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.) | |||||||
220 East 42nd Street, New York, New York | 10017-5891 | |||||||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (212) 907-1500
Common Stock, $0.10 par value | The NASDAQ Global Market | |||||
(Title of class) | (Name of each exchange on which registered) | |||||
Securities registered pursuant to Section 12 (g) of the Act: None |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer x | Smaller reporting company o |
PART I | |||
Item 1 | Business | 5 | |
Item 1A | Risk Factors | 14 | |
Item 1B | Unresolved Staff Comments | 18 | |
Item 2 | Properties | 18 | |
Item 3 | Legal Proceedings | 18 | |
Item 4 | Mine Safety Disclosures | 18 | |
PART II | |||
Item 5 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 19 | |
Item 6 | Selected Financial Data | 21 | |
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 | |
Item 7A | Quantitative and Qualitative Disclosures About Market Risk | 42 | |
Item 8 | Financial Statements and Supplementary Data | 43 | |
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 45 | |
Item 9A | Controls and Procedures | 45 | |
Item 9B | Other Information | 46 | |
PART III | |||
Item 10 | Directors, Executive Officers, and Corporate Governance | 47 | |
Item 11 | Executive Compensation | 48 | |
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 49 | |
Item 13 | Certain Relationships and Related Transactions and Director Independence | 49 | |
Item 14 | Principal Accounting Fees and Services | 51 | |
PART IV | |||
Item 15 | Exhibits and Financial Statement Schedules | 52 |
2 |
● | dependence on key personnel; |
● | maintaining revenue from subscriptions for the Company’s digital and print published products; |
● | protection of intellectual property rights; |
● | changes in market and economic conditions, including global financial issues; |
● | dependence on non-voting revenues and non-voting profits interests in EULAV Asset Management, a Delaware statutory trust (“EAM” or “EAM Trust”), which serves as the investment advisor to the Value Line Funds and engages in related distribution, marketing and administrative services; |
● | fluctuations in EAM’s assets under management due to broadly based changes in the values of equity and debt securities, redemptions by investors and other factors, and the effect these changes may have on the valuation of EAM’s intangible assets; |
● | competition in the fields of publishing, copyright data and investment management; |
● | the impact of government regulation on the Company’s and EAM’s businesses; |
● | availability of free or low cost investment data through discount brokers or generally over the internet; |
● | terrorist attacks, cyber security attacks and natural disasters; |
● | other risks and uncertainties, including but not limited to the risks described in Item 1A, “Risk Factors” herein; and other risks and uncertainties arising from time to time. |
3 |
4 |
5 |
● | Comprehensive reference periodical publications |
● | Targeted, niche periodical newsletters |
● | Investment analysis software |
● | Current and historical financial databases |
6 |
7 |
8 |
9 |
10 |
11 |
Total net assets of the Value Line Funds at April 30, 2013, were: | ||||
($ in thousands) | ||||
Value Line Premier Growth Fund, Inc. | $ | 368,436 | ||
Value Line Strategic Asset Management Trust | 335,561 | |||
Value Line Income and Growth Fund, Inc. | 311,112 | |||
Value Line Small Cap Opportunities Fund, Inc. | 307,913 | |||
Value Line Larger Companies Fund, Inc. | 189,346 | |||
Value Line Asset Allocation Fund, Inc. | 165,534 | |||
Value Line Centurion Fund, Inc. | 140,757 | |||
Value Line Fund, Inc. | 114,212 | |||
Value Line Core Bond Fund | 101,619 | |||
Value Line Tax Exempt Fund, Inc. | 89,869 | |||
Total EAM managed net assets | $ | 2,124,358 | ||
Daily Income Fund managed by Reich & Tang | 61,917 | |||
Total net assets | $ | 2,186,276 |
1. | Value Line Publishing LLC (“VLP”) is the publishing unit for the investment related periodical publications and copyright data. |
2. | The Vanderbilt Advertising Agency, Inc. places advertising on behalf of the Company’s publications. |
3. | Compupower Corporation (“CPWR”) provides subscription fulfillment services and subscriber relations services for VLP’s publications. |
4. | Value Line Distribution Center, Inc. (“VLDC”) primarily handles all of the mailings of the publications to VLP’s subscribers. Additionally, VLDC provides office space for CPWR’s subscriber relations and data processing departments, and provides a disaster recovery site for the New York operations. |
12 |
13 |
Name | Age | Principal Occupation or Employment |
Howard A. Brecher | 59 | Chairman and Chief Executive Officer since October 2011; Acting Chairman and Acting Chief Executive Officer from November 2009 to October 2011; Chief Legal Officer; Vice President and Secretary until January 2010; Vice President and Secretary of each of the Value Line Funds from June 2008 to December 2010; Secretary of EAM LLC from February 2009 until December 2010; Director and General Counsel of AB&Co. Mr. Brecher has been an officer of the Company for more than 20 years. |
Stephen R. Anastasio | 54 | Vice President since December 2010; Director since February 2010; Treasurer since 2005; Treasurer of each of the Value Line Funds from September 2005 to August 2008. Mr. Anastasio has been an officer of the Company for more than 10 years. |
14 |
15 |
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17 |
18 |
Quarter Ended | High | Low | Dividend Declared Per Share |
April 30, 2013 | $9.40 | $9.13 | $0.15 |
January 31, 2013 | $9.68 | $9.43 | $0.15 |
October 31, 2012 | $9.95 | $9.88 | $0.15 |
July 31, 2012 | $11.91 | $11.86 | $0.15 |
April 30, 2012 | $12.17 | $12.06 | $0.15 |
January 31, 2012 | $11.57 | $11.20 | $0.15 |
October 31, 2011 | $13.40 | $12.52 | $0.20 |
July 31, 2011 | $11.57 | $10.17 | $0.20 |
19 |
ISSUER PURCHASES OF EQUITY SECURITIES | ||||
Period | (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 |
February 1, 2013 through February 28, 2013 | - | - | - | $2,852,164 |
March 1, 2013 through March 31, 2013 | - | - | - | $2,852,164 |
April 1, 2013 through April 30, 2013 | 3,623 | $9.50 | 3,623 | $2,817,747 |
Total | 3,623 | $9.50 | 3,623 | $2,817,747 |
1) | On September 19, 2012, the Company’s Board of Directors approved a new share repurchase program, authorizing the repurchase of shares of the Company’s common stock up to an aggregate purchase price of $3,000,000. The repurchases will 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 new repurchase program may be suspended or discontinued at any time at the Company’s discretion and has no set expiration date. During fiscal 2013, the Company repurchased an aggregate of 19,953 shares of the Company’s common stock for $182,254 at an average price of $9.13 per share under the repurchase program. |
2) | On January 20, 2011, the Company’s Board of Directors approved 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 amount of $3,200,000. The repurchase program expired on January 15, 2012 and was not renewed by the Company’s Board of Directors. During fiscal 2012, the Company repurchased an aggregate of 78,500 shares of the Company’s common stock for $946,000, at an average price of $12.05 per share under the repurchase program. During fiscal 2011, the Company repurchased an aggregate of 6,719 shares of the Company’s common stock for $90,000, at an average price of $13.39 per share. |
20 |
Fiscal Years Ended April 30, | ||||||||||||||||||||
($ in thousands, except number of shares and earnings/ (loss) per share amounts) | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||
Revenues: | (1 | ) | (2 | ) | ||||||||||||||||
Investment periodicals and related publications | $ | 31,940 | $ | 33,018 | $ | 34,406 | $ | 35,965 | $ | 39,935 | ||||||||||
Copyright data fees | 3,900 | 3,591 | 3,568 | 3,243 | 4,333 | |||||||||||||||
Total investment periodicals and related publications | 35,840 | 36,609 | 37,974 | 39,208 | 44,268 | |||||||||||||||
Investment management fees and services | - | - | 10,693 | 18,932 | 24,973 | |||||||||||||||
Total revenues | $ | 35,840 | $ | 36,609 | $ | 48,667 | $ | 58,140 | $ | 69,241 | ||||||||||
Income/(loss) from operations | $ | 4,120 | $ | 5,338 | $ | 8,533 | $ | (32,190 | ) | $ | 24,223 | |||||||||
Gain from deconsolidation of subsidiaries | - | - | $ | 50,510 | - | - | ||||||||||||||
Revenues and profits interests from EAM Trust | $ | 6,260 | $ | 5,890 | $ | 2,355 | - | - | ||||||||||||
Income from securities transactions, net | $ | 126 | $ | 70 | $ | 65 | $ | 837 | $ | 11,625 | ||||||||||
