UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
quarterly period ended January
31, 2008
or
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
transition period from _______________________________ to
_______________________________
Commission
File Number: 0-11306
VALUE
LINE, INC.
(Exact
name of registrant as specified in its charter)
|
New
York
|
13-3139843
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
220
East 42nd Street, New York, New York
|
10017-5891
|
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(212)
907-1500
(Registrant's
telephone number, including area code)
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 o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
Accelerated filer o
Non-accelerated filer x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
|
Class
|
Outstanding
at January 31, 2008
|
|
Common
stock, $.10 par value
|
9,981,600
Shares
|
Part
I - Financial
Information
Item
1. Financial Statements
Value
Line, Inc.
Consolidated
Condensed Balance Sheets
(in
thousands, except share amounts)
|
Jan.
31,
|
Apr.
30,
|
|||||||
|
2008
|
2007
|
|||||||
|
(unaudited)
|
||||||||
|
Assets
|
||||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents (including short term investments of $15,837
and
$20,165, respectively)
|
$
|
18,033
|
$
|
20,605
|
||||
|
Trading
securities
|
20,052
|
15,849
|
||||||
|
Securities
available for sale
|
83,603
|
76,822
|
||||||
|
Accounts
receivable, net of allowance for doubtful accounts of $104
and $88,
respectively
|
3,875
|
3,929
|
||||||
|
Receivable
from affiliates
|
2,311
|
2,794
|
||||||
|
Prepaid
expenses and other current assets
|
1,216
|
1,588
|
||||||
|
Prepaid
and refundable income taxes
|
0
|
510
|
||||||
|
Deferred
income taxes
|
139
|
139
|
||||||
|
Total
current assets
|
129,229
|
122,236
|
||||||
|
Long
term assets
|
||||||||
|
Property
and equipment, net
|
4,818
|
4,923
|
||||||
|
Capitalized
software and other intangible assets, net
|
970
|
1,804
|
||||||
|
Total
long term assets
|
5,788
|
6,727
|
||||||
|
Total
assets
|
$
|
135,017
|
$
|
128,963
|
||||
|
Liabilities
and Shareholders' Equity
|
||||||||
| Current Liabilities: | ||||||||
|
Accounts
payable and accrued liabilities
|
$
|
4,571
|
$
|
5,316
|
||||
|
Accrued
salaries
|
1,311
|
1,545
|
||||||
|
Dividends
payable
|
2,995
|
2,995
|
||||||
|
Accrued
taxes payable
|
390
|
0
|
||||||
|
Unearned
revenue
|
25,971
|
28,552
|
||||||
|
Deferred
income taxes
|
7,626
|
8,654
|
||||||
|
Total
current liabilities
|
42,864
|
47,062
|
||||||
|
Long
term liabilities
|
||||||||
|
Unearned
revenue
|
6,684
|
5,948
|
||||||
|
Deferred
charges
|
0
|
381
|
||||||
|
Total
long term liabilities
|
6,684
|
6,329
|
||||||
|
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
|
991
|
991
|
||||||
|
Retained
earnings
|
69,172
|
57,383
|
||||||
|
Treasury
stock, at cost (18,400 shares on 1/31/08 and 4/30/07)
|
(354
|
) |
(354
|
) | ||||
|
Accumulated
other comprehensive income, net of tax
|
14,660
|
16,552
|
||||||
|
Total
shareholders' equity
|
85,469
|
75,572
|
||||||
|
Total
liabilities and shareholders' equity
|
$
|
135,017
|
$
|
128,963
|
||||
The
accompanying notes are an integral part of these consolidated condensed
financial statements.
2
Item
1. Financial
Statements
Value
Line, Inc.
Consolidated
Condensed Statements of Income
(in
thousands, except share & per share amounts)
(unaudited)
|
Three months ended
|
Nine months ended
|
||||||||||||
|
Jan. 31,
|
Jan. 31,
|
||||||||||||
|
2008
|
2007
|
2008
|
2007
|
||||||||||
|
Revenues:
|
|||||||||||||
|
Investment
periodicals and related publications
|
$
|
10,601
|
$
|
11,547
|
$
|
32,424
|
$
|
34,462
|
|||||
|
Licensing
fees
|
2,072
|
1,711
|
5,517
|
5,289
|
|||||||||
|
Investment
management fees & services
|
8,407
|
7,803
|
25,050
|
23,446
|
|||||||||
|
Total
revenues
|
21,080
|
21,061
|
62,991
|
63,197
|
|||||||||
|
Expenses:
|
|||||||||||||
|
Advertising
and promotion
|
3,253
|
3,928
|
10,327
|
10,979
|
|||||||||
|
Salaries
and employee benefits
|
4,535
|
4,755
|
13,668
|
13,921
|
|||||||||
|
Production
and distribution
|
1,424
|
1,663
|
4,698
|
5,268
|
|||||||||
|
Office
and administration
|
2,531
|
1,856
|
6,580
|
5,240
|
|||||||||
|
Total
expenses
|
11,743
|
12,202
|
35,273
|
35,408
|
|||||||||
|
Income
from operations
|
9,337
|
8,859
|
27,718
|
27,789
|
|||||||||
|
Income
from securities transactions, net
|
4,097
|
2,909
|
5,683
|
4,147
|
|||||||||
|
Income
before income taxes
|
13,434
|
11,768
|
33,401
|
31,936
|
|||||||||
|
Provision
for income taxes
|
4,963
|
4,576
|
12,628
|
12,564
|
|||||||||
|
Net
income
|
$
|
8,471
|
$
|
7,192
|
$
|
20,773
|
$
|
19,372
|
|||||
|
Earnings
per share, basic & fully diluted
|
$
|
0.85
|
$
|
0.72
|
$
|
2.08
|
$
|
1.94
|
|||||
|
Weighted
average number of common shares
|
9,981,600
|
9,981,600
|
9,981,600
|
9,981,600
|
|||||||||
The
accompanying notes are an integral part of these consolidated condensed
financial statements.
3
Part
I - Financial
Information
Item
1. Financial Statements
Value
Line, Inc.
Consolidated
Condensed Statements of Cash Flows
(in
thousands)
(unaudited)
|
For
the nine months
|
||||||||
|
ended
|
||||||||
|
Jan.
31,
|
Jan.
