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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 2O549
FORM 10-K
Annual Report Pursuant to Section l3 or l5(d) of the
Securities Exchange Act of l934
For the fiscal year ended April 3O, l995 Commission File Number 0-ll3O6
VALUE LINE, INC.
(Exact name of registrant as specified in its charter)
New York l3-3l39843
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
220 East 42nd Street, New York, N.Y. lOOl7-5891
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 907-1500
--------------
Securities registered pursuant to Section l2(b) of the Act:
None
Securities registered pursuant to Section l2(g) of the Act:
Common Stock, $.10 par value
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months and (2) has been subject to such filing
requirements for the past 9O 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 July 13, 1995 was $62,932,800.
There were 9,976,450 shares of the Company's Common Stock outstanding at
July 13, 1995.
DOCUMENTS INCORPORATED BY REFERENCE.
The following documents are incorporated by reference with this filing:
Part III: l995 Definitive Proxy Statement.
1
Part I
Item l. BUSINESS.
Value Line, Inc. (the "Company"), a New York corporation, was organized in
l982 and is the successor to substantially all of the operations of Arnold
Bernhard & Company, Inc. ("AB&Co.").
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 The Value Line
Investment Survey, one of the nation's major periodical investment services, as
well as The Value Line Mutual Fund Survey, The Value Line No-Load Fund Advisor,
The Value Line OTC Special Situations Service, The Value Line Options Survey,
The Value Line Convertibles Survey, The Value Line Investment Survey--Canadian
Edition, The Value Line Investment Survey--Expanded Edition, and The Value
Line Industry Review which is available in electronic format. The Company's
periodical publications are direct marketed through media and direct mail to
retail and institutional investors. The Company is investment adviser for the
Value Line Family of Mutual Funds, which on April 30, l995, included 15
open-end investment companies with various investment objectives. In addition,
the Company manages investments for private and institutional clients and,
through VLP, provides financial database information through computer media and
computer time-sharing facilities (DataFile and other services). VLP also
markets personal computer software services (VALUE/SCREEN) and other electronic
products for institutional investors. The Company is registered with the
Securities and Exchange Commission as an investment adviser under the
Investment Advisers Act of l94O.
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 publishing and investment management
businesses. Compupower Corporation, another subsidiary, serves the subscription
fulfillment needs of publishers. 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.
A. Investment Information and Publications.
VLP publishes investment related publications and produces electronic
products described below:
2
l. 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. The key evaluations for each stock covered are
"Timeliness(TM)" and "Safety." "Timeliness(TM)" relates to the probable
relative price performance of a stock over the next six to twelve months, as
compared to the rest of the approximately l,7OO covered stocks. Rankings are
updated each week and range from Rank l for the expected best performing
stocks to Rank 5 for the expected poorest performers. "Safety" rankings are a
measure of risk and are based primarily on the issuer's relative financial
strength and the stock's price stability. "Safety" ranges from Rank l for the
least risky stocks to Rank 5 for the riskiest. Value Line employs
approximately 90 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 annual subscription price of The Value Line Investment Survey
is $525.
The Value Line Mutual Fund Survey provides full-page profiles of 1500
mutual funds and condensed coverage of an additional 550 funds. Every two
weeks subscribers receive an updated issue, containing about 150 fund
reports, plus a "Performance & Index" providing current rankings and
performance figures for the full universe of more than 2,000 funds. The Value
Line Mutual Fund Survey also includes semi-annual profiles and analyses on
100 of the nation's major fund families. Additionally, subscribers receive a
12-page periodical monthly newsletter, containing articles of general
interest to subscribers and readers "The Value Line Mutual Fund Advisor,"
with articles on investment trends and issues concerning mutual fund
investors. Funds are ranked for both risk and overall risk-adjusted
performance using strictly quantitative means. A large binder is provided to
house the periodic fund reports. A second binder is provided to full-term
subscribers for the periodical monthly newsletter. The annual subscription
price of The Value Line Mutual Fund Survey is $295.
The Company instituted on-line distribution of individual one-page reports
from The Value Line Investment Survey and The Value Line Mutual Fund Survey
through the CompuServe on-line network.
The Value Line No-Load Fund Advisor is a periodical 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. The annual subscription price of The
Value Line No-Load Fund Advisor is $107.
3
The Value Line Investment Survey - Canadian Edition is a periodical
weekly investment related publication that ranks 110 stocks (75 Canadian and
35 foreign) for future relative performance utilizing the Value Line
Timeliness(TM) Ranking System, similar to the Investment Survey. The
publication is marketed exclusively in Canada. The annual subscription price
of The Value Line Investment Survey - Canadian Edition is $260 (Canadian).
The Value Line OTC Special Situations Service, published periodically 24
times a year, concentrates on fast-growing, smaller companies whose stocks
are perceived by Company analysts as having exceptional appreciation
potential. The annual subscription price of The Value Line OTC Special
Situations Service is $390.
