SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 2002 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 (IRS Employer Identification
incorporation or organization) Number)
220 EAST 42ND STREET, NEW YORK, NY 10017-5891
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 907-1500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.10 PAR VALUE
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's voting stock held by
non-affiliates on June 18, 2002 was $57,227,644.
There were 9,980,125 shares of the Company's Common Stock outstanding at
June 18, 2002.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
ITEM 1. BUSINESS.
Value Line, Inc. (the "Company"), a New York corporation, was organized in
1982 and is the successor to substantially all of the operations of Arnold
Bernhard & Company, Inc. ("AB&Co."). As of June 18, 2002, AB & Co. owned
approximately 86% of the Company's issued and outstanding common stock.
The Company's primary businesses are producing investment related
periodical publications through its wholly-owned subsidiary, Value Line
Publishing, Inc. ("VLP"), and providing investment advisory services to mutual
funds, institutions and individual clients. VLP publishes in both print and
electronic formats The Value Line Investment Survey(TM), one of the nation's
major periodical investment services, as well as The Value Line Investment
Survey -- Small and Mid-Cap Edition, The Value Line 600, Value Line Select, The
Value Line Mutual Fund Survey, The Value Line No-Load Fund Advisor, The Value
Line Insight, The Value Line Special Situations Service, The Value Line Options
Survey and The Value Line Convertibles Survey. VLP also provides current and
historical financial databases (DataFile, Estimates & Projections, Convertibles,
Mutual Funds and other services) in standard computer formats and markets
investment analysis software, The Value Line Investment Survey FOR WINDOWS(R),
The Mutual Fund Survey FOR WINDOWS(R), Value Line Daily Options Survey and Value
Line Electronic Convertibles. These electronic products are available on CD-Rom
and offered directly on the Company's internet site, www.valueline.com. The
Company's print and electronic services are marketed through media, direct mail
and the internet to retail and institutional investors.
The Company is the investment adviser for the Value Line Family of Mutual
Funds, which on April 30, 2002, included 15 open-end investment companies with
various investment objectives. In addition, the Company manages investments for
private and institutional clients. The Company is registered with the Securities
and Exchange Commission as an investment adviser under the Investment Advisers
Act of 1940.
In addition to VLP, the Company's other wholly-owned subsidiaries include a
registered broker-dealer, Value Line Securities, Inc., and an advertising
agency, Vanderbilt Advertising Agency, Inc. These subsidiaries primarily provide
services used by the Company in its investment management and publishing
businesses. Compupower Corporation, another subsidiary, serves the subscription
fulfillment needs of the Company's publishing operations. Value Line
Distribution Center, Inc. ("VLDC") handles all of the mailings of the
publications to the Company's subscribers. Additionally, VLDC provides office
space for Compupower Corporation's computer operations center. The name "Value
Line," as used to describe the Company, its products, and its subsidiaries, is a
registered trademark of the Company. As used herein, except as the context
otherwise requires, the term "Company" includes the Company and its consolidated
subsidiaries.
2
A. INVESTMENT INFORMATION AND PUBLICATIONS.
VLP publishes investment related publications and produces electronic
products described below:
1. PUBLICATIONS:
The Value Line Investment Survey is a weekly investment related periodical
that in addition to various timely articles on current economic, financial and
investment matters ranks common stocks for future relative performance based on
computer-generated statistics of financial results and stock market performance.
A combined Index, published quarterly, allows the subscriber to easily locate a
specific stock among the approximately 3,500 stocks covered in the Small and
Mid-Cap Edition and in the standard edition of The Value Line Investment Survey.
Two of the more important evaluations for each stock covered are
"Timeliness(TM)" and "Safety(TM)." "Timeliness(TM)" relates to the probable
relative price performance of one stock over the next six to twelve months, as
compared to the rest of the approximately 1,700 covered stocks. Rankings are
updated each week and range from Rank 1 for the expected best performing stocks
to Rank 5 for the expected poorest performers. "Safety" Ranks are a measure of
risk and are based primarily on the issuer's relative financial strength and its
stock's price stability. "Safety" ranges from Rank 1 for the least risky stocks
to Rank 5 for the riskiest. VLP employs approximately 100 analysts and
statisticians who prepare articles of interest for each periodical and who
evaluate stock performance and provide future earnings estimates and quarterly
written evaluations with weekly updates when relevant.
The Small and Mid-Cap Edition of The Value Line Investment Survey is a
weekly publication introduced in 1995 that provides detailed descriptions of
approximately 1,800 additional small-and medium-capitalization stocks, many
listed on NASDAQ, beyond the 1,700 stocks of larger-capitalization companies
traditionally covered in The Value Line Investment Survey. Like The Value Line
Investment Survey, the Small and Mid-Cap Edition has its own "Summary & Index"
providing updated performance ranks and other data, as well as "screens" of key
financial performance measures. The "Ratings and Reports" section, providing
updated reports on about 140 stocks each week, has been organized to correspond
closely to the industries reviewed in the Standard Edition of The Value Line
Investment Survey.
The Small and Mid-Cap Edition includes a number of unique as well as
standard features. One unique feature, The Performance Ranking System,
incorporates many of the elements of the Value Line Timeliness(TM) Ranking
System, modified to accommodate the 1,800 stocks in the Small and Mid-Cap
Edition. The Performance(TM) Rank is based on earnings growth and price momentum
and is designed to predict relative price performance over the next six to 12
months.
The principal difference between the Small and Mid-Cap Edition and The
Value Line Investment Survey's Standard Edition is that the Small and Mid-Cap
Edition does not include Value Line's financial forecasts or analysts' comments.
This modification has allowed VLP to offer this service at a relatively low
price.
The Value Line Mutual Fund Survey is published once every three weeks and
was introduced in 1993. It provides full-page profiles of 700 mutual funds and
condensed coverage of more than 1,250 funds. Every three weeks subscribers
receive an updated issue, containing over 200 fund reports, plus a "Performance
& Index" providing current rankings and performance figures for the full
universe of more than 2,000 funds, as well as articles on investment trends and
issues concerning mutual fund investors. The Value Line Mutual Fund Survey also
includes annual profiles and analyses on 100 of the nation's major fund
families. Funds are ranked for both risk and overall risk-adjusted performance
using strictly quantitative means. A large binder is provided to house the fund
reports.
The Value Line No-Load Fund Advisor is a 36 page monthly newsletter for
investors who wish to manage their own portfolios of no- and low-load, open-end
mutual funds. Each issue features strategies for maximizing total return, with
special attention given to tax considerations. Also featured are in-depth
interviews with noted portfolio managers, model portfolios for a range of
investor profiles, and information about retirement planning, industry news, and
listings (with descriptions) of new funds worthy of further consideration. A
full statistical review, including latest performance, rankings and sector
weightings, is updated each month on 600 leading no-load and low-load funds.
3
Value Line Insight is a 12-page monthly newsletter that brings together the
views and opinions of economists, analysts and mutual fund managers from Value
Line and external sources. The product critically assesses mutual fund manager
stock selections using Value Line stock research. It is designed to help
individual stock investors see what professionals are doing while mutual fund
investors get a critical review of management actions.
The Value Line Special Situations Service, published periodically 24 times
a year, concentrates on fast-growing, smaller companies whose stocks are
perceived by VLP analysts as having exceptional appreciation potential.
The Value Line Options Survey, a periodical weekly service published 24
times a year, evaluates and ranks the expected performance of the most active
options listed on United States exchanges (approximately 80,000). An electronic
version of this publication, The Value Line Daily Options Survey (available over
the Internet), was introduced during the latter part of fiscal 1995. A new
enhanced version was introduced in May of 2002. New features include an
interactive database and a new spreadsheet.
The Value Line Convertibles Survey, a periodical service published 24 times
a year, evaluates and ranks approximately 600 convertible securities (bonds and
preferred stocks) and approximately 80 warrants for future market performance.
Value Line Select, a monthly publication, was first published in January
1998. As a stock recommendation service with an exclusive circulation, it
focuses each month on one company that VLP analysts, economists and
statisticians recommend as an investment. Recommendations are backed by in-depth
research and are subject to ongoing monitoring.
The Value Line 600 is a monthly service, which contains full-page reports
on more than 600 stocks. Its reports provide information on many actively
traded, larger capitalization issues as well as some smaller growth stocks.
Since it was introduced in fiscal 1996, it has proven to be very popular among
investors who want the same type of analysis provided in the full Investment
Survey, but who don't want or need coverage of the large number of companies
contained in that publication. Readers also receive supplemental reports as well
as a monthly Index, which includes updated statistics.
2. ELECTRONIC PRODUCTS:
Value Line Investment Survey FOR WINDOWS(R), on CD-ROM, is a powerful
menu-driven software program with fast filtering, ranking, reporting and
graphing capabilities utilizing over 300 data fields for over 7,500 stocks,
industries and indices, including the 1,700 (standard) stocks covered in VLP's
benchmark publication, The Value Line Investment Survey. The product was
introduced in June 1996. Version 3.0 has major enhancements to the user
interface and the ability for users to update data from Value Line's Internet
site (www.valueline.com). New features are added continuously.
Value Line Investment Survey FOR WINDOWS(R) provides over 300 search fields
and more than 100 charting and graphing variables for comparative research. The
software includes a portfolio module that lets users create and track their own
stock portfolios.