31,
|
|||||||
|
2008
|
2007
|
|||||||
|
Cash
flows from operating activities:
|
||||||||
|
Net
income
|
$
|
20,773
|
$
|
19,372
|
||||
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
|
Depreciation
and amortization
|
1,230
|
1,555
|
||||||
|
(Gains)
on sales of trading securities and securities classified as available
for
sale
|
(2,800
|
)
|
(1,984
|
)
|
||||
|
Unrealized
(gains) on trading securities
|
(277
|
)
|
(105
|
)
|
||||
|
Deferred
income taxes
|
(147
|
)
|
(68
|
)
|
||||
|
Changes
in assets and liabilities:
|
||||||||
|
Purchase
of trading securities
|
(3,926
|
)
|
(1,757
|
)
|
||||
|
Decrease
in unearned revenue
|
(1,845
|
)
|
(2,641
|
)
|
||||
|
Decrease
in deferred charges
|
(174
|
)
|
(63
|
)
|
||||
|
Decrease
in accounts payable and accrued expenses
|
(952
|
)
|
(2,066
|
)
|
||||
|
Decrease
in accrued salaries
|
(234
|
)
|
(102
|
)
|
||||
|
Increase/(decrease)
in accrued taxes payable
|
634
|
(455
|
)
|
|||||
|
Decrease
in prepaid expenses and other current assets
|
275
|
36
|
||||||
|
Decrease
in prepaid and refundable income taxes
|
510
|
0
|
||||||
|
Decrease
in accounts receivable
|
54
|
404
|
||||||
|
Decrease
in receivable from affiliates
|
483
|
265
|
||||||
|
Total
adjustments
|
(7,169
|
)
|
(6,981
|
)
|
||||
|
Net
cash provided by operations
|
13,604
|
12,391
|
||||||
|
Cash
flows from investing activities:
|
||||||||
|
Purchases
and sales of securities classified as available for sale:
|
||||||||
|
Proceeds
from sales of equity securities
|
2,793
|
2,061
|
||||||
|
Purchases
of equity securities
|
(4,228
|
)
|
(2,272
|
)
|
||||
|
Proceeds
from sales of fixed income securities
|
5,137
|
10,825
|
||||||
|
Purchases
of fixed income securities
|
(10,603
|
)
|
(12,775
|
)
|
||||
|
Acquisition
of property and equipment
|
(251
|
)
|
(38
|
)
|
||||
|
Expenditures
for capitalized software
|
(40
|
)
|
(241
|
)
|
||||
|
Net
cash used in investing activities
|
(7,192
|
)
|
(2,440
|
)
|
||||
|
Cash
flows from financing activities:
|
||||||||
|
Dividends
paid
|
(8,984
|
)
|
(7,985
|
)
|
||||
|
Net
cash used in financing activities
|
(8,984
|
)
|
(7,985
|
)
|
||||
|
Net
(decrease)/increase in cash and cash equivalents
|
$ |
(2,572
|
)
|
$
|
1,966
|
|||
|
Cash
and cash equivalents at beginning of year
|
20,605
|
15,331
|
||||||
|
Cash
and cash equivalents at end of period
|
$
|
18,033
|
$
|
17,297
|
||||
The
accompanying notes are an integral part of these consolidated condensed
financial statements.
4
Part
I - Financial
Information
Item
1. Financial Statements
VALUE
LINE, INC.
CONSOLIDATED
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR
THE NINE MONTHS ENDED JANUARY 31, 2008
(in
thousands, except share amounts)
(unaudited)
|
Common stock
|
|||||||||||||||||||||||||
|
Number
of
shares
|
Amount
|
Additional
paid-in capital
|
Treasury
Stock
|
Comprehensive
income
|
Retained
earnings
|
Accumulated
Other Comprehensive income
|
Total
|
||||||||||||||||||
|
Balance
at April 30, 2007
|
9,981,600
|
$
|
1,000
|
$
|
991
|
$ |
(354
|
)
|
$
|
57,383
|
$
|
16,552
|
$
|
75,572
|
|||||||||||
|
Comprehensive
income
|
|||||||||||||||||||||||||
|
Net
income
|
$
|
20,773
|
20,773
|
20,773
|
|||||||||||||||||||||
|
Other
comprehensive income, net of tax:
|
|||||||||||||||||||||||||
|
Change
in unrealized gains on securities, net of taxes
|
(1,892
|
)
|
(1,892
|
)
|
(1,892
|
)
|
|||||||||||||||||||
|
|
|||||||||||||||||||||||||
|
Comprehensive
income
|
$
|
18,881
|
|||||||||||||||||||||||
|
Dividends
declared
|
(8,984
|
)
|
(8,984
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Balance
at January 31, 2008
|
9,981,600
|
$
|
1,000
|
$
|
991
|
$ |
(354
|
)
|
$
|
69,172
|
$
|
14,660
|
$
|
85,469
|
|||||||||||
The
accompanying notes are an integral part of these consolidated condensed
financial statements.
5
Part
I - Financial
Information
Item
1. Financial
Statements
VALUE
LINE, INC.
CONSOLIDATED
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR
THE NINE MONTHS ENDED JANUARY 31, 2007
(in
thousands, except share amounts)
(unaudited)
|
Common stock
|
|||||||||||||||||||||||||
|
Number
of
shares
|
Amount
|
Additional
paid-in capital
|
Treasury
Stock
|
Comprehensive
income
|
Retained
earnings
|
Accumulated
Other Comprehensive income
|
Total
|
||||||||||||||||||
|
Balance
at April 30, 2006
|
9,981,600
|
$
|
1,000
|
$
|
991
|
$ |
(354
|
)
|
$
|
44,256
|
$
|
16,042
|
$
|
61,935
|
|||||||||||
|
Comprehensive
income
|
|||||||||||||||||||||||||
|
Net
income
|
$
|
19,372
|
19,372
|
19,372
|
|||||||||||||||||||||
|
Other
comprehensive income, net of tax:
|
|||||||||||||||||||||||||
|
Change
in unrealized gains on securities, net of taxes
|
(792
|
) | (792 | ) |
(792
|
) | |||||||||||||||||||
|
Comprehensive
income
|
$
|
18,580
|
|||||||||||||||||||||||
|
Dividends
declared
|
(8,485
|
)
|
(8,485
|
)
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||
|
Balance
at January 31, 2007
|
9,981,600
|
$
|
1,000
|
$
|
991
|
$ |
(354
|
)
|
$
|
55,143
|
$
|
15,250
|
$
|
72,030
|
|||||||||||
The
accompanying notes are an integral part of these consolidated condensed
financial statements.
6
Notes
to Consolidated Condensed Financial Statements
Note
1-Organization and Summary of Significant Accounting
Policies:
The
interim consolidated condensed financial statements of Value Line, Inc.,
together with its subsidiaries (collectively referred to as the “Company”), are
unaudited. 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 20, 2007 for the fiscal year ended April 30, 2007. Results of
operations covered by this report may not be indicative of the results of
operations for the entire year.
Value
Line, Inc. ("VLI") is incorporated in the State of New York. The Company's
primary businesses are producing investment related periodical publications,
licensing 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, providing investment management
services to the Value Line Funds, institutions and individual accounts and
providing distribution, marketing, and administration services to 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.
Principles
of consolidation:
The
consolidated condensed financial statements include the accounts of the Company
and all of its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue
Recognition:
Depending
upon the product, subscription fulfillment is available in print, via internet
access, and CD-ROM. The length of a subscription varies by product and offer
received by the subscriber. Generally, subscriptions are available as trial
subscriptions, annual subscriptions and/or multi-year subscriptions.
Subscription revenues are recognized on a straight line basis over the life
of
the subscription. Accordingly, the amount of subscription fees to be earned
by
fulfilling subscriptions after the date of the balance sheet is shown as
unearned revenue within current and long-term liabilities.
Licensing
revenues are derived from licensing certain Value Line trademarks and 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, closed-end fund products and exchange traded funds.