The Value Line Options Survey, a periodical weekly service published 48
times a year, evaluates and ranks for future performance the most active
options listed on United States exchanges (approximately 8,000). The annual
subscription price of The Value Line Options Survey is $445. An electronic
version of this publication, The Value Line Daily Options Survey was
introduced during the latter part of fiscal 1995.
The Value Line Convertibles Survey, a periodical weekly service
published 48 times a year, evaluates and ranks for future market performance
approximately 58O convertible securities (bonds and preferred stocks) and
approximately 75 warrants. The annual subscription price of The Value Line
Convertibles Survey is $625.
The Value Line Industry Review, a periodical monthly publication now
available only in electronic form, evaluates 104 industry groups for
relative performance. Providing detailed and extensive sector analysis, it is
designed to meet the needs of professional portfolio managers. The annual
subscription price of The Value Line Industry Review is $1,075.
The Total Return Service is a customized data service derived from The
Value Line Industry Review publication. 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.
The Expanded Edition of The Value Line Investment Survey was introduced by
the Company in April 1995. It provides detailed descriptions of 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 Standard Edition, the Expanded Edition has its own "Summary &
Index" providing updated 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. A new combined Index, published quarterly, allows the
subscriber to locate easily a specific stock among the 3,500 stocks covered.
4
The Expanded Edition includes a number of new as well as standard features:
- - A new 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 Expanded 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.
- - An expanded Business Section provides detail about companies, focusing on
business lines and strategies.
- - An enlarged Assets and Liabilities Section provides long-term statistics
and a more complete balance sheet on each company.
- - New Total-Return Statistics provide an "at a glance" look at a particular
stock's performance -- appreciation plus dividends -- over the past three
months, six months, and one, three, and five years.
The principal difference between the Expanded Edition and the Standard
Edition is that the Expanded Edition does not include financial forecasts or
analysts' comments. This modification has allowed Value Line to offer this
service at a low price.
The cost of the Expanded Edition to current subscribers is $125 per year
and $650 per year for new subscribers combining both Editions.
2. Electronic Products:
VALUE/SCREEN III is a data and software service for screening common
stocks. It is intended for use by investors with personal computers and is sold
primarily to retail investors. It provides extensive financial data on about
1,600 companies covered by The Value Line Investment Survey. Users can screen on
as many as 49 variables for companies' financial performance and for investment
objectives.
Value Line DataFile contains historic annual and quarterly financial
records for more than 5,400 companies in numerous industries, including air
transport, industrial services, beverage, machinery, bank, insurance and
finance, savings and loan associations, toys, and securities brokers. DataFile
is sold to the institutional market. The Company 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, as well as a Convertible
Securities File, The Value Line Industry Review, and custom services.
5
B. Investment Management.
As of April 30, 1995, the Company was the investment adviser for 15 mutual
funds registered under the Investment Company Act of l94O. Value Line
Securities, Inc., a wholly owned subsidiary of the Company, underwrites and
distributes shares of 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.
Total net assets of the Value Line Funds at April 30, 1995, were:
(in millions)
The Value Line Fund, Inc. $290
The Value Line Income Fund, Inc. 133
The Value Line Special Situations Fund, Inc. 88
Value Line Leveraged Growth Investors, Inc. 301
The Value Line Cash Fund, Inc. 354
Value Line U.S. Government Securities Fund, Inc. 263
Value Line Centurion Fund, Inc. 394
The Value Line Tax Exempt Fund, Inc. 249
Value Line Convertible Fund, Inc. 51
Value Line Aggressive Income Trust 33
Value Line New York Tax Exempt Trust 39
Value Line Strategic Asset Management Trust 728
The Value Line Adjustable
Rate U.S. Gov't Securities Fund, Inc. 10
Value Line Small-Cap Growth Fund, Inc. 13
Value Line Asset Allocation Fund, Inc. 29
------
$2,975
------
The investment advisory contracts between each of the Value Line Funds and
the Company provide that the Company will render investment research, advice,
and supervision 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 securities portfolio
under management.
6
The Company also acts as investment adviser for the Hyperion Value Line
Equity Trust, a Canadian mutual fund, and as sub-advisor to other mutual funds.
C. Operating Subsidiaries:
1. Vanderbilt Advertising Agency, Inc.:
Vanderbilt Advertising places advertising for the Company's publications,
investment advisory services, and mutual funds. Commission income generated by
Vanderbilt Advertising serves to reduce the Company's advertising expenses.
2. Compupower Corporation:
The Company owns approximately 99.9% of the outstanding stock of Compupower
Corporation. Compupower provides computerized subscription fulfillment services
for the Company and for other publishers. For the year ended April 3O, l995,
approximately 24% of Compupower's revenues were derived from services rendered
to the Company.