Net income/(loss) | $ | 6,619 | $ | 6,925 | $ | 37,782 | $ | (23,188 | ) | $ | 22,953 | |||||||||
Earnings/(loss) per share, basic and fully diluted | $ | 0.67 | $ | 0.70 | $ | 3.79 | $ | (2.32 | ) | $ | 2.30 | |||||||||
Total assets | $ | 84,341 | $ | 84,369 | $ | 87,803 | $ | 59,985 | $ | 117,555 | ||||||||||
Long term liabilities | $ | 23,962 | $ | 24,871 | $ | 23,133 | $ | 4,863 | $ | 5,255 | ||||||||||
Weighted average number of common shares outstanding | 9,888,774 | 9,921,925 | 9,980,000 | 9,981,600 | 9,981,600 | |||||||||||||||
Cumulative cash dividends declared per share during the fiscal year | $ | 0.60 | $ | 0.70 | $ | 2.60 | $ | 3.60 | $ | 1.50 |
(1) | See Item 1, Business - “Restructuring of Asset Management and Mutual Fund Distribution Businesses” and Item 7, “Management’s Discussion and Analysis”. |
(2) | Fiscal 2010 operating income included expenses of $48,106,000 related to settlement provision (see Form 10-K for fiscal year 2010 filed July 16, 2010.) |
21 |
● | Executive Summary of the Business | |
● | Results of Operations | |
● | Liquidity and Capital Resources | |
● | Recent Accounting Pronouncements | |
● | Critical Accounting Estimates and Policies |
22 |
23 |
Fiscal Years Ended April 30, | ||||||||||||
($ in thousands, except earnings per share) | 2013 | 2012 | 2011 | |||||||||
Income from operations | $ | 4,120 | $ | 5,338 | $ | 8,533 | ||||||
Revenues and profits interests from EAM Trust | $ | 6,260 | $ | 5,890 | $ | 2,355 | ||||||
Income from operations plus non-voting revenues and non-voting profits interests from EAM Trust | $ | 10,380 | $ | 11,228 | $ | 10,888 | ||||||
Operating expenses | $ | 31,720 | $ | 31,271 | $ | 40,134 | ||||||
Gain from deconsolidation of subsidiaries | - | - | $ | 50,510 | ||||||||
Income from securities transactions, net | $ | 126 | $ | 70 | $ | 65 | ||||||
Income before income taxes | $ | 10,506 | $ | 11,298 | $ | 61,463 | ||||||
Net income | $ | 6,619 | $ | 6,925 | $ | 37,782 | ||||||
Earnings per share | $ | 0.67 | $ | 0.70 | $ | 3.79 |
24 |
Fiscal Years Ended April 30, | ||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | Change | |||||||||||||||||||||||||||||
($ in thousands) | $ | % | $ | % | $ | % | 13 vs. 12 | 12 vs. 11 | ||||||||||||||||||||||||
Investment periodicals and related publications: | ||||||||||||||||||||||||||||||||
$ | 19,027 | $ | 20,366 | $ | 21,625 | -6.6 | % | -5.8 | % | |||||||||||||||||||||||
Digital | 12,913 | 12,652 | 12,781 | 2.1 | % | -1.0 | % | |||||||||||||||||||||||||
Total investment periodicals and related publications | 31,940 | 89.1 | % | 33,018 | 90.2 | % | 34,406 | 70.7 | % | -3.3 | % | -4.0 | % | |||||||||||||||||||
Copyright data fees | 3,900 | 10.9 | % | 3,591 | 9.8 | % | 3,568 | 7.3 | % | 8.6 | % | 0.6 | % | |||||||||||||||||||
Total publishing revenues | 35,840 | 36,609 | 37,974 | -2.1 | % | -3.6 | % | |||||||||||||||||||||||||
Investment management | - | - | - | - | 10,693 | 22.0 | % | n/a | -100.0 | % | ||||||||||||||||||||||
Total revenues | $ | 35,840 | $ | 36,609 | $ | 48,667 | -2.1 | % | -24.8 | % |
Fiscal Years Ended April 30, | ||||||||||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||||||||||
Digital | Digital | Digital | ||||||||||||||||||||||
New Sales Orders | 19.0 | % | 24.2 | % | 16.8 | % | 18.6 | % | 13.0 | % | 21.0 | % | ||||||||||||
Conversion and Renewal Sales Orders | 81.0 | % | 75.8 | % | 83.2 | % | 81.4 | % | 87.0 | % | 79.0 | % | ||||||||||||
Total Sales Orders | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
As of April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | Change | |||||||||
Unearned subscription revenue (current and long term liabilities) | $ | 24,709 | $ | 25,995 | -4.9 | % |
25 |
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Asset Flows | Fiscal Years Ended April 30, | |||||||||||||||||||
2013 | 2012 | |||||||||||||||||||
vs. | vs. | |||||||||||||||||||
2013 | 2012 | 2011 | 2012 | 2011 | ||||||||||||||||
Value Line equity fund assets (excludes variable annuity)— beginning | $ | 1,343,996,918 | $ | 1,398,372,388 | $ | 1,446,104,954 | -3.9 | % | -3.3 | % | ||||||||||
Sales/inflows | 252,728,239 | 210,761,258 | 74,397,936 | 19.9 | % | 183.3 | % | |||||||||||||
Redemptions/outflows | (256,633,016 | ) | (277,655,817 | ) | (370,072,264 | ) | -7.6 | % | -25.0 | % | ||||||||||
Dividend and Capital Gain Distributions | (48,112,709 | ) | (19,681,858 | ) | (2,683,333 | ) | 144.5 | % | 633.5 | % | ||||||||||
Market value change | 164,573,032 | 32,200,947 | 250,625,095 | 411.1 | % | -87.2 | % | |||||||||||||
Value Line equity fund assets (non-variable annuity)— ending | 1,456,552,464 | 1,343,996,918 | 1,398,372,388 | 8.4 | % | -3.9 | % | |||||||||||||
Variable annuity fund assets — beginning | $ | 484,476,017 | $ | 520,738,282 | $ | 495,004,319 | -7.0 | % | 5.2 | % | ||||||||||
Sales/inflows | 14,173,864 | 11,869,956 | 15,170,774 | 19.4 | % | -21.8 | % | |||||||||||||
Redemptions/outflows | (66,726,410 | ) | (72,557,743 | ) | (78,046,318 | ) | -8.0 | % | -7.0 | % | ||||||||||
Dividend and Capital Gain Distributions | (4,119,704 | ) | 503,582 | (3,815,539 | ) | -918.1 | % | -113.2 | % | |||||||||||
Market value change | 48,513,595 | 23,921,941 | 92,425,046 | 102.8 | % | -74.1 | % | |||||||||||||
Variable annuity fund assets — ending | 476,317,361 | 484,476,017 | 520,738,282 | -1.7 | % | -7.0 | % | |||||||||||||
Fixed income fund assets — beginning (1) (2) | $ | 217,053,704 | $ | 236,526,222 | $ | 249,868,326 | -8.2 | % | -5.3 | % | ||||||||||
Sales/inflows | 11,765,917 | 41,239,732 | 27,627,007 | -71.5 | % | 49.3 | % | |||||||||||||
Redemptions/outflows | (37,643,781 | ) | (64,139,184 | ) | (44,038,991 | ) | -41.3 | % | 45.6 | % | ||||||||||
Dividend and Capital Gain Distributions | (4,524,535 | ) | (1,752,051 | ) | (1,358,551 | ) | 158.2 | % | 29.0 | % | ||||||||||
Market value change | 4,837,224 | 5,178,985 | 4,428,430 | 6.6 | % | 16.9 | % | |||||||||||||
Fixed income fund assets — ending | 191,488,529 | 217,053,704 | 236,526,222 | -11.8 | % | -8.2 | % | |||||||||||||
Money market fund assets — ending (3) | - | 67,682,443 | 89,356,239 | -100.0 | % | -24.3 | % | |||||||||||||
Assets under management — ending | $ | 2,124,358,355 | $ | 2,113,209,083 | $ | 2,244,993,131 | 0.5 | % | -5.9 | % |
(1) | On March 21, 2013, the shareholders of the Value Line U.S. Government Securities Fund approved the tax free reorganization of the Value Line U.S. Government Securities Fund into the Value Line Core Bond Fund. Shares of the U.S Government Securities Fund were exchanged into the Value Line Core Bond Fund effective March 22, 2013. This transaction is excluded from sales/redemptions. |
(2) | On May 17, 2012, the shareholders of the Value Line New York Tax Exempt Trust approved the tax free reorganization of the Value Line New York Tax Exempt Trust into the Value Line Tax Exempt Fund. Shares of the Value Line New York Tax Exempt Trust were exchanged into the Value Line Tax Exempt Fund effective May 18, 2012. This transaction is excluded from sales/redemptions. |
(3) | On October 19, 2012 the Value Line U.S. Government Money Market Fund merged into the Daily Income Fund U.S. Government Portfolio managed by Reich & Tang. Assets of $61,917,208 of the Value Line U.S. Government Money Market Fund are not included in the total assets under management in fiscal 2013. |
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Fund Categories | Aggregate Assets | Percentage of Assets in Category | Shareholder Accounts | Percentage of Shareholder Accounts in Category | ||||||||||||
Guardian (SAM and Centurion Funds) | $ | 476,317,362 | 21.8 | % | 24,138 | 25.6 | % | |||||||||
VL Funds direct accounts & other dealers | 809,024,029 | 37.0 | % | 34,714 | 36.9 | % | ||||||||||
Dealer platforms | 900,934,172 | 41.2 | % | 35,305 | 37.5 | % | ||||||||||
Total* | $ | 2,186,275,563 | 100.0 | % | 94,157 | 100.00 | % |
30 |
31 |
Fiscal Years Ended April 30, | Change | |||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | 13 vs. 12 | 12 vs. 11 | |||||||||||||||
Non-voting revenues interest | $ | 5,781 | $ | 5,684 | $ | 2,187 | 1.7 | % | 159.9 | % | ||||||||||
Non-voting profits interest | 479 | 206 | 168 | 132.5 | % | 22.6 | % | |||||||||||||
$ | 6,260 | $ | 5,890 | $ | 2,355 | 6.3 | % | 150.1 | % |
32 |
Fiscal Years Ended April 30, | ||||||||||||||||||||
Change | ||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | 13 vs. 12 | 12 vs. 11 | |||||||||||||||
Advertising and promotion | $ | 4,075 | $ | 4,203 | $ | 6,673 | -3.0 | % | -37.0 | % | ||||||||||
Salaries and employee benefits | 15,034 | 15,001 | 17,242 | 0.2 | % | -13.0 | % | |||||||||||||