Value Line earns an asset based licensing fee as specified in the individual
licensing agreements. Revenue is recognized monthly over the term of the
agreement and will fluctuate as the market value of the underlying portfolio
increases or decreases in value.
Investment
management fees consist of management fees from the Value Line Mutual Funds
("Value Line Funds"), and from asset management clients. Investment management
fees for the mutual funds are earned on a monthly basis as services are
performed and the fee is calculated based on average daily net assets of
the
mutual funds in accordance with each fund's advisory agreement. Investment
management fees for the asset management accounts are earned on a monthly
basis
as services are performed and the fee is calculated on assets in accordance
with
each of the management agreements (see note 6).
Service
and distribution fees are received from the Value Line Funds in accordance
with
service and distribution plans under rule 12b-1 of the Investment Company
Act of
1940. The plans are compensation plans, which means that the distributor’s fees
under the plans are payable without regard to actual expenses incurred by
the
distributor, which means the distributor may earn a profit under the plan.
Expenses incurred by Value Line Securities, Inc. ("VLS") include payments
to
securities dealers, banks, financial institutions and other organizations
(including an allocation of VLI expenses), that provide distribution, marketing,
and administrative services with respect to the distribution of the mutual
funds’ shares. Service and distribution fees are received on a monthly basis and
calculated on the average daily net assets of the respective mutual fund
in
accordance with each fund prospectus.
Valuation
of Securities:
The
Company's securities classified as available for sale consist of shares of
the
Value Line Funds and government debt securities accounted for in accordance
with
Statement of Financial Accounting Standards No.115, "Accounting for Certain
Investments in Debt and Equity Securities". The securities available for
sale
and trading securities reflected in the consolidated condensed financial
statements at fair value are valued at market with unrealized gains and losses
on these securities reported, net of applicable taxes, as a separate component
of Shareholders' Equity. Realized gains and losses on sales of the securities
available for sale are recorded in earnings on trade date and are determined
on
the identified cost method.
The
Company classifies its securities available for sale as current assets. It
does
so to properly reflect its liquidity and to recognize the fact that it has
assets available for sale to fully satisfy its current liabilities should
the
need arise.
Market
valuation of securities listed on a securities exchange is based on the closing
sales prices on the last business day of each month. Valuation of open-ended
mutual fund shares is based upon the publicly quoted net asset value of the
shares. The market value of the Company's fixed maturity government debt
obligations are determined utilizing publicly quoted market prices.
In
September 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 157, "Fair Value Measurements" (SFAS
No.
157). SFAS No. 157 defines fair value, establishes a framework for measuring
fair value in accordance with generally accepted accounting principles and
expands disclosure about fair value measurements. SFAS No. 157 is effective
for
fiscal years beginning after November 15, 2007. Management is currently
evaluating the impact the adoption of SFAS No. 157 will have on the Company's
financial statement disclosures.
7
Advertising
expenses:
The
Company expenses advertising costs as incurred.
Reclassification:
Certain
items in the prior year financial statements have been reclassified to conform
to the current year presentation.
Income
Taxes:
The
Company computes its income tax provision in accordance with the provisions
of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Deferred tax liabilities and assets are recognized for the expected
future tax consequences of events that have been reflected in the consolidated
condensed Financial Statements. Deferred tax liabilities and assets are
determined based on the differences between the book values and the tax bases
of
particular assets and liabilities, using tax rates currently in effect for
the
years in which the differences are expected to reverse.
In
July
2006, the Financial Accounting Standards Board issued Interpretation No.
48,
"Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
Statement No. 109" (the "Interpretation" or "FIN 48"). The Interpretation
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. The Interpretation is effective for fiscal years
beginning after December 15, 2006, and is to be applied to all open tax years
as
of the date of effectiveness. As of January 31, 2008, management has reviewed
the tax positions for the years still subject to tax audit under the statute
of
limitations, evaluated the implications of FIN 48, and determined that there
is
no impact to the Company's financial statements at this time.
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 year.
Cash
and
Cash Equivalents:
For
purposes of the consolidated condensed Statements of Cash Flows, the Company
considers all cash held at banks and short term liquid investments with an
original maturity of less than three months to be cash and cash equivalents.
As
of January 31, 2008 and April 30, 2007, cash equivalents included $15,294,000
and $19,868,000, respectively, invested in the Value Line Cash
Fund.
Use
of
Estimates:
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note
2-Investments:
Securities
held by the Company are classified as Trading Securities and Available-for-Sale
Securities. All securities held by VLS, as a broker/dealer, are classified
as
trading securities. Securities held by the Company and its other subsidiaries,
which are all held with the expectation that they may be sold in less than
one
year, are also classified as trading securities. All other investments not
classified as trading securities are classified as available-for-sale
securities.
Trading
Securities:
Trading
securities held by the Company at January 31, 2008 had an aggregate cost
of
$20,042,000 and a market value of $20,052,000. Trading securities held by
the
Company at April 30, 2007 had an aggregate cost of $16,115,000 and a market
value of $15,849,000. There were no sales and no realized trading gains or
losses during the first nine months of fiscal year 2008 or 2007. The net
changes
in unrealized gains of $277,000 for the period ended January 31, 2008 and
the
net changes in unrealized gains of $105,000 for the period ended January
31,
2007, respectively, were included in the Consolidated Condensed Statement
of
Income.
8
Securities
Available for Sale:
Equity
Securities:
The
aggregate cost of the equity securities classified as available for sale,
which
consist of investments in the Value Line Funds, was $28,145,000 and the market
value was $50,542,000 at January 31, 2008. The aggregate cost of the equity
securities classified as available for sale, which consist of investments
in the
Value Line Funds, was $23,917,000 and the market value was $49,719,000 at
April
30, 2007. The total gains for equity securities with net gains included in
Accumulated Other Comprehensive Income on the Consolidated Condensed Balance
Sheet are $22,683,000 and $25,859,000, net of deferred taxes of $7,984,000
and
$9,102,000, as of January 31, 2008 and April 30, 2007, respectively. The
total
losses for equity securities with net losses included in Accumulated Other
Comprehensive Income on the Consolidated Condensed Balance Sheet are $287,000
and $58,000, net of deferred tax benefit of $101,000 and $20,000, as of January
31, 2008 and April 30, 2007, respectively.
The
proceeds and realized capital gains from sales of equity securities classified
as available for sale during the first nine months of fiscal 2008 and 2007
were
$2,793,000 and $2,061,000, respectively, of which $2,793,000 and $2,061,000
representing capital gain distributions from the Value Line Funds were
reclassified to earnings from Accumulated Other Comprehensive Income. The
decrease in gross unrealized losses on equity securities classified as available
for sale of $3,405,000 and the decrease in gross unrealized gains of $1,260,000,
net of deferred taxes of $1,199,000 and $443,000 at January 31, 2008 and
2007,
respectively were included in Shareholders’ Equity.