3. Value Line Securities, Inc.:
Value Line Securities, Inc. ("VLS") is registered as a broker-dealer under
the Securities Exchange Act of l934 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), and VLS derives no revenue from
such sales. Since l986, VLS has effected listed portfolio brokerage transactions
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.
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 l,7OO 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.
E. Investments.
The Company invests in the Value Line Funds and in other marketable
securities.
7
F. Employees.
At July 13, 1995, the Company and its subsidiaries employed 375 persons.
The Company, its affiliates, and its 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. The Company has
imposed rules upon itself and such persons 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,
---------
1995 1994
---- ----
(in thousands)
Investment Information
& Publications $ 11,788 $ 12,385
Investment Management 208,930 182,960
Corporate Assets 44,280 4,976
-------- --------
$264,998 $200,321
======== =========
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 it employs one of the world's largest
independent securities research organizations and that it publishes the
world's largest investment service periodically in terms of number of
subscriptions and annual revenues.
8
I. Executive Officers.
The following table lists the names, ages (at July 13, 1995), 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. Except as
otherwise indicated, 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 60 Chairman of the Board, President,
and Chief Executive Officer of
the Company and AB&Co. Chairman of
the Board of each of the Value Line
Funds.
Samuel Eisenstadt 73 Senior Vice President and Research
Chairman.
David T. Henigson 37 Vice President since 1992 and
Treasurer since 1994; Director
of Compliance and Internal Auditor
of the Company since 1988; Vice
President of each of the Value
Line funds since 1992.
Howard A. Brecher 41 Secretary since 1992; Secretary and
General Counsel of AB&Co. since
1991; attorney with New York
Telephone Company, 1984 to 1991.
9
Item 2. PROPERTIES.
On June 4, 1993, the Company entered into a new lease agreement for
approximately 80,000 square feet that provided for the relocation of its
office space to 220 East 42nd Street, New York, New York. The Company owns a
distribution facility of approximately 23,OOO square feet in North Bergen,
New Jersey. The primary purpose of this location is the distribution of the
Company's publication products. Compupower leases its approximately 8,OOO
- -square foot-office and computer facility in Secaucus, New Jersey. 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, l995.
Part II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded in the over-the-counter market.
The approximate number of record holders of the Registrant's Common Stock at
April 3O, l995 was 990. 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 Paid
Quarter Ended Bid Asked Bid Asked Per Share
- ------------- --------------- -------------- ---------
July 31, 1993...... $33 $34 1/2 $28 $28 $.15
October 31, 1993... 41 1/2 42 31 31 .20
January 31, 1994... 40 40 1/2 32 33 .20
April 30, 1994..... 38 1/2 38 1/2 34 34 1/2 .20
July 31, 1994...... 34 36 31 1/2 33 .20
October 31, 1994... 32 34 1/2 30 1/2 32 1/2 .20
January 31, 1995... 30 1/2 33 29 30 3/4 .20
April 30, 1995..... 31 33 1/4 26 3/4 29 .20
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,
---------------------
1995 1994 1993 1992 1991
(in thousands, except per share amounts)
Revenues:
Investment
information and
publications... $55,912 $57,830 $56,127 $53,745 $48,265
Investment
management
fees........... 23,183 24,220 22,274 20,816 16,388
------ ------ ------ ------ ------
Total revenues $79,095 82,050 78,401 74,561 64,653
Income from
operations...... 29,661 32,464 30,667 30,012 21,197
Net income........ $23,168 $28,902 $27,723 $26,265 $19,597
Earnings per
share........... $2.32 $2.90 $2.78 $2.64 $1.97
Total assets..... $265,042 $200,321 $176,095 $152,457 $130,747
Long term debt.... $ - $ - $ 3,000 $ - $ 3,000
Cash dividends
declared per share $.60 $.80 $.60 $.60 $.60
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Operating Results
The Company's fiscal 1995 earnings were the fourth highest historical
earnings results. This accomplishment comes after three consecutive years of
record earnings. Net earnings for the fiscal year ended April 30, 1995 were
$23,168,000 or $2.32 per share compared with net earnings of $28,902,000 or
$2.90 per share for fiscal year 1994 and net earnings of $27,723,000 or $2.78
per share for fiscal year 1993. The decrease in net earnings for fiscal 1995
from the fiscal 1994 level was primarily due to a decline in Income from
Securities Transactions (formerly called Investment Income) of $7,047,000,
including losses of $4,980,000 related to the Company's strategy of realizing
capital losses in order to reduce income taxes. The $1,550,000 expended in
support of The Value Line Cash Fund also contributed to the decrease.