Value Line Mutual Fund Survey FOR WINDOWS(R), a monthly CD-ROM product with
internet updates, is the electronic version of the Value Line Mutual Fund
Survey. The program features powerful sorting, filtering and portfolio analysis.
Version 2 was introduced in 1998, with added features such as style attribution
analysis, portfolio stress tester, portfolio rebalancing, correlation of fund
returns and hypothetical assets to differentiate it from the competition.
4
Windows is a registered trademark of Microsoft Corp. Value Line, Inc. and
Microsoft Corp. are not affiliated companies.
Value Line DataFile contains current and historic annual and quarterly
financial records for more than 7,500 active companies and over 5,000 companies
that no longer exist in numerous industries, including air transport, industrial
services, beverage, machinery, bank, insurance and finance, savings and loan
associations, toys, and securities brokers. DataFile has over 400 annual and
over 80 quarterly fields for each of the companies included in the database.
DataFile is sold to the institutional market. Value Line DataFile II, which
includes less historical data is also available. This version complies with
Microsoft Access format for small businesses. During fiscal 1997, Value Line
introduced the Value Line Mutual Fund DataFile. It covers over 11,500 mutual
funds with up to 20 years of historical data which consists of almost 200 data
fields. VLP also offers an Estimates and Projections File, with year-ahead and
three-to five-year estimates of financial performance and projections of
stock-price ranges on companies covered in the Value Line Investment Survey, as
well as a Convertible Securities File and custom services.
The Total Return Service is a customized data service. It was developed to
help publicly traded companies meet the SEC's mandated executive-compensation
disclosure requirements. The service consists of a line graph comparing the
total return of a public company's stock over the last five years to a published
equity market index and a published or constructed industry index.
3. VALUE LINE INTERNET:
Most Value Line products and services are available from the Company's
website www.valueline.com. The site includes a multimedia section that features
daily market reports and updates on stocks, options, mutual funds and
convertibles as well as webcasting of daily analyst commentary and fast-breaking
developments on companies in the news. In addition, Value Line has added a host
of new tools to chart and filter stocks and mutual funds along with tools to
build a portfolio, customize a report and receive Value Line reports.
A new internet-only service, the Value Line Research Center, includes
on-line access to Value Line's leading publications covering stocks, mutual
funds, options and convertible securities as well as special situation stocks.
This service includes full subscriptions to The Value Line Investment Survey,
The Value Line Mutual Fund Survey, The Value Line Daily Options Survey, The
Value Line Investment Survey Small and Mid-Cap Edition, The Value Line
Convertibles Survey, The Special Situations Service and the recently introduced
Value Line ETF Survey.
B. INVESTMENT MANAGEMENT.
As of April 30, 2002, the Company was the investment adviser for 15 mutual
funds registered under the Investment Company Act of 1940. Value Line
Securities, Inc., a wholly owned subsidiary of the Company, acts as principal
underwriter and distributor for the Value Line Funds. State Street Bank and
Trust Company, an unaffiliated entity, acts as custodian of the Funds' assets.
Shareholder services for the Value Line Funds are provided by National Financial
Data Services, an unaffiliated entity associated with State Street Bank and
Trust Company.
5
Total net assets of the Value Line Funds at April 30, 2002, were:
(in thousands)
The Value Line Fund, Inc. $ 284,763
Value Line Income and Growth Fund, Inc. 196,087
The Value Line Special Situations Fund, Inc. 269,792
Value Line Leveraged Growth Investors, Inc. 463,539
The Value Line Cash Fund, Inc. 379,961
Value Line U.S. Government Securities Fund, Inc. 146,210
Value Line Centurion Fund, Inc. 473,042
The Value Line Tax Exempt Fund, Inc. 167,860
Value Line Convertible Fund, Inc. 53,729
Value Line Aggressive Income Trust 66,906
Value Line New York Tax Exempt Trust 28,232
Value Line Strategic Asset Management Trust 1,044,345
Value Line Emerging Opportunities Fund, Inc. 79,877
Value Line Asset Allocation Fund, Inc. 215,534
Value Line U.S. Multinational Company Fund, Inc. 16,960
----------
$3,886,837
==========
The investment advisory contracts between each of the Value Line Funds and
the Company provide that the Company will render investment advisory and other
services to the Funds. These contracts must be approved annually in accordance
with statutory procedures. The Company furnishes each fund with its investment
program, subject to such fund's fundamental investment policies and to control
and review by such fund's Board of Directors or Trustees. Each contract also
provides that the Company will furnish, at its expense, various administrative
services, office space, equipment and administrative personnel necessary for
managing the affairs of the funds. Advisory fee rates vary among the funds and
may be subject to certain limitations. Each mutual fund may use "Value Line" in
its name only so long as the Company acts as its investment adviser.
Value Line Asset Management ("VLAM"), a division of the Company, manages
pension funds and institutional and individual portfolios by utilizing the
techniques developed for The Value Line Investment Survey. VLAM has varied
investment advisory agreements with its clients which call for payments to the
Company calculated on the basis of the market value of the assets under
management.
C. WHOLLY-OWNED OPERATING SUBSIDIARIES.
1. VANDERBILT ADVERTISING AGENCY, INC.:
Vanderbilt Advertising Agency, Inc. ("Vanderbilt") places advertising for
the Company's publications, investment advisory services, and mutual funds.
Commission income generated by Vanderbilt serves to reduce the Company's
advertising expenses.
2. COMPUPOWER CORPORATION:
Compupower provides computerized subscription fulfillment services for the
Company as well as subscriber relation's services for Company publications.
Additionally, Compupower also provides microfiche and imaging services to Value
Line, its affiliates and third-party customers.
6
3. VALUE LINE SECURITIES, INC.:
Value Line Securities, Inc. ("VLS") is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. VLS acts as the underwriter and distributor of the
Value Line Funds. Shares of the Value Line Funds are sold to the public without
a sales charge (i.e., on a "no-load" basis). Until December 31, 2001, VLS
effected brokerage transactions in exchange-listed securities for certain of the
Value Line Funds, clearing such transactions on a fully disclosed basis through
unaffiliated broker-dealers who receive a portion of the gross commissions.
Since January 1, 2002, VLS is being reimbursed by certain of the funds for its
trading services. During the past three fiscal years, the Company received
service and distribution fees, pursuant to SEC rule 12b-1 from certain Value
Line Funds which were used to offset marketing and distribution costs for these
funds.
4. VALUE LINE DISTRIBUTION CENTER, INC.:
Value Line Distribution Center, Inc. ("VLDC") handles all of the mailings
of the publications to the Company's subscribers. Additionally, VLDC provides
office space for the Compupower Corporation's subscriber relations and data
processing departments.
D. OTHER BUSINESSES.
The Company publishes the Value Line Arithmetic Composite and the Value
Line Geometric Composite, daily indices of the stock market performance of the
approximately 1,700 common stocks contained in The Value Line Investment Survey.
The calculation of both indices is done by a firm unaffiliated with the Company.
Futures contracts based upon fluctuations in the Value Line Arithmetic Composite
are traded on the Kansas City Board of Trade, and options on the Index are
traded on the Philadelphia Stock Exchange. The Company receives fees in
connection with these activities.
THE VALUE LINE STRATEGY TRUST SERIES I: The Company has licensed for a fee
certain trademarks and proprietary information for a series of unit investment
trusts, THE VALUE LINE STRATEGY TRUST SERIES I. The fundamental strategy for
this Trust and future Trusts in this series is to invest in the 100 Rank #1
stocks and maintain a static portfolio position in these 100 stocks for a
fourteen-month period. At the end of the fourteen months the portfolio will be
liquidated and the investors will be invited to reinvest their distribution in
the next available VALUE LINE STRATEGY TRUST SERIES. These unit investment
trusts are sold by an extensive network of brokerage firms and provide publicity
for the ranking system within the brokerage industry. As of May 17, 2002, total
assets of approximately $22,500,000.00 had been invested in these Trusts.
VALUE LINE TARGET 25 PORTFOLIO: The fundamental strategy for this Trust and
future Trusts in this series is to invest in a selected 25 stocks of the 100
Rank #1 stocks and maintain a static portfolio position in these 25 stocks for a
thirteen-month period. At the end of the thirteen months the portfolio is
liquidated and the investors are invited to reinvest their distribution in the
next available VALUE LINE TARGET 25 PORTFOLIO. Nike Securities, the underwriter
of this UIT, has indicated that it intends to introduce a new UIT series every
month. These unit investment trusts are sold by an extensive network of
brokerage firms and provide a unique exposure for the ranking system within the
brokerage industry. As of May 17, 2002, aggregate assets of over $134,000,000.00
had been invested in these Trusts.
7
THE TARGET VIP AND THE U.S.A. MOMENTUM PORTFOLIOS: These are UIT products
sponsored by Nike which use as a component of their portfolio strategy the
Value Line Target 25 strategy. As of May 1, 2002, $45,000,000.00 was invested
in these trusts.