Government
Debt Securities:
Government
debt securities consist of federal, state, and local government securities
within the United States. The Company’s investments in debt securities are
classified as available for sale and valued at market value. The aggregate
cost
and fair value at January 31, 2008 for government debt securities classified
as
available for sale were as follows:
|
(In
Thousands)
|
||||||||||
|
Maturity
|
Historical
Cost
|
|
Fair Value
|
|
Gross Unrealized
Holding Losses
|
|||||
|
Due
in less than 2 years
|
$
|
11,755
|
$
|
11,577
|
$ |
(178
|
)
|
|||
|
Due
in 2 years or more
|
21,079
|
21,485
|
406
|
|||||||
|
Total
investment in debt securities
|
$
|
32,834
|
$
|
33,062
|
$
|
228
|
||||
The
aggregate cost and fair value at April 30, 2007 for government debt securities
classified as available for sale were as follows:
|
(In
Thousands)
|
||||||||||
|
Maturity
|
Historical
Cost
|
|
Fair Value
|
|
Gross Unrealized
Holding Losses
|
|||||
|
Due
in less than 2 years
|
$
|
9,504
|
$
|
9,324
|
$ |
(180
|
)
|
|||
|
Due
in 2 years or more
|
17,857
|
17,779
|
(78
|
)
|
||||||
|
Total
investment in debt securities
|
$
|
27,361
|
$
|
27,103
|
$ |
(258
|
)
|
|||
The
unrealized gains of $228,000 net of deferred income tax losses of $80,000
in
government debt securities and unrealized losses of $258,000 net of income
tax
benefits of $91,000 were included in Accumulated Other Comprehensive Income
on
the Consolidated Condensed Balance Sheets as of January 31, 2008 and April
30,
2007, respectively.
The
average yield on the Government debt securities classified as available for
sale
at January 31, 2008 and April 30, 2007 was 3.29% and 3.54%,
respectively.
Proceeds
from sales of government debt securities classified as available for sale
during
the nine months ended January 31, 2008 and 2007 were $5,137,000 and $10,825,000,
respectively. The company recognized a gain of $7,000 on the sales of government
debt securities during the first nine months of fiscal 2008. A loss of $77,000
on sales of government debt securities was recognized during the nine months
ended January 31, 2007.
For
the
nine months ended January 31, 2008 and 2007, income from securities transactions
also included $834,000 and $715,000 of dividend income and $1,770,000 and
$1,379,000 of interest income. There was a $36,000 interest expense during
the
nine months ended January 31, 2007.
Note
3-Supplementary Cash Flow Information:
Cash
payments for income taxes were $12,239,000 and $13,115,000 for the nine months
ended January 31, 2008 and 2007, respectively.
9
Note
4-Employees' Profit Sharing and Savings Plan:
Substantially
all employees of the Company and its subsidiaries are members of the Value
Line,
Inc. Profit Sharing and Savings Plan (the "Plan"). In general, this is a
qualified, contributory plan which provides for a discretionary annual Company
contribution which is determined by a formula based on the salaries of eligible
employees and the amount of consolidated net operating income as defined
in the
Plan. The estimated profit sharing plan contribution, which is included as
an
expense in salaries and employee benefits in the Consolidated Condensed
Statement of Income, was $690,000 and $963,000 for the nine months ended
January
31, 2008 and 2007, respectively.
Note
5-Comprehensive Income:
The
Company has adopted Financial Accounting Standards No. 130, "Reporting
Comprehensive Income". Statement No. 130 requires the reporting of comprehensive
income in addition to net income from operations. Comprehensive income is
a more
inclusive financial reporting methodology that includes disclosure of certain
financial information that historically has not been recognized in the
calculation of net income.
At
January 31, 2008 and April 30, 2007, the Company held both equity securities
and
U.S. Government debt securities that are classified as Available for Sale
on the
Consolidated Condensed Balance Sheets. The change in valuation of these
securities, net of deferred income taxes, has been recorded in Accumulated
Other
Comprehensive Income in the Company's Consolidated Condensed Balance
Sheets.
The
components of comprehensive income that are included in the Statement of
Changes
in Shareholders' Equity are as follows:
|
(in
thousands)
|
||||||||||
|
Before
Tax
Amount
|
Tax
(Expense)
or
Benefit
|
Net
of
Tax
Amount
|
||||||||
|
Nine
months ended January 31, 2008
|
||||||||||
|
Unrealized
Gains on Securities:
|
||||||||||
|
Change
in Unrealized Holding Gains Arising during the period
|
$ |
(119
|
)
|
$
|
41
|
$ |
(78
|
)
|
||
|
Less:
Reclassification adjustments for gains realized in net
income
|
(2,800
|
)
|
986
|
(1,814
|
)
|
|||||
|
Change
in Other Comprehensive Income
|
$ |
(2,919
|
)
|
$
|
1,027
|
$ |
(1,892
|
)
|
||
|
Nine
months ended January 31, 2007
|
||||||||||
|
Unrealized
Losses on Securities:
|
||||||||||
|
Change
in Unrealized Holding Losses Arising during the period
|
$
|
761
|
$ |
(268
|
)
|
$
|
493
|
|||
|
Add:
Reclassification of losses realized in net income
|
77
|
(27
|
)
|
50
|
||||||
|
Less:
Reclassification of adjustments for gains realized in net
income
|
(2,061
|
)
|
726
|
(1,335
|
)
|
|||||
|
Change
in Other Comprehensive Income
|
$ |
(1,223
|
)
|
$
|
431
|
$ |
(792
|
)
|
||
Note
6-Related Party Transactions:
The
Company acts as investment adviser and manager for fourteen open-ended
investment companies, the Value Line Funds. The Company earns investment
management fees based upon the average daily net asset values of the respective
Value Line Funds. Service and distribution fees are received from the Value
Line
Funds in accordance with service and distribution plans under rule 12b-1
of the
Investment Company Act of 1940. The plans are compensation plans, which means
that the distributor’s fees under the plans are payable without regard to actual
expenses incurred by the distributor, which means the distributor may earn
a
profit under the plan. Expenses incurred by VLS include payments to securities
dealers, banks, financial institutions and other organizations which provide
distribution, marketing, and administrative services (including payments
by VLS
to VLI for allocated compensation and administration expenses) with respect
to
the distribution of the mutual funds’ shares. Service and distribution fees are
received on a monthly basis and calculated on the average daily net assets
of
the respective mutual fund in accordance with each fund’s
prospectus.
For
the
nine months ended January 31, 2008 and 2007, investment management fees and
12b-1 service and distribution fees amounted to $24,139,000 and $22,608,000,
respectively, which included fee waivers for certain of the Value Line Funds.
These amounts included service and distribution fees of $5,397,000 and
$5,603,000 earned by VLS in fiscal years 2008 and 2007, respectively. The
related receivables from the funds for investment management fees and service
and distribution fees included in Receivables from affiliates were $2,616,000
and $2,534,000 at January 31, 2008 and April 30, 2007,
respectively.
10
For
the
nine months ended January 31, 2008 and 2007, total management fee waivers
were
$174,000 and $191,000 respectively, and service and distribution fee waivers
were $2,943,000 and $2,229,000, respectively. The Company and its subsidiary,
VLS, have no right to recoup the previously waived amounts of management
fees
and 12b-1 fees.
As
of
January 31, 2008, the Company had $50,538,000 invested in the Value Line
equity
funds and $15,294,000 in the Value Line Cash Fund. Combined, this represents
approximately 1.8% of total fund assets at January 31, 2008. Purchases and
redemptions routinely occur in the Value Line Cash Fund as part of business
operations.