11
Revenues of $79,094,000 for fiscal 1995 compare to revenues of $82,050,000
and $78,401,000 for the twelve months ended April 30, 1994 and 1993,
respectively. Publication revenues of $55,912,000 for the fiscal year ended
April 30, 1995 decreased 3.3% from fiscal 1994. The decrease in publications
revenues is primarily a result of the decline in subscription levels for the
Value Line Investment Survey due to the uncertain financial market conditions
that existed during the first three quarters of fiscal 1995. Revenues from the
Company's publications for fiscal 1994 of $57,830,000 increased 3.0% from fiscal
1993 with the increase largely attributable to a higher average level of
subscriptions to the Value Line Investment Survey. Investment management fees
and services revenues of $23,182,000 for the fiscal year ended April 30, 1995
decreased 4.3% from the fiscal 1994 level. The decrease in fiscal 1995 was
primarily a result of a 6.5% decline in the average annual assets under
management in the Value Line mutual funds during the fiscal year. Mutual fund
net assets under management at April 30, 1995 were approximately equal to the
net assets under management at April 30, 1994. Investment management fees and
services revenues for fiscal 1994 increased $1,945,000 or 8.7% from the 1993
levels as a result of an increase in the average level of assets under
management in the Company's mutual funds. Mutual fund assets under management at
fiscal year end 1994 increased during the year from $2.9 billion to $3.0
billion.
Expenses for the fiscal year ended April 30, 1995, exclusive of the
non-recurring expense of $1,550,000, were $47,884,000, a decrease of $1,702,000
or 3.4% over last year's level of $49,586,000. Advertising expenses of
$14,749,000 for the twelve months ended April 30, 1995 decreased $3,596,000 from
expenses of $18,345,000 for the comparable period in fiscal 1994. The decrease
in advertising expenses resulted from management's decision to cut back
marketing expenditures during uncertain financial market conditions and increase
sales efforts during improved financial market conditions. Salaries and employee
benefit expenses of $18,935,000 for the twelve months of fiscal 1995 were
$1,662,000 above the prior level of $17,273,000 primarily as a result of the
additional staff in support of the Mutual Fund Survey and the cost of
replacement staff and recruiting fees at Compupower and the Company's investment
management and research divisions. Office and administration expenses of
$8,003,000 increased $838,000 or 11.70% from the prior year's level as a result
of a $445,000 increase in depreciation and amortization expenses associated with
the new office facility and the computer hardware upgrade, $315,000 of
accelerated amortization resulting from a decision to upgrade the fulfillment
software at Compupower and an increase in professional fees. These increases
were offset by a reduction in rent expense of $767,000 or 34% and the receipt of
$617,000 in partial settlement of a lawsuit. Fiscal 1994 expenses also include
the receipt of $408,000 of proceeds from a partial settlement of this lawsuit.
Expenses for fiscal 1994 increased $1,852,000 as compared with fiscal 1993. The
net increase is a result of increased advertising for the Value Line Investment
Survey, the promotional effort and associated personnel costs incurred in
launching the Value Line Mutual Fund Survey, offset by a $3,050,000 expense
incurred in fiscal 1993 related to the Company's relocation.
12
Income from Securities Transactions of $8,659,000 for the fiscal year
ended April 30, 1995 decreased by $7,047,000 or 44.87% from $15,706,000 at
April 30, 1994. In addition to a $764,000 decrease in capital gains produced
by the Hedge, Tilt and Stem portfolios, the Company also incurred losses of
$4,980,000 related to its tax planning strategy. Sales of mutual fund shares,
unrelated to the tax planning strategy, have produced $326,000 of capital
losses this year as compared to a $101,000 gain last fiscal year. The decline
was largely the result of a decision to liquidate an investment in one of the
Company's mutual funds during the latter part of fiscal 1995 in order to
redeploy these assets in other investment vehicles. Investment income in
fiscal 1994 was $15,706,000, an increase of 10.4% from fiscal 1993. The
increase was principally a result of a higher level of capital gains from the
Company's portfolio of marketable securities.
Liquidity and Capital Resources
The Company has liquid resources which are used in its business totaling
$208,324,000 at April 30, 1995. In addition to $90,311,000 in working capital,
the Company has marketable securities with a market value of $118,013,000, that,
although classified as non-current assets are also readily marketable as the
need for capital arises. The Company has entered into agreements to sell and
repurchase U.S. Government Agency debt securities included in working capital
with a market value of $39,099,000 at April 30, 1995. The repurchase obligations
of $36,994,000 have been entered into on a short term basis. The securities,
currently available for sale, mature during calendar year 1997 and are readily
marketable should management decide to liquidate the Company's holdings and
related obligations. The Company's cash position, including its investment in
The Value Line Cash Fund has increased $30,696,000 at April 30, 1995 largely as
a result of the liquidation of certain of the Company's equity and fixed income
holdings in the Value Line Mutual Funds. The holdings in these funds were
sold primarily to realize certain tax benefits during fiscal 1995.