ENHANCED INDEX PORTFOLIO: The Enhanced Index Portfolio offered by Nike
Securities, uses the same investment strategy as the Value Line Target 25
Portfolio except that the Enhanced Index Portfolio maintains a static investment
position for a period of fifteen months. The fundamental difference is that this
portfolio only places one-third of its assets into the Value Line Target 25
portfolio strategy. (The other two-thirds of the assets use a Dow Jones Index
and the Nasdaq 100 Index strategy). As of May 17, 2002, aggregate assets of over
$3,500,000.00 have been invested in the Value Line Target 25 Portfolio via this
trust.
VALUE LINE 100 #1 RANKED PORTFOLIO: The fundamental strategy of this Trust
offered by Nike & Claymore is to invest in the 100 Value Line Rank #1 stocks and
maintain a static portfolio position in these stocks for a period up to fifteen
months. As of May 17, 2002, aggregate assets of $14,500,000.00 have been
invested in these trusts.
E. INVESTMENTS.
The Company invests in the Value Line Funds, long-term fixed income
government obligations and in other marketable securities.
F. EMPLOYEES.
At April 30, 2002, the Company and its subsidiaries employed 270 people.
The Company, its affiliates, officers, directors and employees may from
time to time own securities which are also held in the portfolios of the Value
Line Funds or recommended in the Company's publications. Analysts covering
stocks may not own stocks they cover. The Company has imposed rules upon itself
requiring monthly reports of securities transactions for their respective
accounts and restricting trading in various types of securities in order to
avoid possible conflicts of interest.
G. ASSETS.
The Company's assets identifiable to each of its principal business
segments were as follows:
APRIL 30,
2002 2001
(IN THOUSANDS)
Investment Periodicals
& Related Publications $ 19,614 $ 20,836
Investment Management 248,188 248,905
Corporate Assets 933 1,251
-------- --------
$268,735 $270,992
H. COMPETITION.
The investment management and the investment information and publications
industries are very competitive. There are many competing firms and a wide
variety of product offerings. Some of the firms in these industries are
substantially larger and have greater financial resources than the Company. The
Company believes that it is one of the world's largest independent securities
research organizations and that it publishes one of the world's largest
investment periodicals service in terms of number of subscriptions, annual
revenues and number of equity research analysts.
8
I. EXECUTIVE OFFICERS.
The following table lists the names, ages (at June 18, 2002), and principal
occupations and employment during the past five years of the Company's Executive
Officers. All officers are elected to terms of office for one year. Each of the
following has held an executive position with the companies indicated for at
least five years.
NAME AGE PRINCIPAL OCCUPATION OR EMPLOYMENT
- ---- --- ----------------------------------
Jean Bernhard Buttner 67 Chairman of the Board, President and Chief
Executive Officer of the Company and AB&Co.
Chairman of the Board and President of each of
the Value Line Funds.
Samuel Eisenstadt 79 Senior Vice President and Research Chairman.
David T. Henigson 44 Vice President and Treasurer; Director of
Compliance and Internal Audit; Vice President,
Secretary and Treasurer of each of the Value
Line Funds; Vice President of AB&Co.
Howard A. Brecher 48 Vice President and Secretary; Vice President,
Secretary, Treasurer and General Counsel of
AB&Co.
ITEM 2. PROPERTIES.
On June 4, 1993, the Company entered into a lease agreement for
approximately 77,000 square feet that provided for the relocation of its office
space to 220 East 42nd Street, New York, New York. On September 14, 2000, the
Company amended its New York lease for office space and returned to the landlord
6,049 sq. ft. of excess capacity. The Company now leases approximately 71,000
square feet of office space at 220 East 42nd Street in New York. During January
1996, a subsidiary of the Company purchased for cash an approximately 85,000
square feet warehouse facility for $4,100,000. That facility consolidated into a
single location the distribution operations for the various Company publications
and the fulfillment operations of Compupower Corporation. The remaining building
capacity provides warehouse space, a disaster recovery site and is available for
future business expansion. The Company believes the capacity of these facilities
is sufficient to meet the Company's current and expected future requirements.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the stockholders during the fourth
quarter of the fiscal year ended April 30, 2002.
9
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Registrant's Common Stock is traded on the over-the-counter market. The
approximate number of record holders of the Registrant's Common Stock at April
30, 2002 was 1,620. Over-the-counter price quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions. The range of the bid and asked quotations and the
dividends paid on these shares during the past two fiscal years were as follows:
DIVIDEND
HIGH LOW DECLARED
QUARTER ENDED BID ASKED BID ASKED PER SHARE
July 31, 2000 .......................... $38.8750 $39.0000 $33.0000 $33.2500 $.25
October 31, 2000 ....................... 37.0625 38.1250 33.7500 34.1250 .25
January 31, 2001 ....................... 37.0630 38.0000 34.0625 34.1875 .25
April 30, 2001 ......................... $41.8130 $43.0000 $36.3750 $37.5000 $.25
July 31, 2001 .......................... $44.7000 $47.5000 $37.4800 $38.0600 $.25
October 31, 2001 ....................... 50.5100 55.5400 38.0000 40.0000 .25
January 31, 2002 ....................... 50.1700 52.0000 39.4800 40.7900 .25
April 30, 2002 ......................... $49.0500 $50.2310 $44.5000 $45.3000 $.25
10
ITEM 6. SELECTED FINANCIAL DATA.
Earnings per share for each of the fiscal years shown below are based on
the weighted average number of shares outstanding.
YEARS ENDED APRIL 30,
2002 2001 2000 1999 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Revenues:
Investment periodicals and related
publications ........................... $ 53,114 $ 56,042 $ 58,857 $ 62,220 $ 61,210
Investment management fees and
services ............................... $ 34,329 $ 42,349 $ 37,385 $ 33,080 $ 32,405
Gain on sale of operating facility ...... $ -- $ -- $ -- $ 518 $ --
Total revenues .......................... $ 87,443 $ 98,391 $ 96,242 $ 95,818 $ 93,615
Income from operations .................. $ 29,186 $ 37,811 $ 36,428 $ 39,436 $ 39,360
Net income .............................. $ 20,323 $ 24,091 $ 33,698 $ 27,172 $ 35,177
Earnings per share, basic and fully
diluted . .............................. $ 2.04 $ 2.41 $ 3.38 $ 2.72 $ 3.53
Total assets ............................ $268,735 $270,992 $298,198 $243,807 $207,525
Cash dividends declared per share ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
11
Item 7. MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FISCAL 2002
OPERATING RESULTS
Net income for the twelve months ended April 30, 2002 of $20,323,000 or
$2.04 per share compared to net income of $24,091,000 or $2.41 per share in
fiscal 2001. Operating income of $29,186,000 for the twelve months ended April
30, 2002 was below operating income of $37,811,000 for the same period last
fiscal year. Revenues of $87,443,000 for the twelve months ended April 30, 2002
were the sixth highest in the Company's history and compared to revenues of
$98,391,000 in the prior year. The decline in net income during the twelve
months ended April 30, 2002 was largely the result of the lower level of
revenues, primarily reduced investment management fees and services revenue due
to a decline in average net asset values in the Value Line mutual funds. The
change in net asset values in the Value Line mutual funds was largely
attributable to the overall decline in the financial markets with the NASDAQ
index falling 20% during the twelve months ended April 30, 2002, representing a
67% decline from its all time high. Additionally, income from securities
transactions included $8,000,000 or $.48 per share of capital losses recognized
from sales of securities and a reduction in capital gain distributions from the
Company's investments in the Value Line mutual funds.
Subscription revenues of $53,114,000 were 5% below revenues for the same
period of the prior fiscal year. The decrease in subscription revenues compared
to the prior year's was primarily a result of the 5% decline in revenues from
THE VALUE LINE INVESTMENT SURVEY and related products, which included THE VALUE
LINE INVESTMENT SURVEY FOR WINDOWS, THE VALUE LINE RESEARCH CENTER, THE VALUE
LINE 600, THE VLIS SMALL AND MID-CAP STOCK EDITION, AND VALUE LINE SELECT. As of
April 30, 2002, combined circulation to THE VALUE INVESTMENT SURVEY, THE VALUE
LINE INVESTMENT SURVEY FOR WINDOWS, THE VALUE LINE RESEARCH CENTER, AND THE
VALUE LINE 600 was 15% higher than the prior year's circulation. During fiscal
2002, the Company experienced an increase in subscription activity with total
new subscription orders rising 14% from the level during the twelve months of
the prior fiscal year. Investment management fees and services revenue of
$34,329,000 for the twelve months ended April 30, 2002 was 19% below the prior
fiscal year's revenue. The change in total subscription and investment
management fees and services revenues was primarily attributable to the
continued difficult financial market conditions.
Operating expenses for the twelve months ended April 30, 2002 of
$58,257,000 were 4% below last year's expenses of $60,580,000. Total advertising
expenses of $19,928,000 were 7% below the prior year's expenses of $21,342,000.
