UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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For the quarterly period ended January31, 20182024
or
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For the transition period from _____________________________________ to __________________________________
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 incorporation or organization) | (I.R.S. Employer Identification No.) |
551 Fifth Avenue, New York, New York | 10176-0001 |
(Address of principal executive offices) | (Zip Code) |
(212) 907-1500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each Exchange on which registered |
Common stock, $0.10 par value per share | VALU | The Nasdaq Capital Market |
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 by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]☒ No [ ]
☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large“large accelerated filer,” “accelerated filer,”filer”, “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]☐ Accelerated filer [ ]☐ Non-accelerated filer [X]
☒
Smaller reporting company [ ]☐ Emerging growth company [ ]
(Do not check if a smaller reporting company)
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ]☐ No [X]
☒
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 | |
Common stock, $0.10 par value per share |
| 9,424,983 shares |
VALUE LINE, INC.
TABLE OF CONTENTSCONTENTS
PageNo. | ||||||
PART I. FINANCIAL INFORMATION | ||||||
Item1. | Consolidated Condensed Financial Statements | |||||
Consolidated Condensed Balance Sheets as of January 31, | 3 | |||||
Consolidated Condensed Statements of Income for the three and nine months ended January 31, | 4 | |||||
Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended January 31, | 5 | |||||
Consolidated Condensed Statements of Cash Flows for the nine months ended January 31, | 6 | |||||
Consolidated Condensed Statement of Changes in | 7 | |||||
Consolidated Condensed Statement of Changes in | 8 | |||||
Notes to Consolidated Condensed Financial Statements | 9 | |||||
Item 2. |
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
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Item 4. | Controls and Procedures |
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PART II. OTHER INFORMATION | ||||||
Item 1. | Legal Proceedings |
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Item1A. | Risk Factors |
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Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 4. | Mine Safety Disclosures | 36 | ||||
Item 5. | Other Information |
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Item 6. | Exhibits |
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Signatures | 38 |
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Part I - Financial Information Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Balance Sheets |
(in thousands, except share amounts) |
January 31, | April 30, | |||||||
2018 | 2017 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents (including short term investments of $3,716 and $6,066, respectively) | $ | 4,218 | $ | 6,557 | ||||
Securities available-for-sale | 18,404 | 16,576 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $15 and $20, respectively | 2,803 | 1,018 | ||||||
Prepaid and refundable income taxes | 606 | 72 | ||||||
Prepaid expenses and other current assets | 1,161 | 1,567 | ||||||
Total current assets | 27,192 | 25,790 | ||||||
Long-term assets: | ||||||||
Investment in EAM Trust | 58,350 | 58,223 | ||||||
Restricted money market investment | 469 | 469 | ||||||
Property and equipment, net | 1,433 | 1,239 | ||||||
Capitalized software and other intangible assets, net | 392 | 1,003 | ||||||
Total long-term assets | 60,644 | 60,934 | ||||||
Total assets | $ | 87,836 | $ | 86,724 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 1,270 | $ | 1,257 | ||||
Accrued salaries | 1,380 | 1,285 | ||||||
Dividends payable | 3,686 | 1,748 | ||||||
Accrued taxes on income | 22 | 112 | ||||||
Unearned revenue | 18,361 | 20,188 | ||||||
Total current liabilities | 24,719 | 24,590 | ||||||
Long-term liabilities: | ||||||||
Unearned revenue | 5,751 | 5,471 | ||||||
Deferred charges | 876 | 432 | ||||||
Deferred income taxes | 11,972 | 18,377 | ||||||
Total long-term liabilities | 18,599 | 24,280 | ||||||
Total liabilities | 43,318 | 48,870 | ||||||
Shareholders' Equity: | ||||||||
Common stock, $0.10 par value; authorized 30,000,000 shares; issued 10,000,000 shares | 1,000 | 1,000 | ||||||
Additional paid-in capital | 991 | 991 | ||||||
Retained earnings | 45,288 | 39,186 | ||||||
Treasury stock, at cost (299,485 and 288,335 shares, respectively) | (3,972 | ) | (3,781 | ) | ||||
Accumulated other comprehensive income, net of tax | 1,211 | 458 | ||||||
Total shareholders' equity | 44,518 | 37,854 | ||||||
Total liabilities and shareholders' equity | $ | 87,836 | $ | 86,724 |
January 31, | April 30, | |||||||
2024 | 2023 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents (including short term investments of $4,739 and $7,240, respectively) | $ | 5,780 | $ | 7,590 | ||||
Equity securities | 15,370 | 14,546 | ||||||
Available-for-sale Fixed Income securities | 46,149 | 39,928 | ||||||
Accounts receivable, net of allowance for credit losses of $33 and $36, respectively | 1,302 | 2,124 | ||||||
Prepaid and refundable income taxes | 6 | 425 | ||||||
Prepaid expenses and other current assets | 1,090 | 1,463 | ||||||
Total current assets | 69,697 | 66,076 | ||||||
Long term assets: | ||||||||
Investment in EAM Trust | 59,640 | 58,775 | ||||||
Restricted money market investments | 305 | 305 | ||||||
Property and equipment, net | 4,797 | 5,788 | ||||||
Capitalized software and other intangible assets, net | 102 | 132 | ||||||
Total long term assets | 64,844 | 65,000 | ||||||
Total assets | $ | 134,541 | $ | 131,076 | ||||
Liabilities and Shareholders' Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 1,094 | $ | 1,263 | ||||
Accrued salaries | 920 | 961 | ||||||
Dividends payable | 2,639 | 2,642 | ||||||
Accrued taxes on income | 192 | 307 | ||||||
Operating lease obligation-short term | 1,241 | 1,344 | ||||||
Unearned revenue | 15,953 | 16,771 | ||||||
Total current liabilities | 22,039 | 23,288 | ||||||
Long term liabilities: | ||||||||
Unearned revenue | 6,544 | 6,202 | ||||||
Operating lease obligation-long term | 3,890 | 4,784 | ||||||
Deferred income taxes | 12,822 | 13,129 | ||||||
Total long term liabilities | 23,256 | 24,115 | ||||||
Total liabilities | 45,295 | 47,403 | ||||||
Shareholders' Equity: | ||||||||
Common stock, $0.10 par value; authorized 30,000,000 shares; issued 10,000,000 shares | 1,000 | 1,000 | ||||||
Additional paid-in capital | 991 | 991 | ||||||
Retained earnings | 102,292 | 95,979 | ||||||
Treasury stock, at cost (573,017 shares and 565,460 shares, respectively) | (15,009 | ) | (14,671 | ) | ||||
Accumulated other comprehensive income, net of tax | (28 | ) | 374 | |||||
Total shareholders' equity | 89,246 | 83,673 | ||||||
Total liabilities and shareholders' equity | $ | 134,541 | $ | 131,076 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
Part I - Financial Information |
Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Statements of Income |
(in thousands, except share & per share amounts) |
(unaudited) |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
January 31, | January 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Investment periodicals and related publications | $ | 7,391 | $ | 7,468 | $ | 22,257 | $ | 22,747 | ||||||||
Copyright data fees | 1,703 | 1,179 | 4,740 | 3,071 | ||||||||||||
Total publishing revenues | 9,094 | 8,647 | 26,997 | 25,818 | ||||||||||||
Gain on sale of operating facility | - | - | - | 8,123 | ||||||||||||
Total revenues | 9,094 | 8,647 | 26,997 | 33,941 | ||||||||||||
Expenses: | ||||||||||||||||
Advertising and promotion | 1,096 | 908 | 2,718 | 2,436 | ||||||||||||
Salaries and employee benefits | 4,739 | 4,621 | 13,813 | 12,830 | ||||||||||||
Production and distribution | 1,524 | 2,134 | 4,322 | 6,958 | ||||||||||||
Office and administration | 948 | 1,196 | 3,384 | 3,769 | ||||||||||||
Total expenses | 8,307 | 8,859 | 24,237 | 25,993 | ||||||||||||
Income from operations | 787 | (212 | ) | 2,760 | 7,948 | |||||||||||
Revenues and profits interests in EAM Trust | 2,284 | 1,934 | 6,657 | 5,782 | ||||||||||||
Income from securities transactions, net | 258 | 132 | 445 | 226 | ||||||||||||
Income before income taxes | 3,329 | 1,854 | 9,862 | 13,956 | ||||||||||||
Income tax provision | (5,667 | ) | 409 | (3,421 | ) | 4,673 | ||||||||||
Net income | $ | 8,996 | $ | 1,445 | $ | 13,283 | $ | 9,283 | ||||||||
Earnings per share, basic & fully diluted | $ | 0.93 | $ | 0.15 | $ | 1.37 | $ | 0.96 | ||||||||
Weighted average number of common shares | 9,700,896 | 9,715,128 | 9,705,347 | 9,724,377 |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
January 31, | January 31, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Revenues: | ||||||||||||||||
Investment periodicals and related publications | $ | 6,319 | $ | 6,592 | $ | 19,174 | $ | 19,795 | ||||||||
Copyright fees | 2,812 | 3,375 | 9,310 | 10,182 | ||||||||||||
Total publishing revenues | 9,131 | 9,967 | 28,484 | 29,977 | ||||||||||||
Expenses: | ||||||||||||||||
Advertising and promotion | 782 | 703 | 2,139 | 2,247 | ||||||||||||
Salaries and employee benefits | 3,719 | 3,758 | 11,156 | 11,574 | ||||||||||||
Production and distribution | 1,219 | 1,371 | 4,094 | 3,829 | ||||||||||||
Office and administration | 1,179 | 1,151 | 3,442 | 3,614 | ||||||||||||
Total expenses | 6,899 | 6,983 | 20,831 | 21,264 | ||||||||||||
Income from operations | 2,232 | 2,984 | 7,653 | 8,713 | ||||||||||||
Revenues and profits interests in EAM Trust | 3,489 | 2,685 | 9,341 | 8,516 | ||||||||||||
Investment gains/(losses) | 2,009 | 1,250 | 1,685 | 1,276 | ||||||||||||
Income before income taxes | 7,730 | 6,919 | 18,679 | 18,505 | ||||||||||||
Income tax provision | 1,845 | 1,671 | 4,447 | 4,469 | ||||||||||||
Net income | $ | 5,885 | $ | 5,248 | $ | 14,232 | $ | 14,036 | ||||||||
Earnings per share, basic & fully diluted | $ | 0.62 | $ | 0.55 | $ | 1.51 | $ | 1.48 | ||||||||
Weighted average number of common shares | 9,426,983 | 9,456,877 | 9,429,575 | 9,465,955 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
Part I - Financial Information |
Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Statements of Comprehensive Income |
(in thousands) |
(unaudited) |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
January 31, | January 31, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 8,996 | $ | 1,445 | $ | 13,283 | $ | 9,283 | ||||||||
Other comprehensive income, net of tax: | ||||||||||||||||
Change in unrealized gains on securities, net of taxes | 496 | 290 | 753 | 150 | ||||||||||||
Other comprehensive income | 496 | 290 | 753 | 150 | ||||||||||||
Comprehensive income | $ | 9,492 | $ | 1,735 | $ | 14,036 | $ | 9,433 |
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
January 31, | January 31, | |||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Net income | $ | 5,885 | $ | 5,248 | $ | 14,232 | $ | 14,036 | ||||||||
Other comprehensive income/(loss), net of tax: | ||||||||||||||||
Change in unrealized gains/(losses) on | ||||||||||||||||
Fixed Income securities, net of tax | 258 | 123 | (402 | ) | 125 | |||||||||||
Other comprehensive income/(loss) | 258 | 123 | (402 | ) | 125 | |||||||||||
Comprehensive income | $ | 6,143 | $ | 5,371 | $ | 13,830 | $ | 14,161 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
Part I - Financial Information |
Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Statements of Cash Flows |
(in thousands) |
(unaudited) |
For the Nine Months Ended | ||||||||
January 31, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 13,283 | $ | 9,283 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation and amortization | 815 | 3,728 | ||||||
Non-voting revenues interest in EAM Trust | (6,074 | ) | (5,389 | ) | ||||
Non-voting profits interest in EAM Trust | (583 | ) | (393 | ) | ||||
Realized gain on sale of operating facility | - | (8,123 | ) | |||||
Realized gains on sale of equity securities | (152 | ) | - | |||||
Deferred rent | 444 | (167 | ) | |||||
Deferred income taxes | (6,405 | ) | (1,257 | ) | ||||
Other, net | (45 | ) | (45 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Unearned revenue | (1,547 | ) | (1,203 | ) | ||||
Accounts payable & accrued expenses | 13 | (748 | ) | |||||
Accrued salaries | 95 | (13 | ) | |||||
Accrued taxes on income | (211 | ) | 65 | |||||
Prepaid and refundable income taxes | (486 | ) | 61 | |||||
Prepaid expenses and other current assets | 406 | (272 | ) | |||||
Accounts receivable | (1,785 | ) | (768 | ) | ||||
Total adjustments | (15,515 | ) | (14,524 | ) | ||||
Net cash used in operating activities | (2,232 | ) | (5,241 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchases of equity securities classified as available-for-sale | - | (4,954 | ) | |||||
Purchases of fixed income securities classified as available-for-sale | (2,636 | ) | (6,135 | ) | ||||
Proceeds from sales of equity securities classified as available-for-sale | 152 | 14 | ||||||
Proceeds from sales of fixed income securities classified as available-for-sale | 1,634 | - | ||||||
Distributions received from EAM Trust | 6,575 | 5,572 | ||||||
Proceeds from sale of operating facility | - | 11,555 | ||||||
Restricted money market investment | - | (469 | ) | |||||
Acquisition of property and equipment | (398 | ) | (879 | ) | ||||
Expenditures for capitalized software | - | (411 | ) | |||||
Net cash provided by investing activities | 5,327 | 4,293 | ||||||
Cash flows from financing activities: | ||||||||
Purchase of treasury stock at cost | (191 | ) | (681 | ) | ||||
Dividends paid | (5,243 | ) | (4,965 | ) | ||||
Net cash used in financing activities | (5,434 | ) | (5,646 | ) | ||||
Net change in cash and cash equivalents | (2,339 | ) | (6,594 | ) | ||||
Cash and cash equivalents at beginning of year | 6,557 | 13,122 | ||||||
Cash and cash equivalents at end of period | $ | 4,218 | $ | 6,528 |
For the Nine Months Ended | ||||||||
January 31, | ||||||||
2024 | 2023 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 14,232 | $ | 14,036 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 1,054 | 1,006 | ||||||
Investment (gains)/losses | 133 | (438 | ) | |||||
Non-voting revenues interest in EAM Trust | (8,420 | ) | (7,917 | ) | ||||
Non-voting profits interest in EAM Trust | (921 | ) | (599 | ) | ||||
Distributions received from EAM Trust | 8,476 | 9,660 | ||||||
Deferred income taxes | (190 | ) | 57 | |||||
Deferred rent | (997 | ) | (920 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Unearned revenue | (476 | ) | (1,010 | ) | ||||
Accounts payable & accrued expenses | (169 | ) | (195 | ) | ||||
Accrued salaries | (41 | ) | (20 | ) | ||||
Accrued taxes on income | (126 | ) | 80 | |||||
Prepaid and refundable income taxes | 419 | 278 | ||||||
Prepaid expenses and other current assets | 373 | 62 | ||||||
Accounts receivable | 822 | (102 | ) | |||||
Total adjustments | (63 | ) | (58 | ) | ||||
Net cash provided by operating activities | 14,169 | 13,978 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of equity securities | (2,073 | ) | (1,322 | ) | ||||
Purchases of fixed income securities classified as available-for-sale | (38,855 | ) | (30,205 | ) | ||||
Proceeds from sales of equity securities | 1,129 | 1,421 | ||||||
Proceeds from sales of fixed income securities classified as available-for-sale | 32,113 | 9,907 | ||||||
Acquisition of property and equipment | (14 | ) | (23 | ) | ||||
Expenditures for capitalized software | (19 | ) | - | |||||
Net cash used in investing activities | (7,719 | ) | (20,222 | ) | ||||
Cash flows from financing activities: | ||||||||
Purchase of treasury stock at cost | (338 | ) | (4,487 | ) | ||||
Dividends paid | (7,922 | ) | (7,111 | ) | ||||
Net cash used in financing activities | (8,260 | ) | (11,598 | ) | ||||
Net change in cash and cash equivalents | (1,810 | ) | (17,842 | ) | ||||
Cash, cash equivalents and restricted cash at beginning of period | 7,895 | 30,008 | ||||||
Cash, cash equivalents and restricted cash at end of period | $ | 6,085 | $ | 12,166 |
The accompanying notes are an integral part of these consolidated condensed financial statements.
