total revenues for reportable segments | $ | 38,548 | $ | 41,961 | ||||
Elimination of intersegment revenues | (8 | ) | (50 | ) | ||||
Total consolidated revenues | $ | 38,540 | $ | 41,911 | ||||
Segment profit | ||||||||
Total profit for reportable segments | 13,899 | 19,199 | ||||||
Add: Income from securities transactions related to corporate assets | 10,552 | 776 | ||||||
Less: Depreciation related to corporate assets | (4 | ) | (8 | ) | ||||
Income before income taxes | $ | 24,447 | $ | 19,967 | ||||
Assets | ||||||||
Total assets for reportable segments | 36,562 | 103,140 | ||||||
Corporate assets | 81,842 | 33,307 | ||||||
Consolidated total assets | $ | 118,404 | $ | 136,447 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
· | dependence on key personnel; |
· | maintaining revenue from subscriptions for the Company’s products; |
· | protection of intellectual property rights; |
· | changes in market and economic conditions; |
· | fluctuations in the Company’s assets under management due to broadly based changes in the values of equity and debt securities, redemptions by investors and other factors; |
· | dependence on Value Line Funds for investment management and related fees; |
· | competition in the fields of publishing, licensing and investment management; |
· | the impact of government regulation on the Company’s business and the uncertainties of litigation and regulatory proceedings; |
· | terrorist attacks; and |
· | other risks and uncertainties, including but not limited to the risks described in Item 1A, “Risk Factors” of the Company’s annual report on Form 10-K for the year ended April 30, 2008, and other risks and uncertainties from time to time. |
Three Months Ended July 31, | Percentage Change | |||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||
Investment periodicals and related publications | $ | 10,337 | $ | 10,963 | -5.7 | % | ||||
Licensing Fees | $ | 1,681 | $ | 1,653 | 1.7 | % | ||||
Investment management fees and services | $ | 8,195 | $ | 8,185 | 0.1 | % | ||||
Total Operating Revenues | $ | 20,213 | $ | 20,801 | -2.8 | % |
Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||
Percentage Change | Percentage Change | |||||||||||||||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | 2008 | 2007 | FY 09 vs. 08 | ||||||||||||||||||
Investment periodicals and related publications | $ | 9,956 | $ | 10,860 | -8.3 | % | $ | 20,293 | $ | 21,823 | -7.0 | % | ||||||||||||
Licensing fees | $ | 1,239 | $ | 1,792 | -30.9 | % | $ | 2,920 | $ | 3,445 | -15.2 | % | ||||||||||||
Investment management fees and services | $ | 7,132 | $ | 8,458 | -15.7 | % | $ | 15,327 | $ | 16,643 | -7.9 | % | ||||||||||||
Total Operating Revenues | $ | 18,327 | $ | 21,110 | -13.2 | % | $ | 38,540 | $ | 41,911 | -8.0 | % |
Three Months Ended July 31, | Percentage Change | |||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||
Print publication revenues | $ | 7,150 | $ | 7,984 | -10.4 | % | ||||
Electronic publication revenues * | $ | 3,187 | $ | 2,979 | 7.0 | % | ||||
Total Investment periodicals and related publications revenue | $ | 10,337 | $ | 10,963 | -5.7 | % | ||||
Unearned Revenues (Short and Long Term) | $ | 30,180 | $ | 33,499 | -9.9 | % |
Six Months Ended October 31, | Percentage Change | |||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||||
Print publication revenues | $ | 13,917 | $ | 15,788 | -11.9 | % | ||||||
Electronic publication revenues | $ | 6,376 | $ | 6,035 | 5.7 | % | ||||||
Total Investment periodicals and related publications revenue | $ | 20,293 | $ | 21,823 | -7.0 | % | ||||||
Unearned Revenues (Short and Long Term) | $ | 29,159 | $ | 31,930 | -8.7 | % |
October 31, | Percentage Change | |||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||||
Equity funds | $ | 2,212,011 | $ | 3,656,441 | -39.5 | % | ||||||
Fixed income funds | $ | 231,834 | $ | 278,999 | -16.9 | % | ||||||
Money market fund | $ | 241,624 | $ | 159,810 | 51.2 | % | ||||||
Total net assets | $ | 2,685,469 | $ | 4,095,250 | -34.4 | % |
Three Months Ended July 31, | Percentage Change | |||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||
Equity funds | $ | 3,180,492 | $ | 3,331,770 | -4.5 | % | ||||
Fixed income funds | $ | 257,356 | $ | 279,712 | -8.0 | % | ||||
Money Market funds | $ | 237,336 | $ | 197,976 | 19.9 | % | ||||
Total net assets | $ | 3,675,184 | $ | 3,809,458 | -3.52 | % | ||||
Equity fund assets sold through GIAC | $ | 749,148 | $ | 891,707 | -16.0 | % | ||||