Production and distribution | 5,694 | 4,894 | 4,718 | 16.3 | % | 3.7 | % | |||||||||||||
Office and administration | 6,917 | 7,173 | 9,504 | -3.6 | % | -24.5 | % | |||||||||||||
Expenses related to restructuring | - | - | 3,764 | n/a | n/a | |||||||||||||||
Provision for settlement | - | - | (1,767 | ) | n/a | n/a | ||||||||||||||
Total expenses | $ | 31,720 | $ | 31,271 | $ | 40,134 | 1.4 | % | -22.1 | % |
33 |
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Investment Periodicals, Publishing & Copyright Data | Investment Management | |||||||||||||||||||||||||||||||||||||||
Fiscal Years Ended April 30, | Fiscal Years Ended April 30, | |||||||||||||||||||||||||||||||||||||||
2013 | 2012 | 2011 | Change | 2013 | 2012 | 2011 (1) | Change | |||||||||||||||||||||||||||||||||
(in thousands) | 13 vs. 12 | 12 vs. 11 | 13 vs. 12 | 12 vs. 11 | ||||||||||||||||||||||||||||||||||||
Segment revenues from external customers | $ | 35,840 | $ | 36,609 | $ | 37,974 | -2.1 | % | -3.6 | % | - | - | $ | 10,693 | n/a | -100.0 | % | |||||||||||||||||||||||
Segment profit from operations | $ | 4,120 | $ | 5,338 | $ | 8,984 | -22.8 | % | -40.6 | % | - | - | $ | (448 | ) | n/a | -100.0 | % | ||||||||||||||||||||||
Segment profit margin from operations | 11.5 | % | 14.6 | % | 23.7 | % | -21.2 | % | -38.4 | % | - | - | -4.2 | % | n/a | -100.0 | % |
(1) | Period from May 1, 2010 through December 23, 2010. |
36 |
Fiscal Years Ended April 30, | ||||||||||||||||||||
Change | ||||||||||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | 13 vs. 12 | 12 vs. 11 | |||||||||||||||
Dividend income | $ | 124 | $ | 68 | $ | 16 | 82.4 | % | 325.0 | % | ||||||||||
Interest income | 4 | 16 | 118 | -75.0 | % | -86.4 | % | |||||||||||||
Realized gains/(losses) on equity and fixed income securities available-for-sale | - | (11 | ) | (68 | ) | 100.0 | % | -83.8 | % | |||||||||||
Other | (2 | ) | (3 | ) | (1 | ) | 33.3 | % | -200.0 | % | ||||||||||
Total income from securities transactions, net | $ | 126 | $ | 70 | $ | 65 | 80.0 | % | 7.7 | % |
37 |
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39 |
● | Revenue recognition |
● | Income taxes |
40 |
Payments due by period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | |||||||||||||||
Long Term Debt Obligations | - | - | - | - | - | |||||||||||||||
Capital Lease Obligations | - | - | - | - | - | |||||||||||||||
Operating Lease Obligations | $ | 5,976 | $ | 1,816 | $ | 2,936 | $ | 1,224 | - | |||||||||||
Purchase Obligations | - | - | - | - | - | |||||||||||||||
Total | $ | 5,976 | $ | 1,816 | $ | 2,936 | $ | 1,224 | - |
41 |
Equity Securities | Hypothetical | ||||||||||||||
Percentage | |||||||||||||||
Estimated Fair | Increase | ||||||||||||||
Value after | (Decrease) in | ||||||||||||||
Hypothetical | Hypothetical | Shareholders’ | |||||||||||||
($ in thousands) | Fair Value | Price Change | Change in Prices | Equity | |||||||||||
As of April 30, 2013 | Equity Securities and ETFs held for dividend yield | $ | 4,732 | 30% increase | $ | 6,152 | 2.80 | % | |||||||
30% decrease | $ | 3,312 | -2.80 | % | |||||||||||
As of April 30, 2013 | Inverse ETF Holdings | $ | 1,950 | 30% increase | $ | 1,365 | -1.15 | % | |||||||
30% decrease | $ | 2,535 | 1.15 | % | |||||||||||
As of April 30, 2013 | Total | $ | 6,682 | 30% increase | $ | 7,517 | 1.64 | % | |||||||
30% decrease | $ | 5,847 | -1.64 | % |
42 |
Equity Securities | Hypothetical | ||||||||||||||
Percentage | |||||||||||||||
Estimated Fair | Increase | ||||||||||||||
Value after | (Decrease) in | ||||||||||||||
Hypothetical | Hypothetical | Shareholders’ | |||||||||||||
($ in thousands) | Fair Value | Price Change | Change in Prices | Equity | |||||||||||
As of April 30, 2012 | Equity Securities and ETFs held for dividend yield | $ | 2,565 | 30% increase | $ | 3,334 | 1.54 | % | |||||||
30% decrease | $ | 1,796 | -1.54 | % | |||||||||||
As of April 30, 2012 | Inverse ETF Holdings | $ | 1,316 | 30% increase | $ | 921 | -0.79 | % | |||||||
30% decrease | $ | 1,710 | 0.79 | % | |||||||||||
As of April 30, 2012 | Total | $ | 3,881 | 30% increase | $ | 4,255 | 0.75 | % | |||||||
30% decrease | $ | 3,506 | -0.75 | % |
Page Number | |
Report of independent auditors | 56 |
Consolidated balance sheets at April 30, 2013 and 2012 | 57 |
Consolidated statements of income for the fiscal years ended April 30, 2013, 2012 and 2011 | 58 |
Consolidated Statements of Comprehensive Income for the fiscal years ended April 30, 2013, 2012 and 2011 | 59 |
Consolidated statements of cash flows for the fiscal years ended April 30, 2013, 2012 and 2011 | 60 |
Consolidated statement of changes in shareholders’ equity for the fiscal years ended April 30, 2013, 2012 and 2011 | 61 |
Notes to the consolidated financial statements | 62 |
43 |
Net Revenues | Income from Operations | Gain from Deconsolidation of Subsidiaries | Revenues and Profits Interests in EAM Trust | Income/ (Loss) From Securities Trans., net | Net Income | Earnings Per Share | ||||||||||||||||||||||
2013, by Quarter | ||||||||||||||||||||||||||||
First | $ | 8,938 | $ | 1,352 | - | $ | 1,473 | $ | 26 | $ | 1,776 | $ | 0.18 | |||||||||||||||
Second | 8,809 | 920 | - | 1,529 | 30 | 1,572 | 0.16 | |||||||||||||||||||||
Third | 8,946 | 1,088 | - | 1,625 | 37 | 1,747 | 0.18 | |||||||||||||||||||||
Fourth | 9,147 | 760 | - | 1,633 | 33 | 1,524 | 0.15 | |||||||||||||||||||||
Total | $ | 35,840 | $ | 4,120 | $ | - | $ | 6,260 | $ | 126 | $ | 6,619 | $ | 0.67 | ||||||||||||||
2012, by Quarter | ||||||||||||||||||||||||||||
First | $ | 9,370 | $ | 1,638 | - | $ | 1,572 | $ | 11 | $ | 2,076 | $ | 0.21 | |||||||||||||||
Second | 9,140 | 1,518 | - | 1,343 | 20 | 1,915 | 0.19 | |||||||||||||||||||||
Third | 8,996 | 1,823 | - | 1,456 | 3 | 1,844 | 0.19 | |||||||||||||||||||||
Fourth | 9,103 | 359 | - | 1,519 | 36 | 1,090 | 0.11 | |||||||||||||||||||||
Total | $ | 36,609 | $ | 5,338 | $ | - | $ | 5,890 | $ | 70 | $ | 6,925 | $ | 0.70 | ||||||||||||||
2011, by Quarter | ||||||||||||||||||||||||||||
First (1) | $ | 13,609 | $ | 3,546 | - | $ | - | $ | 37 | $ | 2,317 | $ | 0.23 | |||||||||||||||
Second (1) | 13,498 | 1,790 | - | - | 51 | 1,087 | 0.11 | |||||||||||||||||||||
Third (1), (2) | 12,035 | 229 | 50,510 | 724 | (40 | ) | 31,437 | 3.15 | ||||||||||||||||||||
Fourth (3), (2) | 9,525 | 2,968 | - | 1,631 | 17 | 2,941 | �� | 0.30 | ||||||||||||||||||||
Total | $ | 48,667 | $ | 8,533 | $ | 50,510 | $ | 2,355 | $ | 65 | $ | 37,782 | $ | 3.79 | ||||||||||||||
(1) | During the first, second and third quarters of fiscal 2011, the Company recorded expenses related to the EAM Restructuring Transaction of $1,342,000, $1,120,000 and $1,302,000, respectively. |
(2) | The Company’s expenses include non-cash post-employment compensation of $1,475,000 during the third quarter and an additional $295,000 during the fourth quarter of fiscal 2011related to a grant of a voting profits interest in EAM to a former employee. |
(3) | The fourth quarter of fiscal 2011includes $914,000 related to the operating lease exit costs in connection with EAM’s exit from the Company’s office facility and the reversal of $1,767,000 of previously recorded expenses associated with the Provision for Settlement due to a change in estimated costs to administer the Fair Fund. |
44 |
(a) | Evaluation of Disclosure Controls and Procedures. |
(b) | Management’s Annual Report on Internal Control over Financial Reporting. |
45 |
46 |
(a) Names of Directors, Age as of June 28, 2013 and Principal Occupation | Director Since | |
Howard A. Brecher* (59). Chairman and Chief Executive Officer of the Company since October 2011; Acting Chairman and Acting Chief Executive Officer of the Company from November 2009 until October 2011; Chief Legal Officer; Vice President and Secretary of the Company from prior to 2005 until January 2010; Vice President and Secretary of the Value Line Funds from June 2008 until December 2010; Secretary of EAM LLC from February 2009 until December 2010; Director and General Counsel of AB&Co., Inc. since prior to 2005. Mr. Brecher has been an officer of the Company for more than 20 years. In addition to his current roles with the Company, he has also served as Secretary of the Company and as a senior officer of significant affiliates of the Company. Mr. Brecher is a graduate of Harvard College, Harvard Business School and Harvard Law School. He also holds a Master’s Degree in tax law from New York University. | 1992 | |
Stephen P. Davis (61). Managing Member, Davis Investigative Group, LLC since 2001. Mr. Davis served as a senior officer in the New York City Police Department and has successfully managed his own business servicing the financial services industry and other clients for more than 11 years. | 2010 | |
