<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended JULY 31, 1995 Commission file number 0-11306
VALUE LINE, INC.
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(Exact name of registrant as specified in its charter)
New York 13-3139843
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 East 42nd Street, New York, New York 10017-5891
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(address of principal executive offices) (zip code)
Registrant's telephone number including area code (212) 907-1500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JULY 31, 1995
----- ----------------------------
Common stock, $.10 par value 9,976,450 Shares
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
July 31, Apr. 30,
1995 1995
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<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $57,103 and $43,608, respectively) $58,410 $45,026
Trading securities 51,491 48,187
Short term securities available for sale 39,246 39,099
Accounts receivable, net of allowance for doubtful
accounts of $360 and $350, respectively 3,189 3,348
Receivable from affiliates 1,781 1,641
Prepaid expenses and other current assets 1,468 1,416
------------------------
Total current assets 155,585 138,717
Long term securities available for sale 125,593 118,013
Property and equipment, net 7,921 7,922
Goodwill 343 346
------------------------
Total assets $289,442 $264,998
========================
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $5,686 $6,358
Securities sold under agreements to repurchase 36,994 36,994
Accrued salaries 1,782 1,466
Dividends and interest payable 546 534
Accrued taxes payable 8,365 3,054
------------------------
Total current liabilities 53,373 48,406
Unearned revenue 36,251 36,789
Deferred income taxes 8,949 4,806
Deferred charges 1,739 1,808
Shareholders' Equity:
Common stock, $.10 par value; authorized 30,000,000
shares; issued 10,000,000 shares 1,000 1,000
Additional paid-in capital 938 940
Retained earnings 171,330 163,101
Treasury stock, at cost (23,550 shares on 7/31/95
and 24,650 shares on 4/30/95) (453) (474)
Unrealized gain on securities, net of taxes 16,315 8,622
------------------------
Total shareholders' equity 189,130 173,189
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Total liabilities and shareholders' equity $289,442 $264,998
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Value Line, Inc.
Consolidated Statements of Income and Retained Earnings
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
July 31,
1995 1994
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<S> <C> <C>
Revenues:
Investment periodicals and
related publications $13,791 $14,242
Investment management fees & svcs 6,237 5,972
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Total revenues 20,028 20,214
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Expenses:
Advertising and promotion 3,105 5,434
Salaries and employee benefits 4,918 4,421
Printing, paper and distribution 1,798 1,507
Office and administration 2,658 2,212
Mutual fund support expense --- 1,550
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Total expenses 12,479 15,124
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Income from operations 7,549 5,090
Income from securities transactions, net 9,322 577
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Income before income taxes 16,871 5,667
Provision for taxes 6,647 2,239
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Net income $10,224 $3,428
Retained earnings, at beginning of
year 163,101 145,918
Dividends declared (1,995) (1,995)
------------------------
Retained earnings, at end of period $171,330 $147,351
========================
Earnings per share $1.02 $0.34
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Value Line, Inc.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three months ended
July 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $10,224 $3,428
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 317 344
Accretion of discount (147) ---
(Gains)/losses on sale of trading securities
and securities held for sale (4,237) 271
Unrealized (gains)/losses on trading securities (3,846) 246
Changes in assets and liabilities:
Decrease in unearned revenue (538) (1,203)
Increase/(decrease) in deferred charges (69) 384
Increase/(decrease) in accounts payable
and accrued expenses (562) 91
Increase in accrued salaries 272 246
Increase in interest payable 12 159
Increase in accrued taxes payable 5,311 1,022
(Increase)/decrease in prepaid expenses and
other current assets (52) 589
(Increase)/decrease in accounts receivable 208 1,443
(Increase)/decrease in receivable from affiliates (96) (188)
------------------------
Total adjustments (3,427) 3,404
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Net cash provided by operations 6,797 6,832
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Cash flows from investing activities:
Proceeds from sales of securities 15,000 ---
Purchase of securities (7,901) (837)
Proceeds from sale of trading securities 13,154 20,293
Purchase of trading securities (11,377) (21,344)
Acquisition of property, and equipment, net (313) (380)
------------------------
Net cash provided by/(used in) investing activities 8,563 (2,268)
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Cash flows from financing activities:
Proceeds from sale of treasury stock 19 ---
Dividends paid (1,995) (1,995)
Loan repayment --- (1,416)
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Net cash (used in) financing activities (1,976) (3,411)
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Net increase in cash and cash equivalents 13,384 1,153
Cash and cash equivalents at beginning of period 45,026 14,330
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Cash and cash equivalents at end of period $58,410 $15,483
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES - NOTE 1:
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of normal
recurring accruals except as noted below) considered necessary for a fair
presentation. This report should be read in conjunction with the financial
statements and footnotes contained in the Company's annual report on Form 10-K,
dated July 19, 1995 for the fiscal year ended April 30, 1995. Results of
operations covered by this report may not be indicative of the results of
operations for the entire year.