Part I - Financial Information |
Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Statement of Changes in Shareholders' Equity |
For the Three Months Ended July 31, 2023, Six Months Ended October 31, 2023, and Nine Months Ended January 31, |
(in thousands, except share amounts) |
(unaudited) |
Common stock | Additional paid- in | Treasury Stock | Retained | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income | Total | |||||||||||||||||||||||||
Balance at April 30, 2017 | 10,000,000 | $ | 1,000 | $ | 991 | (288,335 | ) | $ | (3,781 | ) | $ | 39,186 | $ | 458 | $ | 37,854 | ||||||||||||||||
Net income | 13,283 | 13,283 | ||||||||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | 753 | 753 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (11,150 | ) | (191 | ) | (191 | ) | ||||||||||||||||||||||||||
Dividends declared | (7,181 | ) | (7,181 | ) | ||||||||||||||||||||||||||||
Balance at January 31, 2018 | 10,000,000 | $ | 1,000 | $ | 991 | (299,485 | ) | $ | (3,972 | ) | $ | 45,288 | $ | 1,211 | $ | 44,518 |
Common stock | Additional paid-in- | Treasury stock | Retained | Accumulated other comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income | Total | |||||||||||||||||||||||||
Balance at April 30, 2023 | 10,000,000 | $ | 1,000 | $ | 991 | (565,460 | ) | $ | (14,671 | ) | $ | 95,979 | $ | 374 | $ | 83,673 | ||||||||||||||||
Net income | 4,859 | 4,859 | ||||||||||||||||||||||||||||||
Change in unrealized gains on Fixed Income securities, net of taxes | (212 | ) | (212 | ) | ||||||||||||||||||||||||||||
Purchase of treasury stock | (4,011 | ) | (188 | ) | (188 | ) | ||||||||||||||||||||||||||
Dividends declared | (2,641 | ) | (2,641 | ) | ||||||||||||||||||||||||||||
Balance at July 31, 2023 | 10,000,000 | $ | 1,000 | $ | 991 | (569,471 | ) | $ | (14,859 | ) | $ | 98,197 | $ | 162 | $ | 85,491 |
Dividends declared per common share were
Dividends declared per common share were $0.56 for the six months ending October 31,
Dividends declared per common share were $0.84 for the nine months ending January 31, The accompanying notes are an integral part of |
The accompanying notes are an integral part of these consolidated condensed financial statements.
7 Part I - Financial Information |
Item 1. Financial Statements |
Value Line, Inc. |
Consolidated Condensed Statement of Changes in Shareholders' Equity |
For the Three Months Ended July 31, 2022, Six Months Ended October 31, 2022 and Nine Months Ended January 31, |
(in thousands, except share amounts) |
(unaudited) |
Common stock | Additional paid- in | Treasury Stock | Retained | Accumulated Other Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income | Total | |||||||||||||||||||||||||
Balance at April 30, 2016 | 10,000,000 | $ | 1,000 | $ | 991 | (243,411 | ) | $ | (3,040 | ) | $ | 35,524 | $ | 125 | $ | 34,600 | ||||||||||||||||
Net income | 9,283 | 9,283 | ||||||||||||||||||||||||||||||
Change in unrealized gains on securities, net of taxes | 150 | 150 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (41,461 | ) | (681 | ) | (681 | ) | ||||||||||||||||||||||||||
Dividends declared | (4,957 | ) | (4,957 | ) | ||||||||||||||||||||||||||||
Balance at January 31, 2017 | 10,000,000 | $ | 1,000 | $ | 991 | (284,872 | ) | $ | (3,721 | ) | $ | 39,850 | $ | 275 | $ | 38,395 |
Common stock | Additional paid-in- | Treasury stock | Retained | Accumulated other comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income | Total | |||||||||||||||||||||||||
Balance at April 30, 2022 | 10,000,000 | $ | 1,000 | $ | 991 | (490,157 | ) | $ | (9,967 | ) | $ | 87,645 | $ | (24 | ) | $ | 79,645 | |||||||||||||||
Net income | 4,458 | 4,458 | ||||||||||||||||||||||||||||||
Change in unrealized gains on Fixed Income securities, net of taxes | 5 | 5 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (35,029 | ) | (2,382 | ) | (2,382 | ) | ||||||||||||||||||||||||||
Dividends declared | (2,369 | ) | (2,369 | ) | ||||||||||||||||||||||||||||
Balance at July 31, 2022 | 10,000,000 | $ | 1,000 | $ | 991 | (525,186 | ) | $ | (12,349 | ) | $ | 89,734 | $ | (19 | ) | $ | 79,357 |
Dividends declared per common share were
Dividends declared per common share were $0.50 for the six months ending October 31,
Dividends declared per common share were $0.75 for the nine months ending January 31, |
The accompanying notes are an integral part of these consolidated condensed financial statements.
The accompanying notes are an integral part of these consolidated condensed financial statements. 8 Value Line, Inc. | |||||||
Notes to Consolidated Condensed Financial Statements | |||||||
January 31, | |||||||
(Unaudited) |
Note 1 - Organization and Summary of Significant Accounting Policies: |
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Value Line, Inc. ("Value Line" or "VLI", and collectively with its subsidiaries, the “Company”) is incorporated in the State of New York. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. The Company's |
The Consolidated Condensed Balance Sheets as of January 31, |
Use of Estimates: |
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The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. |
Principles of Consolidation: |
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The Company follows the guidance in the Financial Accounting Standards Board's ("FASB") Topic 810 “Consolidation” to determine if it should consolidate its investment in a variable interest entity ("VIE"). A VIE is a legal entity in which either (i) equity investors do not have sufficient equity investment at risk to enable the entity to finance its activities independently or (ii) the equity holders at risk lack the obligation to absorb losses, the right to receive residual returns or the right to make decisions about the |
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In accordance with FASB's Topic 810, the assets, liabilities, and results of operations of subsidiaries in which the Company has a controlling interest have been consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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Revenue Recognition: |
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Depending upon the product, subscription fulfillment for Value Line periodicals and related publications is available in print or digitally, via internet access. The length of a subscription varies by product and offer received by the subscriber. Generally, subscriptions are offered as annual subscriptions. Subscription revenues, net of discounts, are recognized ratably on a straight line basis when the product is served to the client over the life of the subscription. Accordingly, the amount of subscription fees to be earned by fulfilling subscriptions after the date of the balance sheets are shown as unearned revenue within current and long-term liabilities. |
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Investment in Unconsolidated Entities: |
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The Company accounts for its investment in its unconsolidated entity, EAM, using the equity method of accounting in accordance with |
The |
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Valuation of Securities: |
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The Company's securities classified as cash equivalents, equity securities and available-for-sale fixed income securities consist of shares of money market funds that invest primarily in short-term U.S. Government securities, |
The Company classifies its equity securities and available-for-sale fixed income securities as current assets to properly reflect its liquidity and to recognize the fact that it has liquid assets available-for-sale should the need arise.
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Market valuations of securities listed on a securities exchange and ETF shares are based on the closing sales prices on the last business day of each month. The market value of the Company's fixed maturity U.S. Government debt securities is determined utilizing publicly quoted market prices. Cash equivalents consist of investments in money market funds that invest primarily in U.S. Government securities valued in accordance with rule 2a-7 under the 1940 Act. | |||||||
The Fair Value Measurements Topic of FASB's ASC defines fair value as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. The Fair Value Measurements Topic established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the information that market participants would use in pricing the asset or liability, including assumptions about risk. Examples of risks include those inherent in a particular valuation technique used to measure fair value such as the risk inherent in the inputs to the valuation technique. Inputs are classified as observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting | |||||||
10 The three-tier hierarchy of inputs is summarized in the three broad levels listed below. | |||||||
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 following summarizes the levels of fair value measurements of the |
As of January 31, 2024 | ||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 4,739 | $ | - | $ | - | $ | 4,739 | ||||||||
Equity securities | 15,370 | - | - | 15,370 | ||||||||||||
Available-for-sale fixed income securities | 45,899 | 250 | - | 46,149 | ||||||||||||
$ | 66,008 | $ | 250 | $ | - | $ | 66,258 |
As of April 30, 2023 | ||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 7,240 | $ | - | $ | - | $ | 7,240 | ||||||||
Equity securities | 14,546 | - | - | 14,546 | ||||||||||||
Available-for-sale fixed income securities | 39,178 | 750 | - | 39,928 | ||||||||||||
$ | 60,964 | $ | 750 | $ | - | $ | 61,714 |
As of January 31, 2018 | ||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 3,716 | $ | - | $ | - | $ | 3,716 | ||||||||
Securities available-for-sale | 18,404 | - | - | 18,404 | ||||||||||||
$ | 22,120 | $ | - | $ | - | $ | 22,120 | |||||||||
As of April 30, 2017 | ||||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash equivalents | $ | 6,066 | $ | - | $ | - | $ | 6,066 | ||||||||
Securities available-for-sale | 16,576 | - | - | 16,576 | ||||||||||||
$ | 22,642 | $ | - | $ | - | $ | 22,642 |
The Company had no other financial instruments such as futures, forwards and swap contracts. For the periods ended January 31, |
Advertising expenses:
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The Company expenses advertising costs as incurred. |
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Income Taxes: |
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The Company computes its income tax provision in accordance with the Income Tax Topic of the FASB's ASC. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Condensed Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book values and the tax bases of particular assets and liabilities, using tax rates currently in effect for the years in which the differences are expected to reverse. The Company adopted the provisions of ASU 2015-17, Income taxes (Topic 740) |
The Income Tax Topic of the FASB's ASC establishes for all entities, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. As of January 31, |
Earnings per share:
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Earnings per share are based on the weighted average number of shares of common stock and common stock equivalents outstanding during each period. Any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding. The Company does not have any potentially dilutive common shares from outstanding stock options, warrants, restricted stock, or restricted stock units. |
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Cash and Cash Equivalents: |
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For purposes of the Consolidated Condensed 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 January 31, |
Note 2 - Investments: |
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Investments held by the Company and its subsidiaries are classified as equity securities and available-for-sale fixed income securities in accordance with FASB's ASC 321, Investments - Equity Securities and with FASB's ASC 320, Investments - Debt |
Equity Securities: |
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Equity securities |
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As of January 31, |
Proceeds from sales of equity securities |
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The carrying value and fair value of equity securities |
($ in thousands) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
ETFs - equities | $ | 11,109 | $ | 4,265 | $ | (4 | ) | $ | 15,370 |
($ in thousands) | Cost | Gross Unrealized Gains | Fair Value | |||||||||
ETFs - equities | $ | 8,385 | $ | 1,541 | $ | 9,926 |
The carrying value and fair value of equity securities |
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($ in thousands) | Cost | Gross Unrealized Gains | Fair Value | |||||||||
ETFs - equities | $ | 8,385 | $ | 712 | $ | 9,097 |
12 Government Debt Securities (Fixed Income Securities): |
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Fixed income securities consist of certificates of deposits and securities issued by federal, state and local governments within the United States. |
Amortized | Gross Unrealized | Gross Unrealized | ||||||||||||||
($ in thousands) | Historical Cost | Holding Gains | Holding Losses | Fair Value | ||||||||||||
Maturity | ||||||||||||||||
Due within 1 year | $ | 7,136 | $ | 5 | $ | (8 | ) | $ | 7,133 | |||||||
Due 1 year through 5 years | 1,350 | - | (5 | ) | 1,345 | |||||||||||
Total investment in government debt securities | $ | 8,486 | $ | 5 | $ | (13 | ) | $ | 8,478 |
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Amortized | Gross Unrealized | Gross Unrealized | ||||||||||||||
($ in thousands) | Historical Cost | Holding Gains | Holding Losses | Fair Value | ||||||||||||
Maturity | ||||||||||||||||
Due within 1 year | $ | 4,384 | $ | 4 | $ | (3 | ) | $ | 4,385 | |||||||
Due 1 year through 5 years | 3,100 | - | (6 | ) | 3,094 | |||||||||||
Total investment in government debt securities | $ | 7,484 | $ | 4 | $ | (9 | ) | $ | 7,479 |
Proceeds from maturities and sales of government debt securities classified as available-for-sale during the nine months ended January 31, The aggregate cost and fair value at January 31, 2024 of fixed income securities classified as available-for-sale were
The increase in gross unrealized losses of | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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The average yield on the Government debt securities classified as available-for-sale at January 31,
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Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
($ in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Dividend income | $ | 66 | $ | 74 | $ | 170 | $ | 147 | ||||||||
Interest income | 25 | 4 | 75 | 6 | ||||||||||||
Capital gain distributions | 152 | 39 | 152 | 39 | ||||||||||||
Other | 15 | 15 | 48 | 34 | ||||||||||||
Total income from securities transactions, net | $ | 258 | $ | 132 | $ | 445 | $ | 226 |
Investment in Unconsolidated Entities: |
Equity Method Investment: |
As of January 31, |
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The value of |
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It is anticipated that EAM will have sufficient liquidity and earn enough profit to conduct its current and future operations so the management of EAM will not need additional funding. |
