<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 January 31, 1996 Commission file number 0-11306
-------
VALUE LINE, INC.
----------------
(Exact name of registrant as specified in its charter)
New York 13-3139843
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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
--------------
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 March 12, 1996
----- -----------------------------
Common stock, $.10 par value 9,976,975 Shares
----------------
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Jan. 31, Apr. 30,
1996 1995
----------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $41,262 and $43,608, respectively) $41,926 $45,026
Trading securities 59,082 48,187
Short term securities available for sale 39,538 39,099
Accounts receivable, net of allowance for doubtful
accounts of $419 and $350, respectively 2,200 3,348
Receivable from affiliates 2,040 1,641
Prepaid expenses and other current assets 2,343 1,416
----------------------
Total current assets 147,129 138,717
Long term securities available for sale 153,050 118,013
Property and equipment, net 12,214 7,922
Goodwill, net 337 346
----------------------
Total assets $312,730 $264,998
========= =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $7,931 $6,358
Securities sold under agreements to repurchase 36,994 36,994
Accrued salaries 990 1,466
Dividends and interest payable 2,077 534
Accrued taxes payable 5,638 3,054
----------------------
Total current liabilities 53,630 48,406
Unearned revenue 40,729 36,789
Deferred income taxes 8,993 4,806
Deferred charges 1,600 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 944 940
Retained earnings 189,881 163,101
Treasury stock, at cost (23,025 shares on 1/31/96,
24,650 shares on 4/30/95) (443) (474)
Unrealized gain on securities, net of taxes 16,396 8,622
----------------------
Total shareholders' equity 207,778 173,189
----------------------
Total liabilities and shareholders' equity $312,730 $264,998
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2 OF 11
<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 Nine months ended
Jan. 31, Jan. 31,
1996 1995 1996 1995
---------------------- ------------------
<S> <C> <C>
Revenues:
Investment periodicals and
related publications $14,869 $13,833 $42,944 $42,023
Investment management fees & svcs 6,820 5,592 19,530 17,422
Settlement of disputed securities trades --- --- 2,054 617
---------------------- ------------------
Total revenues 21,689 19,425 64,528 60,062
---------------------- ------------------
Expenses:
Advertising and promotion 4,154 3,458 10,837 12,673
Salaries and employee benefits 5,434 4,774 15,304 14,124
Printing, paper and distribution 2,075 1,677 5,767 4,564
Office and administration 2,514 2,293 7,424 6,855
Mutual fund support expense --- --- --- 1,550
---------------------- ------------------
Total expenses 14,177 12,202 39,332 39,766
---------------------- ------------------
Income from operations 7,512 7,223 25,196 20,296
Income from securities transactions, net 16,096 4,366 28,698 8,467
---------------------- ------------------
Income before taxes 23,608 11,589 53,894 28,763
Provision for taxes 9,317 4,578 21,128 11,363
---------------------- ------------------
Net income $14,291 $7,01 $32,766 $17,400
Retained earnings, at beginning of
year 177,584 152,317 163,101 145,918
Dividends declared (1,994) --- (5,986) (3,990)
---------------------- ------------------
Retained earnings, at end of period $189,881 $159,328 $189,881 $159,328
====================== ==================
Earnings per share $1.43 $0.70 $3.28 $1.74
====================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3 OF 11
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Value Line, Inc.
Consolidated Statements oCash Flows
(in thousands)
<TABLE>
<CAPTION>
For the Nine months
ended
Jan. 31, Jan. 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $32,766 $17,400
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 981 1,023
Accretion of discount (439) (343)
(Gains) on sale of trading securities
and securities held for sale (7,505) (1,285)
Unrealized (gains)/losses on trading securities (7,508) 929
Changes in assets and liabilities:
Increase in unearned revenue 3,940 236
Increase/(decrease) in deferred charges (208) 1,018
Increase/(decrease) in accounts payable
and accrued expenses 1,147 (1,321)
Decrease in accrued salaries (476) (154)
Increase/(decrease) in interest payable (452) 218
Increase/(decrease) in accrued taxes payable 2,584 (1,444)
(Increase)/decrease in prepaid expenses and
other current assets (927) 825
Decrease in accounts receivable 1,330 2,358
(Increase) in receivable from affiliates (399) (160)
----------- -----------
Total adjustments (7,932) 1,900
----------- -----------
Net cash provided by operations 24,834 19,300
----------- -----------
Cash flows from investing activities:
Proceeds from sales of securities 18,085 2,000
Purchase of securities (37,581) (7,260)
Proceeds from sale of trading securities 37,856 59,849
Purchase of trading securities (37,074) (52,712)
Acquisition of property, and equipment, net (5,264) (956)
----------- -----------
Net cash provided by/(used in) investing activities (23,978) 921
----------- -----------
Cash flows from financing activities:
Proceeds from sale of treasury stock 35 ---
Dividends paid (3,991) (5,985)
Loan repayment --- (1,416)
----------- -----------
Net cash (used in) financing activities (3,956) (7,401)
----------- -----------
Net increase/(decrease) in cash and cash equivalents (3,100) 12,820
Cash and cash equivalents at beginning of period 45,026 14,330
----------- -----------
Cash and cash equivalents at end of period $41,926 $27,150
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4 OF 11
<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 January 31, 1996 and April 30, 1995, cash
equivalents included $37,605,000 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.