Alfred R. Fiore (57). Retired Chief of Police, Westport CT. Mr. Fiore served as the senior official of a municipal department with both executive and budget responsibilities. He was Chief of Police, Westport CT from 2004 to 2011 and was a member of that Police Department for more than 33 years. | 2010 | |
William E. Reed (68). President, W.E. Reed. Mr. Reed has successfully managed his own private business for over 41 years, providing a spectrum of services to real estate owners and managers regionally. | 2010 | |
Glenn J. Muenzer (56). Special Agent (Retired), Federal Bureau of Investigation (the “FBI”) since 1991. Mr. Muenzer is accomplished law enforcement professional with extensive law enforcement and financial investigative experience. Prior to joining the FBI, Mr. Muenzer was Vice President and Manager of Internal Audit at Thomson McKinnon Securities, Inc.; Assistant Vice President of Internal Audit at EF Hutton; Senior Auditor with Deloitte & Touche. Mr. Muenzer is a Certified Public Accountant. | 2012 | |
Stephen R. Anastasio* (54). Vice President of the Company since December 2010; Treasurer since September 2005 and Director since February 2010; Treasurer of each of the Value Line Funds from September 2005 to August 2008. Mr. Anastasio has been employed by Value Line, Inc. for more than 23 years. In addition to his current roles with the Company, he has served as Chief Financial Officer, Treasurer, Chief Accounting Officer and Corporate Controller of the Company. His relevant experience also includes being Treasurer of each of the Value Line Mutual Funds from 2005 to 2008. Mr. Anastasio is a graduate of Fairleigh Dickinson University and is a Certified Public Accountant. | 2010 | |
Mary Bernstein* (63). Director of Accounting of the Company since 2010; Accounting Manager of the Company from 2000 to 2010. Mrs. Bernstein holds an MBA Degree in accounting from Baruch College of CUNY and is a Certified Public Accountant. Mrs. Bernstein has been employed by Value Line, Inc. for more than 17 years. | 2010 |
47 |
(b) | The information pertaining to executive officers of the Company is set forth in Part I , Item I, subsection J under the caption “Executive Officers of the Registrant” of this Form 10-K. |
48 |
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | |
Arnold Bernhard & Co., Inc.* | 8,633,733 | 87.4% | |
220 East 42nd Street | |||
New York, NY 10017 |
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | ||||||
Howard A. Brecher | 800 | * | ||||||
Stephen R. Anastasio | 200 | * | ||||||
Glenn J. Muenzer | 200 | * | ||||||
William E. Reed | 500 | * | ||||||
Stephen P. Davis | 200 | * | ||||||
Alfred R. Fiore | 300 | * | ||||||
Mary Bernstein | 200 | * | ||||||
All directors and executive officers as a group (7 persons) | 2,400 | * |
49 |
50 |
Fiscal Years Ended April 30, | ||||||||
2013 | 2012 | |||||||
Audit fees | $ | 134,000 | $ | 159,260 | ||||
Audit-related fees | - | 35,145 | ||||||
Tax fees | 76,430 | 144,465 | ||||||
Total | $ | 210,430 | $ | 338,870 |
51 |
3.1 | Certificate of Incorporation of the Company, as amended through April 7, 1983, is incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of Value Line, Inc. filed with the SEC on April 7, 1983. |
3.2 | Certificate of Amendment of Certificate of Incorporation dated October 24, 1989 is incorporated by reference to Exhibit 3.2 to the Amended Annual Report on Form 10-K/A for the year ended April 30, 2008 filed with the SEC on June 5, 2009. |
3.3 | By-laws of the Company, as amended through January 18, 1996, are incorporated by reference to Exhibit 3.1 to the Amended Quarterly Report on Form 10-Q/A for the quarter ended January 31, 1996 filed with the SEC on March 19, 1996. |
10.1 | Form of tax allocation arrangement between the Company and AB&Co. is incorporated by reference to Exhibit 10.8 to the Registration Statement on Form S-1 of Value Line, Inc. filed with the SEC on April 7, 1983. |
10.2 | Form of Servicing and Reimbursement Agreement between the Company and AB&Co., dated as of November 1, 1982, is incorporated by reference to Exhibit 10.9 to the Registration Statement on Form S-1 of Value Line, Inc. filed with the SEC on April 7, 1983. |
10.3(a) | Lease, dated as of June 4, 1993, for the Company’s premises at 220 East 42nd Street, New York, NY, is incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the year ended April 30, 1994 filed with the SEC on June 17, 1994. |
10.3(b) | Amendment to Lease, dated September 14, 2000, is incorporated by reference to Exhibit 10.14 to the Amended Annual Report on Form 10-K/A for the year ended April 30, 2001 filed with the SEC on August 17, 2001. |
10.3(c) | Amendment to Lease, dated April 23, 2007, is incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K for the year ended April 30, 2007 filed with the SEC on July 20, 2007. |
10.3(d) | Lease Modification, dated as of February 7, 2013, is incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2013 filed with the SEC on March 13, 2013. |
10.4 | Form of indemnification agreement, dated July 13, 2010, by and between the Company and each of Howard A. Brecher, Stephen Davis, Alfred Fiore, William E. Reed, Mitchell E. Appel, Stephen R. Anastasio and Thomas T. Sarkany is incorporated by reference to Exhibit 10.15 to the Annual Report on Form 10-K for the year ended April 30, 2010 filed with the SEC on July 16, 2010. |
10.5 | EULAV Asset Management Declaration of Trust dated as of December 23, 2010 is incorporated by reference to Exhibit 10.16 to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2011 filed with the SEC on March 24, 2011. |
52 |
10.6 | Agreement of Sublease, dated as of February 7, 2013, for the Company’s premises at 485 Lexington Ave., New York, NY, is incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2013 filed with the SEC on March 13, 2013. |
14.1 | Code of Business Conduct and Ethics is incorporated by reference to Exhibit 14.1 to the Quarterly Report on Form 10-Q for the quarter ended January 31, 2011 filed with the SEC on March 24, 2011. |
21 | List of subsidiaries of Value Line, Inc.* |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
31.2 | Certification of Principal Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this Annual Report on Form 10-K.* |
32.2 | Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit shall not be deemed “filed” as a part of this Annual Report on Form 10-K.* |
99.1 | EULAV Asset Management Audited Consolidated Financial Statements as of April 30, 2013. Separate financial statements of subsidiaries not consolidated and fifty percent or less owned persons.* |
* Filed herewith. |
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE | XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document |
53 |
By: | /s/ Howard A. Brecher | |||
Howard A. Brecher | ||||
Chairman & Chief Executive Officer | ||||
(Principal Executive Officer) |
By: | /s/ Howard A. Brecher | |||
Howard A. Brecher | ||||
Chairman & Chief Executive Officer and Director | ||||
(Principal Executive Officer) |
By: | /s/ Stephen R. Anastasio | |||
Stephen R. Anastasio | ||||
Vice President & Treasurer and Director | ||||
(Principal Financial Officer and Principal Accounting Officer) |
54 |
/s/ Glenn J. Muenzer | |
Glenn J. Muenzer | |
Director | |
| |
/s/ William E. Reed | |
William E. Reed | |
Director | |
| |
/s/ Stephen P. Davis | |
Stephen P. Davis | |
Director | |
| |
/s/ Alfred R. Fiore | |
Alfred R. Fiore | |
Director | |
| |
/s/ Mary Bernstein | |
Mary Bernstein | |
Director |
55 |
HOROWITZ & ULLMANN, P.C.
Certified Public Accountants
A member of the | 275 Madison Avenue |
AICPA Center for Audit Quality | New York, NY 10016 |
New York State Society of CPAs | Telephone: (212) 532-3736 |
PCAOB registered | Facsimile: (212) 545-8997 |
E-mail: cpas@horowitz-ullmann.com |
Report of Independent Accountants
To the Board of Directors
of Value Line, Inc.
Introductory Paragraph
We have audited the accompanying financial statements of Value Line, Inc. and Subsidiaries, which comprise the consolidated balance sheets as of April 30, 2013, and 2012, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended April 30, 2013, and the related notes to the financial statements.
Management’s Responsibility
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Value Line, Inc. and Subsidiaries as of April 30, 2013, and 2012, and the results of its operations and its cash flows for each of the years in the three-year period ended April 30, 2013, in accordance with accounting principles generally accepted in the United States of America.
New York, NY
July 18, 2013
56 |
Item 8.