The Company monitors its Investment in EAM Trust for impairment to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. Impairment indicators include, but are not limited to the following: (a) a significant deterioration in the earnings performance, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of the industry in which the investee operates, or (d) factors that raise significant concerns about the |
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The components of |
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
($ in thousands) (unaudited) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
Investment management fees earned from the Value Line Funds, net of waivers shown below | $ | 6,320 | $ | 4,809 | $ | 17,388 | $ | 14,951 | ||||||||
12b-1 fees and other fees, net of waivers shown below | $ | 1,632 | $ | 1,457 | $ | 4,811 | $ | 4,507 | ||||||||
Other income | $ | 192 | $ | 146 | $ | 295 | $ | 150 | ||||||||
Investment management fee waivers and reimbursements | $ | 77 | $ | 73 | $ | 239 | $ | 104 | ||||||||
12b-1 fee waivers | $ | 24 | $ | 26 | $ | 72 | $ | 80 | ||||||||
Value Line’s non-voting revenues interest | $ | 3,083 | $ | 2,512 | $ | 8,420 | $ | 7,917 | ||||||||
EAM's net income (1) | $ | 812 | $ | 346 | $ | 1,842 | $ | 1,198 |
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
($ in thousands) (unaudited) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Investment management fees earned from the Value Line Funds, net of fee waivers | $ | 4,070 | $ | 3,674 | $ | 12,096 | $ | 10,991 | ||||||||
12b-1 fees and other fees, net of fee waivers | $ | 1,676 | $ | 1,438 | $ | 4,844 | $ | 4,357 | ||||||||
Other income | $ | 52 | $ | 57 | $ | 156 | $ | 136 | ||||||||
Investment management fee waivers | $ | 131 | $ | 132 | $ | 392 | $ | 308 | ||||||||
12b-1 fee waivers | $ | 169 | $ | 235 | $ | 583 | $ | 700 | ||||||||
Value Line’s non-voting revenues interest | $ | 2,057 | $ | 1,803 | $ | 6,074 | $ | 5,389 | ||||||||
EAM's net income (1) | $ | 514 | $ | 262 | $ | 1,166 | $ | 786 |
(1) Represents EAM's net income, after giving effect to Value |
January 31, | April 30, | |||||||
($ in thousands) | 2024 | 2023 | ||||||
(unaudited) | ||||||||
EAM's total assets | $ | 62,610 | $ | 61,389 | ||||
EAM's total liabilities (1) | (5,532 | ) | (4,357 | ) | ||||
EAM's total equity | $ | 57,078 | $ | 57,032 |
January 31, | April 30, | |||||||
($ in thousands) | 2018 | 2017 | ||||||
(unaudited) | ||||||||
EAM's total assets | $ | 60,666 | $ | 60,432 | ||||
EAM's total liabilities (1) | (3,655 | ) | (2,931 | ) | ||||
EAM's total equity | $ | 57,011 | $ | 57,501 |
(1) At January 31, |
Note3 - Variable Interest Entity |
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The Company |
The Company has determined that it does not have a controlling financial interest in EAM because it does not have the power to direct the activities of EAM that most significantly impact its economic performance. Value Line does not hold any voting stock of EAM and it does not have any involvement in the day-to-day activities or operations of EAM. Although the EAM Trust Agreement provides Value Line with certain consent rights and contains certain restrictive covenants related to the activities of EAM, these are considered to be protective rights and therefore Value Line does not maintain control over EAM. |
In addition, although EAM is expected to be profitable, there is a risk that it could operate at a loss. While all of the |
The Company has not provided any explicit or implicit financial or other support to EAM other than what was contractually agreed to in the EAM Trust Agreement. Value Line has no obligation to fund EAM in the future and, as a result, has no exposure to loss beyond its initial investment and any undistributed revenues and profits interests retained in EAM. The following table presents the total assets of EAM, the maximum exposure to loss due to involvement with EAM, as well as the value of the assets and liabilities the Company has recorded on its Consolidated Condensed Balance Sheets for its interest in EAM. |
Value Line | ||||||||||||||||
($ in thousands) | VIE Assets | Investment in EAM Trust (1) | Liabilities | Maximum Exposure to Loss | ||||||||||||
As of January 31, 2024 (unaudited) | $ | 62,610 | $ | 59,640 | $ | - | $ | 59,640 | ||||||||
As of April 30, 2023 | $ | 61,389 | $ | 58,775 | $ | - | $ | 58,775 |
Value Line | ||||||||||||||||
($ in thousands) | VIE Assets | Investment in EAM Trust (1) | Liabilities | Maximum Exposure to Loss | ||||||||||||
As of January 31, 2018 (unaudited) | $ | 60,666 | $ | 58,350 | $ | - | $ | 58,350 | ||||||||
As of April 30, 2017 | $ | 60,432 | $ | 58,223 | $ | - | $ | 58,223 |
(1) Reported within Long-Term Assets on the Consolidated Condensed Balance Sheets. |
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Note 4 - Supplementary Cash |
Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Condensed Statement of Cash Flows that sum to the total of the same such amounts shown in the Consolidated Condensed Statement of Cash Flows.
Nine Months Ended January 31, | ||||||||
($ in thousands) | 2024 | 2023 | ||||||
Cash and cash equivalents | $ | 5,780 | $ | 11,861 | ||||
Restricted cash | 305 | 305 | ||||||
Total cash, cash equivalents, and restricted cash shown in the Consolidated Condensed Statement of Cash Flows | $ | 6,085 | $ | 12,166 |
Income Tax Payments:
The Company made income tax payments as follows:
Nine Months Ended January 31, | ||||||||
($ in thousands) | 2024 | 2023 | ||||||
State and local income tax payments | $ | 656 | $ | 732 | ||||
Federal income tax payments | $ | 4,000 | $ | 3,327 |
Nine months ended January 31, | ||||||||
($ in thousands) | 2018 | 2017 | ||||||
State and local income tax payments | $ | 232 | $ | 552 | ||||
Federal income tax payments to the Parent | $ | 3,450 | $ | 5,250 |
Note 5 - Employees' Profit Sharing and Savings Plan: |
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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 |
Note 6 - Comprehensive Income: |
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The FASB's ASC Comprehensive Income topic 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 otherwise would not be recognized in the calculation of net income. |
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As of January 31, |
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The components of comprehensive income included in the Consolidated Condensed Statements of Income and Changes in Shareholders' Equity for the nine months ended January 31, |
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($ in thousands) | Amount Before Tax | Tax (Expense) / Benefit | Amount Net of Tax | |||||||||
Change in unrealized gains/(losses) on available-for-sale fixed income securities | $ | (508 | ) | $ | 106 | $ | (402 | ) | ||||
$ | (508 | ) | $ | 106 | $ | (402 | ) |
($ in thousands) | Amount Before Tax | Tax Expense | Amount Net of Tax | |||||||||
Change in unrealized gains on securities | $ | 978 | $ | (105 | ) | $ | 873 | |||||
Less: Gains realized in net income | $ | (152 | ) | $ | 32 | $ | (120 | ) | ||||
$ | 826 | $ | (73 | ) | $ | 753 |
The components of comprehensive income included in the Consolidated Condensed Statements of Income and Changes in Shareholders' Equity for the nine months ended January 31, |
($ in thousands) | Amount Before Tax | Tax Expense | Amount Net of Tax | |||||||||
Change in unrealized gains on securities | $ | 271 | $ | (96 | ) | $ | 175 | |||||
Less: Gains realized in net income | (39 | ) | 14 | (25 | ) | |||||||
$ | 232 | $ | (82 | ) | $ | 150 |
($ in thousands) | Amount Before Tax | Tax (Expense) / Benefit | Amount Net of Tax | |||||||||
Change in unrealized gains/(losses) on available-for-sale fixed income securities | $ | 158 | $ | (33 | ) | $ | 125 | |||||
$ | 158 | $ | (33 | ) | $ | 125 |
Note 7 - Related Party Transactions: |
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Investment Management (overview): |
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The Company has substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Accordingly, the Company does not report this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and |
Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, |
The |
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EAM Trust - VLI's non-voting revenues and non-voting profits interests: |
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The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business. EAM currently has no separately managed account |
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
($ in thousands) | 2024 | 2023 | 2024 | 2023 | ||||||||||||
Non-voting revenues interest in EAM | $ | 3,083 | $ | 2,512 | $ | 8,420 | $ | 7,917 | ||||||||
Non-voting profits interest in EAM | 406 | 173 | 921 | 599 | ||||||||||||
$ | 3,489 | $ | 2,685 | $ | 9,341 | $ | 8,516 |
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||
($ in thousands) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Non-voting revenues interest in EAM | $ | 2,057 | $ | 1,803 | $ | 6,074 | $ | 5,389 | ||||||||
Non-voting profits interest in EAM | 227 | 131 | 583 | 393 | ||||||||||||
$ | 2,284 | $ | 1,934 | $ | 6,657 | $ | 5,782 |
At January 31, |
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Transactions with Parent: |
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During the nine months ended January 31, |
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The Company is a party to a tax-sharing arrangement with the Parent which allocates the tax liabilities of the two Companies between them. The Company made federal tax payments of |
As of January 31, |
Note 8 - Federal, State and Local Income Taxes: |
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In accordance with the requirements of the Income Tax Topic of the FASB's ASC, the Company's provision for income taxes includes the following: |
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Three Months Ended January 31, | Nine Months Ended January 31, | Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||||||||
($ in thousands) | 2018 | 2017 | 2018 | 2017 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||||||
Current tax expense: | ||||||||||||||||||||||||||||||||
Federal | $ | 222 | $ | 851 | $ | 2,681 | $ | 5,424 | $ | 1,195 | $ | 1,191 | $ | 3,657 | $ | 3,581 | ||||||||||||||||
State and local | 55 | 166 | 303 | 506 | 469 | 364 | 979 | 831 | ||||||||||||||||||||||||
Current tax expense | 277 | 1,017 | 2,984 | 5,930 | 1,664 | 1,555 | 4,636 | 4,412 | ||||||||||||||||||||||||
Deferred tax expense (benefit): | ||||||||||||||||||||||||||||||||
Federal | (6,014 | ) | (282 | ) | (6,326 | ) | (870 | ) | 288 | 184 | (18 | ) | 85 | |||||||||||||||||||
State and local | 70 | (326 | ) | (79 | ) | (387 | ) | (107 | ) | (68 | ) | (171 | ) | (28 | ) | |||||||||||||||||
Deferred tax expense (benefit): | (5,944 | ) | (608 | ) | (6,405 | ) | (1,257 | ) | 181 | 116 | (189 | ) | 57 | |||||||||||||||||||
Income tax provision | $ | (5,667 | ) | $ | 409 | $ | (3,421 | ) | $ | 4,673 | $ | 1,845 | $ | 1,671 | $ | 4,447 | $ | 4,469 |
17 On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act (the "Tax Act"), was enacted. The Tax Act |
The overall effective income tax |
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Deferred income taxes, a liability, 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 long-term deferred tax liability are as follows: |
January 31, | April 30, | |||||||
($ in thousands) | 2024 | 2023 | ||||||
Federal tax liability (benefit): | ||||||||
Deferred gain on deconsolidation of EAM | $ | 10,669 | $ | 10,669 | ||||
Deferred non-cash post-employment compensation | (372 | ) | (372 | ) | ||||
Depreciation and amortization | 70 | 59 | ||||||
Unrealized gain/(loss) on fixed income securities held for sale | (7 | ) | 99 | |||||
Unrealized gain on equity securities | 895 | 919 | ||||||
Right of Use Asset | (154 | ) | (174 | ) | ||||
Deferred charges | (133 | ) | (136 | ) | ||||
Other | (461 | ) | (432 | ) | ||||
Total federal tax liability | 10,507 | 10,632 | ||||||
State and local tax liabilities (benefits): | ||||||||
Deferred gain on deconsolidation of EAM | 2,252 | 2,062 | ||||||
Deferred non-cash post-employment compensation | (78 | ) | (72 | ) | ||||
Depreciation and amortization | 15 | 125 | ||||||
Unrealized gain/(loss) on fixed income securities held for sale | (2 | ) | 19 | |||||
Unrealized gain on equity securities | 189 | 178 | ||||||
Other | (61 | ) | 185 | |||||
Total state and local tax liabilities | 2,315 | 2,497 | ||||||
Deferred tax liability, long-term | $ | 12,822 | $ | 13,129 |
January 31, | April 30, | |||||||
($ in thousands) | 2018 | 2017 | ||||||
Federal tax liability (benefit): | ||||||||
Deferred gain on deconsolidation of EAM | $ | 10,655 | $ | 17,742 | ||||
Deferred non-cash post-employment compensation | (372 | ) | (619 | ) | ||||
Depreciation and amortization | 179 | 454 | ||||||
Unrealized loss (gain) on securities held for sale | 322 | (366 | ) | |||||
Other | (42 | ) | - | |||||
Total federal tax liability | 10,742 | 17,211 | ||||||
State and local tax liabilities (benefits): | ||||||||
Deferred gain on deconsolidation of EAM | 1,298 | 1,206 | ||||||
Deferred non-cash post-employment compensation | (45 | ) | (42 | ) | ||||
Depreciation and amortization | 22 | 31 | ||||||
Other | (45 | ) | (29 | ) | ||||
Total state and local tax liabilities | 1,230 | 1,166 | ||||||
Deferred tax liability, long-term | $ | 11,972 | $ | 18,377 |
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At the end of each interim reporting period, the Company estimates the effective income tax rate to apply for the full fiscal year. The Company uses the effective income tax rate determined to provide for income taxes on a year-to-date basis and reflects the tax effect of any tax law changes and certain other discrete events in the period in which they occur. |
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The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following: |
Nine Months Ended January 31, | ||||||||
2024 | 2023 | |||||||
U.S. statutory federal tax rate | 21.00 | % | 21.00 | % | ||||
Increase (decrease) in tax rate from: | ||||||||
State and local income taxes, net of federal income tax benefit | 3.04 | % | 3.39 | % | ||||
Effect of dividends received deductions | (0.24 | )% | (0.25 | )% | ||||
Other, net | - | 0.01 | % | |||||
Effective income tax rate | 23.80 | % | 24.15 | % |
Nine Months Ended January 31, | ||||||||
2018 | 2017 | |||||||
U.S. statutory federal tax rate | 30.33 | % | 35.00 | % | ||||
Increase (decrease) in tax rate from: | ||||||||
Effect on deferred tax liabilities from federal tax rate reduction to 21% | -65.87 | % | - | |||||
State and local income taxes, net of federal income tax benefit | 1.27 | % | -0.39 | % | ||||
Effect of dividends received deductions | -0.47 | % | -0.29 | % | ||||
Domestic production tax credit | -0.13 | % | -0.19 | % | ||||
Other, net | 0.18 | % | -0.65 | % | ||||
Effective income tax rate | -34.69 | % | 33.48 | % |
The Company believes that, as of January 31, |
18 The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing agreement which requires it to make tax payments to the Parent equal to the Company's liability/(benefit) as if it filed a separate return. Beginning with the fiscal year ended April 30, 2017, the Company files combined income tax returns with the Parent on a unitary basis in certain |