For
the
nine months ended January 31, 2008 and 2007, the Company was reimbursed $739,000
and $807,000, respectively, for payments it made on behalf of and services
it
provided to the Parent. At January 31, 2008, accrued taxes payable included
a
federal tax liability owed to the Parent in the amount of $314,000. At April
30,
2007, Receivables from affiliates included a Receivable from the Parent of
$243,000. These transactions are in accordance with the tax sharing arrangement
described in Note 7.
From
time
to time, the Parent has purchased additional shares of the Company in the
market
when and as the Parent has determined it to be appropriate. As stated several
times in the past, the public is reminded that the Parent may make additional
purchases from time to time in the future. For the three months ended January
31, 2008, the Parent purchased 2,701 shares in the market at an average cost
of
$39.88 per share.
Note
7-Federal, State and Local Income Taxes:
The
Company computes its income tax provision in accordance with the provisions
of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
The
provision for income taxes includes the following:
|
Nine months ended January 31,
|
|||||||
|
2008
|
2007
|
||||||
|
(in
thousands)
|
|||||||
|
Current:
|
|||||||
|
Federal
|
$
|
10,142
|
$
|
9,985
|
|||
|
State
and local
|
2,633
|
2,647
|
|||||
|
12,775
|
12,632
|
||||||
|
Deferred:
|
|||||||
|
Federal
|
(78
|
)
|
(38
|
)
|
|||
|
State
and local
|
(69
|
)
|
(30
|
)
|
|||
|
(147
|
)
|
(68
|
)
|
||||
|
Provision
for income taxes
|
$
|
12,628
|
$
|
12,564
|
|||
Deferred
income taxes are provided for temporary differences between the financial
reporting basis and the tax basis of the Company’s assets and liabilities. The
tax effect of temporary differences giving rise to the Company’s deferred tax
(liability)/assets are primarily a result of unrealized gains on the Company’s
available for sale securities portfolios.
The
provision for income taxes differs from the amount of income tax determined
by
applying the applicable U.S. statutory income tax rate to pretax income as
a
result of the following:
|
Nine months ended January 31,
|
|
||||||
|
|
|
2008
|
|
2007
|
|||
|
(in
thousands)
|
|||||||
|
Tax
expense at the U.S. statutory rate
|
$
|
11,690
|
$
|
11,178
|
|||
|
Increase
(decrease) in tax expense from:
|
|||||||
|
State
and local income taxes, net of federal income tax benefit
|
1,667
|
1,701
|
|||||
|
Effect
of tax exempt income and dividend exclusion
|
(616
|
)
|
(267
|
)
|
|||
|
Other,
net
|
(113
|
)
|
(48
|
)
|
|||
|
Provision
for income taxes
|
$
|
12,628
|
$
|
12,564
|
|||
The
Company is included in the consolidated federal income tax return of the
Parent.
The Company has a tax sharing arrangement which requires it to make tax payments
to the Parent equal to the Company’s liability as if it filed a separate
return.
11
Note
8-Business Segments:
The
Company operates two reportable business segments: Investment Periodicals,
Publishing & Licensing and Investment Management. The Investment
Periodicals, Publishing & Licensing segment produces investment related
periodical publications (retail and institutional) in both print and electronic
form, and receives licensing fees for Value Line proprietary ranking system
information and Value Line trademarks. The Investment Management segment
provides advisory services to the Value Line Funds, as well as institutional
and
individual accounts. The segments are differentiated by the products and
services they offer. The accounting policies of the segments are the same
as
those described in the summary of significant accounting policies. The Company
allocates all revenues and expenses, except for depreciation and income from
securities transactions related to corporate assets, between the two reportable
segments.
Disclosure
of Reportable Segment Profit and Segment Assets (in thousands)
|
Nine months ended January 31, 2008
|
||||||||||
|
Investment
Periodicals,
Publishing &
Licensing
|
Investment
Management
|
Total
|
||||||||
|
|
|
|||||||||
|
Revenues
from external customers
|
$
|
37,941
|
$
|
25,050
|
$
|
62,991
|
||||
|
Intersegment
revenues
|
74
|
-
|
74
|
|||||||
|
Income
from securities transactions
|
205
|
4,088
|
4,293
|
|||||||
|
Depreciation
and amortization
|
1,170
|
48
|
1,218
|
|||||||
|
Segment
operating profit
|
15,622
|
12,108
|
27,730
|
|||||||
|
Segment
assets
|
16,439
|
81,652
|
98,091
|
|||||||
|
Expenditures
for segment assets
|
291
|
-
|
291
|
|||||||
|
Nine months ended January 31, 2007
|
||||||||||
|
Investment
Periodicals,
Publishing &
Licensing
|
|
Investment
Management
|
|
Total
|
||||||
|
Revenues
from external customers
|
$
|
39,751
|
$
|
23,446
|
$
|
63,197
|
||||
|
Intersegment
revenues
|
83
|
-
|
83
|
|||||||
|
Income
from securities transactions
|
131
|
2,992
|
3,123
|
|||||||
|
Depreciation
and amortization
|
1,490
|
55
|
1,545
|
|||||||
|
Segment
operating profit
|
15,831
|
11,969
|
27,800
|
|||||||
|
Segment
assets
|
18,304
|
77,784
|
96,088
|
|||||||
|
Expenditures
for segment assets
|
275
|
4
|
279
|
|||||||
Reconciliation
of Reportable Segment Revenues, Operating Profit and Assets
|
(in
thousands)
|
|||||||
|
2008
|
|
2007
|
|||||
|
Revenues
|
|||||||
|
Total
revenues for reportable segments
|
$
|
63,065
|
$
|
63,280
|
|||
|
Elimination
of intersegment revenues
|
(74
|
)
|
(83
|
)
|
|||
|
Total
consolidated revenues
|
$
|
62,991
|
$
|
63,197
|
|||
|
Segment
profit
|
|||||||
|
Total
profit for reportable segments
|
32,023
|
30,923
|
|||||
|
Add:
Income from securities transactions
|
|||||||
|
related to corporate assets
|
1,390
|
1,024
|
|||||
|
Less:
Depreciation related to corporate assets
|
(12
|
)
|
(11
|
)
|
|||
|
Income before income taxes
|
$
|
33,401
|
$
|
31,936
|
|||
|
Assets
|
|||||||
|
Total
assets for reportable segments
|
98,091
|
96,088
|
|||||
|
Corporate
assets
|
36,926
|
27,859
|
|||||
|
Consolidated
total assets
|
$
|
135,017
|
$
|
123,947
|
|||
12
Note
9-Contingencies:
By
letter
dated June 15, 2005, the staff of the Securities and Exchange Commission
informed the Company that it was conducting an informal inquiry. Thereafter,
the
staff has requested documents and information related to, among other things,
trades for the Company’s and its affiliates’ proprietary accounts, execution of
trades through VLS for the Value Line Funds and the fees collected by VLS
from
the Value Line Funds pursuant to a Service and Distribution Plan. The Company
and its subsidiaries are cooperating with the inquiry. Management cannot
determine the effect, if any, that the inquiry will have on the results of
operations and financial condition.