Reclassification:
Certain prior year amounts disclosed in the Consolidated Financial Statements
and Notes thereto have been reclassified to conform to current year
presentation.
Marketable Securities - Note 2:
- -------------------------------
Trading Securities:
Securities held by Value Line Securities, Inc. had an aggregate cost of
$44,501,000 and $40,767,000 and a market value of $59,082,000 and $48,187,000 at
January 31, 1996 and April 30, 1995, respectively.
5 OF 11
<PAGE>
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Short-Term Securities Available for Sale:
Short-term securities available for sale consists of the Company'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 these securities, which
approximates cost, at January 31, 1996 and April 30, 1995 was $29,735,000 and
$29,438,000 for the FNMA and $9,803,000 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 $127,826,000 and
$104,749,000 and the market value was $153,050,000 and $118,013,000 at January
31, 1996 and April 30, 1995, respectively. At January 31, 1996, gross unrealized
gains on these securities of $25,224,000, net of deferred taxes of $8,828,000,
were included in shareholders' equity. Realized gains and the proceeds received
from sales of these securities during the nine months ended January 31, 1996
were $3,581,000 and $18,085,000, respectively.
Supplemental Disclosure of Cash Flow Information - Note 3:
- ----------------------------------------------------------
Cash payments for income taxes were $18,545,000 and $12,804,000 during the
nine months ended January 31, 1996 and 1995, respectively. Interest payments of
$2,107,000 and $1,042,000 were remitted during the nine months of fiscal 1996
and fiscal 1995, respectively.
Securities Sold under Agreements to Repurchase - Note 4:
- --------------------------------------------------------
The outstanding obligation of $36,994,000 at January 31, 1996 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 February 5, 1996
with respect to the FNMA ($27,899,000) and February 12, 1996 for the obligation
to repurchase the FFCB securities ($9,095,000). These obligations accrue
interest at the stated interest rates of 5.6%, 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 OF 11
<PAGE>
VALUE LINE, INC.
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Property and Equipment:
- -----------------------
During January 1996, the Company purchased for cash an approximately 85,000
square foot warehouse facility for $4,100,000 under a newly formed subsidiary,
Value Line Distribution Center, Inc. The new facility will house the
distribution operations for the various Company publications and the
fulfillment operations of the Compupower Corporation. The remaining building
capacity will provide warehouse storage, a disaster recovery site and will
provide for future business expansion.
7 OF 11
<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 $246,549,000 at January 31, 1996. In addition to $93,499,000
in working capital, the Company has long-term securities available for sale with
a market value of $153,050,000, 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 $39,538,000 at January 31,
1996. 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 $3,188,000, and its securities available
for sale, classified as long term, have increased $35,037,000 for the nine
months ended January 31, 1996. During January 1996, the Company purchased under
a newly formed subsidiary an approximately 85,000 square foot building located
in the State of New Jersey for $4,100,000 in cash. The building will provide a
central location for the Company's distribution and fulfillment operations,
warehouse storage, a disaster recovery site and additional space for future
business expansion. 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
1996 other than the short term refinancing of the repurchase obligations.
Results of Operations:
Net income for the nine months ended January 31, 1996 of $32,766,000 or $3.28
per share was $15,366,000 or 88% higher than the prior year's net income of
$17,400,000 or $1.74 per share. Net income of $14,291,000 or $1.43 per share for
the third quarter of fiscal 1996 increased 104% from net income of $7,011,000
for the third quarter of fiscal 1995. Net income for the third quarter of fiscal
1996 set a new record high for earnings of any quarter in the Company's history.
Net income for the nine months ended January 31, 1996 also set a new record
for the earnings for any full year in the Company's history.