The |
Note 9 - Property and Equipment: |
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Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the remaining terms of the leases. For income tax purposes, depreciation of furniture and equipment is computed using accelerated methods and buildings and leasehold improvements are depreciated over prescribed extended tax lives. Property and equipment, net, on the Consolidated Condensed Balance Sheets was comprised of the following: |
January 31, | April 30, | |||||||
($ in thousands) | 2018 | 2017 | ||||||
Building and leasehold improvements | $ | 1,013 | $ | 789 | ||||
Furniture and equipment | 4,021 | 3,865 | ||||||
5,034 | 4,654 | |||||||
Accumulated depreciation and amortization | (3,601 | ) | (3,415 | ) | ||||
Total property and equipment, net | $ | 1,433 | $ | 1,239 |
January 31, | April 30, | |||||||
($ in thousands) | 2024 | 2023 | ||||||
Building and leasehold improvements | $ | 1,013 | $ | 1,013 | ||||
Operating lease - right-of-use asset | 4,399 | 5,300 | ||||||
Furniture and equipment | 4,092 | 4,079 | ||||||
9,504 | 10,392 | |||||||
Accumulated depreciation and amortization | (4,707 | ) | (4,604 | ) | ||||
Total property and equipment, net | $ | 4,797 | $ | 5,788 |
Note 10 - Accounting for the Costs of Computer Software Developed for Internal Use: |
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The Company has adopted the provisions of the Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software Developed for Internal Use". SOP 98-1 requires companies to capitalize as long-lived assets many of the costs associated with developing or |
During the nine months ended January 31, 2024 and January 31, 2023, the Company did not incur and did not capitalize expenditures related to |
Note 11 - Treasury Stock and Repurchase Program: |
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Treasury stock, at cost, consists of the following: |
(in thousands except for shares and cost per share) | Shares | Total Average Cost Assigned | Average Cost per Share | Aggregate Purchase Price Remaining Under the Program | ||||||||||||||
Balance as of April 30, 2017 (1)(2) | 288,335 | $ | 3,781 | $ | 13.11 | $ | 609 | |||||||||||
Purchases effected in open market during the quarters ended: | ||||||||||||||||||
July 31, 2017 | 2,353 | 40 | 17.29 | 569 | ||||||||||||||
October 31, 2017 | 6,512 | 110 | 16.90 | 459 | ||||||||||||||
January 31, 2018 | 2,285 | 41 | 17.99 | 418 | ||||||||||||||
Balance as of January 31, 2018 | 299,485 | $ | 3,972 | $ | 13.26 | $ | 418 |
(in thousands except for shares and cost per share) | Shares | Cost Assigned | Average Cost per Share | Aggregate Purchase Price Remaining Under the Program | ||||||||||||
Balance as of October 31, 2023 | 573,017 | $ | 15,009 | $ | 26.19 | $ | 1,396 | |||||||||
Purchases effected in open market during the months ended: | ||||||||||||||||
November 30, 2023 | - | - | - | 1,396 | ||||||||||||
December 31, 2023 | - | - | - | 1,396 | ||||||||||||
January 31, 2024 | - | - | - | 1,396 | ||||||||||||
Balance as of January 31, 2024 | 573,017 | $ | 15,009 | $ | 26.19 | $ | 1,396 |
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Note 12 - Lease Commitments: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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In February The Company adopted ASU 2016-02 using a modified retrospective transition approach as of the Effective Date as permitted by the amendments in ASU 2018-11, which provides an alternative modified retrospective transition method. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (i.e. May 1, 2019). The Company has elected to employ the transitionary relief offered by the FASB and, therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized. The Company leases office space in New York, NY and a warehouse and appurtenant office space in Lyndhurst, NJ. The Company has evaluated these leases and determined that they are operating leases under the definitions of the guidance of ASU 2016-02. The lease in Lyndhurst, NJ will expire and the Company is making alternative arrangements for the functions performed at the Warehouse, subsequent to the expiration of the lease. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. On May 1, 2019, the Company recorded a right-of-use asset in the amount of $9,575,000, which represents the lease liability of $10,340,000 adjusted for previously recorded unamortized lease incentives in the amount of $765,000. The right-of-use asset is amortized over the remaining lease term in the amount equal to the difference between the calculated straight-line expense of the total lease payments less the monthly interest calculated on the remaining lease liability. As of January 31, 2024, the Company had a long-term lease asset of $4,399,000 recorded in property and equipment in its Consolidated Condensed Balance Sheets. The Company recognizes lease expense, calculated as the remaining cost of the lease allocated over the remaining lease term on a straight-line basis. Lease expense is presented as part of continuing operations in the consolidated condensed statements of income. The Company recognized $375,000 and $1,125,000 in lease expenses in both fiscal years 2024 and 2023 during the three and nine months ended January 31, 2024 and January 31, 2023, respectively. For the nine months ended January 31, 2024, the Company paid $1,221,000 in rent relating to the leases. As a payment arising from an operating lease, the $1,221,000 is classified within operating activities in the consolidated condensed statements of cash flows. The Company’s leases generally do not provide an implicit interest rate, and therefore the Company estimated an incremental borrowing rate, or IBR, as of the commencement date, to determine the present value of its operating lease liabilities. The IBR is defined under ASC 842 as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The following table reconciles the undiscounted future minimum lease payments to the total operating lease liabilities recognized on the Consolidated Condensed Balance Sheet as of January 31, 2024:
* Excludes the nine months ended January 31, 2024 The following table summarizes the weighted-average remaining lease terms and weighted-average discount rates for our operating leases:
20 Note 13 - Restricted Cash and Deposits: Restricted Money Market Investment in the noncurrent assets on the Consolidated Condensed Balance Sheet at January 31, 2024, includes $305,000, which represents cash invested in a bank money market fund securing a letter of credit ("LOC") in the amount of $305,000 issued to the sublandlord as a security deposit for the Company's Note 14 - Concentration: During the nine months ended January 31, 2024, 32.7% of total publishing revenues of $28,484,000 were derived from a single customer. Note 15 - Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of January 31, 2024 and January 31, 2023, the Company had $2,268,000 and $2,427,000, respectively, in excess of the FDIC insured limit. Management has concluded the excess does not represent a material risk, based on the creditworthiness of the counter parties. Note 16 – Segment Information: The investment periodicals and related publications (such as digital equivalents), along with supplying the embedded Proprietary information and intellectual property rights, are treated as one segment, Publishing. It is the Company’s only reportable segment, and all required segment financial information can be found directly in the consolidated financial statements. The accounting policies for our reportable segment are the same as those described in Note 1. 21 Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Cautionary Statement Regarding Forward-Looking Information In this report, “Value Line,” “we,” “us,” “our” refers to Value Line, Inc. and “the Company” refers to Value Line and its subsidiaries unless the context otherwise requires. This report contains statements that are predictive in nature, depend upon or refer to future events or conditions (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar or negative expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, as amended. Actual results for Value Line, Inc. (“Value Line” or “the Company”) may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the following:
22 These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors which may involve external factors over which we may have no control or changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at our discretion, could also have material adverse effects on future results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC's rules, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, current plans, anticipated actions, and future financial conditions and results may differ from those expressed in any forward-looking information contained herein. Executive Summary of the Business The Company's core business is producing investment periodicals and their underlying research and making available certain Value Line copyrights, Value Line trademarks and Value Line Proprietary Ranks and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. Value Line markets under well-known brands including Value Line®, the Value Line logo®, The Value Line Investment Survey®, Smart Research, Smarter Investing™and The Most Trusted Name in Investment Research®. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. EULAV Asset Management Trust (“EAM”) was established to provide the investment management services to the Value Line Funds, institutional and individual accounts and provide distribution, marketing, and administrative services to the Value Line® Mutual Funds ("Value Line Funds"). The Company maintains a significant investment in EAM from which it receives payments in respect of its non-voting revenues and non-voting profits interests. The Company’s target audiences within the investment research field are individual investors, colleges, libraries, and investment management professionals. Individuals come to Value Line for complete research in one package. Institutional licensees consist of corporations, financial professionals, colleges, and municipal libraries. Libraries and universities offer the Company’s detailed research to their patrons and students. Investment management professionals use the research and historical information in their day-to-day businesses. The Company has a dedicated department that solicits institutional subscriptions. Payments received for new and renewal subscriptions and the value of receivables for amounts billed to retail and institutional customers are recorded as unearned revenue until the order is fulfilled. As the orders are fulfilled, the Company recognizes revenue in equal installments over the life of the particular subscription. Accordingly, the subscription fees to be earned by fulfilling subscriptions after the date of a particular balance sheet are shown on that balance sheet as unearned revenue within current and long-term liabilities. The investment periodicals and related publications (such as digital equivalents), along with supplying the embedded Proprietary information and intellectual property rights, are treated as one segment, Publishing. It is the Company’s only reportable segment, and all required segment financial information can be found directly in the consolidated financial statements. Asset Management and Mutual Fund Distribution Businesses Pursuant to the EAM Declaration of Trust, the Company maintains an interest in certain revenues of EAM and a portion of the residual profits of EAM but has no voting authority with respect to the election or removal of the trustees of EAM or control of its business. 23 The business of EAM is managed by its trustees each owning 20% of the voting interest in EAM and by its officers subject to the direction of the trustees. The Company’s non-voting revenues and non-voting profits interests in EAM entitle it to receive a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business distributed quarterly and 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Voting Profits Interest Holders will receive the other 50% of residual profits of EAM. Distribution is not less than 90% of EAM’s profits payable each fiscal quarter under the provisions of the EAM Trust Agreement. Business Environment The U.S. economy performed much better than expected during calendar 2023. Last year started with talks of the possibility of at least a mild recession during the 12-month period, with restrictive monetary policies leading to a decrease in demand for goods and services. That scenario, however, did not materialize, as U.S. consumer spending held up in 2023 despite elevated inflation and higher interest rates. The consumer sector was buoyed by savings built up during the COVID-19 pandemic, the unprecedented government spending of recent years, and growth in real wages. For the full year, GDP expanded 2.5%. The economy also got off to a solid start this year, but the consensus expectation is that GDP growth will slow in the second and third quarters. The Federal Reserve in its March Beige Book summation of economic conditions said there are signs of some fatigue in the consumer sector, which accounts for roughly two-thirds of the nation’s economic output. Potential headwinds for the U.S. consumer include rising personal debt levels and still elevated interest rates. Elsewhere, both durable goods orders and manufacturing activity were notably weaker at the start of 2024. Clearly, there are signs of some increasing sluggishness in parts of the economy. Although a recession, which is defined as two-consecutive quarters of falling GDP, is not expected during calendar 2024, our view is that the pace of GDP growth will drop below 2% this year. Meantime, Federal Reserve Chairman Jerome Powell and the Federal Open Market Committee (FOMC) are walking a tightrope on monetary policy. The central bank does not want to start cutting interest rates too early and see inflation reaccelerate. This was a problem for the U.S. economy in the late 1970s. However, the FOMC also must guard against staying too restrictive and risk creating stress in parts of the economy. Concerns about the negative impact of higher rates on the regional banks and the commercial real estate market persist. Our stance is that the Federal Reserve will begin loosening monetary policy in the second half of this year, but a cut as early as the June FOMC meeting can’t be ruled out if the economy were to weaken more than expected in the coming months. In conclusion, the Federal Reserve’s restrictive monetary tightening course has clearly made a dent in inflation without disrupting the labor market. The progress has been significant enough that Fed Chairman Powell hinted in his March testimony before Congress that the central bank could begin cutting rates by midyear, perhaps even earlier, if inflation continues on its downward trajectory. In all, the current business environment has held up fairly well, with profit growth for S&P 500 companies averaging around 4% in the fourth quarter. For 2024, Wall Street anticipates low double-digit corporate earnings growth. 24 Results of Operations for the Three and Nine Months Ended January 31, 2024 and 2023 The following table illustrates the Company’s key components of revenues and expenses.