All other equity fund assets | $ | 2,431,344 | $ | 2,440,063 | -0.4 | % | ||||
Total Equity fund net assets | $ | 3,180,492 | $ | 3,331,770 | -4.5 | % |
October 31, | Percentage Change | |||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||||
Equity fund assets sold through GIAC | $ | 521,810 | $ | 948,673 | -45.0 | % | ||||||
All other equity fund assets | $ | 1,690,201 | $ | 2,707,768 | -37.6 | % | ||||||
Total Equity fund net assets | $ | 2,212,011 | $ | 3,656,441 | -39.5 | % |
Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||
2008 | 2007 | Percentage Change | 2008 | 2007 | Percentage Change | |||||||||||||||||||
(in thousands) | FY 09 vs. 08 | FY 09 vs. 08 | ||||||||||||||||||||||
Advertising and promotion | $ | 3,328 | $ | 3,478 | -4.3 | % | $ | 6,569 | $ | 7,074 | -7.1 | % |
Three Months Ended July 31, | Percentage Change | |||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | |||||||
Advertising and promotion | $ | 3,241 | $ | 3,596 | -9.9 | % |
Three Months Ended July 31, | Percentage Change | |||||||||||||||||||||||||||||||||
Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||||||||||||
2008 | 2007 | Percentage Change | 2008 | 2007 | Percentage Change | |||||||||||||||||||||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | FY 09 vs. 08 | FY 09 vs. 08 | |||||||||||||||||||||||||||||
Salaries and employee benefits | $ | 4,857 | $ | 4,609 | 5.4 | % | $ | 4,809 | $ | 4,524 | 6.3 | % | $ | 9,666 | $ | 9,133 | 5.8 | % |
Three Months Ended July 31, | Percentage Change | |||||||||||||||||||||||||||||||||
Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||||||||||||
2008 | 2007 | Percentage Change | 2008 | 2007 | Percentage Change | |||||||||||||||||||||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | FY 09 vs. 08 | FY 09 vs. 08 | |||||||||||||||||||||||||||||
Production and distribution | $ | 1,530 | $ | 1,663 | -8.0 | % | $ | 1,459 | $ | 1,611 | -9.4 | % | $ | 2,989 | $ | 3,274 | -8.7 | % |
Three Months Ended July 31, | Percentage Change | |||||||||||||||||||||||||||||||||
Three Months Ended October 31, | Six Months Ended October 31, | |||||||||||||||||||||||||||||||||
2008 | 2007 | Percentage Change | 2008 | 2007 | Percentage Change | |||||||||||||||||||||||||||||
(in thousands) | 2008 | 2007 | FY 09 vs. 08 | FY 09 vs. 08 | FY 09 vs. 08 | |||||||||||||||||||||||||||||
Office and administration | $ | 3,120 | $ | 1,968 | 58.5 | % | $ | 2,465 | $ | 2,081 | 18.5 | % | $ | 5,585 | $ | 4,049 | 37.9 | % |
Estimated Fair Value after | ||||||||||||||||
Hypothetical Change in Interest Rates | ||||||||||||||||
(bp = basis points) | ||||||||||||||||
6 mo. | 6 mo. | 1 yr. | 1 yr. | |||||||||||||
Fair | 50bp | 50bp | 100bp | 100bp | ||||||||||||
Fixed Income Securities | Value | increase | decrease | increase | decrease | |||||||||||
As of July 31, 2008 | ||||||||||||||||
Investments in securities with fixed maturities | $ | 58,370 | $ | 57,320 | $ | 57,991 | $ | 56,709 | $ | 57,643 | ||||||
As of April 30, 2008 | ||||||||||||||||
Investments in securities with fixed maturities | $ | 65,030 | $ | 63,947 | $ | 64,753 | $ | 63,146 | $ | 64,250 |
Estimated Fair Value after | ||||||||||||||||||||
Hypothetical Change in Interest Rates | ||||||||||||||||||||
(bp = basis points) | ||||||||||||||||||||
6 mos. | 6 mos. | 1 yr. | 1 yr. | |||||||||||||||||
Fair | 50bp | 50bp | 100bp | 100bp | ||||||||||||||||
Fixed Income Securities | Value | increase | decrease | increase | decrease | |||||||||||||||
As of October 31, 2008 | ||||||||||||||||||||
Investments in securities with fixed maturities | $ | 67,677 | $ | 66,553 | $ | 67,046 | $ | 66,049 | $ | 66,729 | ||||||||||
Investments in securities with fixed maturities | $ | 65,030 | $ | 63,947 | $ | 64,753 | $ | 63,146 | $ | 64,250 |
Estimated | |||||||||||||
Fair Value after | Hypothetical Percentage | ||||||||||||
Equity Securities | Hypothetical | Hypothetical | Increase (Decrease) in | ||||||||||
(in thousands) | Fair Value | Price Change | Change in Prices | Shareholders’ Equity | |||||||||
As of July 31, 2008 | $ | 50,183 | 30% increase | $ | 65,238 | 11.16 | % | ||||||
30% decrease | $ | 35,128 | (11.16 | )% | |||||||||
$ | 51,870 | 30% increase | $ | 67,431 | 11.48 | % | |||||||
30% decrease | $ | 36,309 | (11.48 | )% |
(a) | The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. |
(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 have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting. |