Management believes that the Company's cash and other liquid asset
resources used in its business, together with future cash flows from operations,
will be sufficient to finance current and forecasted operations.
Management anticipates no significant borrowing requirements during fiscal
1995 other than the short term refinancing of the repurchase obligations.
13
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 lO-K:
Page Numbers
Reports of independent accountants 21
Consolidated balance sheets--April 3O, 1995 and 1994 23
Consolidated statements of income and retained earnings
--years ended April 3O, 1995, 1994 and 1993 24
Consolidated statements of cash flows
--years ended April 3O, 1995, 1994 and 1993 25
Notes to the consolidated financial statements 26
Supplementary schedules 35
Quarterly Results (Unaudited):
(in thousands, except per share amounts)
Income Earnings
Total From Net Per
Revenues Operations Income Share
-------- ---------- ------- ------
1995, by Quarter -
First............ $20,214 $ 5,090 $ 3,428 $ .34
Second........... 19,806 7,985 6,961 .70
Third............ 19,425 7,223 7,011 .70
Fourth........... 19,649 9,362 5,768 .58
------- ------- ------- -----
Total $79,094 $29,660 $23,168 $2.32
1994, by Quarter -
First.............. $19,615 $ 9,149 $ 8,370 $ .84
Second............. 20,079 8,712 8,139 .82
Third.............. 21,228 7,503 8,992 .90
Fourth............. 21,128 7,100 3,401 .34
------- ------- ------- -----
Total $82,050 $32,464 $28,902 $2.90
1993, by Quarter -
First.............. $19,030 $ 7,917 $ 5,756 $0.58
Second............. 19,302 9,007 6,692 0.67
Third.............. 19,806 7,446 10,736 1.08
Fourth............. 20,263 6,297 4,539 0.45
------- ------- ------- -----
Total $78,401 $30,667 $27,723 $2.78
14
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.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item is incorporated herein by reference to
the annual proxy statement to be filed with the Securities and Exchange
Commission within 12O days after April 3O, l995, except that the information
pertaining to Executive Officers is set forth in Part I herein under the caption
"Executive Officers of the Registrant."
Item 11. EXECUTIVE COMPENSATION.
Information required by this item is incorporated herein by reference to
the annual proxy statement to be filed with the Securities and Exchange
Commission within 12O days after April 3O, 1995.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information required by this item is incorporated herein by reference to the
annual proxy statement to be filed with the Securities and Exchange Commission
within 12O days after April 3O, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is incorporated herein by reference to
the annual proxy statement to be filed with the Securities and Exchange
Commission within 12O days after April 3O, 1995.
15
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.
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.
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
incorporated by reference to the Registration Statement
- Form S-1 of Value Line, Inc. Part II, Item 16.(a)
10.10 filed with the Securities and Exchange Commission
on April 7, 1983.
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 10K for the year ended April 30,
1994.
20.10 Subsidiaries of the Registrant.
16
(b) Reports on Form 8-K.
No matters were reported on Form 8-K.
(c) Exhibits.
Subsidiaries of the Registrant, Exhibit 22 attached.
17
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 1O-K for the
fiscal year ended April 3O, 1995, to be signed on its behalf by the undersigned,
thereunto duly authorized.
VALUE LINE, INC.
(Registrant)
By: /s/ Jean Bernhard Buttner
____________________________
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
Principal Executive Officer
By: /s/ Stephen R. Anastasio
____________________________
Principal Financial
and Accounting Officer
Dated: July 18, 1995
18
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 1O-K for the
fiscal year ended April 3O, 1995, to be signed on its behalf by the undersigned
as Directors of the Registrant.
/s/Jean Bernhard Buttner /s/William S. Kanaga
- ------------------------ --------------------
Jean Bernhard Buttner William S. Kanaga
/s/Arnold Van H. Bernhard /s/Howard A. Brecher
- ------------------------- --------------------
Arnold Van H. Bernhard Howard A. Brecher
/s/Harold Bernard, Jr. /s/Samuel Eisenstadt
- ---------------------- --------------------
Harold Bernard, Jr. Samuel Eisenstadt
/s/W. Scott Thomas /s/David T. Henigson
- ------------------ --------------------
W. Scott Thomas David T. Henigson
Dated: July 18, 1995
19
Exhibit 22
Subsidiaries of the Registrant
------------------------------
Percentage
of Voting
Securities
State of Owned By
Incorporation Registrant
------------- -----------
Compupower Corporation Delaware 99.9%
Value Line Securities, Inc. New York l00%
The Vanderbilt Advertising
Agency, Inc. New York l00%
Value Line Publishing, Inc. New York 100%
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 and of cash flows
present fairly, in all material respects, the financial position of Value Line,
Inc. and its subsidiaries at April 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
April 30, 1995, in conformity with generally accepted accounting principles.
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 generally accepted auditing standards 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 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
this 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 financial statements.