During the nine months ended January 31, 2024, the Company’s net income of $14,232,000, or $1.51 per share, was 1.4% above net income of $14,036,000, or $1.48 per share, for the nine months ended January 31, 2023. For the nine months ended January 31, 2024, operating expenses decreased 2.0% below those during the nine months ended January 31, 2023. During the three months ended January 31, 2024, the Company’s net income of $5,885,000, or $0.62 per share, was 12.2% above net income of $5,248,000, or $0.55 per share, for the three months ended January 31, 2023. For the three months ended January 31, 2024, operating expenses decreased 1.2% below those during the three months ended January 31, 2023. During the nine months ended January 31, 2024, there were 9,429,575 average common shares outstanding as compared to 9,465,955 average common shares outstanding during the nine months ended January 31, 2023. 25 Total operating revenues
Within investment periodicals and related publications, subscription sales orders are derived from print and digital products. The following chart illustrates the changes in the sales orders associated with print and digital subscriptions. Sources of subscription sales
During the nine months ended January 31, 2024, new
Unearned subscription revenue as of January 31, 2024, is 2.1% below April 30, 2023 and 1.2% below January 31, 2023. A certain amount of variation is to be expected due to the volume of new orders and timing of long-term renewal contracts, direct mail campaigns and large Institutional Sales orders. 26 Investment periodicals and related publications revenues Investment periodicals and related publications revenues of $19,174,000 (excluding copyright fees) during the nine months ended January 31, 2024 were 3.1% below publishing revenues of $19,795,000, as compared to the prior fiscal year. The Company continued activity to attract new subscribers, primarily digital subscriptions through various marketing channels, primarily direct mail, e-mail, and by the efforts of our sales personnel. As fewer individual investors manage their own portfolios, total product line circulation at January 31, 2024, was 3.6% below total product line circulation at January 31, 2023. However, Institutional Sales department total sales orders reached a record level in the fiscal year ended April 30, 2023 and this growing, more profitable business with financial advisors and professional investors significantly offsets the long-term trend of declining individual investor circulation. Circulation also reflected management’s decision to reduce marketing efforts temporarily while the challenging stock market environment persisted. Total print circulation at January 31, 2024 was 5.0% below the total print circulation at January 31, 2023. During the nine months ended January 31, 2024, print publication revenues of $6,987,000 decreased 7.3%, below print publication revenues of $7,539,000 during the same quarter of 2023. Total digital circulation at January 31, 2024 was 1.7% below total digital circulation at January 31, 2023 with the professional clientele offsetting the decline in individual subscribers. During the nine months ended January 31, 2024, digital revenues of $12,187,000 were down 0.6% as compared to the prior fiscal year. These figures reflect weak investor sentiment, likely temporary, and the ongoing shift from our print services to digital counterparts. Sales of our higher-price, higher-profit, publications have been stronger than sales of lower price “starter” products. Value Line serves primarily individual and professional investors in stocks, and other securities, who pay mostly on annual or multi-year subscription plans, for basic services or as much as $100,000 or more annually for comprehensive premium quality research, not obtainable elsewhere. The ongoing goal of adding new subscribers has led us to introduce publications and packages at a range of price points. The Value Line Proprietary Ranks (the “Ranking System”), a component of the Company’s flagship product, The Value Line Investment Survey, are also utilized in the Company’s copyright business. The Ranking System is made available to EAM for specific uses without charge. During the twelve month period ended January 31, 2024, the combined Ranking System “Rank 1 & 2” stocks’ increase of 9.1% compared favorably to the Russell 2000 Index’s increase of 0.8% during the comparable period. Copyright fees During the nine months ended January 31, 2024, copyright fees of $9,310,000 were 8.6% below those during the corresponding period in the prior fiscal year. These fees depend on the assets under management in financial products with contractual arrangements to use the Ranks and other Value Line proprietary information. Investment management fees and services – (unconsolidated) The Company has substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Accordingly, the Company does not report this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and will receive ongoing payments in respect of its non-voting revenues and non-voting profits interests. Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, 2024, were $4.06 billion, which is $1.02 billion, or 33.6%, above total assets of $3.04 billion in the Value Line Funds managed and/or distributed by EAM at January 31, 2023. 27 Value Line Mutual Funds
EAM Trust - Results of operations before distribution to interest holders The gross fees and net income of EAM’s investment management operations during the nine months ended January 31, 2024, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $17,388,000, 12b-1 fees and other fees of 4,811,000 and other net gains of $295,000. For the same period, total investment management fee waivers were $239,000 and 12b-1 fee waivers were $72,000. During the nine months ended January 31, 2024, EAM's net income was $1,842,000 after giving effect to Value Line’s non-voting revenues interest of $8,420,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest. The gross fees and net income of EAM’s investment management operations during the nine months ended January 31, 2023, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $14,951,000, 12b-1 fees and other fees of $4,507,000 and other net gains of $150,000. For the same period, total investment management fee waivers were $104,000 and 12b-1 fee waivers were $80,000. During the nine months ended January 31, 2023, EAM's net income was $1,198,000 after giving effect to Value Line’s non-voting revenues interest of $7,917,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest. As of January 31, 2024, one of the Value Line Funds has full 12b-1 fees waivers in place, and five funds have partial investment management fee waivers in place. Although, under the terms of the EAM Declaration of Trust, the Company does not receive or share in the revenues from 12b-1 distribution fees, the Company could benefit from the fee waivers to the extent that the resulting reduction of expense ratios and enhancement of the performance of the Value Line Funds attracts new assets. The Value Line equity and hybrid funds’ assets represent 99.1% and fixed income fund assets represent 0.90%, respectively, of total fund assets under management (“AUM”) as of January 31, 2024. At January 31, 2024, equity and hybrid AUM increased by 34.3% and fixed income AUM decreased by 11.9% as compared to last year at January 31, 2023. 28 EAM - The Company’s non-voting revenues and non-voting profits interests The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business that is distributed quarterly, and 50% of EAM’s net profits, not less than 90% of which is distributed in cash every fiscal quarter. The Company recorded income from its non-voting revenues interest and its non-voting profits interest in EAM as follows:
Operating expenses
Expenses within the Company are categorized into advertising and promotion, salaries and employee benefits, production and distribution, office and administration. Operating expenses of $20,831,000 during the nine months ended January 31, 2024, were 2.0% below those during the nine months ended January 31, 2023 as a result of cost controls in fiscal year 2023 and fiscal year 2024. Advertising and promotion During the nine months ended January 31, 2024, advertising and promotion expenses of $2,139,000 decreased 4.8% as compared to the prior fiscal year. During the nine months ended January 31, 2024, decreases were primarily due to decreases in renewal solicitations and sales commissions. Salaries and employee benefits During the nine months ended January 31, 2024, salaries and employee benefits of $11,156,000 decreased 3.6% below the prior fiscal year, primarily due to decreases in salaries and employee benefits resulting from reduced employee headcount in fiscal year 2024. Production and distribution During the nine months ended January 31, 2024, production and distribution expenses of $4,094,000 increased 6.9% above prior fiscal year primarily due to increases in production support of the Company’s website and maintenance of the Company’s publishing and application software and operating systems. Increase in third party distribution expense is associated with outsourcing and upgrading a portion of our customer fulfillment operations. 29 Office and administration During the nine months ended January 31, 2024, office and administrative expenses of $3,442,000 decreased 4.8% below the prior fiscal year, primarily due to decreases in professional fees and utilities. Concentration During the nine months ended January 31, 2024, 32.7% of total publishing revenues of $28,484,000 were derived from a single customer. Investment gains / (losses)
During the nine months ended January 31, 2024, the Company’s investment gains, primarily derived from dividend and interest income, investment gains recognized on sales of equity securities during the period and unrealized gains recognized on equity securities held at the end of the period in fiscal 2024, resulted in investment gains of $1,685,000. During the nine months ended January 31, 2023, the Company’s investment gains, primarily derived from dividend and interest income, investment gains recognized on sales of equity securities during the period and unrealized gains recognized on equity securities held at January 31, 2023 in fiscal 2023, resulted in investment gains of $1,276,000. Proceeds from the sales of equity securities during the nine months ended January 31, 2024 and January 31, 2023 were $1,129,000 and $1,421,000, respectively. Effective income tax rate The overall effective income tax rates, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2024 and January 31, 2023 were 23.80% and 24.15%, respectively. The lower effective tax rate during nine months ended January 31, 2024 as compared to January 31, 2023, is primarily a result of a decrease in the state and local income taxes from 3.39% to 3.04% due to changes in state and local income tax allocations. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to changes in tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-tax income, the Company's geographic profit mix among tax jurisdictions, taxation method adopted by each locality, new interpretations of existing tax laws and rulings and settlements with tax authorities. 30 Lease Commitments On November 30, 2016, Value Line, Inc. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Liquidity and Capital Resources The Company had working capital, defined as current assets less current liabilities, of The Company’s cash and cash equivalents include $4,739,000 and $7,240,000 at January 31, 2024 and April 30, 2023, respectively, invested primarily in commercial banks and in Money Market Funds at brokers, which operate under Rule 2a-7 of the 1940 Act and invest primarily in short-term U.S. government securities. Cash from operating activities The Company had cash inflows from operating activities of $14,169,000 during the nine months ended January 31, 2024, compared to cash inflows of $13,978,000 during the nine months ended January 31, 2023. The increase in cash inflows was a result of increased interest income, the timing of receipts from accounts receivable and slowdown in the decline of unearned revenue from the same period last year. Cash from investing activities The Company had cash outflows from investing activities of $7,719,000 during the nine months ended January 31, 2024, compared to cash outflows from investing activities of $20,222,000 for the nine months ended January 31, 2023, respectively. The lower cash outflows for the nine months ended January 31, 2024 compared to January 31, 2023, was primarily due to increases in |
Fiscal Years Ended April 30, | ($ in thousands) | |||
2019 | $ | 1,366 | ||
2020 | 1,399 | |||
2021 | 1,432 | |||
2022 | 1,506 | |||
2023 and thereafter | 8,496 | |||
$ | 14,199 |
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-Looking Information
This report contains statements that are predictive in nature, depend upon or refer to future events or conditions (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar or negative expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, as amended. Actual results for Value Line, Inc. (“Value Line” or “the Company”) may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the following:$0.28 per share during fiscal year 2024 aggregated $7,922,000. Quarterly regular dividend payments of $0.25 per share during fiscal year 2023 aggregated $7,111,000.
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Seasonality Our publishing revenues are comprised of subscriptions which Critical Accounting Estimates and Policies The Company prepares its Consolidated Financial Statements in |
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Contractual Obligations We are a party to lease contracts which will result in cash payments to lessors in future periods. Operating lease liabilities are included in our Consolidated Balance Sheets. Estimated payments of these liabilities in each of the next five fiscal years and thereafter are (in thousands): $413 in |
These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors which may involve external factors over which we may have no control or changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at our discretion, could also have material adverse effects on future results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC's rules, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, current plans, anticipated actions, and future financial conditions and results may differ from those expressed in any forward-looking information contained herein.
In this report, “Value Line,” “we,” “us,” “our” refers to Value Line, Inc. and the “Company” refers to Value Line and its subsidiaries unless the context otherwise requires.
Executive Summary of the Business
The Company's core business is producing investment periodicals and their underlying research and making available copyright data, including certain proprietary Ranking System and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. Value Line markets under well-known brands including Value Line®, the Value Line logo®, The Value Line Investment Survey®, Smart Research, Smarter Investing™ and The Most Trusted Name in Investment Research®. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. Effective December 23, 2010, EULAV Asset Management Trust (“EAM”) was established to provide the investment management services to the Value Line Funds, institutional and individual accounts and provide distribution, marketing, and administrative services to the Value Line® Mutual Funds ("Value Line Funds"). The Company maintains a significant investment in EAM from which it receives payments in respect of its non-voting revenues and non-voting profits interests.
The Company’s target audiences within the investment research field are individual investors, colleges, libraries, and investment management professionals. Individuals come to Value Line for complete research in one package. Institutional licensees consist of corporations, financial professionals, colleges, and municipal libraries. Libraries and universities offer the Company’s detailed research to their patrons and students. Investment management professionals use the research and historical information in their day-to-day businesses. The Company has a dedicated department that solicits institutional subscriptions.
Payments received for new and renewal subscriptions and the value of receivables for amounts billed to retail and institutional customers are recorded as unearned revenue until the order is fulfilled. As the orders are fulfilled, the Company recognizes revenue in equal installments over the life of the particular subscription. Accordingly, the subscription fees to be earned by fulfilling subscriptions after the date of a particular balance sheet are shown on that balance sheet as unearned revenue within current and long-term liabilities.