Revenues of $64,528,000 for the nine months of fiscal 1996 increased 7% from
revenues of $60,062,000 for the same period of fiscal 1995. Subscription
revenues of $42,944,000 were 2% higher than revenues of $42,023,000 for fiscal
1995. Full term subscription levels to all products increased 28% from the prior
year's level. The Value Line Investment Survey - Expanded Edition, introduced in
the latter part of fiscal 1995, contributed in excess of $1,500,000 of revenues
during the first nine months of fiscal 1996 while revenues from The Investment
Survey increased over $900,000 during this period. These increases were
partially offset by decreases in revenues from the print version of the Value
Line Mutual Fund Survey. Revenues derived from investment management fees and
services for the nine months ended January 31, 1996 of $19,530,000 were
$2,108,000 or 12% higher than the level at January 31, 1995. The revenue
increase was primarily a result of a 12% increase in the average annual net
assets under management in Value Line mutual funds. Assets under management at
January 31, 1996 increased 22% from the levels at January 31, 1995. Total
revenues for the nine months ended January 31, 1996 and January 31, 1995
included proceeds of $2,054,000 and $617,000, respectively, from the settlement
of a disputed securities transaction.
8 OF 11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations: (continued:)
Expenses for the nine months ended January 31, 1996 of $39,332,000 were 1% below
the prior year's level of $39,765,000. The prior year's expenses included a one
time charge of $1,550,000 in support of the Cash Fund, the majority of
which already has been recouped. Advertising expenses of $10,837,000 were
$1,836,000 or 14% below the prior year's level. The significant reduction in
expenses was attributable to a decline in advertising for the print version of
the Value Line Mutual Fund Survey while the development of a new electronic
version was under commencement. Advertising expenses for The Value Line
Investment Survey increased 22% while marketing expenses of $922,000 were
incurred in fiscal 1996 for new products including The Value Line Fund Analyzer,
The Value Line Investment Survey Expanded Edition, The No-Load Mutual Fund
Advisor, The No-Load Analyzer, and the Value Line Investment Survey Condensed.
Salary and employee benefit expenses of $15,304,000 for the nine months ended
January 31, 1996 were 8% higher than the prior year's level of $14,124,000 as
a result of filling vacant staff positions in the Data Processing and Mutual
Fund divisions, additional staffing in the customer service department and the
effect of a 4% general salary increase as of August 1, 1994. Office and
administration expenses of $7,424,000 increased $570,000 or 8% from the prior
year's level. The increases were a result of professional fees related to
potential business expansion alternatives, a lawsuit in which the Company is a
plaintiff and from the estimated restructure costs related to the purchase of
the new facility. These increases were 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 mutual funds.
Income from securities transactions for the nine months ended January 31, 1996
of $28,698,000 increased $20,231,000 from the prior year's level of $8,467,000.
The increase in capital gains produced by the Company's trading portfolios of
$10,508,000 and the increase in capital gains distributions from the Company's
mutual funds of $4,710,000 were the major contributors to the additional income.
The additional capital gains during fiscal 1996 versus fiscal 1995 of $3,908,000
from the sale of equity and fixed income fund shares in connection with the
Company's annual portfolio realignment also contributed to the increase in
income from securities transactions.
9 OF 11
<PAGE>
Item 14. Exhibits (a) 3.
1. -- By-laws of Value Line, Inc., as amended.
10 of 11
<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
January 31, 1996 to be signed on its behalf by the undersigned thereunto
duly authorized.
Value Line, Inc.
(Registrant)
Date: March 16, 1996 By: -----------------------------
Jean Bernhard Buttner
Chairman and President
Date: March 16, 1996 By: -----------------------------
Stephen R. Anastasio
Corporate Controller
11 OF 11
<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
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 41,926
<SECURITIES> 98,620
<RECEIVABLES> 4,659
<ALLOWANCES> (419)
<INVENTORY> 0
<CURRENT-ASSETS> 147,129
<PP&E> 18,546
<DEPRECIATION> (6,332)
<TOTAL-ASSETS> 312,730
<CURRENT-LIABILITIES> 53,630
<BONDS> 0
0
0
<COMMON> 1,000
<OTHER-SE> 206,778
<TOTAL-LIABILITY-AND-EQUITY> 312,730
<SALES> 42,944
<TOTAL-REVENUES> 64,528
<CGS> 0
<TOTAL-COSTS> 39,332
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,894
<INCOME-TAX> 21,128
<INCOME-CONTINUING> 32,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,766
<EPS-PRIMARY> 3.28
<EPS-DILUTED> 0
</TABLE>