/s/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
New York, New York
June 26, 1995
21
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration
statement on Form S-8 (No. 2-90593) of our report dated June 26, 1995 relating
to the consolidated financial statements of Value Line, Inc. and subsidiaries
for the years ended April 30, 1995 and 1994, which appears on page 22 of this
Form 10-K. We also consent to the incorporation by reference of our report on
the Financial Statement Schedules, which appears in this Form 10-K.
/S/ PRICE WATERHOUSE LLP
- ------------------------
PRICE WATERHOUSE LLP
New York, New York
July 26, 1995
22
Value Line, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
Apr. 30, Apr. 30,
1995 1994
---------------------
Assets
Current Assets:
Cash and cash equivalents (including short term
investments of $43,608 and $13,992, respectively) $45,026 $14,330
Trading securities 48,187 45,896
Short term securities available for sale 39,099 -
Accounts receivable, net of allowance for doubtful
accounts of $350 and $218, respectively 3,348 5,997
Receivable from affiliates 1,641 1,451
Prepaid expenses and other current assets 1,416 1,804
----------------------
Total current assets 138,717 69,478
Long term securities available for sale 118,013 121,626
Property and equipment, net 7,922 8,859
Goodwill 346 358
----------------------
Total assets $264,998 $200,321
======================
Liabilities and Shareholders' Equity
Current Liabilities:
Loan payable-current portion $ - $3,000
Securities sold under agreements to repurchase 36,994 -
Accounts payable and accrued liabilities 6,358 8,790
Accrued salaries 1,466 1,253
Dividends and interest payable 534 1,995
Accrued taxes payable 3,054 1,268
----------------------
Total current liabilities 48,406 16,306
Unearned revenue 36,789 35,529
Deferred charges 1,808 760
Deferred income taxes 4,806 342
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 940 940
Retained earnings 163,101 145,918
Treasury stock, at cost (24,650 on April 30, 1995,
and April 30, 1994) (474) (474)
Unrealized gains on securities available for sale, net of taxes 8,622 -
----------------------
Total shareholders' equity 173,189 147,384
----------------------
Total liabilities and shareholders' equity $264,998 $200,321
======================
The accompanying notes are an integral part of these financial statements.
Value Line, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Years ended April 30,
1995 1994 1993
-----------------------------------------------
Cash flows from operating activities:
Net income $23,168 $28,902 $27,723
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,293 866 2,035
Accretion of discount (484) - -
(Gains)/losses on sale of trading securities
and securities held for sale 4,077 (6,851) (3,623)
Unrealized (gains)/losses on trading securities (3,445) 1,060 33
Loss on write-down of equipment 166 - -
Deferred income taxes 653 (510) (1,446)
Other - 5 234
Changes in assets and liabilities:
Increase/(decrease) in unearned revenue 1,260 (56) (93)
Increase in deferred charges 1,048 1,121 -
Increase/(decrease) in accounts payable
and accrued expenses (1,676) 642 2,870
Increase in accrued salaries 213 77 71
Increase/(decrease) in interest payable 534 (10) (7)
Increase/(decrease) in accrued taxes payable 955 (366) 493
(Increase)/decrease in prepaid expenses and
other current assets 388 (534) 329
(Increase)/decrease in accounts receivable (735) (1,907) 451
(Increase)/decrease in receivable from affiliates (190) 32 (219)
-----------------------------------------------
Total adjustments 4,057 (6,431) 1,128
-----------------------------------------------
Net cash provided by operating activities 27,225 22,471 28,851
-----------------------------------------------
Cash flows from investing activities:
Proceeds from sales of securities 46,945 6,218 9,490
Purchases of securities (35,374) (30,382) (16,330)
Proceeds from sales of trading securities 74,964 90,761 51,055
Purchases of trading securities (70,708) (77,908) (62,890)
Acquisitions of property and equipment (1,376) (5,838) (541)
-----------------------------------------------
Net cash provided by/(used in) investing activities 14,451 (17,149) (19,216)
-----------------------------------------------
Cash flows from financing activities:
Proceeds from sales of treasury stock - 72 9
Dividends paid (7,980) (7,480) (5,982)
Loan repayment (3,000) - -
-----------------------------------------------
Net cash (used in) financing activities (10,980) (7,408) (5,973)
-----------------------------------------------
Net increase/(decrease) in cash and cash equivalents 30,696 (2,086) 3,662
Cash and cash equivalents at beginning of year 14,330 16,416 12,754
-----------------------------------------------
Cash and cash equivalents at end of year $45,026 $14,330 $16,416
===============================================
The accompanying notes are an integral part of these financial statements.
Value Line, Inc.