The investment periodicals and related publications (retail and institutional) and fees from copyright data including the proprietary Ranking System information and other proprietary information consolidate into one segment called Publishing.
The Company’s move to new headquarters in February 2017 resulted in lower rent expense over the term of the sublease.
Asset Management and Mutual Fund Distribution Businesses
The business of EAM is managed by its trustees each owning 20% of the voting profits interest in EAM and by its officers subject to the direction of the trustees. The Company’s non-voting revenues and non-voting profits interests in EAM entitle it to receive a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business and 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Voting Profits Interest Holders will receive the other 50% of residual profits of EAM. Distribution is not less than 90% of EAM’s profits payable each fiscal quarter under the provisions of the EAM Trust Agreement. Value Line’s percent share of EAM’s revenues calculated each fiscal quarter was 49.73%, 50.28% and 50.88% during the first, second and third quarters of fiscal 2018, respectively, and 49.45%, 49.14% and 49.19% during the first, second and third quarters of fiscal 2017, respectively.
Pursuant to the EAM Declaration of Trust, the Company granted EAM the right to use the Value Line name for all existing Value Line Funds and agreed to supply the Value Line proprietary Ranking System information to EAM without charge or expense.
Business Environment
The nation's long business expansion, which is now approaching a decade in duration, continues to press ahead. On point, after a trio of solid quarterly increases in the gross domestic product to close out the final nine months of 2017, recent trends in employment, wage growth, personal income and spending, and the leading indicators suggest that the opening three months of this year will bring additional improvement.
Encouragingly, this latest buildup in economic momentum seems likely to continue this year. True, there could be some early-year choppiness, as there often is during the seasonally low opening period, although weather-related issues have been less numerous than in recent years. Meanwhile, once spring arrives, GDP should kick into somewhat higher gear, with growth moving back up into the 3% range that was in place during the middle quarters of last year. The likely improvement should be driven by increases in infrastructure spending, gains in industrial activity, additional durability in housing, and solid levels of consumer spending by a public that, for the most part, has seen its wealth expand due to the historic bull market, increasing pay checks and rising real estate values.
Of course, few up cycles continue without interruption, and this one figures to be no exception. And although we do not see a recession on the horizon--with the current expansion likely to last into the early years of the next decade given the absence of growth or inflation excesses to date--there are risks that should not be dismissed. Chief among these would be the failure of fiscal initiative and monetary policy adjustments to keep the economic ball rolling without inviting major overheating. Other risks would be serious political headwinds at home or damaging flare-ups overseas.
For now, though, the business outlook continues to be bright and this is helping to keep the stock market at a high level, albeit with a few high-profile reversals along the way, as P/E ratios remain at the upper end of their historic range.
Results of Operations for the Three and Nine Months Ended January 31, 2018 and January 31, 2017
The following table illustrates the Company’s key components of revenues and expenses.
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||
($ in thousands, except earnings per share) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Income from operations including gain on sale of operating facility in fiscal 2017 | $ | 787 | $ | (212 | ) | #N/A | $ | 2,760 | $ | 7,948 | -65.3 | % | ||||||||||||
Non-voting revenues and non-voting profits interests from EAM Trust | $ | 2,284 | $ | 1,934 | 18.1 | % | 6,657 | 5,782 | 15.1 | % | ||||||||||||||
Income from operations plus non-voting revenues and non-voting profits interests from EAM Trust | $ | 3,071 | $ | 1,722 | 78.3 | % | $ | 9,417 | $ | 13,730 | -31.4 | % | ||||||||||||
Operating expenses | $ | 8,307 | $ | 8,859 | -6.2 | % | $ | 24,237 | $ | 25,993 | -6.8 | % | ||||||||||||
Income from securities transactions, net | $ | 258 | $ | 132 | 95.5 | % | $ | 445 | $ | 226 | 96.9 | % | ||||||||||||
Income before income taxes | $ | 3,329 | $ | 1,854 | 79.6 | % | $ | 9,862 | $ | 13,956 | -29.3 | % | ||||||||||||
Net income | $ | 8,996 | $ | 1,445 | 522.6 | % | $ | 13,283 | $ | 9,283 | 43.1 | % | ||||||||||||
Earnings per share | $ | 0.93 | $ | 0.15 | 520.0 | % | $ | 1.37 | $ | 0.96 | 42.7 | % |
During the nine months ended January 31, 2018, the Company’s net income of $13,283,000, or $1.37 per share, was $4,000,000 or 43.1% above net income of $9,283,000, or $0.96 per share, for the nine months ended January 31, 2017. During the nine months ended January 31, 2018 there were 9,705,347 average common shares outstanding as compared to 9,724,377 average common shares outstanding during the nine months ended January 31, 2017. Income from operations of $2,760,000 during the nine months ended January 31, 2018 was $5,188,000 below income from operations of $7,948,000, which included a pre-tax gain of $8,123,000 from the sale of the Company's operating facility during the nine months ended January 31, 2017 for which it received net proceeds of $11,555,000 on July 29, 2016. During the three months ended January 31, 2018, the Company’s net income of $8,996,000, or $0.93 per share, was $7,551,000 above net income of $1,445,000, or $0.15 per share, for the three months ended January 31, 2017 due to the fiscal 2018 reduction in the U.S. statutory federal corporate income tax rate from 35% to 21% on the Company’s long-term deferred tax liabilities, resulting in a tax benefit of 65.87% of pre-tax income for the nine months ended January 31, 2018. The Company re-calculated its net deferred tax assets and liabilities using the Federal Tax Rate under the Tax Act. The effect of the re-calculation is reflected entirely in the third quarter ended January 31, 2018 (the period that includes the enactment date) and is allocated directly to both current and deferred income tax expenses from continuing operations. The decrease in income from operations during the nine months ended January 31, 2018, was partially offset by a $2,913,000 decrease in depreciation and amortization expense in fiscal year 2018.
Total operating revenues
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||
($ in thousands) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Investment periodicals and related publications: | ||||||||||||||||||||||||
$ | 3,479 | $ | 3,446 | 1.0 | % | $ | 10,405 | $ | 10,601 | -1.8 | % | |||||||||||||
Digital | 3,912 | 4,022 | -2.7 | % | 11,852 | 12,146 | -2.4 | % | ||||||||||||||||
Total investment periodicals and related publications | 7,391 | 7,468 | -1.0 | % | 22,257 | 22,747 | -2.2 | % | ||||||||||||||||
Copyright data fees | 1,703 | 1,179 | 44.4 | % | 4,740 | 3,071 | 54.3 | % | ||||||||||||||||
Total publishing revenues | 9,094 | 8,647 | 5.2 | % | 26,997 | 25,818 | 4.6 | % | ||||||||||||||||
Gain on sale of operating facility | - | - | n/a | - | 8,123 | n/a | ||||||||||||||||||
Total revenues | $ | 9,094 | $ | 8,647 | 5.2 | % | $ | 26,997 | $ | 33,941 | -20.5 | % |
Within investment periodicals and related publications, subscription sales orders are derived from print and digital products. The following chart illustrates the changes in the sales orders associated with print and digital subscriptions.
Sources of subscription sales
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||||||||||||||
Digital | Digital | Digital | Digital | |||||||||||||||||||||||||||||
New Sales | 15.3 | % | 14.2 | % | 10.3 | % | 13.4 | % | 16.1 | % | 15.2 | % | 12.7 | % | 16.2 | % | ||||||||||||||||
Conversion and Renewal Sales | 84.7 | % | 85.8 | % | 89.7 | % | 86.6 | % | 83.9 | % | 84.8 | % | 87.3 | % | 83.8 | % | ||||||||||||||||
Total Gross Sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
During the nine months ended January 31, 2018 new sales of print publications increased as a percent of the total gross print sales as a result of an increase in new print retail sales orders while conversion and renewal sales of print orders decreased from the prior fiscal year. New sales of digital publications decreased as a percent of the total gross digital sales as a result of a decrease in new digital retail sales orders, related to a two-year trend of lower advertising expenditures. Conversion and renewal sales of digital services slightly increased as a percent of the total gross digital sales over the prior fiscal year as a result of a slower decline than the decline in new sales due to efforts by our in-house Retail and Institutional Sales departments.
As of January 31, | As of April 30, | As of January 31, | Change | |||||||||||||||||
($ in thousands) | 2018 | 2017 | 2017 | Jan-18 vs. Apr-17 | Jan-18 vs. Jan-17 | |||||||||||||||
Unearned subscription revenue (current and long-term liabilities) | $ | 24,112 | $ | 25,659 | $ | 24,239 | -6.0 | % | -0.5 | % |
Unearned subscription revenue as of January 31, 2018 is comparable to January 31, 2017 and is 6.0% below April 30, 2017. The decline from April 30, 2017, reflects both the timing of advertising for order generation and the fact that April 30th is the usual annual peak. A certain amount of variation is to be expected due to the volume of new orders and timing of renewal orders, direct mail campaigns and large Institutional Sales orders.
Investment periodicals and related publications revenues
Investment periodicals and related publications revenues of $22,257,000 decreased $490,000, or 2.2%, for the nine months ended January 31, 2018, as compared to the prior fiscal year. The Company continued its efforts to attract new subscribers through various marketing channels, primarily direct mail, e-mail, and by the efforts of our sales personnel. Total product line circulation at January 31, 2018 was 3.7% below total product line circulation at January 31, 2017. The Company has been successful in growing revenues from digitally-delivered investment periodicals within the institutional market. Institutional Sales generated total sales orders of $9,789,000 for the nine months ended January 31, 2018 which were 1.1%, above comparable total sales orders of $9,687,000 for the nine months ended January 31, 2017. Revenues from institutional subscribers increased 1.6% above the prior fiscal year. This revenue growth continues a positive trend for Institutional Sales, but is not sufficient to wholly offset the lost revenues from retail subscribers. We have also benefited from the ability to realize modest price increases as well as “converting” an increased volume of customers from lower cost retail to the more robust professional priced services. The retail telemarketing sales team generated total sales orders of $6,102,000 for the nine months ended January 31, 2018 which compares to $6,661,000 in the prior fiscal year.
Print publication revenues of $10,405,000 decreased $196,000 or 1.8% for the nine months ended January 31, 2018 as compared to the prior fiscal year. Revenues from institutional print publications increased $146,000 or 8.6% while print publications revenues from retail subscribers decreased $342,000 or 3.8% for the nine months ended January 31, 2018, as compared to the prior fiscal year. Total print circulation at January 31, 2018 was 3.1% above total print circulation at January 31, 2017. Digital publications revenues of $11,852,000 during the nine months ended January 31, 2018 were $294,000 or 2.4% below the prior fiscal year. Revenues from institutional digital publications increased less than 1% as compared to the prior fiscal year. Digital publications revenues from retail subscribers decreased $315,000 or 9.5% as compared to the prior fiscal year. Total digital circulation at January 31, 2018 was 12.6% below total digital circulation at January 31, 2017.
Value Line serves primarily individual and professional investors in stocks, who pay, primarily on annual subscription plans, for basic services or as much as $100,000 or more annually for comprehensive premium quality research, not obtainable elsewhere. The ongoing goal of adding new subscribers has led us to experiment with varying terms for our reliable, proprietary research including periods of intensive promotion of “starter” services and publications.
Copyright data fees
The Value Line proprietary Ranking System information (the “Ranking System”), a component of the Company’s flagship product, The Value Line Investment Survey, is also utilized in the Company’s copyright data business. The Ranking System is made available to EAM for specific uses without charge. The Ranking System is designed to be predictive over a six to twelve month period. For the six month period ended January 31, 2018, the combined Ranking System “Rank 1 & 2” stocks’ increase of 13.2% outperformed the Russell 2000 index’s increase of 10.5% during the comparable period. For the twelve month period ended January 31, 2018, the combined Ranking System “Rank 1 & 2” stocks’ increase of 16.0% outperformed the Russell 2000 index’s increase of 15.7% during the comparable period.
During the three and nine months ended January 31, 2018, copyright data fees of $1,703,000 and $4,740,000, respectively, were 44.4% and 54.3%, respectively, above the prior fiscal year. As of January 31, 2018, total third party sponsored assets were attributable to three contracts for copyright data representing $4.4 billion in various products, as compared to three contracts for copyright data representing $3.2 billion in assets at January 31, 2017.
The Company believes this part of the business is dependent upon the desire of third parties to use the Value Line trademarks and proprietary research for their products, on competition and on fluctuations in segments of the equity markets. Our quantitative specialists are seeking to develop and confirm reliable models for additional copyright data products.
Gain on sale of operating facility
On July 29, 2016, Value Line closed the sale of its 85,000 sq. ft. distribution, fulfillment and warehouse operating facility located at 125 East Union Avenue, East Rutherford, NJ, received net proceeds of $11,555,000 and reported an increment to net profits after tax during the first quarter of fiscal 2017 of approximately $5.2 million. The distribution, fulfillment and warehouse operations were relocated to an alternative 24,110 sq. ft. leased facility.
Investment management fees and services – (unconsolidated)
The Company has a substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Accordingly, the Company does not report this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and will receive ongoing payments in respect of its non-voting revenues and non-voting profits interests.
Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, 2018, were $2.6 billion, which is $300 million, or 13%, above total assets of $2.2 billion in the Value Line Funds managed and/or distributed by EAM at January 31, 2017. The increase reflects successful investment selection capturing market appreciation, offset by net redemptions in nine of the eleven Value Line Funds over the twelve month period ended January 31, 2018.
Shares of Value Line Strategic Asset Management Trust (“SAM”) and Value Line Centurion Fund (“Centurion”) are within certain variable annuity and variable life insurance contracts issued by The Guardian Insurance & Annuity Company, Inc. (“GIAC”); new contracts of this type are no longer sold.