The decrease in advertising expenses resulted primarily from a lower level of
marketing costs for two of the equity mutual funds for which the Company is the
advisor and a decline in discount brokerage commissions incurred for sales of
the Value Line mutual funds directly related to a lower level of assets in the
Value Line family of mutual funds. The Company increased its direct mail
marketing efforts for the Value Line publications and the Value Line mutual
funds by 34% compared to the same period last fiscal year primarily due to the
effectiveness of this method of advertising. In addition, the United States
Postal Service raised postal rates approximately 9% and 2% effective January 1,
2001 and July 1, 2001, respectively, which increased both direct mail marketing
and product distribution expenses during fiscal 2002. Salaries and employee
benefit expenses of $21,801,000 were 4% below expenses of $22,728,000 recorded
in the prior fiscal year. Printing, paper and distribution costs for the twelve
months ended April 30, 2002 of $8,831,000 were 10% above expenses of $8,058,000
for the twelve months ended April 30, 2001. The increase in production and
distribution expenses resulted from an increase in subscription circulation and
the aforementioned increase in postage costs. Additionally, expenses associated
with outsourcing a portion of the Company's stock and mutual fund data
collection services and amortization of previously deferred costs for the
development of computer software for internal use contributed to the higher
production expenses. Office and administrative expenses of $7,697,000 were 9%
below last year's expenses of $8,452,000. The net decrease in administrative
expenses primarily
12
resulted from a reclassification of maintenance and amortization expenses for
software development to production expenses and a decline in depreciation and
rent expenses.
The Company's securities portfolios produced a gain of $5,828,000 for the
twelve months ended April 30, 2002, which was 87% above the gain of $3,118,000
for the same period last fiscal year. The twelve months of fiscal 2002 included
gains of $6,365,000 offset by $3,699,000 of tax management related losses from
sales of securities in the Company's long-term equity securities portfolio.
Additionally, income from securities transactions during fiscal 2002 included
$2,276,000 of capital gain distributions from the Value Line mutual funds, which
was $8,200,000 less than last year's distribution partially due to the Company's
effective tax management. The Company's trading portfolio produced losses of
$2,191,000 during the twelve months ended April 30, 2002 versus a loss of
$5,471,000 during the same period last fiscal year. The value of the Company's
securities portfolios was negatively impacted by the declining financial market
that started at the beginning of fiscal year 2001 and accelerated dramatically
during the current fiscal year. Income from securities transactions included
dividend income of $2,487,000 for the twelve months ended April 30, 2002, which
compared with dividend income of $4,996,000 for the same period last fiscal
year.
LIQUIDITY AND CAPITAL RESOURCES
The Company had liquid resources, which were used in its business, of
$237,521,000 at April 30, 2002. In addition to $108,477,000 of working capital,
the Company had long-term securities with a market value of $129,044,000, that,
although classified as non-current assets, are also readily marketable should
the need arise.
The Company's cash flow from operations of $20,145,000 for the twelve
months ended April 30, 2002 was 21% lower than fiscal 2001's cash flow of
$25,648,000. The decrease in cash flow from operations was primarily a result of
lower pretax earnings partially offset by an increase in unserved paid
subscription orders. Net cash inflows from investing activities during the
twelve months of fiscal 2002 were $2,039,000 or 9% lower than net cash inflows
for the twelve months of fiscal 2001 due largely to the Company's decision to
re-deploy its cash holdings into the Company's trading portfolio utilizing
varied investment strategies.
From time to time, the Company's Parent has purchased additional shares of
Value Line, Inc. in the market when, and as the Parent has determined it to be
appropriate. The Company understands that the Parent may make additional
purchases from time to time in the future.
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 anticipates no borrowing for fiscal year 2003.
13
FISCAL 2001
OPERATING RESULTS
Revenues of $98,391,000 for the twelve months of fiscal year 2001 set a new
record high for the Company and exceeded last year's revenues by 2%. Operating
income of $37,811,000 for the twelve months ended April 30, 2001, ranked third
highest in the Company's history and was 4% higher than operating income of
$36,428,000 for the same period of last fiscal year. Net income for the twelve
months ended April 30, 2001 of $24,091,000, or $2.41 per share, was below the
prior year's net income of $33,698,000, or $3.38 per share due to lower income
from securities transactions that resulted from a falling equity market and tax
advantaged sales from the Company's long-term securities holdings and trading
portfolio during the fiscal year. Without the tax selling, earnings per share
would have been $2.98 for fiscal 2001. However, this strategy saved the Company
nearly $4,000,000 in current income tax payments.
Subscription revenues of $56,042,000 for fiscal 2001 compare to revenues of
$58,857,000 during the prior fiscal year. The decrease in subscription revenues
compared to the prior year is due primarily to a 6% net decrease in revenues
from THE VALUE LINE INVESTMENT SURVEY. This decrease was partially offset by
increases in revenues from related products including THE VALUE LINE INVESTMENT
SURVEY ON THE WEB AND VALUE LINE SELECT. The decrease in publication revenues
resulted in part from reduced levels of advertising during the first half of the
prior fiscal year that occurred while the Company had been in the process of
revising its advertising strategy. Additionally, the availability of free or low
cost data on the Internet is believed to have had a negative impact on revenue
growth. Extremely difficult market conditions facing investors throughout the
fiscal year has also restrained demand for the Company's investment
publications. Investment management fees and services revenues of $42,349,000
for the twelve months ended April 30, 2001, were 13% above the prior fiscal
year's revenues. Effective July 1, 2000, the Company received service and
distribution fees under rule 12b-1 of the Investment Company Act of 1940 from
thirteen of the fifteen Value Line mutual funds. The increase in revenues from
investment management fees and services, compared to the prior year, resulted
primarily from the receipt of higher service and distribution fees from the
Value Line Mutual Funds. Average assets under management in the Company's mutual
funds were 2% lower than the prior year's average net assets.
Operating expenses for the twelve months ended April 30, 2001 of
$60,580,000 were well controlled, and only 1% higher than last year's expenses
of $59,814,000. Although cost components for our direct mail campaigns such as
paper and postage, and media advertising rates have risen between 5% and 10%,
total company-wide advertising and promotional expenses of $21,342,000 were 1%
below the prior year's expenses of $21,629,000. Advertising for the Company's
publications decreased $2,476,000, primarily resulting from fewer television and
media advertisements. Additionally, last year's advertising included $953,000 of
expenses related to the employment of an outside advertising agency to promote
the Company's products. Advertising expenses for the Value Line mutual funds
increased $1,885,000. Salaries and employee benefit expenses of $22,728,000 were
1% below expenses of $22,986,000 recorded in the prior fiscal year. Production
and distribution costs for the twelve months of fiscal 2001 of $8,058,000 were
18% above expenses of $6,809,000 for the twelve months ended April 30, 2000. The
increase in production expenses resulted from the amortization of new product
development costs for THE VALUE LINE INVESTMENT SURVEY FOR WINDOWS Version 3 and
Version 2 of the Company's Website, expenses associated with outsourcing a
portion of the Company's stock and mutual fund data collection services and
amortization of previously deferred costs for the development of computer
software for internal use based on new accounting methodology promulgated by the
Financial Accounting Standards Board. These increases were partly offset by
lower production and distribution expenses related to lower production runs for
print publications. Office and administration expenses of $8,452,000 were 1%
higher than last year's expenses of $8,390,000.
The Company's securities portfolios produced income of $3,118,000 for the
twelve months ended April 30, 2001 compared to income of $18,504,000 during last
fiscal year. The steady decline in the valuation of securities that started at
the beginning of fiscal year 2001 and accelerated dramatically
14
during the third quarter, with the NASDAQ index falling 47% during fiscal year
2001, resulted in trading losses of $5,471,000 during the twelve months ended
April 30, 2001, versus a gain of $3,862,000 during the same period of last
fiscal year. In light of the decline in the equity markets and as part of Value
Line's tax and investment strategy, the Company realigned certain of its long
term securities holdings and trading securities which resulted in the
recognition of approximately $9,500,000 in capital losses that mostly offset
previously recognized capital gains. This tax strategy succeeded in reducing the
Company's federal, state and city income taxes by almost $4,000,000. Dividend
income from the Company's investments in the Value Line mutual funds increased
29% from fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company had liquid resources, which are used in its business, of
$246,697,000 at April 30, 2001. In addition to $97,913,000 of working capital,
the Company had long-term securities available for sale with a market value of
$148,784,000, that, although classified as non-current assets, are also readily
marketable should the need arise.
The Company's cash flow from operations of $25,648,000 for the twelve
months ended April 30, 2001 was 31% higher than fiscal 2000's cash flow of
$19,637,000. The increase was primarily due to the tax savings strategy employed
by the Company after the substantial decline in the financial markets and from
the higher level of operating income that resulted from record high revenues.
Net cash inflows from investing activities during the twelve months of fiscal
2001 were $26,365,000 higher than net cash outflows for the twelve months of
fiscal 2000 due largely to the Company's decision to realign its long-term
securities holdings and trading portfolio in accordance with it's tax and
investment strategies.