Consolidated Statements of Income and Retained Earnings
(in thousands, except per share amounts)
Years ended April 30,
1995 1994 1993
-----------------------------------------------
Revenues:
Investment periodicals and related publications $55,912 $57,830 $56,127
Investment management fees & services 23,182 24,220 22,274
-----------------------------------------------
Total revenues 79,094 82,050 78,401
-----------------------------------------------
Expenses:
Advertising and promotion 14,749 18,345 14,837
Salaries and employee benefits 18,935 17,273 15,775
Printing, paper and distribution 6,197 6,803 6,095
Office and administration 8,003 7,165 7,977
Mutual fund support expenses 1,550 - -
Relocation expenses - - 3,050
-----------------------------------------------
Total expenses 49,434 49,586 47,734
-----------------------------------------------
Income from operations 29,660 32,464 30,667
Income from securities transactions, net 8,659 15,706 14,224
-----------------------------------------------
Income before income taxes 38,319 48,170 44,891
Provision for income taxes 15,151 19,268 17,168
-----------------------------------------------
Net income $23,168 $28,902 $27,723
Retained earnings, at beginning of year 145,918 124,995 103,254
Dividends declared (5,985) (7,979) (5,982)
-----------------------------------------------
Retained earnings, at end of year $163,101 $145,918 $124,995
===============================================
Earnings per share $2.32 $2.90 $2.78
===============================================
The accompanying notes are an integral part of these financial statements.
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 80% 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 which range from three months to three years.
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 less 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.
Securities Sold Under Agreements to Repurchase:
The Company has entered into agreements to sell and repurchase U.S.
Government Agency debt securities. The securities are recorded at market
value and are included in "Short-term securities available for sale" on the
Consolidated Balance Sheets.
Valuation of Securities:
Effective May 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" ("SFAS 115"). As a result of adopting SFAS
115, the Company changed the method by which it values its long-term
securities portfolio, which consists of shares of the Value Line Mutual
Funds, and short-term securities portfolio, which the Company classifies as
available for sale, from the lower of aggregate cost or market to market
value. Unrealized gains and losses on these securities are reported, net of
applicable taxes, as a separate component of Shareholders' Equity. Realized
gains and losses on sales of the securities are recorded in earnings on trade
date and are determined on the identified cost method. SFAS 115 cannot be
retroactively applied to the financial statements of periods prior to May 1,
1994.
Trading securities, which consist of securities held by Value Line
Securities, Inc., the Company's broker-dealer subsidiary, and certain
adjustable rate preferred shares 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 40
years.
Value Line, Inc.
Notes to Consolidated Financial Statements
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, 1995 and 1994, cash equivalents
included $41,503,000 and $10,266,000, respectively, invested in the Value
Line money market funds.
Reclassification: Certain prior year amounts disclosed in the Consolidated
Financial Statements and Notes thereto have been reclassified to conform to
current year presentation.
Note 2-Supplementary Cash Flow Information:
Cash payments for income taxes were $12,974,000, $20,171,000, and
$18,123,000, in 1995, 1994 and 1993, respectively. Interest payments of
$1,315,000, $183,000 and $201,000 were made in 1995, 1994, and 1993,
respectively.
Note 3-Related Party Transactions:
The Company acts as investment adviser and manager for fifteen open-end
investment companies known as the Value Line Family of Funds (see Note 4).
The Company earns investment management fees calculated based upon the
average daily net asset values of the respective funds. 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
and other advisory clients of the Company that are cleared on a fully
disclosed basis through non-affiliated brokers. For the years ended April
30, 1995, 1994 and 1993, investment management fees and brokerage commission
income, net of clearing fees, amounted to $17,782,000, $19,098,000 and
$17,050,000, respectively. The related receivables from the funds for
management advisory fees included in Receivable from affiliates in the
Consolidated Balance Sheets were $1,352,000 and $1,379,000 at April 30, 1995
and 1994, respectively.
For the years ended April 30, 1995, 1994 and 1993, the Company was
reimbursed $414,000, $454,000 and $309,000, respectively, for payments it
made on behalf of and services it provided to the Parent. At April 30, 1995
and 1994, Receivable from affiliates included a receivable from the Parent of
$257,000 and $36,000, respectively. For the years ended April 30, 1995, 1994
and 1993, the Company made federal income tax payments to to the Parent
amounting to $10,225,000, $16,020,000 and $14,014,000, respectively. At
April 30, 1995 and 1994, accrued taxes payable included $438,000 payable to
and $92,000 receivable from the Parent, respectively. These data are in
accordance with the tax sharing arrangement described in Note 6.
Value Line, Inc.
Notes to Consolidated Financial Statements
Note 4-Investments:
Trading Securities:
Securities held by Value Line Securities, Inc. had an aggregate cost of
$40,767,000 and $39,475,000 and a market value of $48,187,000 and $43,549,000
at April 30, 1995 and April 30, 1994, respectively. The adjustable rate
preferred stock securities held by Value Line, Inc. which were sold during
fiscal 1995 are recorded at the lower of aggregate cost or market at April
30, 1994. The aggregate cost and market value of these securities at April
30, 1994 was $2,347,000 and $2,737,000, respectively.