Consolidated Balance Sheets
(in thousands, except share amounts)
April 30, 2013 | April 30, 2012 | |||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents (including short term investments of $6,312 and $10,848, respectively) | $ | 6,840 | $ | 12,042 | ||||
Securities available-for-sale | 6,682 | 3,881 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $17 and $44, respectively | 1,278 | 902 | ||||||
Prepaid and refundable income taxes | - | 779 | ||||||
Prepaid expenses and other current assets | 1,646 | 1,071 | ||||||
Deferred income taxes | 227 | 442 | ||||||
Total current assets | 16,673 | 19,117 | ||||||
Long term assets: | ||||||||
Investment in EAM Trust | 57,511 | 56,331 | ||||||
Property and equipment, net | 3,930 | 3,854 | ||||||
Capitalized software and other intangible assets, net | 6,227 | 5,067 | ||||||
Total long term assets | 67,668 | 65,252 | ||||||
Total assets | $ | 84,341 | $ | 84,369 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 2,460 | $ | 2,948 | ||||
Accrued salaries | 1,200 | 1,108 | ||||||
Dividends payable | 1,481 | 1,484 | ||||||
Accrued taxes on income | 180 | 96 | ||||||
Unearned revenue | 22,073 | 21,548 | ||||||
Total current liabilities | 27,394 | 27,184 | ||||||
Long term liabilities: | ||||||||
Unearned revenue | 2,636 | 4,447 | ||||||
Deferred income taxes | 21,326 | 20,424 | ||||||
Total long term liabilities | 23,962 | 24,871 | ||||||
Total liabilities | 51,356 | 52,055 | ||||||
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 | 32,315 | 31,628 | ||||||
Treasury stock, at cost (123,572 shares and 103,619 shares, respectively) | (1,572 | ) | (1,390 | ) | ||||
Accumulated other comprehensive income, net of tax | 251 | 85 | ||||||
Total shareholders’ equity | 32,985 | 32,314 | ||||||
Total liabilities and shareholders’ equity | $ | 84,341 | $ | 84,369 |
57 |
(in thousands, except share & per share amounts)
For the Fiscal Years Ended | ||||||||||||
April 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Revenues: | ||||||||||||
Investment periodicals and related publications | $ | 31,940 | $ | 33,018 | $ | 34,406 | ||||||
Copyright data fees | 3,900 | 3,591 | 3,568 | |||||||||
Investment management fees & services | - | - | 10,693 | |||||||||
Total revenues | 35,840 | 36,609 | 48,667 | |||||||||
Expenses: | ||||||||||||
Advertising and promotion | 4,075 | 4,203 | 6,673 | |||||||||
Salaries and employee benefits | 15,034 | 15,001 | 17,242 | |||||||||
Production and distribution | 5,694 | 4,894 | 4,718 | |||||||||
Office and administration | 6,917 | 7,173 | 9,504 | |||||||||
Expenses related to restructuring | - | - | 3,764 | |||||||||
Provision for settlement | - | - | (1,767 | ) | ||||||||
Total expenses | 31,720 | 31,271 | 40,134 | |||||||||
Income from operations | 4,120 | 5,338 | 8,533 | |||||||||
Gain on deconsolidation of subsidiaries | - | - | 50,510 | |||||||||
Revenues and profits interests in EAM Trust | 6,260 | 5,890 | 2,355 | |||||||||
Income from securities transactions, net | 126 | 70 | 65 | |||||||||
Income before income taxes | 10,506 | 11,298 | 61,463 | |||||||||
Income tax provision | 3,887 | 4,373 | 23,681 | |||||||||
Net income | $ | 6,619 | $ | 6,925 | $ | 37,782 | ||||||
Earnings per share, basic & fully diluted | $ | 0.67 | $ | 0.70 | $ | 3.79 | ||||||
Weighted average number of common shares | 9,888,774 | 9,921,925 | 9,980,000 |
58 |
(in thousands)
For the Fiscal Years Ended | ||||||||||||
April 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Net income | $ | 6,619 | $ | 6,925 | $ | 37,782 | ||||||
Other comprehensive income, net of tax: | ||||||||||||
Change in unrealized gains on securities, net of taxes | 166 | 22 | 65 | |||||||||
Other comprehensive income | 166 | 22 | 65 | |||||||||
Comprehensive income | $ | 6,785 | $ | 6,947 | $ | 37,847 |
59 |
(in thousands)
For the Fiscal Years Ended | ||||||||||||
April 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 6,619 | $ | 6,925 | $ | 37,782 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 1,552 | 724 | 593 | |||||||||
Amortization of bond premium | - | - | 13 | |||||||||
Gain on deconsolidation of subsidiaries | - | - | (50,510 | ) | ||||||||
Post-employment non-cash compensation | - | - | 1,770 | |||||||||
Non-voting revenues interest in EAM Trust | (5,781 | ) | (5,684 | ) | (2,187 | ) | ||||||
Non-voting profits interest in EAM Trust | (479 | ) | (206 | ) | (168 | ) | ||||||
Realized and unrealized losses on securities available-for-sale | - | 11 | 63 | |||||||||
Deferred income taxes | 1,078 | 4,288 | 23,738 | |||||||||
Expenses for operating lease exit obligation | - | - | 914 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Unearned revenue | (1,286 | ) | (1,006 | ) | (176 | ) | ||||||
Reserve for settlement | (32 | ) | (1,189 | ) | (2,783 | ) | ||||||
Operating lease exit obligation | (439 | ) | (439 | ) | - | |||||||
Accounts payable & accrued expenses | (17 | ) | (1,154 | ) | (1,524 | ) | ||||||
Accrued salaries | 92 | 195 | (318 | ) | ||||||||
Accrued taxes on income | 33 | (60 | ) | 91 | ||||||||
Prepaid and refundable income taxes | 779 | (720 | ) | 1,970 | ||||||||
Prepaid expenses and other current assets | (575 | ) | (43 | ) | (35 | ) | ||||||
Accounts receivable | (376 | ) | 697 | 82 | ||||||||
Receivable from affiliates | - | 37 | 1,345 | |||||||||
Total adjustments | (5,451 | ) | (4,549 | ) | (27,122 | ) | ||||||
Net cash provided by operating activities | 1,168 | 2,376 | 10,660 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchases/sales of securities classified as available-for-sale: | ||||||||||||
Maturities and sales of fixed income securities | - | 11,196 | 38,021 | |||||||||
Proceeds from sales of equity securities | - | 89 | - | |||||||||
Purchases of fixed income securities | - | - | (27,310 | ) | ||||||||
Purchases of equity securities | (2,545 | ) | (2,468 | ) | (1,360 | ) | ||||||
Cash contribution to deconsolidated subsidiary capital | - | - | (5,484 | ) | ||||||||
Distributions received from EAM Trust | 5,080 | 5,876 | 1,793 | |||||||||
Acquisition of property and equipment | (331 | ) | (48 | ) | (106 | ) | ||||||
Expenditures for capitalized software | (2,457 | ) | (3,383 | ) | (1,801 | ) | ||||||
Net cash (used) provided by investing activities | (253 | ) | 11,262 | 3,753 | ||||||||
Cash flows from financing activities: | ||||||||||||
Purchase of treasury stock at cost | (182 | ) | (946 | ) | (90 | ) | ||||||
Dividends paid | (5,935 | ) | (7,452 | ) | (23,956 | ) | ||||||
Net cash used by financing activities | (6,117 | ) | (8,398 | ) | (24,046 | ) | ||||||
Net change in cash and cash equivalents | (5,202 | ) | 5,240 | (9,633 | ) | |||||||
Cash and cash equivalents at beginning of year | 12,042 | 6,802 | 16,435 | |||||||||
Cash and cash equivalents at end of year | $ | 6,840 | $ | 12,042 | $ | 6,802 |
60 |
For the Fiscal Years Ended April 30, 2013, 2012 and 2011
(in thousands, except share amounts)
Additional | Accumulated Other | |||||||||||||||||||||||||||||||
Common stock | paid-in | Treasury Stock | Retained | Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income (loss) | Total | |||||||||||||||||||||||||
Balance as of April 30, 2010 | 10,000,000 | $ | 1,000 | $ | 991 | (18,400 | ) | $ | (354 | ) | $ | 19,813 | $ | (2 | ) | $ | 21,448 | |||||||||||||||
Net income | 37,782 | 37,782 | ||||||||||||||||||||||||||||||
Change in unrealized gains on | ||||||||||||||||||||||||||||||||
securities, net of taxes | 65 | 65 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (6,719 | ) | (90 | ) | (90 | ) | ||||||||||||||||||||||||||
Dividends declared | (25,951 | ) | (25,951 | ) | ||||||||||||||||||||||||||||
Balance as of April 30, 2011 | 10,000,000 | $ | 1,000 | $ | 991 | (25,119 | ) | $ | (444 | ) | $ | 31,644 | $ | 63 | $ | 33,254 | ||||||||||||||||
Dividends declared per share were $0.20 for each of the three months ending July 31, 2010, January 31, 2011 and April 30, 2011, and $2.00 for the three months ending October 31, 2010. | ||||||||||||||||||||||||||||||||
Additional | Accumulated Other | |||||||||||||||||||||||||||||||
Common stock | paid-in | Treasury Stock | Retained | Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income (loss) | Total | |||||||||||||||||||||||||
Balance as of April 30, 2011 | 10,000,000 | $ | 1,000 | $ | 991 | (25,119 | ) | $ | (444 | ) | $ | 31,644 | $ | 63 | $ | 33,254 | ||||||||||||||||
Net income | 6,925 | 6,925 | ||||||||||||||||||||||||||||||
Change in unrealized gains on | ||||||||||||||||||||||||||||||||
securities, net of taxes | 22 | 22 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (78,500 | ) | (946 | ) | (946 | ) | ||||||||||||||||||||||||||
Dividends declared | (6,941 | ) | (6,941 | ) | ||||||||||||||||||||||||||||
Balance as of April 30, 2012 | 10,000,000 | $ | 1,000 | $ | 991 | (103,619 | ) | $ | (1,390 | ) | $ | 31,628 | $ | 85 | $ | 32,314 | ||||||||||||||||
Dividends declared per share were $0.20 for each of the three months ending July 31, 2011 and October 31, 2011 and $0.15 for each of the three months ending January 31, 2012 and April 30, 2012. | ||||||||||||||||||||||||||||||||
Additional | Accumulated Other | |||||||||||||||||||||||||||||||
Common stock | paid-in | Treasury Stock | Retained | Comprehensive | ||||||||||||||||||||||||||||
Shares | Amount | capital | Shares | Amount | earnings | income (loss) | Total | |||||||||||||||||||||||||
Balance as of April 30, 2012 | 10,000,000 | $ | 1,000 | $ | 991 | (103,619 | ) | $ | (1,390 | ) | $ | 31,628 | $ | 85 | $ | 32,314 | ||||||||||||||||
Net income | 6,619 | 6,619 | ||||||||||||||||||||||||||||||
Change in unrealized gains on | ||||||||||||||||||||||||||||||||
securities, net of taxes | 166 | 166 | ||||||||||||||||||||||||||||||
Purchase of treasury stock | (19,953 | ) | (182 | ) | (182 | ) | ||||||||||||||||||||||||||
Dividends declared | (5,932 | ) | (5,932 | ) | ||||||||||||||||||||||||||||
