<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 31, 1995 Commission file number 0-11306
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VALUE LINE, INC.
(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
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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 December 11, 1995
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Common stock, $.10 par value 9,976,450 Shares
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<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Oct. 31, Apr. 30,
1995 1995
-----------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $48,817 and $43,608, respectively) $49,324 $45,026
Trading securities 52,496 48,187
Short term securities available for sale 39,392 39,099
Accounts receivable, net of allowance for doubtful
accounts of $359 and $350, respectively 2,719 3,348
Receivable from affiliates 1,948 1,641
Prepaid expenses and other current assets 1,843 1,416
-----------------------
Total current assets 147,722 138,717
Long term securities available for sale 138,567 118,013
Property and equipment, net 8,279 7,922
Goodwill 340 346
-----------------------
Total assets $294,908 $264,998
=======================
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $7,567 $6,358
Securities sold under agreements to repurchase 36,994 36,994
Accrued salaries 975 1,466
Dividends and interest payable 1,135 534
Accrued taxes payable 3,694 3,054
-----------------------
Total current liabilities 50,365 48,406
Unearned revenue 35,005 36,789
Deferred income taxes 10,187 4,806
Deferred charges 1,669 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 177,584 163,101
Treasury stock, at cost (23,550 shares on 10/31/95
and 24,650 shares on 4/30/95) (453) (474)
Unrealized gain on securities, net of taxes 18,613 8,622
-----------------------
Total shareholders' equity 197,682 173,189
-----------------------
Total liabilities and shareholders' equity $294,908 $264,998
=======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
2.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Statements of Income and Retained Earnings
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
Oct. 31, Oct. 31,
1995 1994 1995 1994
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<S> <C> <C> <C> <C>
Revenues:
Investment periodicals and
related publications $14,285 $13,948 $28,076 $28,190
Investment management fees & svcs 6,472 5,858 12,709 11,830
Settlement of disputed securities trades 2,054 617 2,054 617
----------------------- -------------------------
Total revenues 22,811 20,423 42,839 40,637
----------------------- -------------------------
Expenses:
Advertising and promotion 3,578 3,781 6,683 9,215
Salaries and employee benefits 4,953 4,928 9,871 9,350
Printing, paper and distribution 1,894 1,379 3,692 2,887
Office and administration 2,252 2,350 4,910 4,562
Mutual fund support expense --- --- --- 1,550
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Total expenses 12,677 12,438 25,156 27,564
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Income from operations 10,134 7,985 17,683 13,073
Income from securities transactions, net 3,279 3,523 12,601 4,101
----------------------- -------------------------
Income before income taxes 13,413 11,508 30,284 17,174
Provision for taxes 5,163 4,547 11,810 6,785
----------------------- -------------------------
Net income $8,250 $6,961 $18,474 $10,389
Retained earnings, at beginning of
year 171,330 147,351 163,101 145,918
Dividends declared (1,996) (1,995) (3,991) (3,990)
----------------------- -------------------------
Retained earnings, at end of period $177,584 $152,317 $177,584 $152,317
======================== ==========================
Earnings per share $0.83 $0.70 $1.85 $1.04
======================== ==========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six months ended
Oct. 31,
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $18,474 $10,389
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 639 684
Accretion of discount (293) (197)
(Gains) on sales of trading securities
and securities held for sale (5,866) (665)
Unrealized (gains) on trading securities (4,024) (1,131)
Changes in assets and liabilities:
Decrease in unearned revenue (1,784) (3,503)
Increase/(decrease) in deferred charges (139) 634
Increase/(decrease) in accounts payable
and accrued expenses 244 (425)
Decrease in accrued salaries (491) (257)
Increase in interest payable 601 185
Increase/(decrease) in accrued taxes payable 640 (1,161)
(Increase)/decrease in prepaid expenses and
other current assets (427) 639
Decrease in accounts receivable 826 1,118
(Increase) in receivable from affiliates (307) (16)
------------------------
Total adjustments (10,381) (4,095)
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Net cash provided by operations 8,093 6,294
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Cash flows from investing activities:
Proceeds from sales of securities 15,000 ---
Purchase of securities (17,339) (1,687)
Proceeds from sale of trading securities 26,869 38,930
Purchase of trading securities (23,363) (38,331)
Acquisition of property, and equipment, net (990) (656)
------------------------
Net cash provided by/(used in) investing activities 177 (1,744)
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Cash flows from financing activities:
Proceeds from sale of treasury stock 19 ---
Dividends paid (3,991) (3,990)
Loan repayment --- (1,416)
------------------------
Net cash (used in) financing activities (3,972) (5,406)
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Net increase in cash and cash equivalents 4,298 (856)
Cash and cash equivalents at beginning of period 45,026 14,330
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Cash and cash equivalents at end of period $49,324 $13,474
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4.
<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 October 31, 1995 and April 30, 1995, cash
equivalents included $42,639,000 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
$41,247,000 and $40,767,000 and a market value of $52,496,000 and $48,187,000
at October 31, 1995 and April 30, 1995, respectively.
5.