Value Line Mutual Funds
As of January 31, | ||||||||||||
($ in millions) | 2018 | 2017 | Change | |||||||||
Variable annuity assets ("GIAC") | $ | 418 | $ | 419 | -0.2 | % | ||||||
All other open end equity and hybrid fund assets | 2,078 | 1,754 | 18.5 | % | ||||||||
Total equity and hybrid funds | 2,496 | 2,173 | 14.9 | % | ||||||||
Fixed income funds | 116 | 129 | -10.1 | % | ||||||||
Total EAM managed net assets | $ | 2,612 | $ | 2,302 | 13.5 | % |
The Daily Income Fund managed by Reich & Tang Asset Management LLC was liquidated on July 29, 2015. Since then the Value Line Fund shareholders have been provided a money market fund alternative investment managed by Federated Government Obligations Fund.
EAM has successfully broadened distribution, particularly within the Adviser/Independent Broker Dealer (“IBD”) channel. Assets in that channel are up $105 million or 17% year over year as a result of market appreciation. The channel accounts for approximately 61% of gross sales for the year. Due to stronger gross annual sales than that of the prior year, the Advisor/IBD channel continues to be positive and the leading channel for net sales for the period. The marketing efforts have led to clients of over 4,000 financial advisers (individual reps or RIAs) owning a Value Line fund as of January 31, 2018. The largest distribution channel for the Value Line Funds remains the fund supermarket platforms such as Charles Schwab & Co., Inc., Fidelity, Pershing and E-Trade.
As of January 31, 2018, four of six Value Line equity and hybrid mutual funds, excluding SAM and Centurion, held an overall four or five star rating by Morningstar, Inc. As of January 31, 2018, three of the six equity and hybrid funds were in the top quintile of their respective peer groups for the one year period, and three of the six funds were in the top quintile for the three year period according to Morningstar.
Several of the Value Line Funds have received national recognition. The Value Line Mid-Cap Focused Fund, the Value Line Small Cap Opportunities Fund and the Value Line Income and Growth Fund have been named “Category Kings” in The Wall Street Journal in multiple months in calendar 2017.
EAM Trust - Results of operations before distribution to interest holders
The overall results of EAM’s investment management operations during the nine months ended January 31, 2018, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $12,096,000, 12b-1 fees and other fees of $4,844,000 and other income of $156,000 which included dividend, interest and licensing fees income. For the same period, total investment management fee waivers were $392,000 and 12b-1 fee waivers for four Value Line Funds were $583,000. During the nine months ended January 31, 2018, EAM's net income was $1,166,000 after giving effect to Value Line’s non-voting revenues interest of $6,074,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.
The overall results of EAM’s investment management operations during the nine months ended January 31, 2017, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $10,991,000, 12b-1 fees and other fees of $4,357,000 and other income of $136,000 which includes, dividend, interest and licensing fees income. For the same period, total investment management fee waivers were $308,000 and 12b-1 fee waivers for four Value Line Funds were $700,000. During the nine months ended January 31, 2017, EAM's net income was $786,000 after giving effect to Value Line’s non-voting revenues interest of $5,389,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.
As of January 31, 2018, three of the Value Line Funds have all or a portion of the 12b-1 fees being waived, and one fund has partial investment management fee waivers in place. Although, under the terms of the EAM Declaration of Trust, the Company no longer receives or shares in the revenues from 12b-1 distribution fees, the Company could benefit from the fee waivers to the extent that the resulting reduction of expense ratios and enhancement of the performance of the Value Line Funds attracts new assets.
The Value Line equity and hybrid funds assets represent 79.6%, variable annuity funds issued by GIAC represent 16.0%, and fixed income fund assets represent 4.4%, respectively, of total fund assets under management (“AUM”) as of January 31, 2018. At January 31, 2018, equity, hybrid and GIAC variable annuities AUM increased by 14.9% and fixed income AUM decreased by 10.1% as compared to the prior fiscal year.
EAM - The Company’s non-voting revenues and non-voting profits interests
The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business, and 50% of EAM’s net profits, not less than 90% of which is distributed in cash every fiscal quarter.
The Company recorded income from its non-voting revenues interest and its non-voting profits interest in EAM as follows:
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||
($ in thousands) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Non-voting revenues interest | $ | 2,057 | $ | 1,803 | 14.1 | % | $ | 6,074 | $ | 5,389 | 12.7 | % | ||||||||||||
Non-voting profits interest | 227 | 131 | 73.3 | % | 583 | 393 | 48.3 | % | ||||||||||||||||
$ | 2,284 | $ | 1,934 | 18.1 | % | $ | 6,657 | $ | 5,782 | 15.1 | % |
During the nine months ended January 31, 2018 and January 31, 2017, the Company recorded revenues of $6,657,000 and $5,782,000, respectively, consisting of $6,074,000 and $5,389,000, from its non-voting revenues interest in EAM and $583,000 and $393,000, from its non-voting profits interest in EAM without incurring any directly related expenses.
Operating expenses
Three Months Ended January 31, | Nine Months Ended January 31, | |||||||||||||||||||||||
($ in thousands) | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||
Advertising and promotion | $ | 1,096 | $ | 908 | 20.7 | % | $ | 2,718 | $ | 2,436 | 11.6 | % | ||||||||||||
Salaries and employee benefits | 4,739 | 4,621 | 2.6 | % | 13,813 | 12,830 | 7.7 | % | ||||||||||||||||
Production and distribution | 1,524 | 2,134 | -28.6 | % | 4,322 | 6,958 | -37.9 | % | ||||||||||||||||
Office and administration | 948 | 1,196 | -20.7 | % | 3,384 | 3,769 | -10.2 | % | ||||||||||||||||
Total expenses | $ | 8,307 | $ | 8,859 | -6.2 | % | $ | 24,237 | $ | 25,993 | -6.8 | % |
Expenses within the Company are categorized into advertising and promotion, salaries and benefits, production and distribution, office and administration.
Operating expenses of $24,237,000 for the nine months ended January 31, 2018 decreased $1,756,000, or 6.8%, as compared to the nine months ended January 31, 2017 primarily due to a $2,913,000 decrease in depreciation and amortization expense partially offset by a $282,000 increase in advertising expenses and a $983,000 increase in salaries and employee benefits in fiscal 2018. During the three months ended January 31, 2018 operating expenses of $8,307,000 decreased $552,000, or 6.2%, as compared to the three months ended January 31, 2017 primarily due to a $619,000 decrease in depreciation and amortization expense partially offset by a $188,000 increase in advertising expenses and a $118,000 increase in salaries and employee benefits during the third quarter of fiscal 2018 as compared to the third quarter of the prior fiscal year.
Advertising and promotion
During the three and nine months ended January 31, 2018, advertising and promotion expenses of $1,096,000 and $2,718,000, respectively, increased $188,000 and $282,000, respectively, as compared to the prior fiscal year primarily due to an increase in media advertising expense. Direct marketing expenses of $889,000 during the nine months ended January 31, 2018 increased $170,000 as compared to the prior fiscal year due to the increases in expenses for TheValue Line Investment Survey and The Value Line Special Situations in fiscal 2018.
Salaries and employee benefits
During the three and nine months ended January 31, 2018 salaries and employee benefits of $4,739,000 and $13,813,000, respectively, increased $118,000 and $983,000, respectively, above those of the prior fiscal year’s which included the effect of a decrease of $215,000 in the capitalization of internal salaries and benefits expenses for digital project development during the nine months ended January 31, 2018, as compared to the prior fiscal year. The remaining increases in salaries and employee benefits, primarily in the Information Technology department (“IT”) related to the Company’s digital infrastructure and production processes, and Research and Quantitative Research departments.
Production and distribution
During the three and nine months ended January 31, 2018 production and distribution expenses of $1,524,000 and $4,322,000, respectively, decreased $610,000 and $2,636,000, respectively, as compared to the prior fiscal year. During the nine months ended January 31, 2018 a decrease of $2,945,000 was attributable to a decline in amortization of internally developed software costs related to digital security and product production software. During the nine months ended January 31, 2018 the decrease in production costs was partially offset by a $280,000 increase in production support of the Company’s website, maintenance of the Company’s publishing and application software and operating systems and web “framework”.
Office and administration
During the three and nine months ended January 31, 2018 office and administration expenses of $948,000 and $3,384,000, respectively, decreased $248,000 and $385,000, respectively, as compared to the prior fiscal year. During the nine months ended January 31, 2018 a decrease in office and administration expenses was primarily as a result of a $321,000 decrease in the cost of space rental due to lower rent payments resulting from the sub-lease agreement with ABM Industries, Incorporated (“ABM” or the “Sublandlord”). In accordance with GAAP, we allocated the benefit of the free rent period and other concessions over the term of our new NYC sublease, commenced on December 1, 2016. In fact, however, the Company did not pay cash rent for the new New York City office facility from December 2016 through October 2017. Additional decreases include $109,000 savings in real estate taxes due to the relocation of VLDC operations to a new leased NJ facility upon the sale of the operating facility in July 2016 and relocation of the NYC office to a new smaller facility at 551 Fifth Ave., NY in February 2017.
Concentration
During the nine months ended January 31, 2018, 17% of total publishing revenues of $26,997,000 were derived from a single customer.
Income from Securities Transactions, net
During the three months ended January 31, 2018 and January 31, 2017 the Company’s income from securities transactions, net, primarily derived from dividend income, was $258,000 and $132,000, respectively. During the nine months ended January 31, 2018 and January 31, 2017 the Company’s income from securities transactions, net, primarily derived from dividend income, was $445,000 and $226,000, respectively. There were no sales, or gains or losses from sales of equity securities during the nine months ended January 31, 2018. Proceeds from maturities and sales of government debt securities classified as available-for-sale during the nine months ended January 31, 2018 were $1,634,000. Proceeds from equity securities classified as available-for-sale were $152,000 and $14,000 during the nine months ended January 31, 2018 and January 31, 2017, respectively. There were no sales or proceeds from sales of government debt securities in fiscal 2017. In fiscal 2018 income from securities transactions, net, included capital gain distribution from ETFs of $152,000 which compares to capital gain distribution from ETFs of $39,000 in fiscal 2017.
Lease Commitments
In February 2017 the Company's headquarters and offices moved to a new location. On November 30, 2016, Value Line, Inc., received consent from the landlord at 551 Fifth Avenue, New York, NY to the terms of a new sublease agreement between Value Line, Inc. and ABM Industries, Incorporated commencing on December 1, 2016. Pursuant to the agreement Value Line leased from ABM 24,726 square feet of office space located on the second and third floors at 551 Fifth Avenue, New York, NY (“Building” or “Premises”) beginning on December 1, 2016 and ending on November 29, 2027. Base rent under the sublease agreement is $1,126,000 per annum during the first year with an annual increase in base rent of 2.25% scheduled for each subsequent year, payable in equal monthly installments on the first day of each month, subject to customary concessions in the Company’s favor and pass-through of certain increases in utility costs and real estate taxes over the base year. The Company provided a security deposit represented by a letter of credit in the amount of $469,000 in October 2016, which is scheduled to be reduced to $305,000 on September 30, 2021 and fully refunded after the sublease ends. This Building became the Company’s new corporate office facility. The Company is required to pay for certain operating expenses associated with the Premises as well as utilities supplied to the Premises. The sublease terms provide for a significant decrease (23% initially) in the Company’s annual rental expenditure taking into account free rent for the first six months of the sublease. Sublandlord provided Value Line a work allowance of $417,000 which accompanied with the six months free rent worth $563,000 was applied against the Company’s obligation to pay rent at our NYC headquarters, delaying the actual rent payments until November 2017.
On February 29, 2016, the Company’s subsidiary Value Line Distribution Center (“VLDC”) and Seagis Property Group LP (the “Landlord”) entered into a lease agreement, pursuant to which VLDC has leased 24,110 square feet of warehouse and appurtenant office space located at 205 Chubb Ave., Lyndhurst, NJ (“Warehouse”) beginning on May 1, 2016 and ending on April 30, 2024 (“Lease”). Base rent under the Lease is $192,880 per annum payable in equal monthly installments on the first day of each month, in advance during fiscal 2017 and will gradually increase to $237,218 in fiscal 2024, subject to customary increases based on operating costs and real estate taxes. The Company provided a security deposit in cash in the amount of $32,146, which will be fully refunded after the lease term expires. The lease is a net lease requiring the Company to pay for certain operating expenses associated with the Warehouse as well as utilities supplied to the Warehouse.
Effective income tax rate
The overall effective income tax rates, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2018 and January 31, 2017 were (34.69%) and 33.48%, respectively. The aforementioned reduction in the income tax rate results in a tax benefit of 65.87% of pre-tax income for the nine months ended January 31, 2018, primarily attributable to the effect on the long-term deferred tax liability. The Company re-calculated its net deferred tax assets and liabilities using the Federal Tax Rate under the Tax Act. The effect of the re-calculation is reflected entirely in the third quarter ended January 31, 2018 (the period that includes the enactment date) and is allocated directly to both current and deferred income tax expenses from continuing operations. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to the new tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-tax income, the Company's geographic profit mix between tax jurisdictions, taxation method adopted by each locality, new interpretations of existing tax laws and rulings and settlements with tax authorities.
Liquidity and Capital Resources
The Company had working capital, defined as current assets less current liabilities, of $2,008,000 as of January 31, 2018 and working capital of $1,200,000 as of April 30, 2017. These amounts include short term unearned revenue of $18,361,000 and $20,188,000 reflected in total current liabilities at January 31, 2018 and April 30, 2017, respectively. Cash and short term securities were $22,622,000 and $23,133,000 as of January 31, 2018 and April 30, 2017, respectively.
The Company’s cash and cash equivalents include $3,716,000 and $6,066,000 at January 31, 2018 and April 30, 2017, respectively, invested primarily in Money Market Funds at brokers, which operate under Rule 2a-7 of the 1940 Securities and Exchange Act and invest primarily in short term U.S. government securities.