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 anticipates no borrowing for fiscal year 2002.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the registrant and its
subsidiaries are included as a part of this Form 10K:
PAGE NUMBERS
Reports of independent accountants 21
Consolidated balance sheets -- April 30, 2002 and 2001 22
Consolidated statements of income and retained earnings
-- years ended April 30, 2002, 2001 and 2000 23
Consolidated statements of cash flows -- years ended
April 30, 2002, 2001 and 2000 24
Consolidated statement of changes in stockholders' equity
-- years ended April 30, 2002, 2001 and 2000 25
Notes to the consolidated financial statements 26
Supplementary schedules 34
15
Quarterly Results (Unaudited):
(in thousands, except per share amounts)
INCOME EARNINGS
TOTAL FROM NET PER
REVENUES OPERATIONS INCOME SHARE
2002, by Quarter --
First .................... $22,840 $ 7,287 $ 4,599 $ 0.46
Second ................... 21,777 7,290 5,515 0.55
Third .................... 21,620 6,315 5,618 0.56
Fourth ................... 21,206 8,294 4,591 0.47
------- ------- ------- -------
Total $87,443 $29,186 $20,323 $ 2.04
2001, by Quarter --
First .................... $24,555 $ 9,366 $ 6,225 $ 0.62
Second ................... 25,673 10,002 6,497 0.65
Third .................... 24,956 8,136 11,793 1.19
Fourth ................... 23,207 10,307 (424) (.05)
------- ------- ------- -------
Total $98,391 $37,811 $24,091 $ 2.41
2000, by Quarter --
First .................... $23,831 $10,292 $ 6,914 $ 0.69
Second ................... 23,415 9,825 6,386 0.64
Third .................... 24,065 7,086 14,093 1.41
Fourth ................... 24,931 9,225 6,305 0.64
------- ------- ------- -------
Total $96,242 $36,428 $33,698 $ 3.38
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements with the independent accountants on
accounting and financial disclosure matters.
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item will be filed as an amendment to this
Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information required by this item will be filed as an amendment to this
Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item will be filed as an amendment to this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item will be filed as an amendment to this
Form 10-K.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) 1. Financial Statements
See Item 8.
2. Schedules Schedule I -- Marketable Securities.
Schedule XIII -- Other Investments. (Reg. S-X, Article 5)
All other Schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3. Exhibits
3.1 Articles of Incorporation of the Company, as amended through
April 17, 1983, are incorporated by reference to the Registration
Statement -- Form S-1 of Value Line, Inc. Part II, Item 16.(a)
3.1 filed with the Securities and Exchange Commission on April 7,
1983.
3.2 Certificate of Amendment of Certificate of Incorporation dated
October 24, 1989.
10.8 Form of tax allocation arrangement between the Company and AB&Co.
incorporated by reference to the Registration Statement -- Form
S-1 of Value Line, Inc. Part II, Item 16.(a) 10.8 filed with the
Securities and Exchange Commission on April 7, 1983.
10.9 Form of Servicing and Reimbursement Agreement between the Company
and AB&Co., dated as of November 1, 1982 incorporated by
reference to the Registration Statement -- Form S-1 of Value
Line, Inc. Part II, Item 16.(a) 10.9 filed with the Securities
and Exchange Commission on April 7, 1983.
10.10 Value Line, Inc. Profit Sharing and Savings Plan as amended and
restated effective May 1, 1989, including amendments through
April 30, 1995, incorporated by reference to the Annual Report on
Form 10-K for the year ended April 30, 1996.
10.13 Lease for the Company's premises at 220 East 42nd Street, New
York, N.Y. incorporated by reference to the Annual Report on Form
10-K for the year ended April 30, 1994.
21 Subsidiaries of the Registrant.
(b) Reports on Form 8-K.
None
(c) Exhibits.
21 Subsidiaries of the Registrant.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report on Form 10-K for the
fiscal year ended April 30, 2002, to be signed on its behalf by the undersigned,
thereunto duly authorized.
VALUE LINE, INC.
(REGISTRANT)
By: /s/Jean Bernhard Buttner
------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By: /s/Jean Bernhard Buttner
------------------------------------------
Jean Bernhard Buttner
Chairman & Chief Executive Officer
By: /s/Stephen R. Anastasio
------------------------------------------
Stephen R. Anastasio
Principal Financial and Accounting Officer
By: /s/David T. Henigson
------------------------------------------
David T. Henigson
Vice President and Treasurer
Dated: July 26, 2002
19
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report on Form 10-K for the
fiscal year ended April 30, 2002, to be signed on its behalf by the undersigned
as Directors of the Registrant.
/s/Jean Bernhard Buttner /s/Howard A. Brecher
- ------------------------------ ------------------------------
Jean Bernhard Buttner Howard A. Brecher
/s/Harold Bernard, Jr. /s/Samuel Eisenstadt
- ------------------------------ ------------------------------
Harold Bernard, Jr. Samuel Eisenstadt
/s/Marion N. Ruth /s/David T. Henigson
- ------------------------------ ------------------------------
Marion N. Ruth David T. Henigson
/s/Dr. Herbert Pardes
- ------------------------------
Dr. Herbert Pardes
Dated: July 26, 2002
20
HOROWITZ & ULLMANN, P.C.
Certified Public Accountants
275 Madison Avenue
New York, NY 10016
A member of the Telephone: (212)532-3736
AICPA SEC Practice Section Facsimile: (212)545-8997
New York State Society of CPA's E-mail: cpas@horowitz-ullmann.com
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Value Line, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings, changes in
stockholders' equity, and cash flows present fairly, in all material respects,
the financial position of Value Line, Inc. and subsidiaries at April 30, 2002
and 2001, and the results of their operations, changes in stockholders' equity,
and their cash flows for each of the three years in the period ended April 30,
2002, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Our audits of the consolidated financial statements referred to above also
included an audit of the Financial Statement Schedules listed in Item 14 (a) of
Form 10-K. In our opinion, these Financial Statement Schedules present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated statements.
/s/ Horowitz & Ulmann, P.C.
July 18, 2002
New York, NY
21
VALUE LINE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
APR. 30, APR. 30,
ASSETS 2002 2001
Current Assets: ------------ ------------
Cash and cash equivalents (including short term
investments of $117,177 and $86,094, respectively) ...... $ 117,401 $ 86,424
Trading securities ........................................ 3,624 15,360
Accounts receivable, net of allowance for doubtful
accounts of $73 and $131, respectively ................... 2,072 2,216
Receivable from affiliates ................................ 2,467 2,821
Prepaid expenses and other current assets ................. 1,204 1,274
Deferred income taxes ..................................... 575 742
------------ ------------
Total current assets .................................... 127,343 108,837
Long term securities ...................................... 129,044 148,784
Property and equipment, net ............................... 8,491 9,423
Capitalized software and other intangible assets, net ..... 3,857 3,948
------------ ------------
TOTAL ASSETS ............................................ $ 268,735 $ 270,992
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities .................. $ 3,681 $ 5,716
Payable to clearing broker ................................ 10,803 --
Accrued salaries .......................................... 1,859 2,291
Dividends payable ......................................... 2,495 2,494
Accrued taxes payable ..................................... 28 423
------------ ------------
Total current liabilities ............................... 18,866 10,924
Unearned revenue .......................................... 40,639 39,526
Deferred charges .......................................... -- 142
Deferred income taxes ..................................... 13,225 20,194
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 ................................ 975 963
Retained earnings ......................................... 173,760 163,416
Treasury stock, at cost (19,875 shares on April 30, 2002,
and 21,075 on April 30, 2001) ............................ (383) (406)
Accumulated other comprehensive income, net of taxes ...... 20,653 35,233
------------ ------------
TOTAL SHAREHOLDERS' EQUITY .............................. 196,005 200,206
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $ 268,735 $ 270,992
============ ============
SEE INDEPENDENT AUDITOR'S REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
22
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED APRIL 30,
2002 2001 2000
--------- --------- ---------
REVENUES:
Investment periodicals and related publications .. $ 53,114 $ 56,042 $ 58,857
Investment management fees & services ............ 34,329 42,349 37,385
--------- --------- ---------
Total revenues ................................. 87,443 98,391 96,242
--------- --------- ---------
EXPENSES:
Advertising and promotion ........................ 19,928 21,342 21,629
Salaries and employee benefits ................... 21,801 22,728 22,986
Production and distribution ...................... 8,831 8,058 6,809
Office and administration ........................ 7,697 8,452 8,390
--------- --------- ---------
Total expenses ................................. 58,257 60,580 59,814
--------- --------- ---------
Income from operations ............................. 29,186 37,811 36,428
Income from securities transactions, net ........... 5,828 3,118 18,504
--------- --------- ---------
Income before income taxes ......................... 35,014 40,929 54,932
Provision for income taxes ......................... 14,691 16,838 21,234
--------- --------- ---------
Net income ..................................... $ 20,323 $ 24,091 $ 33,698
Retained earnings, at beginning of year ............ 163,416 149,304 125,585
Dividends declared ................................. (9,979) (9,979) (9,979)
--------- --------- ---------
Retained earnings, at end of year .................. $ 173,760 $ 163,416 $ 149,304
========= ========= =========
Earnings per share, basic and fully diluted ........ $ 2.04 $ 2.41 $ 3.38
========= ========= =========
SEE INDEPENDENT AUDITOR'S REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
23
VALUE LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED APRIL 30,
2002 2001 2000
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................... $ 20,323 $ 24,091 $ 33,698
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation and amortization ........................................ 3,113 3,090 2,523
Amortization of bond discounts ....................................... (4) -- --
Deferred income taxes ................................................ 1,049 (654) 703
Gains on sales of trading securities
and securities held for sale ........................................ (3,277) (1,278) (13,497)
Unrealized (gains)/losses on trading securities ...................... 258 2,842 (1,112)
Other ................................................................ 6 348 2
Changes in assets and liabilities:
Increase/(decrease) in unearned revenue ............................. 1,113 (1,590) (1,984)
Decrease in deferred charges ........................................ (277) (277) (278)
Increase/(decrease) in accounts payable
and accrued expenses ............................................... (1,900) (1,446) 1,320
(Decrease)/increase in accrued salaries ............................. (432) 228 298
(Decrease) in accrued taxes payable ................................. (395) (66) (252)
(Increase)/decrease in prepaid expenses and
other current assets ............................................... 70 (159) (202)
(Increase)/decrease in accounts receivable .......................... 144 279 (1,108)
(Increase)/decrease in receivable from affiliates ................... 354 240 (474)
------------ ------------ ------------
Total adjustments .................................................. (178) 1,557 (14,061)
------------ ------------ ------------
Net cash provided by operations ........................................ 20,145 25,648 19,637
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of long term securities .......................... 56,102 64,408 18,467
Purchases of long term securities .................................... (14,279) (36,941) (18,452)
Purchases of securities held to maturity ............................. (25,074) -- --
Proceeds from sales of trading securities ............................ 37,536 65,229 35,939
Purchases of trading securities ...................................... (31,414) (67,016) (36,640)
Acquisition of property, and equipment, net .......................... (447) (721) (395)
Expenditures for capitalized software ................................ (1,649) (2,145) (2,470)
------------ ------------ ------------
Net cash provided by/(used in) investing activities .................... 20,775 22,814 (3,551)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of treasury stock ................................. 35 9 --
Dividends paid ....................................................... (9,978) (9,980) (9,979)
------------ ------------ ------------
Net cash (used in) financing activities ................................ (9,943) (9,971) (9,979)
------------ ------------ ------------
Net increase in cash and cash equivalents .............................. 30,977 38,491 6,107
Cash and cash equivalents at beginning of period ....................... 86,424 47,933 41,826
------------ ------------ ------------
Cash and cash equivalents at end of period ............................. $ 117,401 $ 86,424 $ 47,933
============ ============ ============
SEE INDEPENDENT AUDITOR'S REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
24
VALUE LINE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED APRIL 30, 2002, 2001 AND 2000
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ACCUMULATED
NUMBER PAR VALUE ADDITIONAL OTHER
OF COMMON OF COMMON PAID-IN TREASURY COMPREHENSIVE RETAINED COMPREHENSIVE
SHARES SHARES CAPITAL STOCK INCOME EARNINGS INCOME TOTAL
------------------------------------------------------------------------------------------------
BALANCE AT APRIL 30, 1999 ......... 9,978,625 $1,000 $959 ($411) $125,585 $39,770 $166,903
Comprehensive income
Net income ....................... $33,698 33,698 33,698
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities .......... 20,244 20,244 20,244
-------
Comprehensive income .............. $53,942
=======
Dividends declared ................ (9,979) (9,979)
---------------------------------------- -------------------------------------
BALANCE AT APRIL 30, 2000 ......... 9,978,625 $1,000 $959 ($411) $149,304 $60,014 $210,866
======================================== =====================================
Comprehensive income
Net income ....................... $24,091 24,091 24,091
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities .......... (24,781) (24,781) (24,781)
-------
Comprehensive income .............. ($690)
=======
Exercise of stock options ......... 300 4 5 9
Dividends declared ................ (9,979) (9,979)
======================================== =====================================
BALANCE AT APRIL 30, 2001 ......... 9,978,925 $1,000 $963 ($406) $163,416 $35,233 $200,206
======================================== =====================================
Comprehensive income
Net income ....................... $20,323 20,323 20,323
Other comprehensive income,
net of tax:
Change in unrealized
gains on securities .......... (14,580) (14,580) (14,580)
-------
Comprehensive income .............. $5,743
=======
Exercise of stock options ......... 1,200 12 23 35
Dividends declared ................ (9,979) (9,979)
---------------------------------------- -------------------------------------
BALANCE AT APRIL 30, 2002 ......... 9,980,125 $1,000 $975 ($383) $173,760 $20,653 $196,005
======================================== =====================================
SEE INDEPENDENT AUDITOR'S REPORT AND ACCOMPANYING NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
25
VALUE LINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Value Line, Inc. (the "Company") is incorporated in New York State and carries
on the investment periodicals and related publications and investment management
activities formerly performed by Arnold Bernhard & Co., Inc. (the "Parent")
which owns approximately 86% of the issued and outstanding common stock of the
Company.
PRINCIPLES OF CONSOLIDATION: The consolidated 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: Subscription revenues are recognized ratably over the terms
of the subscriptions. Accordingly, the amount of subscription fees to be earned
by servicing subscriptions after the date of the balance sheet is shown as
unearned revenue. The unearned revenue shown on the balance sheet is a
noncurrent deferred credit. This classification recognizes that the fulfillment
of this commitment will require the use of significantly fewer current assets
than the amount of the unearned revenues and, accordingly, combining it with
current liabilities would significantly understate the liquidity position of the
Company.
Investment management fees are recorded as revenue as the related services are
performed.
VALUATION OF SECURITIES: The Company's long-term securities portfolio, which
consists of shares of the Value Line Mutual Funds and government debt
securities, is accounted for in accordance with Statement of Financial
Accounting Standards No.115, "Accounting for Certain Investments in Debt and
Equity Securities" .The Valuel Line Mutual Funds are valued at market with
unrealized gains and losses on these securities reported, net of applicable
taxes, as a separate component of Shareholders' Equity. Investments in
government debt securities that are held to maturity are carried at amortized
cost. Realized gains and losses on sales of the long term securities are
recorded in earnings on trade date and are determined on the identified cost
method.
Trading securities held by the Company are valued at market with unrealized
gains and losses included in earnings.
GOODWILL: Goodwill represents the excess of the purchase price over the fair
value of net assets acquired and is being amortized over a period of 14 years.
ADVERTISING EXPENSES: The Company expenses advertising costs as incurred.
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 Statements of Cash
Flows, the Company considers all cash held at banks and short term liquid
investments with an original maturity of less than three months to be cash and
cash equivalents. As of April 30, 2002 and 2001, cash equivalents included
$116,885,000 and $86,011,000, respectively, invested in the Value Line money
market funds.
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 -- SUPPLEMENTARY CASH FLOW INFORMATION:
Cash payments for income taxes were $14,034,000, $17,561,000, and $20,713,000,
in fiscal 2002, 2001, and 2000, respectively. Interest payments of $6,000,
$6,000, and $17,000, were made in fiscal 2002, 2001, and 2000, respectively.
26
NOTE 3 -- RELATED PARTY TRANSACTIONS:
The Company acts as investment adviser and manager for fifteen open-ended
investment companies, the Value Line Family of Funds (see Note 4). The Company
earns investment management fees based upon the average daily net asset values
of the respective funds. Effective July 1, 2000, the Company received service
and distribution fees under rule 12b-1 of the Investment Company Act of 1940
from thirteen of the fifteen mutual funds for which Value Line is the adviser.
The Company also earns brokerage commission income, net of clearing fees, on
securities transactions executed by Value Line Securities, Inc. on behalf of the
funds that are cleared on a fully disclosed basis through non-affiliated
brokers. For the years ended April 30, 2002, 2001, and 2000, investment
management fees, service and distribution fees and brokerage commission income,
net of clearing fees, amounted to $32,296,000, $39,296,000,and $33,658,000,
respectively. These amounts include service and distribution fees of $6,269,000,
$6,366,000,and $799,000, respectively. The related receivables from the funds
for management advisory fees and service and distribution fees included in
Receivable from affiliates were $2,417,000, and $2,697,000 at April 30, 2002 and
2001, respectively.
For the years ended April 30, 2002, 2001, and 2000, the Company was reimbursed
$539,000, $549,000 and $519,000, respectively, for payments it made on behalf of
and services it provided to the Parent. At April 30, 2002 and 2001, receivable
from affiliates included a receivable from the Parent of $47,000 and $46,000,
respectively. For the years ended April 30, 2002, 2001, and 2000, the Company
made federal income tax payments to the Parent amounting to $11,498,000,
$14,250,000 and $17,460,000, respectively. At April 30, 2002, prepaid expenses
and other current assets included a receivable of $24,000 from the Parent for
federal income taxes. At April 30, 2001, accrued taxes payable include a federal
tax liability owed to the Parent in the amount of $302,000. These data are in
accordance with the tax sharing arrangement described in Note 6.
NOTE 4 -- INVESTMENTS:
TRADING SECURITIES:
Securities held by the Company had an aggregate cost of $3,508,000 and a market
value of $3,624,000 at April 30, 2002, and an aggregate cost of $14,981,000 and
a market value of $15,360,000 at April 30, 2001. Net realized trading losses
amounted to $5,355,000 during the year ended April 30, 2002. Net realized
trading losses amounted to $3,143,000 during the year ended April 30, 2001. Net
realized trading gains related to equity securities aggregated $3,188,000 during
fiscal 2000. The net change in unrealized gains for the periods ended April 30,
2002, 2001 and 2000 were $264,000, $2,842,000 and $1,112,000, respectively.
LONG-TERM SECURITIES AVAILABLE FOR SALE:
The aggregate cost of the long-term securities, which are invested in the Value
Line mutual funds, was $61,451,000 and the market value was $93,226,000 at April
30, 2002. The aggregate cost of the long- term securities at April 30, 2001 was
$94,579,000 and the market value was $148,784,000. The decrease in gross
unrealized gains on these securities of $22,431,000 and $38,125,000, net of
deferred taxes of $7,851,000 and $13,344,000 were included in shareholders'
equity at April 30, 2002 and 2001. The increase in gross unrealized gains on
these securities of $31,144,000 net of the change in deferred taxes of
$10,900,000, were included in shareholders' equity at April 30, 2000.