Balance as of April 30, 2013 | 10,000,000 | $ | 1,000 | $ | 991 | (123,572 | ) | $ | (1,572 | ) | $ | 32,315 | $ | 251 | $ | 32,985 |
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Note 1-Organization and Summary of Significant Accounting Policies: | |||||||
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 primary business is producing investment periodicals and related publications and making available copyright data including certain Value Line trademarks and Value Line Proprietary Ranking System information to third parties under written agreements for use in third party managed and marketed investment products. | |||||||
Prior to December 23, 2010 (the “Restructuring Date”), VLI, through its direct subsidiary EULAV Asset Management LLC (“EAM LLC”), provided investment management services to the Value Line Mutual Funds (“Value Line Funds” or the “Funds”), institutions and individual accounts, and, through EAM LLC’s subsidiary EULAV Securities, Inc. (“ESI”), provided distribution, marketing, and administrative services to the Value Line Funds. On December 23, 2010, the Company deconsolidated the asset management and mutual fund distribution subsidiaries and exchanged its controlling interest in these subsidiaries for a non-voting revenues interest and a non-voting profits interest in EULAV Asset Management Trust, a Delaware business statutory trust (“EAM” or “EAM Trust”), the successor to EAM LLC and the sole member of EULAV Securities LLC (“ES”), the successor to ESI, (the “Restructuring Transaction”). During fiscal 2011, VLI also recorded as post-employment compensation expense the value of a voting profits interest in EAM granted to one of the trustees of EAM, a former VLI employee. Pursuant to the EAM Declaration of Trust dated as of December 23, 2010 (the “EAM Trust Agreement”), VLI granted EAM the right to use the Value Line name for all existing Value Line Funds and agreed to supply, without charge or expense, the Value Line Proprietary Ranking System information to EAM for use in managing the Value Line Funds. The name “Value Line” as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. | |||||||
Use of Estimates: | |||||||
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: | |||||||
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 entity’s activities that most significantly affect the entity’s economic performance. A holder of a variable interest in a VIE is required to consolidate the entity if it is determined that it has a controlling financial interest in the VIE and is therefore the primary beneficiary. The determination of a controlling financial interest in a VIE is based on a qualitative assessment to identify the variable interest holder, if any, that has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) either the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The accounting guidance requires the Company to perform an ongoing assessment of whether the Company is the primary beneficiary of a VIE and the Company has determined it is not the primary beneficiary of a VIE (see Note 5). | |||||||
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. On December 23, 2010, the Company completed the Restructuring Transaction and deconsolidated the related affiliates in accordance with FASB’s Topic 810. As part of the Restructuring Transaction, the Company received a significant non-voting revenues interest (excluding distribution revenues) and a non-voting profits interest in the new entity, EAM. The Company relied on the guidance in FASB’s ASC Topics 323 and 810 in its determination not to consolidate its investment in EAM and to account for such investment under the equity method of accounting. The Company reports the amount it receives for its non-voting revenues and non-voting profits interests as a separate line item below operating income in the Consolidated Statements of Income. | |||||||
Revenue Recognition: | |||||||
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. | |||||||
Copyright data revenues are derived from providing certain Value Line trademarks and the Value Line Proprietary Ranking System information to third parties under written agreements for use in selecting securities for third party marketed products, including unit investment trusts, annuities and exchange traded funds (“ETFs”). The Company earns asset-based copyright data fees as specified in the individual agreements. Revenue is recognized monthly over the term of the agreement and, because it is asset-based, will fluctuate as the market value of the underlying portfolio increases or decreases in value. |
62 |
Prior to the Restructuring Date, the Company earned investment management fees that consisted of management fees from the Value Line Funds and from asset management clients. Investment management fees for the Funds were earned on a monthly basis as services were performed. The fees were calculated based on the average daily net assets of the Funds in accordance with each Fund’s advisory agreement (see Note 3 “Related Party Transactions”). | |||||||
The management fees and average daily net assets for the Value Line Funds are calculated by State Street Bank, which serves as the fund accountant, fund administrator, and custodian of the Value Line Funds. | |||||||
The Value Line Funds are open-end management companies registered under the Investment Company Act of 1940 (the “1940 Act”). Shareholder transactions for the Value Line Funds are processed each business day by the third party transfer agent of the Funds. Shares can be redeemed without advance notice upon request of the shareowners each day that the New York Stock Exchange is open. Prior to December 1, 2010, EAM LLC, in addition to managing the Value Line Funds, separately managed accounts of institutions and high net worth individuals for which it was paid advisory fees. EAM had no separately managed accounts as of April 30, 2013 or April 30, 2012. Assets within the separately managed accounts were held at third party custodians and were subject to the terms of the applicable advisory agreements and did not have any advance notice requirement for withdrawals. | |||||||
Also, prior to the Restructuring Date, service and distribution fees were received from the Value Line Funds in accordance with service and distribution plans under rule 12b-1 of the Investment Company Act of 1940. These plans are compensation plans, which means that the distributor’s fees under these plans are payable without regard to actual expenses incurred by the distributor, and therefore the distributor may earn a profit under the plan. Expenses incurred by ESI, the distributor of the Value Line Funds prior to the Restructuring Date, included payments to securities dealers, banks, financial institutions and other organizations that provided distribution, marketing, and administrative services with respect to the Value Line Funds. Service and distribution fees are received by the distributor on a monthly basis and calculated based upon the average daily net assets of the respective Fund in accordance with each Fund’s prospectus (see Note 3 “Related Party Transactions”). | |||||||
Investment in Unconsolidated Entities: | |||||||
The Company accounts for its investment in its unconsolidated entity, EAM, using the equity method of accounting in accordance with FASB’s ASC 323. The equity method is an appropriate means of recognizing increases or decreases measured by GAAP in the economic resources underlying the investments. Under the equity method, an investor recognizes its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend or distribution. An investor adjusts the carrying amount of an investment for its share of the earnings or losses recognized by the investee. | |||||||
The Company’s “interests” in EAM, the investment adviser to and the sole member of the distributor of the Value Line Funds, consist of a “non-voting revenues interest” and a “non-voting profits interest” in EAM as defined in the EAM Trust Agreement. The non-voting revenues interest entitles the Company to receive a range of 41% to 55%, based on the amount of EAM’s adjusted gross revenues, excluding ES’s distribution revenues (“Revenues Interest”). The non-voting profits interest entitles the Company to receive 50% of EAM’s profits, subject to certain limited adjustments as defined in the EAM Trust Agreement (“Profits Interest”). The Revenues Interest and at least 90% of the Profits Interest are to be distributed each quarter to all interest holders of EAM, including Value Line. Subsequent to the Restructuring Date, the Company’s Revenues Interest in EAM excludes participation in the service and distribution fees of EAM’s subsidiary ES. The Company reflects its non-voting revenues and non-voting profits interests in EAM as non-operating income under the equity method of accounting subsequent to the Restructuring Transaction. Although the Company does not have control over the operating and financial policies of EAM, pursuant to the EAM Trust Agreement, the Company has a contractual right to receive its share of EAM’s revenues and profits. | |||||||
Valuation of Securities: | |||||||
The Company’s securities classified as cash equivalents and available-for-sale consist of shares of money market funds that invest primarily in short-term U.S. Government securities, investments in ETFs, shares of equity securities in various publicly traded companies and bank certificates of deposits and are valued in accordance with the requirements of the Fair Value Measurements Topic of the FASB’s ASC 820. The securities classified available-for-sale reflected in the Consolidated Balance Sheets are valued at market and unrealized gains and losses, net of applicable taxes, are reported as a separate component of shareholders’ equity. Realized gains and losses on sales of the securities classified as available-for-sale are recorded in earnings as of the trade date and are determined on the identified cost method. | |||||||