13
| Item 2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS.
|
Safe
Harbor Statement under the Private Securities Litigation Reform Act of
1995
This
report contains statements (including certain projections and business trends)
accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”,
“will”, “intend” and other similar or negative expressions, that are
“forward-looking statements” as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected
as
a result of certain risks and uncertainties, including but not limited to the
following:
|
·
|
dependence
on key personnel;
|
|
·
|
maintaining
revenue from subscriptions for the Company’s
products;
|
|
·
|
protection
of intellectual property rights;
|
|
·
|
changes
in market and economic conditions;
|
|
·
|
fluctuations
in the Company’s assets under management due to broadly based changes in
the values of equity and debt securities, redemptions by investors
and
other factors;
|
|
·
|
dependence
on Value Line Funds for investment management and related
fees;
|
|
·
|
competition
in the fields of publishing, licensing and investment
management;
|
|
·
|
the
impact of government regulation on the Company’s business and the
uncertainties of litigation and regulatory
proceedings;
|
|
·
|
terrorist
attacks; and
|
|
·
|
other
risks and uncertainties, including but not limited to the risks described
in Item 1A, “Risk Factors” of the Company’s annual report on Form 10-K for
year ended April 30, 2007, and other risks and uncertainties from
time to
time.
|
Any
forward-looking statements are made only as of the date hereof, and the Company
undertakes no obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise.
Results
of Operations
Net
income
for the nine months ended January 31, 2008 of $20,773,000 or $2.08 per share
was
$1,401,000 or 7% above net income of $19,372,000 or $1.94 per share for
the
nine
months of the prior fiscal year.
Net
income of $8,471,000 for the third quarter of fiscal 2008 was 18% above net
income of $7,192,000 for the third quarter last fiscal year. Operating income
of
$27,718,000 for the nine months ended January 31, 2008 was $71,000 below
operating income of $27,789,000 last fiscal year. Operating income of $9,337,000
for the third quarter of fiscal 2008 was 5% above operating income of $8,859,000
for the third quarter last fiscal year. The Company’s income from securities
transactions of $5,683,000 for the nine months ended January 31, 2008 was 37%
above last year’s. Shareholders’ equity of $85,469,000 at January 31, 2008 was
19% higher than shareholders’ equity of $72,030,000
at
January 31, 2007.
Operating
revenues
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Investment
periodicals and related publications
|
$
|
32,424
|
$
|
34,462
|
-5.9
|
%
|
||||
|
Licensing
Fees
|
$
|
5,517
|
$
|
5,289
|
4.3
|
%
|
||||
|
Investment
management fees and services
|
$
|
25,050
|
$
|
23,446
|
6.8
|
%
|
||||
|
Total
Operating Revenues
|
$
|
62,991
|
$
|
63,197
|
-0.33
|
%
|
||||
14
Investment
periodicals and related publications revenues
The
investment periodicals and related publications revenues were down $2,038,000
or
6% for the nine months ended January 31, 2008 as compared to the nine months
ended January 31, 2007. As a percentage of total operating revenues, investment
periodicals and related publications revenues have decreased from 55% during
the
first nine months of fiscal 2007 to 51% during the first nine months of fiscal
2008. While the Company continues to bring in new subscribers through various
marketing channels, primarily direct mail and the Internet, total product line
circulation continues to decline. Factors that have contributed to the decline
in the investment periodicals and related publications revenues include the
increasing amount of competition in the form of free and paid investment
research on the Internet and research provided by brokerage firms at no cost
to
their clients.
Within
investment periodicals and related publications are subscription revenues to
print and electronic products.
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Print
publication revenues
|
$
|
23,393
|
$
|
25,827
|
-9.4
|
%
|
||||
|
Electronic
publication revenues *
|
$
|
9,031
|
$
|
8,635
|
4.6
|
%
|
||||
|
Total
Investment periodicals and related publications revenue
|
$
|
32,424
|
$
|
34,462
|
-5.9
|
%
|
||||
|
Unearned
Revenues (Short and Long Term)
|
$
|
32,655
|
$
|
33,482
|
-2.5
|
%
|
||||
*
Retail
business is down, Institutional Sales are up.
Value
Line’s electronic publications revenues derive 46% from institutional accounts
and 54% from retail subscribers. For the nine months ended January 31, 2008,
institutional revenues increased $743,000 or 22%, while revenues from retail
subscribers were down $347,000 or 7% as compared to the nine months ended
January 31, 2007. The decrease in electronic retail publications revenues is
attributable to the decrease in circulation within the Company’s software
products.
Circulation of The
Value Line Investment Analyzer decreased
19%, which resulted in a $411,000 decline in revenues from this product,
partially offset by an increase in the circulation and revenues from
online subscriptions to The
Value Line Investment Survey. For
the
nine months ended January 31, 2008 print publication revenues decreased
$2,434,000 or 9% below last fiscal year.
Licensing
revenues
Licensing
fee revenues have increased $228,000 or 4% for the nine months ended January
31,
2008 as compared to the nine months ended January 31, 2007. The slow growth
in
licensing fees revenues is primarily due to the volatility in the equity markets
and the conversion of three closed-end funds traded on the American Stock
Exchange, to open-end Exchange Traded Funds during the second half of calendar
2006 through the first half of 2007. These three conversions, initiated in
part
as a result of the actions of companies that invest in closed-end funds for
the
purpose of encouraging trust action to eliminate discount NAV pricing, resulted
in the withdrawal of assets that in turn, lowered the Company’s asset based
licensing fees for the nine months of fiscal 2008. As of January 31, 2008,
total
third party sponsored assets attributable to the licensing business represent
$6.1 billion in various products. The Company believes the growth of the
business is dependent upon the desire of third party marketers to use the Value
Line trademarks and proprietary research for their products, signing new
licensing agreements, and the marketplace’s acceptance of new products. Value
Line believes it was an early entrant into this new market seven years ago
and
today the market has matured and the Company and its third party sponsors face
more competition in the marketplace.
15
Investment
management fees and distribution services revenues
The
investment management fees and distribution services revenues were up $1,604,000
or 7% for the nine months ended January 31, 2008 as compared to the nine months
ended January 31, 2007. While management fees for the first nine months of
fiscal year 2008 were up $1,737,000 or 10% as compared to the first nine months
of fiscal year 2007 there was a net decrease of $206,000 or 4% in distribution
services revenues due to 12b-1 fee waivers for certain of the Value Line Funds.
For the nine months ended January 31, 2008 and 2007, 12b-1 fee waivers were
$2,943,000 and $2,229,000, respectively. For the nine months ended January
31,
2008 and 2007, total management fee waivers were $174,000 and $191,000,
respectively. The Company and its subsidiary, VLS, have no right to recoup
the
previously waived amounts of management fees and 12b-1 fees.
The
table
below illustrates the total fund assets for the nine months ended January 31,
2008 as compared to the nine months last fiscal year. The second table shows
the
two channels through which the equity funds are available. Shares of Value
Line
Strategic Asset Management Trust (“SAM”) and Value Line Centurion Fund are
available to the public only through the purchase of certain variable annuity
and variable life insurance contracts issued by The Guardian Insurance &
Annuity Company, Inc. (“GIAC”).