<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 October 31, 1995 and April 30, 1995 was $29,637,000 and
$29,438,000 for the FNMA and $9,755,000 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 $109,931,000 and
$104,749,000 and the market value was $138,567,000 and $118,013,000 at October
31, 1995 and April 30, 1995, respectively. At October 31, 1995, gross unrealized
gains on these securities of $28,636,000, net of deferred taxes of $10,023,000,
were included in shareholders' equity. Realized gains and the proceeds received
from sales of these securities during the six months ended October 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 $11,172,000 and $7,944,000 during the
six months ended October 31, 1995 and 1994, respectively. Interest payments of
$571,000 and $513,000 were remitted during the first six months of fiscal 1996
and fiscal 1995, respectively.
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE - NOTE 4:
The outstanding obligation of $36,994,000 at October 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.
6.
<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 $235,924,000 at October 31, 1995. In addition to $97,357,000
in working capital, the Company has long-term securities available for sale with
a market value of $138,567,000, 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 $39,392,000 at October 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 working
capital, including cash, has increased $7,046,000, and its securities available
for sale, classified as long term, have increased $20,554,000 for the six months
ended October 31, 1995. 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:
Net income for the three months ended October 31, 1995 of $8,250,000 or $.83 per
share was $1,289,000 or 19% higher than the prior year's net income of
$6,961,000 or $.70 per share. Net income for the six months ended October 31,
1995 of $18,474,000 or $1.85 per share compares with net income of $10,389,000
or $1.04 per share at October 31, 1994, a $8,085,000 or 78% increase. Net income
for the second quarter and first six months of fiscal 1996 establishes new
record high earnings for both of these periods.
Revenues of $42,839,000 for the six months of fiscal 1996 increased 5% from
revenues of $40,637,000 for the same period of fiscal 1995. Revenues for the
three months and six months ended October 31, 1995 and October 31, 1994 included
proceeds of $2,054,000 and $617,000, respectively, from the settlement of a
disputed securities transaction. Subscription revenues of $28,076,000 were
approximately equal to fiscal 1995's level. The Value Line Investment
Survey-Expanded Edition contributed in excess of $864,000 in revenues during its
first six months of circulation and was largely offset by decreases in revenues
from the Mutual Fund Survey. Revenues derived from investment management fees
and services for the six months ended October 31, 1995 of $12,709,000 were
$879,000 or 7% above the level at October 31, 1994. The revenue increase in the
Mutual Fund Advisory division was the primary factor for this improvement and
resulted from an 8% increase in the average annual net assets under management.
Expenses for the six months ended October 31, 1995 of $25,156,000 were 9% below
the prior year's level of $27,564,000. The prior year's expenses included a one
time charge of $1,550,000 (approximately $0.09 per share) in support of the V.L.
Cash Fund. Advertising expenses of $6,683,000 were $2,532,000 or 27% below the
prior year's level. The significant reduction in expenses was primarily
attributable to a decline in advertising for the print version of the Value Line
Mutual Fund Survey of $3,403,000 while the development of a new electronic
version was under way, partially offset by an increase in advertising expenses
for the Value Line Investment Survey and marketing expenses for new products
including The Value Line Investment Survey-Expanded Edition, The No-Load Mutual
Fund Advisor and The Value Line Investment Survey-Condensed. Salary and employee
7.
<PAGE>
benefit expenses of $9,871,000 for the six months ended October 31, 1995 were
$521,000 above the prior year's level of $9,350,000, a result of general salary
increases and the filling of vacant staff positions. Office and administration
expenses of $4,910,000 increased 8% from the prior year's level primarily due to
increased professional fees related to a lawsuit in which the Company is a
plaintiff and the cost to review potential business expansion alternatives. This
increase was partially offset by a decrease in software amortization related to
a decision during fiscal 1995 to replace the Company's fulfillment software.
Fiscal 1995 also includes the absorption of expenses related to the
establishment of two new mutual funds.
Income from securities transactions for the six months ended October 31, 1995 of
$12,601,000 increased $8,500,000 from the prior year's level of $4,101,000. The
capital gains increases produced by the Company's trading portfolios of
$5,408,000 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.
8.
<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 October 31,
1995 to be signed on its behalf by the undersigned thereunto duly authorized.
Value Line, Inc.
(Registrant)
Date: December 15, 1995 By: s/David T. Henigson
-------------------------
David T. Henigson
Vice President & Treasurer
Date: December 15, 1995 By: s/Stephen R. Anastasio
-------------------------
Stephen R. Anastasio
Corporate Controller
9.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> OCT-31-1995
<CASH> 49,324
<SECURITIES> 91,888
<RECEIVABLES> 5,026
<ALLOWANCES> (359)
<INVENTORY> 0
<CURRENT-ASSETS> 147,722
<PP&E> 14,280
<DEPRECIATION> 6,001
<TOTAL-ASSETS> 294,908
<CURRENT-LIABILITIES> (50,365)
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 196,682
<TOTAL-LIABILITY-AND-EQUITY> 294,908
<SALES> 28,076
<TOTAL-REVENUES> 42,839
<CGS> 0
<TOTAL-COSTS> 25,156
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 30,284
<INCOME-TAX> 11,810
<INCOME-CONTINUING> 18,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,474
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 0
</TABLE>