The Company classifies its securities available-for-sale 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. | |||||||
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. |
63 |
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. Risks include those inherent in a particular valuation technique, such as the uncertainty inherent in the variables used by 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 entity’s own assumptions about the factors market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. | |||||||
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 Company’s investments: |
As of April 30, 2013 | |||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||
Cash equivalents | $ 6,312 | $ - | $ - | $ 6,312 | |||
Securities available-for-sale | 6,682 | - | - | 6,682 | |||
$ 12,994 | $ - | $ - | $ 12,994 | ||||
As of April 30, 2012 | |||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | |||
Cash equivalents | $ 10,848 | $ - | $ - | $ 10,848 | |||
Securities available-for-sale | 3,881 | - | - | 3,881 | |||
$ 14,729 | $ - | $ - | $ 14,729 |
The Company had no other financial instruments such as futures, forwards and swap contracts. For the periods ended April 30, 2013 and April 30, 2012, there were no Level 2 nor Level 3 investments. The Company does not have any liabilities subject to fair value measurement. | |||||||
Advertising expenses: | |||||||
The Company expenses advertising costs as incurred. | |||||||
Income Taxes: | |||||||
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 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 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 April 30, 2013, management has reviewed the tax positions for the years still subject to tax audit under the statute of limitations, evaluated the implications, and determined that there is no material impact to the Company’s financial statements. |
64 |
Earnings per share: | |||||||
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. | |||||||
Cash and Cash Equivalents: | |||||||
For purposes of the Consolidated Statements of Cash Flows, the Company considers all cash held at banks and short term liquid investments with an original maturity of less than three months to be cash and cash equivalents. As of April 30, 2013 and April 30, 2012, cash equivalents included $6,312,000 and $10,848,000, respectively, for amounts invested in savings accounts at large commercial banks, held as bank certificates of deposits, and investments in money market mutual funds that invest in short term U.S. government securities. | |||||||
Expenses Related to Restructuring: | |||||||
During fiscal 2011, the Company expensed all costs associated with the Restructuring Transaction as incurred (see Note 15 “Restructuring Expenses and Provision for Settlement”). In addition, the Company recorded as non-cash post-employment compensation expense the value of the voting profits interest in EAM granted to a former employee. | |||||||
Note 2-Supplementary Cash Flow Information: |
Fiscal Years Ended April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | |||||||||
State and local income tax payments | $ | (120 | ) | $ | (159 | ) | $ | (15 | ) | |||
Federal income tax payments to the Parent | $ | (1,877 | ) | $ | (845 | ) | $ | (348 | ) | |||
Federal income tax refunds from the Parent | $ | - | $ | - | $ | 1,598 | ||||||
Interest payments | $ | - | $ | - | $ | (2 | ) |
The Company also received $1,598,000 of federal income tax refunds during the first quarter of fiscal 2011, which was included as prepaid and refundable income taxes in the Consolidated Balance Sheet of April 30, 2010. | |||||||
On December 23, 2010, the Company completed the Restructuring Transaction which included the receipt of a non-voting revenues interest and a non-voting profits interest in EAM in exchange for VLI’s voting shares in EAM LLC and ESI. This investment, classified as Investment in EAM Trust on the Consolidated Balance Sheets, was valued at $55,805,000 as of December 23, 2010, which included $5,484,000 of cash and $1,516,000 of FDIC insured corporate notes, contributed by VLI to EAM as part of the Restructuring Transaction. The Company satisfied its non-cash post-employment compensation obligation, valued at $1,770,000, by granting a voting profits interest in EAM to a former employee in connection with the Restructuring Transaction. | |||||||
See Note 3-Related Party Transactions for tax amounts associated with Arnold Bernhard and Co., Inc. (“AB&Co.” or the “Parent”). | |||||||
Note 3-Related Party Transactions: | |||||||
Investment Management (overview): | |||||||
On December 23, 2010, the Company deconsolidated its asset management and mutual fund distribution businesses and its interest in these businesses was restructured as a non-voting revenues and non-voting profits interests in EAM. Accordingly, the Company no longer reports this operation as a separate business segment, although it still maintains a significant interest in the cash flows generated by this business and will receive non-voting revenues and non-voting profits interests going forward, as discussed below. | |||||||
Total assets in the Value Line Funds managed and/or distributed by EAM at April 30, 2013, were $2.19 billion, which is $73 million or 3.5% above total assets of $2.11 billion in the Value Line Funds managed by EAM at April 30, 2012. | |||||||
Total assets in the Value Line Funds managed by EAM at April 30, 2012, were $2.11 billion, 5.9% below total assets of $2.24 billion in the Value Line Funds managed by EAM at April 30, 2011. Overall assets in the Value Line Funds at April 30, 2012, decreased $132 million since April 30, 2011, as a result of net redemptions within the Value Line Funds for the twelve months ended April 30, 2012. | |||||||
During December 2011, the Value Line Convertible Fund merged into the Value Line Income and Growth Fund. The Value Line Convertible Fund had approximately $20 million in assets under management before the merger. In May 2012, the Value Line New York Tax Exempt Trust ($15 million) combined into the Value Line Tax Exempt Fund ($90 million). The combination offers many benefits for fund shareholders. | |||||||
During October 2012, the USGMMF merged into a third party fund, the Daily Income Fund, managed by Reich & Tang. EAM distributes the Daily Income Fund on behalf of Reich & Tang and maintains the shareholder accounts on behalf of the Value Line Funds shareholders who invest in the Daily Income Fund, but EAM is no longer subsidizing the expenses of the USGMMF resulting from the low interest rate economic environment. In addition, the merger of the USGMMF eliminated the cost of administration and fund accounting. |
65 |
During December 2012, the Value Line Aggressive Income Trust changed its investment strategy and changed its name to the Value Line Core Bond Fund. In doing so, the Value Line Funds now have a core bond fund offering that still meets the fundamental investment objectives of the Aggressive Income Trust, which is maximization of current income with a secondary objective of capital appreciation, yet have broader appeal and a larger pool of investors to attract assets. Such assets may include existing shareholders of other Value Line Funds as shareholders redeem equities. | |||||||
During December 2012, the Value Line Emerging Opportunities Fund changed its name to Value Line Small Cap Opportunities Fund. By changing the name, the strategy of the fund and correct category is clearly defined for investors. | |||||||
During March 2013, the Value Line U.S. Government Securities Fund merged into the Value Line Core Bond Fund. This created a core bond fund with $100 million in assets, a critical threshold for many institutional money managers. | |||||||
The non-voting revenues and 90% of the Company’s non-voting profits interests due from EAM to the Company are payable each fiscal quarter under the provisions of the EAM Trust Agreement. The distributable amounts earned through the balance sheet date, which is included in the Investment in EAM Trust on the Consolidated Balance Sheets, and not yet paid, were $1,621,000 and $497,000 at April 30, 2013 and April 30, 2012, respectively. | |||||||
EAM Trust - VLI’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. EAM currently has no separately managed account clients. During the period from December 23, 2010 until May 28, 2011, EAM occupied a portion of the premises that the Company leases from a third party. The Company received $44,000 for the month of May, 2011 for rent and certain accounting and other administrative support services provided to EAM during the transitional period. The Company recorded income from its non-voting revenues interest and its non-voting profits interests in EAM as follows: |
Fiscal Years Ended April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | |||||||||
Non-voting revenues interest in EAM | $ | 5,781 | $ | 5,684 | $ | 2,187 | ||||||
Non-voting profits interest in EAM | 479 | 206 | 168 | |||||||||
$ | 6,260 | $ | 5,890 | $ | 2,355 | |||||||
Transactions with Parent: | |||||||
For the fiscal years ended April 30, 2013, 2012 and 2011, the Company was reimbursed $220,000, $268,000, and $356,000, respectively, for payments it made on behalf of and for services the Company provided to the Parent. There were no receivables due from the Parent at April 30, 2013 or April 30, 2012. | |||||||
The Company is a party to a tax-sharing arrangement with the Parent which allocates the tax liabilities of the two Companies between them. For the years ended April 30, 2013, 2012, and 2011, the Company made payments to the Parent for federal income tax amounting to $1,877,000, $845,000, and $348,000, respectively. At April 30, 2013 and April 30, 2012, prepaid and refundable income taxes in the Consolidated Balance Sheets included $0 and $530,000, respectively, for prepaid federal income tax due from the Parent. | |||||||