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Equity
funds
|
$
|
3,221,732
|
$
|
3,203,167
|
0.6
|
%
|
||||
|
Fixed
income funds
|
$
|
271,562
|
$
|
293,707
|
-7.5
|
%
|
||||
|
Money
Market funds
|
$
|
167,625
|
$
|
179,668
|
-6.7
|
%
|
||||
|
Total
net assets
|
$
|
3,660,919
|
$
|
3,676,542
|
-0.4
|
%
|
||||
|
|
|
|
|
|||||||
|
Equity
fund assets sold through GIAC
|
$
|
812,361
|
$
|
925,515
|
-12.2
|
%
|
||||
|
All
other equity fund assets
|
$
|
2,409,371
|
$
|
2,277,652
|
5.8
|
%
|
||||
|
Total
Equity fund net assets
|
$
|
3,221,732
|
$
|
3,203,167
|
0.6
|
%
|
||||
The
Company believes that the 5.8% growth in equity funds for the nine months of
fiscal 2008, excluding SAM and Centurion Funds sold through GIAC, has been
in
large part due to the good performance for certain Value Line Funds at various
intervals in terms of short, mid and long-term returns. As of January 31, 2008,
80% of the equity funds, excluding SAM and Centurion, had four or five star
ratings by Morningstar, Inc. The largest distribution channel for the Value
Line
Funds remains the fund supermarket platforms including, but not limited to,
Charles Schwab & Co., Inc., TD Ameritrade, Inc., and National City
Bank.
Expenses
Advertising
and promotion
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Advertising
and promotion
|
$
|
10,327
|
$
|
10,979
|
-5.9
|
%
|
||||
Advertising
and promotion expenses for the nine months ended January 31, 2008 decreased
$652,000 as compared to the nine months ended January 31, 2007. Costs associated
with direct mail decreased $1,173,000 or 30% below last fiscal year, due to
a
reduction in the overall number of pieces mailed year to year. Promotion expense
for the three months and nine months ended January 31, 2008 declined by $381,000
as a result of the reversal of deferred advertising charges related to two
of
Value Line Mutual Funds. Expenditures for print media promoting the Value Line
Mutual Funds in select markets increased by $512,000 for the nine months ended
January 31, 2008. The major increase of $992,000 is due to fees paid to third
party intermediaries, such as, Charles Schwab & Co., Inc. to market the
Value Line Funds. This expense will fluctuate based on assets invested in the
Value Line Funds by clients of the intermediaries, the change in
16
market
value of such assets, and the addition of any new intermediary selling
agreements. The Company anticipates third party intermediary expenses will
continue to increase as assets grow and more shareholders come into the Value
Line Funds through intermediaries rather than direct accounts.
Salary
and employee benefits
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Salaries
and employee benefits
|
$
|
13,668
|
$
|
13,921
|
-1.8
|
%
|
||||
Over
the
past several years, the Company has increased productivity by the combination
of
roles and responsibilities along with selective outsourcing. Some duplication
of
effort has been eliminated and certain tasks, such as data entry, have been
outsourced to third party vendors that the Company believes can provide better
controls and results at a favorable cost.
Production
and distribution
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Production
and distribution
|
$
|
4,698
|
$
|
5,268
|
-10.8
|
%
|
||||
Production
and distribution expenses for the nine months ended January 31, 2008 were
$570,000 below expenses for the nine months ended January 31, 2007. Amortized
software costs decreased $367,000 below last fiscal year due to a decrease
of
capitalized projects and costs. In addition, the decline in expenses was due
to
volume reductions in paper, printing and mailing costs that resulted primarily
from a decrease in circulation of the print products. Partially offsetting
the
savings during the nine months of fiscal 2008 was an 8% increase in the cost
of
paper (since July 2006) and an 11% increase in postage rates (since May
2007).
Office
and administration
|
Nine
Months Ended January 31,
(in
thousands)
|
2008
|
2007
|
Percentage
Change
FY 08 vs. 07
|
|||||||
|
Office
and administration
|
$
|
6,580
|
$
|
5,240
|
25.6
|
%
|
||||
Office
and administration expenses for the nine months ended January 31, 2008 were
$1,340,000 above expenses for the nine months ended January 31, 2007. During
the
first nine months of fiscal year 2008 professional fees significantly increased
as compared to the first nine months of fiscal year 2007. Professional fees
can
fluctuate year to year based on the level of operations, such as litigation
or
regulatory activity requiring the use of outside professional consultants.
Within Occupancy, during the last fiscal quarter of fiscal 2007, the Company
amended its lease in midtown New York extending the lease expiration date to
May
2013 on negotiated terms in place of the Company’s renewal option at market
rate, which resulted in significantly higher rent as a result of market
conditions. Under the terms of its original lease, the Company began receiving
a
rent concession in the amount of $767,950 credited equally during the six months
beginning December 2007.
Income
from securities transactions, net
For
the
nine months ended January 31, 2008 the Company’s income from securities
transactions, net, is $1,536,000 higher than income for the nine months ended
January 31, 2007. Income from securities transactions, net, includes dividend
and interest income of $2,604,000 at January 31, 2008 that is $510,000 or 24%
higher than income of $2,094,000 for the nine months ended January 31, 2007
due
to an increase in interest rates. Realized capital gains, net of realized
capital losses during the first nine months of fiscal 2008 are $2,800,000,
of
which $2,793,000 represents
17
distributions
from the Value Line Mutual Funds. This compares to capital gains of $1,984,000,
net of realized capital losses in fiscal 2007, of which $2,061,000 represented
distributions from the Value Line Mutual Funds.
Liquidity
and Capital Resources
The
Company had working capital of $86,365,000 as of January 31, 2008 and
$71,924,000 as of January 31, 2007. Cash and short-term securities totaled
$121,688,000 as of January 31, 2008 and $110,311,000 as of January 31,
2007.
Cash
from operating activities
The
Company’s cash flow from operations of $13,604,000 for the nine months ended
January 31, 2008 was 10% above cash flow from operations of $12,391,000 for
the
nine months ended January 31, 2007. The primary change was the slowing decline
in unearned revenues and the timing of payments of accounts payable and accrued
expenses, which was partially offset by the purchase of additional fixed income
government debt securities within the company’s trading portfolio. In addition,
prepaid expenses decreased $510,000 as a result of a refund of prepaid income
taxes and as stated under the terms of its lease, beginning December 2007,
the
Company is receiving a six month rent concession from its landlord that amounted
to $256,000 during the quarter ended January 31, 2008.
Cash
from investing activities
The
Company’s cash outflow from investing activities of $7,192,000 for the nine
months ended January 31, 2008 was 195% above cash outflow from investing
activities of $2,440,000 for the nine months ended January 31, 2007 due to
the
maturity of fixed income securities during the prior fiscal year and
the
redeployment of cash holdings to equity securities and fixed income during
the nine months of fiscal 2008.