Realized capital gains from the sales of these securities were $8,633,000,
$3,907,000,and $10,748,000 during fiscal years 2002, 2001 and 2000,
respectively. The proceeds received from the sales of these securities during
the fiscal years ended April 30, 2002, 2001, and 2000 were $56,102,000 and
$64,408,000, $18,467,000, respectively.
27
GOVERNMENT DEBT SECURITIES HELD TO MATURITY:
The Company's investment in debt securities are held to maturity and valued at
amortized cost. The amortized cost and aggregate fair value at April 30, 2002
were $35,818,000 and $35,881,000 for U.S. government debt securities which
mature as follows:
(In Thousands)
Amortized Gross Unrealized
Cost Fair Value Holding Gains
Due in 1-2 years $8,018 $8,057 $39
Due in 2-5 years $27,800 $27,824 $24
------------------------------------------
Total investment in debt securities $35,818 $35,881 $63
==========================================
The average yield on the U.S. Government debt securities held to maturity at
April 30, 2002 was 3.76%.
For the years ended April 30, 2002, 2001, and 2000, income from securities
transactions also included $2,487,000, $4,996,000,and $3,871,000, of dividend
income; $343,000, $34,000, and $36,000, of interest income; and $6,000, $6,000
and $17,000, of related interest expense, respectively Investment income for
fiscal year 2001 included gains related to derivative financial futures
contracts in the amount of $513,000, and in fiscal 2000 losses were $439,000.
NOTE 5 -- PROPERTY AND EQUIPMENT:
Property and equipment are carried at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
assets, or in the case of leasehold improvements, over the remaining terms of
the leases. For income tax purposes, depreciation of furniture and equipment is
computed using accelerated methods and buildings and leasehold improvements are
depreciated over prescribed, extended tax lives.
Property and equipment consist of the following:
APRIL 30,
2002 2001
------- -------
(IN THOUSANDS)
Land ........................................ $ 726 $ 726
Building and leasehold improvements ......... 7,834 7,826
Furniture and equipment ..................... 10,356 9,929
------- -------
18,916 18,481
Accumulated depreciation and amortization ... (10,425) (9,058)
------- -------
$ 8,491 $ 9,423
======= =======
28
NOTE 6 -- FEDERAL, STATE AND LOCAL INCOME TAXES:
The Company computes its tax 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:
YEARS ENDED APRIL 30,
2002 2001 2000
------- ------- -------
(IN THOUSANDS)
Current:
Federal .................... $11,232 $14,253 $17,529
State and local ............ 2,502 3,455 2,831
------- ------- -------
13,734 17,708 20,360
Deferred:
Federal .................... 960 (899) 776
State and local ............ (3) 29 98
------- ------- -------
957 (870) 874
------- ------- -------
$14,691 $16,838 $21,234
======= ======= =======
Deferred 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)/asset are as follows:
YEARS ENDED APRIL 30,
2002 2001 2000
-------- -------- --------
(IN THOUSANDS)
Unrealized gains on securities held for sale ...... ($11,121) ($18,972) ($32,315)
Unrealized gains on trading securities ............ (40) (133) (1,127)
Relocation reserve ................................ -- -- 64
Depreciation and amortization ..................... (575) (729) (568)
Deferred charges .................................. 451 561 703
Other, net ........................................ (1,365) (179) (206)
-------- -------- --------
($12,650) ($19,452) ($33,449)
======== ======== ========
Included in deferred income taxes in total current assets are deferred state and
local income taxes of $112,000 and $109,000 at April 30, 2002 and 2001,
respectively. At April 30, 2002 and 2001, deferred income taxes in current
assets also included $463,000 and $633,000 of deferred federal income taxes
respectively.
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:
YEARS ENDED APRIL 30,
2002 2001 2000
------- ------- -------
(IN THOUSANDS)
Tax expense at the U.S. statutory rate ............... $12,255 $14,325 $19,226
Increase (decrease) in tax expense from:
State and local income taxes, net of
federal income tax benefit ........................ 1,629 2,246 1,904
Effect of tax exempt income and dividend
deductions ........................................ (28) (108) (110)
Other, net ......................................... 835 375 214
------- ------- -------
$14,691 $16,838 $21,234
======= ======= =======
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.
29
NOTE 7 -- 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 upon the salaries of
eligible employees and the amount of consolidated net operating income as
defined in the Plan. Plan expense, included in salaries and employee benefits in
the Consolidated Statements of Income and Retained Earnings, for the years ended
April 30, 2002, 2001, and 2000 was $1,171,000, $1,180,000, and $1,189,000
respectively.
NOTE 8 -- INCENTIVE STOCK OPTIONS:
On April 17, 1993, the Incentive Stock Option Plan expired. On the date of
expiration, 22,550 options available for grant were cancelled. Information on
the 1983 Incentive Stock Option Plan for the three years ended April 30, 2002,
is as follows:
NUMBER OF OPTION
SHARES PRICES
----------- -----------
Outstanding at April 30, 1999 ............... 2,975 $29.75
Granted .................................. --
Exercised ................................ --
Cancelled ................................ --
----------
Outstanding at April 30, 2000 ............... 2,975 $29.75
Granted .................................. --
Exercised ................................ (300) $29.75
Cancelled ................................ --
----------
Outstanding at April 30, 2001 ............... 2,675 $29.75
Granted .................................. --
Exercised ................................ (1,200) $29.75
Cancelled ................................ --
----------
Outstanding at April 30, 2002 ............... 1,475 $29.75
==========
Options outstanding at April 30, 2002 expire at various dates through March
2003. At April 30, 2002, 1,475 of the outstanding options were exercisable. Of
the common stock held in treasury at April 30, 2002, 1,475 shares were held for
exercise of stock options.
NOTE 9 -- TREASURY STOCK:
Treasury stock, at cost, for the three years ended April 30, 2002, consists of
the following:
SHARES AMOUNT
---------- -------------
(IN THOUSANDS)
Balance April 30, 1999 ....................... 21,375 $411
Exercise of incentive stock options ......... -- --
--------- ---------
Balance April 30, 2000 ....................... 21,375 $411
Exercise of incentive stock options ......... (300) (5)
--------- ---------
Balance April 30, 2001 ....................... 21,075 $406
Exercise of incentive stock options ......... (1,200) (23)
--------- ---------
Balance April 30, 2002 ....................... 19,875 $383
========= =========
NOTE 10 -- LEASE COMMITMENTS:
On June 4, 1993, the Company entered into a 15 year lease agreement to provide
primary office space. The lease includes free rental periods as well as
scheduled base rent escalations over the term of the lease. The total amount of
the base rent payments is being charged to expense on the straight-line method
over the term of the lease. The Company has recorded a deferred charge on its
Consolidated Balance Sheets to reflect the excess of annual rental expense over
cash payments since
30
inception of the lease. On September 14, 2000, the Company amended its lease for
primary office space and returned to the landlord approximately 6,000 square
feet of excess office capacity, reducing the Company's future minimum lease
payments, accordingly.
Future minimum payments, exclusive of forecasted increases in real estate
taxes and wage escalations, under operating leases for office space, with
remaining terms of one year or more, are as follows:
Year ended April 30: (IN THOUSANDS)
2003 ..................... $1,588
2004 ..................... 1,754
2005 ..................... 1,788
2006 ..................... 1,788
2007 ..................... 1,788
Thereafter ............... 1,169
----------
$9,875
==========
Rental expense for the years ended April 30, 2002, 2001 and 2000 under operating
leases covering office space was $1,373,000, $1,446,000, and $1,490,000,
respectively.
NOTE 11 -- BUSINESS SEGMENTS:
The Company operates two reportable business segments: Publishing and Investment
Management Services. The publishing segment produces investment related
periodicals in both print and electronic form. The investment management segment
provides advisory services to mutual funds, institutional and individual clients
as well as brokerage services for the Value Line family of mutual funds. 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 related to corporate assets, between the
two reportable segments.