From time to time, the Parent has purchased additional shares of common stock of the Company in the market when and as the Parent has determined it to be appropriate. The Parent may make additional purchases of common stock of the Company from time to time in the future. As of April 30, 2013, the Parent owned approximately 87.4% of the outstanding shares of common stock of the Company. | |||||||
Note 4-Investments: | |||||||
Securities Available-for-Sale: | |||||||
Investments held by the Company and its subsidiaries are classified as securities available-for-sale in accordance with FASB’s ASC 320, Investments - Debt and Equity Securities. All of the Company’s securities classified as available-for-sale were readily marketable or had a maturity of twelve months or less and are classified as current assets on the Consolidated Balance Sheets. |
66 |
($ in thousands) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Common stocks | $ | 103 | $ | 27 | $ | (16 | ) | $ | 114 | |||||||
ETFs - equities | 3,878 | 740 | - | 4,618 | ||||||||||||
Inverse ETFs - equities | 2,314 | - | (364 | ) | 1,950 | |||||||||||
$ | 6,295 | $ | 767 | $ | (380 | ) | $ | 6,682 | ||||||||
The carrying value and fair value of securities available-for-sale at April 30, 2012 were as follows: | ||||||||||||||||
($ in thousands) | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Common stocks | $ | 103 | $ | 14 | $ | (5 | ) | $ | 112 | |||||||
ETFs - equities | 2,257 | 201 | (5 | ) | 2,453 | |||||||||||
Inverse ETFs - equities | 1,389 | - | (73 | ) | 1,316 | |||||||||||
$ | 3,749 | $ | 215 | $ | (83 | ) | $ | 3,881 |
67 |
Fiscal Years Ended April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | |||||||||
Dividend income | $ | 124 | $ | 68 | $ | 16 | ||||||
Interest income (1) | 4 | 16 | 118 | |||||||||
Realized and unrealized gains (losses) on securities available-for-sale (2) | - | (11 | ) | (63 | ) | |||||||
Interest expense | - | - | (2 | ) | ||||||||
Other | (2 | ) | (3 | ) | (4 | ) | ||||||
Total income from securities transactions, net | $ | 126 | $ | 70 | $ | 65 |
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Fiscal Years Ended April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | 2011 (1) | |||||||||
Investment management fees earned from the Value Line Funds, net of waivers shown below | $ | 12,773 | $ | 12,465 | $ | 4,592 | ||||||
12b-1 fees and other fees, net of waivers shown below | $ | 3,905 | $ | 3,466 | $ | 1,293 | ||||||
Other income | $ | 14 | $ | 12 | $ | 3 | ||||||
Investment management fee waivers and reimbursements (2) | $ | 379 | $ | 806 | $ | 303 | ||||||
12b-1 fee waivers (2) | $ | 2,156 | $ | 2,257 | $ | 855 | ||||||
Value Line’s non-voting revenues interest | $ | 5,781 | $ | 5,684 | $ | 2,187 | ||||||
EAM’s net income (3) | $ | 945 | $ | 461 | $ | 336 |
Fiscal Years Ended April 30, | ||||||||
($ in thousands) | 2013 | 2012 | ||||||
EAM’s total assets | $ | 59,349 | $ | 57,482 | ||||
EAM’s total liabilities (1) | (2,814 | ) | (663 | ) | ||||
EAM’s total equity | $ | 56,535 | $ | 56,819 |
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Value Line | ||||||||||||||||
($ in thousands) | VIE Assets | Investment in EAM Trust (1) | Liabilities | Maximum Exposure to Loss | ||||||||||||
As of April 30, 2013 | $ | 59,349 | $ | 57,511 | $ | - | $ | 57,511 | ||||||||
As of April 30, 2012 | $ | 57,482 | $ | 56,331 | $ | - | $ | 56,331 |
As of April 30, | ||||||||
($ in thousands) | 2013 | 2012 | ||||||
Land | $ | 726 | $ | 726 | ||||
Building and leasehold improvements | 7,391 | 7,283 | ||||||
Furniture and equipment | 11,180 | 10,955 | ||||||
19,297 | 18,964 | |||||||
Accumulated depreciation and amortization | (15,367 | ) | (15,110 | ) | ||||
Total property and equipment, net | $ | 3,930 | $ | 3,854 |
Fiscal Years Ended April 30, | ||||||||||||
($ in thousands) | 2013 | 2012 | 2011 | |||||||||
Current tax expense (benefit): | ||||||||||||
Federal | $ | 2,679 | $ | 139 | $ | 356 | ||||||
State and local | 130 | (54 | ) | (413 | ) | |||||||
2,809 | 85 | (57 | ) | |||||||||
Deferred tax expense: | ||||||||||||
Federal | 728 | 3,785 | 20,535 | |||||||||
State and local | 350 | 503 | 3,203 | |||||||||
1,078 | 4,288 | 23,738 | ||||||||||
Income tax provision: | $ | 3,887 | $ | 4,373 | $ | 23,681 |
As of April 30, | ||||||||
($ in thousands) | 2013 | 2012 | ||||||
Federal tax benefit (liability): | ||||||||
Net operating loss | $ | - | $ | 126 | ||||
Unrealized gains on securities available-for-sale | (136 | ) | (46 | ) | ||||
Operating lease exit obligation | 13 | 153 | ||||||
Deferred professional fees | 49 | 80 | ||||||
Deferred charges | 265 | 76 | ||||||
Total federal tax benefit | 191 | 389 | ||||||
State and local tax benefits: | ||||||||
Net operating loss | - | 15 | ||||||
Other | 36 | 38 | ||||||
Total state and local tax benefits | 36 | 53 | ||||||
Deferred tax asset, short term | $ | 227 | $ | 442 |
70 |
As of April 30, | ||||||||
($ in thousands) | 2013 | 2012 | ||||||
Federal tax liability (benefit): | ||||||||
Deferred gain on deconsolidation of EAM | $ | 17,679 | $ | 17,679 | ||||
Deferred non-cash post-employment compensation | (619 | ) | (619 | ) | ||||
Depreciation and amortization | 1,642 | 1,032 | ||||||
Other | 262 | 120 | ||||||
Total federal tax liability | 18,964 | 18,212 | ||||||
State and local tax liabilities (benefits): | ||||||||
Deferred gain on deconsolidation of EAM | 2,243 | 2,182 | ||||||
Deferred non-cash post-employment compensation | (79 | ) | (76 | ) | ||||
Depreciation and amortization | 208 | 127 | ||||||
Deferred professional fees | (10 | ) | (21 | ) | ||||
Total state and local tax liabilities | 2,362 | 2,212 | ||||||
Deferred tax liability, long term | $ | 21,326 | $ | 20,424 |
Fiscal Years Ended April 30, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
U.S. statutory federal rate | 35.00 | % | 35.00 | % | 35.00 | % | ||||||
Increase (decrease) in tax rate from: | ||||||||||||
State and local income taxes, net of federal income tax benefit | 2.96 | % | 2.58 | % | 2.95 | % | ||||||
Effect of dividends received deductions | -0.27 | % | - | - | ||||||||
Alternative minimum tax - net operating loss limitation | - | 1.23 | % | 0.58 | % | |||||||
Domestic production tax credit | -0.52 | % | - | - | ||||||||
Other, net | -0.17 | % | -0.10 | % | - | |||||||
Effective income tax rate | 37.00 | % | 38.71 | % | 38.53 | % |
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Fiscal Years Ending April 30, | Current Lease | New Sublease | Total | ||||||||||
($ in thousands) | |||||||||||||
2014 | $ | 1,326 | $ | 490 | $ | 1,816 | |||||||
2015 | - | 1,468 | 1,468 | ||||||||||
2016 | - | 1,468 | 1,468 | ||||||||||
2017 | - | 1,224 | 1,224 | ||||||||||
$ | 1,326 | $ | 4,650 | $ | 5,976 |
72 |
($ in thousands) | Publishing | Investment Management | Consolidated Total | |||||||||
Revenues from external customers | $ | 37,974 | $ | 10,693 | $ | 48,667 | ||||||
Intersegment revenues | 7 | - | 7 | |||||||||
Total revenues for reportable segments | 37,981 | 10,693 | 48,674 | |||||||||
Elimination of intersegment revenues | (7 | ) | - | (7 | ) | |||||||
Total consolidated revenues | $ | 37,974 | $ | 10,693 | $ | 48,667 | ||||||
Depreciation and amortization | $ | 579 | $ | 14 | $ | 593 | ||||||
Depreciation related to corporate assets | $ | (3 | ) | - | $ | (3 | ) | |||||
Gain from deconsolidation of subsidiaries (1) | $ | - | $ | 50,510 | $ | 50,510 | ||||||
Income from securities transactions | - | 6 | 6 | |||||||||
Segment profit (loss) from operations (2) | 8,984 | (448 | ) | 8,536 | ||||||||
Profit for reportable segments | $ | 8,984 | $ | 50,068 | $ | 59,052 | ||||||
Revenues and profits interests in EAM Trust | 2,355 | |||||||||||
Income from securities transactions related to corporate assets | 59 | |||||||||||
Depreciation related to corporate assets | (3 | ) | ||||||||||
Income before income taxes | $ | 61,463 | ||||||||||
($ in thousands) | Assets | Expenditures for Segment Assets | ||||||
Publishing | $ | 11,827 | $ | 1,897 | ||||
Investment Management | - | 10 | ||||||
Corporate assets | 75,976 | - | ||||||
Consolidated total | $ | 87,803 | $ | 1,907 |
73 |
($ in thousands) | Amount Before Tax | Tax Expense | Tax Benefit | Amount Net of Tax | ||||||||||||
Change in unrealized gains on securities | $ | 255 | $ | (195 | ) | $ | 106 | $ | 166 | |||||||
$ | 255 | $ | (195 | ) | $ | 106 | $ | 166 |
($ in thousands) | Amount Before Tax | Tax Expense | Tax Benefit | Amount Net of Tax | ||||||||||||
Change in unrealized gains on securities | $ | 24 | $ | (33 | ) | $ | 24 | $ | 15 | |||||||
Add: Losses realized in net income | 11 | (4 | ) | - | 7 | |||||||||||
$ | 35 | $ | (37 | ) | $ | 24 | $ | 22 |
($ in thousands) | Amount Before Tax | Tax Expense | Tax Benefit | Amount Net of Tax | ||||||||||||
Change in unrealized gains on securities | $ | 32 | $ | (14 | ) | $ | 3 | $ | 21 | |||||||
Add: Losses realized in net income | 68 | (24 | ) | - | 44 | |||||||||||
$ | 100 | $ | (38 | ) | $ | 3 | $ | 65 |
74 |
($ in thousands except for cost per share) | Shares | Total Average Cost Assigned | Average Cost per Share | Aggregate Purchase Price Remaining Under the Program | ||||||||||||
Balance as of April 30, 2010 (1) | 18,400 | $ | 354 | $ | 19.24 | n/a | ||||||||||
Purchases effected in open market | 6,719 | 90 | $ | 13.39 | $ | 3,110 | ||||||||||
Balance as of April 30, 2011 | 25,119 | $ | 444 | $ | 17.67 | $ | 3,110 | |||||||||
Purchases effected in open market | 78,500 | 946 | $ | 12.05 | $ | 2,165 | ||||||||||
Balance as of April 30, 2012 (2) | 103,619 | $ | 1,390 | $ | 13.41 | $ | - | |||||||||
Purchases effected in open market (3) | 19,953 | 182 | $ | 9.13 | $ | 2,818 | ||||||||||
Balance as of April 30, 2013 | 123,572 | $ | 1,572 | $ | 12.72 | $ | 2,818 |
75 |