Cash
from financing activities
The
Company’s net cash outflow from financing activities of $8,984,000 for the nine
months ended January 31, 2008 increased 13% as compared to the nine months
of
the prior fiscal year due to the payment of a higher quarterly dividend per
common share of $0.30 in fiscal 2008 as compared to $0.25 paid during the first
two quarters and $0.30 during the third quarter of fiscal 2007.
Management
believes that the Company’s cash and other liquid asset resources used in its
business together with the future cash flows from operations will be sufficient
to finance current and forecasted operations. Management does not anticipate
any
borrowing in fiscal 2008.
Critical
Accounting Estimates and Policies
The
Company’s Critical Accounting Estimates and Policies have not changed from those
reported in Management’s Discussion and Analysis of Financial Condition and
Results of Operations in the Company’s Form 10-K for the fiscal year ended April
30, 2007.
18
Item
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Market
Risk Disclosures
The
Company’s Consolidated Balance Sheet includes a substantial amount of assets
whose fair values are subject to market risks. The Company’s significant market
risks are primarily associated with interest rates and equity prices. The
following sections address the significant market risks associated with the
Company’s business activities.
Interest
Rate Risk
The
Company’s strategy has been to acquire highly liquid debt securities with
extremely low credit risk. Despite this strategy management recognizes and
accepts the possibility that losses may occur. To limit the price fluctuation
in
these securities from interest rate changes, the Company’s management invests
primarily in short-term obligations maturing in 1 to 5 years.
The
fair
values of the Company’s fixed maturity investments will fluctuate in response to
changes in market interest rates. Increases and decreases in prevailing interest
rates generally translate into decreases and increases in fair values of those
instruments. Additionally, fair values of interest rate sensitive instruments
may be affected by prepayment options, relative values of alternative
investments, and other general market conditions.
The
following table summarizes the estimated effects of hypothetical increases
and
decreases in interest rates on assets that are subject to interest rate risk.
It
is assumed that the changes occur immediately and uniformly to each category
of
instrument containing interest rate risks. The hypothetical changes in market
interest rates do not reflect what could be deemed best or worst case scenarios.
Variations in market interest rates could produce significant changes in the
timing of repayments due to prepayment options available. For these reasons,
actual results might differ from those reflected in the table. Dollars are
in
thousands.
|
Estimated Fair Value after
Hypothetical Change in Interest Rates
|
||||||||||||||||
|
(bp = basis points)
|
||||||||||||||||
|
Fixed
Income Securities
|
Fair
Value
|
6
mos.
50bp
increase
|
6
mos.
50bp
decrease
|
1
yr.
100bp
increase
|
1
yr.
100bp
decrease
|
|||||||||||
|
As
of January 31, 2008
|
||||||||||||||||
|
Investments
in securities with fixed maturities
|
$
|
53,114
|
$
|
52,202
|
$
|
53,082
|
$
|
51,473
|
$
|
52,813
|
||||||
|
As
of April 30, 2007
|
||||||||||||||||
|
Investments
in securities with fixed maturities
|
$
|
42,952
|
$
|
42,357
|
$
|
43,074
|
$
|
41,900
|
$
|
43,054
|
||||||
Management
regularly monitors the maturity structure of the Company’s investments in debt
securities in order to maintain an acceptable price risk associated with changes
in interest rates.
19
Equity
Price Risk
The
carrying values of investments subject to equity price risks are based on quoted
market prices or management’s estimates of fair value as of the balance sheet
dates. Market prices are subject to fluctuation and, consequently, the amount
realized in the subsequent sale of an investment may significantly differ from
the reported market value. Fluctuation in the market price of a security may
result from perceived changes in the underlying economic characteristics of
the
issuer, the relative price of alternative investments and general market
conditions. Furthermore, amounts realized in the sale of a particular security
may be affected by the relative quantity of the security being
sold.
Value
Line invests a significant amount of its assets in equity securities,
primarily the Value Line Funds. Each mutual fund invests in a variety of equity
positions.
The
table
below summarizes Value Line’s equity price risks as of January 31, 2008 and
April 30, 2007 and shows the effects of a hypothetical 30% increase and a 30%
decrease in market prices as of those dates. The selected hypothetical changes
do not reflect what could be considered the best or worst case scenarios.
Dollars are in thousands.
|
Equity
Securities
|
Fair
Value
|
Hypothetical
Price Change
|
Estimated
Fair Value after
Hypothetical
Change in Prices
|
Hypothetical Percentage
Increase (Decrease) in
Shareholders’ Equity
|
|||||||||
|
As
of January 31, 2008
|
50,542
|
30% increase
|
$
|
65,704
|
11.53
|
%
|
|||||||
|
|
30% decrease
|
$
|
35,379
|
(11.53
|
)%
|
||||||||
|
49,719
|
30% increase
|
$
|
64,635
|
12.83
|
%
|
||||||||
|
|
30% decrease
|
$
|
34,803
|
(12.83
|
)%
|
||||||||
20
Item
4.
CONTROLS AND PROCEDURES
|
(a)
|
The
Company maintains disclosure controls and procedures that are designed
to
ensure that information required to be disclosed in the Company’s reports
filed with the SEC is recorded, processed, summarized and reported
within
the time periods specified in the SEC’s rules and forms, and that such
information is accumulated and communicated to the Company’s management,
including its Chief Executive Officer, Chief Compliance Officer and
Principal Accounting Officer, as appropriate, to allow timely decisions
regarding disclosure.
|
The
Company’s management has evaluated, with the participation of the Company’s
Chief Executive Officer and Principal Accounting Officer, the effectiveness
of
the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of
the
end of the period covered by this report. Based on that evaluation, the Chief
Executive Officer and Principal Accounting Officer have concluded that the
Company’s disclosure controls and procedures were effective as of the end of the
period covered by this report.
|
(b)
|
The
registrant’s principal executive officer and principal accounting officer
have determined that there have been no changes in the registrant’s
internal control over financial reporting that occurred during the
registrant’s last fiscal quarter that have materially affected, or is
reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
|
21
Part
II -
Other Information
Item
1.
Legal Proceedings
Refer
to
Note 9 (Contingencies) of the consolidated condensed financial statements for
discussion of legal proceedings.
Item
1A.
Risk Factors
There
have been no material changes to the risk factors disclosed in Item 1A - Risk
Factors in the Company’s Annual Report on Form 10-K for the year ended April 30,
2007.
Item
6.
Exhibits
31.1
Certificate of Chief Executive Officer Required Under Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2
Certificate of Principal Accounting Officer Required Under Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1
Joint Chief Executive Officer/Principal Accounting Officer Certificate Required
Under Section 906 of the Sarbanes-Oxley Act of 2002.
22
VALUE
LINE, INC.
Signatures
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q report for the period ended
January
31, 2008 to be signed on its behalf by the undersigned thereunto
duly
authorized.
|
Value
Line, Inc.
|
||
|
(Registrant)
|
||
|
Date:
March 14, 2008
|
By:
|
s/Jean
Bernhard Buttner
|
|
Jean
Bernhard Buttner
|
||
|
Chairman
& Chief Executive Officer
|
||
|
Date:
March 14, 2008
|
By:
|
s/Stephen
R. Anastasio
|
|
Stephen
R. Anastasio
|
||
|
Treasurer,
Principal Accounting Officer
|
||
23