Cash and Cash Equivalents:
The Company considers all cash held at banks and invested in the Value Line
money market funds with an original maturity of less than three months to be
cash and cash equivalents. As of July 31, 1995 and April 30, 1995, cash
equivalents included $53,225,000 and $41,503,000, respectively, invested in the
Value Line money market funds.
Securities Sold Under Agreements to Repurchase:
The Company has entered into agreements to sell and repurchase U.S. Government
Agency debt securities. The securities are recorded at market value and are
included in "Short-term securities available for sale" on the Consolidated
Balance Sheets.
Valuation of Securities:
The Company's long-term securities portfolio, which consists of shares of the
Value Line Mutual Funds, and short-term securities portfolio, that the Company
classifies as available for sale are valued at market value in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Unrealized gains and losses on these
securities are reported, net of applicable taxes as a separate component of
Shareholders' Equity. Realized gains and losses on sales of the securities are
recorded in earnings on trade date and are determined on the identified cost
method.
Trading securities, which consist of securities held by Value Line
Securities, Inc., the Company's broker-dealer subsidiary are valued at market
with unrealized gains and losses included in earnings.
MARKETABLE SECURITIES - NOTE 2:
Trading Securities:
Securities held by Value Line Securities, Inc. had an aggregate cost of
$40,273,000 and $40,767,000 and a market value of $51,491,000 and $48,187,000
at July 31, 1995 and April 30, 1995, respectively.
<PAGE>
Short-Term Securities Available for Sale:
Short-term securities available for sale consists of Value Line, Inc.'s
holdings in the following securities:
Federal National Mortgage Association (FNMA), floating rate notes due
August 5, 1997; par value $30,325,000.
Federal Farm Credit Bank (FFCB), floating rate notes due February 12,
1997; par value $10,000,000.
The market value of the Company's holdings in the these securities, which
approximates cost, at July 31, 1995 and April 30, 1995 was $29,536,000 and
$29,438,000 for the FNMA and $9,710,000 and $9,661,000 for the FFCB,
respectively. These notes were purchased at a discount from their respective
face values. The accretion of this discount has been included as an addition to
the cost of the securities and reflected as interest income in the Consolidated
Statements of Income and Retained Earnings.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $100,494,000 and
$104,749,000 and the market value was $125,593,000 and $118,013,000 at July 31,
1995 and April 30, 1995, respectively. At July 31, 1995, gross unrealized gains
on these securities of $25,099,000, net of deferred taxes of $8,784,000, were
included in shareholders' equity. Realized gains and the proceeds received from
sales of these securities during the three months ended July 31, 1995 were
$2,844,000 and $15,000,000, respectively.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NOTE 3:
Cash payments for income taxes were $1,421,000 and $1,214,000 during the
three months ended July 31, 1995 and 1994, respectively. Interest payments of
$604,000 and $33,000 were remitted during the first three months of fiscal 1996
and fiscal 1995, respectively.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - NOTE 4:
The outstanding obligation of $36,994,000 at July 31, 1995 under the
agreements to repurchase the Federal National Mortgage Association Floating
Rate Notes due August 5, 1997 (FNMA), and Federal Farm Credit Bank Floating
Rate Notes due February 12, 1997 (FFCB), stated in Note 2, mature on November
6, 1995 with respect to the FNMA ($27,899,000) and November 13, 1995 for the
obligation to repurchase the FFCB securities ($9,095,000). These obligations
accrue interest at the stated interest rates of 6.26% and 6.125%, respectively.
The Company intends to refinance these obligations on a short term basis.
MUTUAL FUND SUPPORT EXPENSES - NOTE 5:
On June 28, 1994, the Company purchased as part of its investment management
operations for which it receives fee income, U.S. Government Agency notes with
a market value as of that date of $38,615,000 from the Value Line Cash Fund for
which it is the investment adviser, in order to maintain a $1.00 per share net
asset value. In addition, as part of the same transaction the Company
reimbursed the Value Line Cash Fund $1,550,000 for losses the Fund incurred on
the sale which the Company may recoup in the future.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Liquidity and Capital Resources:
Value Line, Inc. (the Company) has liquid resources which are used in its
business totaling $227,805,000 at July 31, 1995. In addition to $102,212,000 in
working capital, the Company has long-term securities available for sale with a
market value of $125,593,000, that, although classified as non-current assets
are also readily marketable as the need arises. The Company has entered into
agreements to sell and repurchase U.S. Government Agency debt securities
included in working capital with a market value of $39,246,000 at July 31,
1995. The repurchase obligations of $36,994,000 have been entered into on a
short-term basis. The securities, currently available for sale, mature during
calendar year 1997 and are readily marketable should management decide to
liquidate the Company's holdings and related obligations. The Company's cash
position, including its investment in The Value Line Cash Fund has increased
$13,384,000 at July 31, 1995 primarily as a result of the liquidation of
certain of the Company's equity holdings in the Value Line Mutual Funds.