DISCLOSURE OF REPORTABLE SEGMENT PROFIT AND SEGMENT ASSETS (IN THOUSANDS)
APRIL 30, 2002
----------------------------------------
INVESTMENT
MANAGEMENT
PUBLISHING SERVICES TOTAL
---------- -------- -----
Revenues from external customers .... $53,114 $34,329 $87,443
Intersegment revenues ............... 216 -- 216
Income from securities transactions . 58 5,770 5,828
Depreciation and amortization ....... 3,013 54 3,067
Segment profit ...................... 16,410 12,822 29,232
Segment assets ...................... 19,614 248,188 267,802
Expenditures for segment assets ..... 2,069 27 2,096
APRIL 30, 2001
----------------------------------------
INVESTMENT
MANAGEMENT
PUBLISHING SERVICES TOTAL
---------- -------- -----
Revenues from external customers .... $56,042 $42,349 $98,391
Intersegment revenues ............... 143 -- 143
Income from securities transactions . 240 2,878 3,118
Depreciation and amortization ....... 2,951 90 3,041
Segment profit ...................... 18,192 19,668 37,860
Segment assets ...................... 20,836 248,905 269,741
Expenditures for segment assets ..... 2,733 122 2,855
31
RECONCILIATION OF REPORTABLE SEGMENT REVENUES,
OPERATING PROFIT AND ASSETS
(IN THOUSANDS)
2002 2001
-------- --------
REVENUES
Total revenues for reportable segments ......... $ 87,659 $ 98,534
Elimination of intersegment revenues ........... (216) (143)
-------- --------
Total consolidated revenues .................... $ 87,443 $ 98,391
======== ========
SEGMENT PROFIT
Total profit for reportable segments ........... $ 35,060 $ 40,978
Less: Depreciation related to corporate assets . (46) (49)
-------- --------
Income before income taxes ..................... $ 35,014 $ 40,929
======== ========
ASSETS
Total assets for reportable segments ........... $267,802 $269,741
Corporate assets ............................... 933 1,251
-------- --------
Consolidated total assets ...................... $268,735 $270,992
======== ========
NOTE 12 -- NET CAPITAL:
The Company's wholly owned subsidiary, Value Line Securities, Inc. is subject to
the net capital provisions of Rule 15c3-1 under the Securities Exchange Act of
1934, which requires the maintenance of minimum net capital of $100,000 or
one-fifteenth of aggregate indebtedness, if larger. Additionally, dividends may
only be declared if aggregate indebtedness is less than twelve times net
capital.
At April 30, 2002, the net capital, as defined of Value Line Securities, Inc. of
$14,344,000 exceeded required net capital by $13,495,000 and the ratio of
aggregate indebtedness to net capital was .90 to 1.
NOTE 13 -- DISCLOSURE OF CREDIT RISK OF FINANCIAL INSTRUMENTS WITH OFF BALANCE
SHEET RISK:
In the normal course of business, the Company enters into contractual
commitments, principally financial futures contracts for securities indices.
Financial futures contracts provide for the delayed delivery of financial
instruments for which the seller agrees to make delivery at a specified future
date, at a specified price or yield. The contract or notional amount of these
contracts reflects the extent of involvement the Company has in these contracts.
At April 30, 2002 and 2001, the Company did not have any investment in financial
futures contracts. The average fair value of the commitments during fiscal 2001
was $196,000. The Company limits its credit risk associated with such
instruments by entering into exchange traded future contracts.
The Company executes, as agent, securities transactions on behalf of the Value
Line mutual funds. If either the mutual fund or a counter party fail to perform,
the Company may be required to discharge the obligations of the nonperforming
party. In such circumstances, the Company may sustain a loss if the market value
of the security is different from the contract value of the transaction.
No single customer accounted for a significant portion of the Company's sales in
2002, 2001 or 2000, nor accounts receivable for 2002 or 2001.
NOTE 14 -- COMPREHENSIVE INCOME:
During the fiscal year 1999, the Company adopted FASB statement 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.
32
At April 30, 2002, 2001, and 2000, the Company held long term securities
classified as available for sale. The change in valuation of these securities,
net of deferred taxes has been recorded in the Company's Consolidated Balance
Sheets. The decrease in gross unrealized gains were $22,431,000 and $38,125,000
and the change in the related deferred taxes were $7,851,000 and $13,344,000 for
the years ended April 30, 2002 and 2001. The increase in gross unrealized gains
was $31,144,000 and the change in the related deferred taxes was $10,900,000
during the year ended April 30, 2000.
NOTE 15 -- ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR INTERNAL
USE:
During fiscal year 1999, the Company adopted the provisions of the Statement of
Position 98-1, (SOP 98-1), "Accounting for the Costs of Computer Software
Developed for Internal Use". SOP 98-1 is effective for tax years ending after
December 31, 1998.
The SOP 98-1 requires companies to capitalize as long-lived assets many of the
costs associated with developing or obtaining software for internal use and
amortize those costs over the software's estimated useful life in a systematic
and rational manner.
At April 30, 2002 and 20001 the Company capitalized $949,000 and $1,032,000 of
costs, net of amortization, related to the development of software for internal
use. Such costs are capitalized and amortized over the expected useful life of
the asset which is approximately 3 years. Amortization expense for the years
ended April 30, 2002, 2001 and 2000 was $917,000, $703,000,and $276,000
respectively.
33
VALUE LINE, INC.
SCHEDULE 1-MARKETABLE SECURITIES
AS OF APRIL 30, 2002
COMMON STOCK NAME NUMBER OF SHARES COST MKT VALUE
- ----------------- ----------------- ----- ---------
ALBANY MOLECULAR RESH ............ 181 $5,036 $4,389
ALLOY INC. ....................... 325 5,080 4,111
AMERICAN AXLE .................... 179 5,036 5,907
ANNTAYLOR STORES ................. 107 5,027 4,651
ARMOR HOLDINGS ................... 194 5,009 4,918
CAREMARK RX ...................... 256 5,005 5,504
CENDANT CORP. .................... 257 5,006 4,623
CHILDREN'S PLACE ................. 148 5,070 5,124
COOPER TIRE & RUBBER ............. 212 5,096 5,258
COTT CORP. ....................... 245 5,022 4,954
CULP INC. ........................ 625 5,166 5,638
DELUXE CORP. ..................... 112 4,993 4,915
DILLARDS "A" ..................... 201 4,989 4,922
DOLE FOOD ........................ 151 5,099 5,024
FACTSET RES SYS .................. 152 5,003 5,294
GETTY IMAGES ..................... 140 4,959 4,873
GTECH HOLDINGS ................... 87 5,008 5,212
HARRAH'S ENTERTAINMT ............. 128 5,008 6,292
HEARTLAND EXPRESS ................ 228 5,037 4,467
INTERMET ......................... 500 5,185 5,485
JO-ANN STORES .................... 334 5,003 6,473
L-3 COMMUNICATIONS HLDGS ......... 41 4,971 5,239
LENNAR CORP. ..................... 89 5,006 4,943
NISSAN MOTOR (ADR) ............... 360 5,003 5,609
NORDSTROM ........................ 197 5,055 4,622
OSTEOTECH ........................ 617 4,995 4,936
PRG-SCHULTZ INT'L ................ 379 4,918 5,200
RIGHT MGMT CONSULTANTS ........... 207 5,222 5,527
ROSS STORES ...................... 133 5,000 5,401
RUSSELL 2000 ISHARES ............. 28,163 2,746,760 2,852,912
S&P 500 ISHARES .................. 5,460 584,766 589,407
SHARPER IMAGE .................... 246 5,129 5,508
SHOPKO STORES .................... 287 4,998 5,978
STANDARD REGISTER ................ 157 5,182 5,024
STAPLES INC. ..................... 241 4,960 4,813
TBC CORP. ........................ 333 4,985 4,962
UNIVERSAL FOREST PRODUCTS ........ 212 5,056 5,300
TOTAL MARKETABLE SECURITIES $3,507,845 $3,623,414
==========================
34
VALUE LINE, INC.
SCHEDULE XIII-OTHER INVESTMENTS:4/30/2002
MUTUAL FUND AND STOCK INVESTMENTS:
- ---------------------------------- HISTORICAL
COST MARKET VALUE
---- ------------
The Value Line Fund, Inc. .................................................... $ 1,500,000 $ 1,501,488
The Value Line Special Situations Fund, Inc. ................................. 2,250,000 2,305,945
The Value Line Income and Growth Fund, Inc. .................................. 1,273,374 1,737,816
The Value Line Leveraged Growth Investors, Inc. .............................. 8,531,084 15,153,494
The Value Line U.S. Government Securities Fund, Inc. ......................... 1,185 1,272
The Value Line Tax Exempt National Bond Fund, Inc. ........................... 2,238,693 2,348,171
The Value Line New York Tax Exempt Trust ..................................... 2,033,252 2,031,525
The Value Line Aggressive Income Trust ....................................... 1,167,890 1,259,447
The Value Line Emerging Opportunity Fund, Inc. ............................... 13,898,460 23,391,697
The Value Line Asset Allocation Fund, Inc. .................................. 21,133,895 33,877,517
The Value Line U.S. Multinational Company Fund, Inc. ......................... 7,423,597 9,617,218
300 Shares of National Association of Securities Dealers, Inc. ............... 3,300 3,300
------------------------------------------
TOTAL MUTUAL FUND AND STOCK SECURITIES ....................................... $ 61,454,730 $ 93,228,890
OTHER LONG TERM SECURITIES:
- -------------------------- HISTORICAL AMORTIZED
COST COST
---- ------------
U.S. Treasury Notes 4.25% .................................................... 3,063,750 3,041,250
U.S. Treasury Notes 3.50% .................................................... 4,820,703 4,838,632
U.S. Treasury Notes 2.75% .................................................... 4,969,530 4,977,148
GNMA 5.5% .................................................................... 5,967,188 5,901,695
GNMA 6% ...................................................................... 1,000,938 1,000,938
Federal Home Loan Bank ....................................................... 11,055,000 11,055,000
Municipal Bonds .............................................................. 5,000,000 5,000,000
------------------------------------------
Total Other Long Term Securities ............................................. $ 35,877,109 $ 35,814,663
Total Long Term Securities ................................................... $ 97,331,839 $ 129,043,553
==========================================
35