Cash from operating activities
The Company had cash outflows from operating activities of $2,232,000 during the nine months ended January 31, 2018 compared to cash outflows from operations of $5,241,000 during the nine months ended January 31, 2017. The decrease in cash outflows from fiscal 2017 to fiscal 2018 was primarily attributable to the payment of federal state and local income taxes on the sale of the Company’s operating facility in fiscal 2017, partially offset by the timing of receipts from accounts receivable, payments of invoices to relocate the Company’s operating facilities and the timing of prepaid expenses.
Cash from investing activities
The Company’s cash inflows from investing activities of $5,327,000 during the nine months ended January 31, 2018, compared to cash inflows from investing activities of $4,293,000 for the nine months ended January 31, 2017. During fiscal 2018, the Company continued to invest in fixed income securities. During the nine months ended January 31, 2017, the Company invested $11,089,000 in fixed income and equity securities from the net proceeds of $11,555,000 received from sale of the Company’s operating facility and invested $469,000 in a bank money market fund and pledged this investment to represent cash securing a Bank Letter of Credit issued to the sublandlord as a security deposit for the Company's new leased corporate office facility.
Cash from financing activities
During the nine months ended January 31, 2018, the Company’s cash outflows from financing activities were $5,434,000 and compared to cash outflows from financing activities of $5,646,000 for the nine months ended January 31, 2017. Cash outflows for financing activities included $191,000 and $681,000 for the repurchase of 11,150 and 41,461 shares of the Company’s common stock under the September 19, 2012 board approved common stock repurchase program, during fiscal years 2018 and 2017, respectively. Quarterly dividend payments of $0.18 per share during the nine months ended January 31, 2018 aggregated $5,243,000 as compared to $4,965,000 aggregated quarterly dividend payments of $0.17 per share during the nine months ended January 31, 2017.
On January 19, 2018, the Board of Directors of Value Line declared a quarterly dividend of $0.18 per share and a special dividend of $0.20 per share. At January 31, 2018 there were 9,700,515 common shares outstanding as compared to 9,715,128 common shares outstanding at January 31, 2017. The Company expects financing activities to continue to include use of cash for dividend payments and common share repurchases for the foreseeable 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 and from the Company’s non-voting revenues and non-voting profits interests in EAM will be sufficient to finance current and forecasted liquidity needs for the next twelve months. Management does not anticipate making any borrowings during the next twelve months. As of January 31, 2018, retained earnings and liquid assets were $45,288,000 and $22,622,000, respectively.
Seasonality
Our publishing revenues are comprised of subscriptions which are generally annual subscriptions, paid in advance. Our cash flows from operating activities are minimally seasonal in nature, primarily due to the timing of customer payments made for orders and subscription renewals.
Off-balance sheet arrangements
We are not a party to any off-balance sheet arrangements, other than operating leases entered into in the ordinary course of business.
Recent Accounting Pronouncements
In November 2015, the FASB issued ASU 2015-17, Income taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Under existing standards, deferred taxes for each tax-paying jurisdiction are presented as a net current asset or liability and net long-term asset or liability. To simplify presentation, the new guidance will require that all deferred tax assets and liabilities, along with related valuation allowances, be classified as long-term on the balance sheet. As a result, each tax-paying jurisdiction will now only have one net long-term asset or liability. The new guidance does not change the existing requirement that prohibits offsetting deferred tax liabilities from one jurisdiction against deferred tax assets of another jurisdiction. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, which will be our fiscal year 2018 beginning May 1, 2017. Due to the full valuation allowance on our U.S. deferred tax assets, we do not expect the adoption of ASU 2015-17 to have a material impact on our consolidated financial statements and related disclosures.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02"). The core principle of Topic 842 requires that a lessee should recognize the assets and liabilities on the balance sheet and disclose key information about leasing arrangements. The amendments in ASU 2016-2 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is in the process of evaluating the impact of this standard on the consolidated financial statements.
In August, 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments ( a consensus of the Emerging Issues Task Force) ( “ASU 2016-15”). The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The amendments in ASU 2016-15 are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption during an interim period. The Company is in the process of evaluating the impact of this standard on the consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is evaluating the effect that ASU No. 2014-09 will have on its consolidated condensed financial statements and related disclosures, as well as the expected method of adoption. The Company plans to adopt ASU No. 2014-09 in the first quarter of fiscal 2019, and does not believe it will have a material impact on its consolidated condensed financial statements and related disclosures.
Critical Accounting Estimates and Policies
The Company prepares its Consolidated Condensed Financial Statements in accordance with accepted accounting principles as in effect in the United States (U.S. “GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent, and the Company evaluates its estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies reflect the significant judgments and estimates used in the preparation of its Consolidated Condensed Financial Statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk Disclosures
The Company’sCompany’s Consolidated Condensed Balance Sheet includes a substantial amount of assets whose fair values are subject to market risks. The Company’s market risks are primarily associated with interest rates and equity price risk. The following sections address the significant market risks associated with the Company’s investment activities.
Interest Rate Risk
The Company’s strategy has been to acquire debt securities with low credit risk. Despite this strategy management recognizes and accepts the possibility that losses may occur. To limit the price fluctuation in these securities from interest rate changes, the Company’s management invests primarily in short-term obligations maturing within one year.
The fair values of the Company’sCompany’s fixed maturity investments will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by prepayment options, relative values of alternative investments, and other general market conditions.
Fixed income securities consist of bank certificates of deposits and securitiessecurities issued by federal, state and local governments within the United States. As of January 31, 2018 and April 30, 20172024 the aggregate cost and fair value of fixed income securities classified as available-for-sale were $8,486,000$46,184,000 and $7,484,000, respectively,$46,149,000, respectively. As of April 30, 2023 the aggregate cost and fair value was $8,478,000of fixed income securities classified as available-for-sale were $39,455,000 and $7,479,000,$39,928,000, respectively.
The following table summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. Variations in market interest rates could produce significant changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table.
Fixed Income Securities
Estimated Fair Value after Hypothetical Change in Interest Rates | Estimated Fair Value after | |||||||||||||||||||||||||||||||||||||||
(in thousands) | Hypothetical Change in Interest Rates | |||||||||||||||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||||||
(bp = basis points) | (bp = basis points) | |||||||||||||||||||||||||||||||||||||||
6 mos. | 6 mos. | 1 yr. | 1 yr. | 1 year | 1 year | 1 year | 1 year | |||||||||||||||||||||||||||||||||
Fair | 50bp | 50bp | 100bp | 100bp | Fair Value | 50 bp increase | 50 bp decrease | 100 bp increase | 100 bp decrease | |||||||||||||||||||||||||||||||
Value | increase | decrease | increase | decrease | ||||||||||||||||||||||||||||||||||||
As of January 31, 2018 | ||||||||||||||||||||||||||||||||||||||||
As of January 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
Investments in securities with fixed maturities | $ | 8,478 | $ | 8,550 | $ | 8,548 | $ | 8,673 | $ | 8,583 | $ | 46,149 | $ | 44,904 | $ | 45,269 | $ | 44,722 | $ | 45,452 | ||||||||||||||||||||
As of April 30, 2017 | ||||||||||||||||||||||||||||||||||||||||
As of April 30, 2023 | ||||||||||||||||||||||||||||||||||||||||
Investments in securities with fixed maturities | $ | 7,479 | $ | 7,473 | $ | 7,504 | $ | 7,473 | $ | 7,500 | $ | 39,928 | $ | 39,202 | $ | 39,512 | $ | 39,048 | $ | 39,667 |
Management regularly monitors the maturity structure of the Company’sCompany’s investments in debt securities in order to maintain an acceptable price risk associated with changes in interest rates.
Equity Price Risk
The carrying values of investments subject to equity price risks are based on quoted market prices as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.
The Company’s equity investment strategy has been to acquire equity securities across a diversediversity of industry group.groups. The portfolio consists primarily of ETFs and select common stock holdingsheld for dividend yield that attempt to replicate the performance of blue chip companies with a concentration on large capitalization companies with high relative dividend yields.certain equity indexes. In order to maintain liquidity in these securities, the Company’s policy has been to invest in and hold in its portfolio, no more than 5% of the approximate average daily trading volume in any one issue. Additionally, the Company may purchase and hold non-leveraged ETFs whose performance inversely corresponds to the market value changes of investments in other ETF securities held in the equity portfolio for dividend yield.
As of January 31, 20182024 and April 30, 2017,2023, the aggregate cost of the equity securities, classified as available-for-sale, which consist of investments in the SPDR Series Trust S&P Dividend ETF (SDY), First Trust Value Line Dividend Index ETF (FVD), PowerShares Financial Preferred ETF (PGF), Select Utilities Select Sector SPDR ETF (XLU), First Trust Value Line 100 ETF (FVL) and ProsharesProShares Trust S&P 500 Dividend Aristocrats ETF (NOBL), IShares DJ Select Dividend ETF (DVY), and other Exchange Traded Funds was $8,385,000a combined total of $11,109,000 and $10,169,000, respectively, and the fair value was $9,926,000$15,370,000 and $9,097,000,$14,546,000, respectively.
Equity Securities |
Estimated Fair Value after |
Hypothetical Percentage |
|
| Hypothetical | |||||||||||||||||||||||
($ in thousands) | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Percentage Increase (Decrease) in Shareholders’ Equity | ||||||||||||||||||||||||
As of January 31, 2024 | Equity Securities and ETFs held for dividend yield | $ | 15,370 | 30% increase | $ | 19,982 | 4.08 | % | ||||||||||||||||||||
Hypothetical | Hypothetical | Increase (Decrease) in | 30% decrease | $ | 10,760 | (4.08 | %) | |||||||||||||||||||||
($ in thousands) | Fair Value | Price Change | Change in Prices | Shareholders’ Equity | ||||||||||||||||||||||||
As of January 31, 2018 | Equity Securities and ETFs held for dividend yield | $ | 9,926 | 30% increase | $ | 12,904 | 4.39 | % | ||||||||||||||||||||
30% decrease | $ | 6,948 | -4.39 | % |
Equity Securities |
Estimated Fair Value after |
Hypothetical Percentage | ||||||||||||
Hypothetical | Hypothetical | Increase (Decrease) in | ||||||||||||
($ in thousands) | Fair Value | Price Change | Change in Prices | Shareholders’ Equity | ||||||||||
As of April 30, 2017 | Equity Securities and ETFs held for dividend yield | $ | 9,097 | 30% increase | $ | 11,826 | 4.69 | % | ||||||
30% decrease | $ | 6,368 | -4.69 | % |
Equity Securities |
| Hypothetical | ||||||||||||
($ in thousands) | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Percentage Increase (Decrease) in Shareholders’ Equity | ||||||||||
As of April 30, 2023 | Equity Securities and ETFs held for dividend yield | $ | 14,546 | 30% increase | $ | 18,910 | 4.12 | % | ||||||
30% decrease | $ | 10,182 | (4.12 | %) |
Item 4. CONTROLS AND PROCEDURES
(a) | The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) 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 Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding disclosure. |
The Company’s management has evaluated, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, theThe Company’s Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
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(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 |
Part II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
ThereIn Part II, Item 1A of this Quarterly Report on Form 10-Q for the period ended January 31, 2024 new risk factors have been no material changesadded to the risk factors disclosed in Item 1A –- Risk Factors in the Company’sCompany's Annual Report on Form 10-K for the year ended April 30, 20172023 filed with the SEC on July 26, 2017.28, 2023. The new risk factors reflect management's continuing analysis of developments in the Company's business environment, rather than any specific event or particular issue.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) |
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The following table provides information with respect to all repurchases of common stock made by or on behalf of the Company during the fiscal quarter ended January 31, 2018. All purchases listed below were made in the open market at prevailing market prices.2024.
ISSUER PURCHASES OF EQUITY SECURITIES | ||||||||||||||||
(a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |||||||||||||
November 1 - 30, 2017 | 2,285 | $ | 18 | 2,285 | $ | 418,000 | ||||||||||
December 1 - 31, 2017 | - | - | - | 418,000 | ||||||||||||
January 1 - 31, 2018 | - | - | - | 418,000 | ||||||||||||
Total | 2,285 | $ | 18 | 2,285 | $ | 418,000 |
ISSUER PURCHASES OF EQUITY SECURITIES | ||||||||||||||||
(a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs | |||||||||||||
November 1 - 30, 2023 | - | - | - | $ | 1,396,000 | |||||||||||
December 1 - 31, 2023 | - | - | - | 1,396,000 | ||||||||||||
January 1 - 31, 2024 | - | - | - | 1,396,000 | ||||||||||||
Total | - | - | - | $ | 1,396,000 |
The Company did not repurchase common stock during the current fiscal quarter. All shares represent shareswere repurchased pursuant to authorization of the Board ofof Directors.
On September 19, 2012,October 21, 2022, the Company’sCompany's Board of Directors authorizedapproved a share repurchase program authorizing the repurchase of shares of the Company’s common stock at such times and prices as management determined to be advisable, up to an aggregate purchase price of $3,000,000. The repurchases may be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, in block purchases or otherwise. The repurchase program may be suspended or discontinued at any time at the Company’s discretion and has no set expiration date. There is a remainder of $1,396,000 before the authorized limit is reached.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.Value Line has never adopted a Rule 10b5-1 trading arrangement (as that term is defined in Item 408(a)(1)(i) of Regulation S-K). None of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K) during fiscal quarters ended July 31, 2023, October 31, 2023 and January 31, 2024.
Item 6. Exhibits
31.1 |
31.2 |
32.1 |
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| Inline XBRL Instance Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | The cover page of this Quarterly Report on Form 10-Q, formatted in inline XBRL (including Exhibit 101). |
VALUE LINE, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Value Line, Inc.
(Registrant)
By: | ||||
/s/ | Howard A. Brecher | |||
Howard A. Brecher | ||||
Chief Executive Officer | ||||
(Principal Executive Officer) | ||||
By: /s/ | ||||
Stephen R. Anastasio | ||||
Stephen R. Anastasio | ||||
Vice President & Treasurer | ||||
(Principal Financial Officer) |
Date: March 14, 201815, 2024