Management believes that the Company's cash and other liquid asset resources
used in its business together with future cash flows from operations will be
sufficient to finance current and forecasted operations.
Management anticipates no significant borrowing requirements during fiscal 1995
other than the short term refinancing of the repurchase obligations.
Results of Operations:
The Company's net income for the three months ended July 31, 1995 of
$10,224,000 or $1.02 per share compares with net income of $3,428,000 or $.34
per share at July 31, 1994, a $6,796,000 or 198% increase. The net income for
the first quarter of fiscal 1996 establishes a new record high for the
Company's earnings during this period. Net income for the three months ended
July 31, 1994 included a non-recurring expense of $1,550,000 in support of the
Value Line Cash Fund.
Revenues of $20,028,000 for the first quarter of fiscal 1996 compares to
revenues of $20,214,000 for the three months of fiscal 1995. Subscription
revenues of $13,791,000 were 3.2% below the fiscal 1995 levels, primarily as a
result of a decrease in average full term subscriptions. However, total
circulation at July 31, 1995 increased 13.1% from the level at July 31, 1994.
The Value Line Investment Survey - Expanded Edition and other new products,
introduced during the latter part of fiscal 1995, have been very successful.
Revenues derived from investment management fees and services for the three
months ended July 31, 1995 of $6,237,000 were $265,000 or 4.4% above the level
at July 31, 1994. Revenue increases in the Mutual Fund Advisory division and
the Asset Management operation were the primary factors for the increase. The
increase in revenues from the Mutual Fund Advisory segment resulted from a 4.9%
increase in the average annual net assets under management in the Value Line
Mutual Funds.
Expenses for the three months ended July 31, 1995 of $12,479,000 were 17.5%
below the prior year's level of $15,124,000. The prior year's expenses included
a charge of $1,550,000 in support of the Value Line Cash Fund. Advertising
expenses of $3,105,000 were $2,329,000 or 42.9% below the prior year's level.
The significant cut-back in advertising and promotion expenses for the Value
Line Mutual Fund Survey and the strategic reductions in advertising expenses
for the Value Line Investment Survey were the primary contributors to the
decrease in advertising expenses. Advertising and market research expenses
incurred during the first three months of fiscal 1996 for new products,
<PAGE>
including The VLIS-Expanded Edition, The No-Load Mutual Fund Advisor and The
VLIS-Condensed Edition partially offset these decreases. Salary and employee
benefit expenses of $4,918,000 for the three months ended July 31, 1995 were
$497,000 above the prior year's level of $4,421,000 as a result of general
salary increases and filling vacant staff positions. Office and administration
expenses of $2,658,000 increased 20.2% from the prior year's level primarily as
a result of increased professional fees related to a lawsuit for which the
Company is the plaintiff and the cost to review potential business expansion
alternatives. Fiscal 1995 includes the absorption of expenses related to the
establishment of two new Mutual Funds.
Income from securities transactions for the first quarter ended July 31, 1995
of $9,322,000 increased $8,745,000 from the prior year's level of $577,000. The
increase in capital gains of $6,073,000 produced by the Company's trading
portfolio including a reduction in capital losses from the liquidation of
certain trading securities during the prior year were the major contributors to
the additional income. The realization of capital gains of $2,844,000 from the
sale of equity shares held in one of the Company's Mutual Funds also
contributed to the increase in income from securities transactions.
<PAGE>
VALUE LINE, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10Q report for the period ended
July 31, 1995 to be signed on its behalf by the undersigned thereunto
duly authorized.
VALUE LINE, INC.
(Registrant)
Date: September 14, 1995 By: /s/ Jean Bernhard Buttner
-----------------------------------
Jean Bernhard Buttner
Chairman and President
Date: September 14, 1995 By: /s/ Stephen R. Anastasio
-----------------------------------
Stephen R. Anastasio
Corporate Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONSOLIDATED BALANCE SHEET AND STATEMENT OF INCOME AND RETAINED
EARNINGS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JUL-31-1995
<CASH> 58,410
<SECURITIES> 90,737
<RECEIVABLES> 5,330
<ALLOWANCES> (360)
<INVENTORY> 0
<CURRENT-ASSETS> 155,585
<PP&E> 13,603
<DEPRECIATION> (5,682)
<TOTAL-ASSETS> 289,442
<CURRENT-LIABILITIES> 53,373
<BONDS> 0
<COMMON> 1,000
0
0
<OTHER-SE> 188,130
<TOTAL-LIABILITY-AND-EQUITY> 289,442
<SALES> 13,791
<TOTAL-REVENUES> 20,028
<CGS> 0
<TOTAL-COSTS> 9,821
<OTHER-EXPENSES> 2,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,871
<INCOME-TAX> 6,647
<INCOME-CONTINUING> 10,224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,224
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
</TABLE>