Short-Term Securities Available for Sale:
Short-term securities available for sale consists of Value Line, Inc.'s
holdings in the following securities:
Federal National Mortgage Association (FNMA), floating rate notes due
August 5, 1997; par value $30,325,000.
Federal Farm Credit Bank (FFCB), floating rate notes due February 12,
1997; par value $10,000,000.
The market value of the Company's holdings in the FNMA and FFCB, which
approximates cost, at April 30, 1995 was $29,438,000 and $9,661,000,
respectively. These notes were purchased at a discount from their respective
face values. The accretion of this discount has been included as an addition
to the cost of the securities and reflected as interest income in the
Consolidated Statements of Income and Retained Earnings.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $104,749,000 and
$121,626,000 and the market value was $118,013,000 and $127,993,000 at April
30, 1995 and April 30, 1994, respectively. At April 30, 1995, gross
unrealized gains on these securities of $13,264,000, net of deferred taxes of
$4,642,000, were included in shareholders' equity. Realized losses and the
proceeds received from sales of these securities during the fiscal year ended
April 30, 1995 were $5,306,000 and $46,934,000, respectively. At April 30,
1994, these securities were recorded at the lower of aggregate cost or market.
For the years ended April 30, 1995, 1994 and 1993, total net income from
securities consisted of $4,938,000, $5,094,000 and $5,244,000 of dividend
income; $396,000, $11,789,000 and $9,159,000 of net capital gains;
$1,912,000, $56,000 and $53,000 of interest income; and $1,865,000, $183,000
and $195,000 of related interest expense, respectively. Net income from
securities also included $3,279,000 of unrealized gains for the year ended
April 30, 1995 and $1,060,000 and $33,000 of unrealized losses on marketable
securities for the years ended April 30, 1994 and 1993, respectively.
Value Line, Inc.
Notes to Consolidated Financial Statements
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 is computed using
accelerated methods.
Property and equipment consisted of the following:
April 30,
------------------
1995 1994
------ ------
(in thousands)
Land $59 $59
Building and leasehold improvements 3,442 3,504
Furniture and equipment 9,789 9,384
------ ------
13,290 12,947
Accumulated depreciation and amortization (5,368) (4,088)
------ ------
$7,922 $8,859
====== ======
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,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Current:
Federal $10,733 $15,676 $14,217
State and local 3,765 4,102 4,397
------- ------- -------
14,498 19,778 18,614
Deferred:
Federal 795 (523) (1,066)
State and local (142) 13 (380)
------- ------- -------
653 (510) (1,446)
------- ------- -------
$15,151 $19,268 $17,168
======= ======= =======
Value Line, Inc.
Notes to Consolidated Financial Statements
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,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Unrealized gains on securities held for sale ($4,642) - -
Unrealized gains on trading securities (2,489) (1,279) (1,604)
Relocation reserve 263 675 610
Depreciation (363) (393) (255)
Deferred charges 770 267 -
Other, net 694 258 267
------- ------ ------
($5,767) ($472) ($982)
======= ====== =====
Included in accrued taxes payable in current liabilities in the
Consolidated Balance Sheets are deferred federal tax liabilities of
$1,373,000 and $401,000 at April 30, 1995 and 1994, respectively. Also
included in accrued taxes payable are deferred state and local tax benefits
of $413,000 and $271,000 at April 30, 1995 and 1994, 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,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Tax expense at the U.S. statutory rate $13,458 $16,917 $15,317
Increase (decrease) in tax expense from:
State and local income taxes, net of
federal income tax benefit 2,351 2,670 2,651
Effect of tax exempt income and dividend
deductions (684) (768) (846)
Other, net 27 449 46
------- ------- -------
$15,151 $19,268 $17,168
======= ======= =======
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.
Value Line, Inc.
Notes to Consolidated Financial Statements
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, 1995, 1994 and 1993 was
$968,000, $1,470,000 and $1,159,000, 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,
1995, is as follows:
Number of Option
Shares Prices
--------- -----------------
Outstanding at May 1, 1992 8,200 $17.00 to $26.25
Granted 5,000 $29.75
Exercised (500) $17.50
Cancelled (2,500) $23.50
------
Outstanding at April 30, 1993 10,200 $17.00 to $29.75
Granted -
Exercised (3,950) $17.00 to $20.00
Cancelled -
------
Outstanding at April 30, 1994 6,250 $17.50 to $29.75
Granted -
Exercised -
Cancelled -
------
Outstanding at April 30, 1995 6,250 $17.50 to $29.75
======
Options outstanding at April 30, 1995 expire at various dates through March
2003. At April 30, 1995, 3,750 of the outstanding options were exercisable.
Of the common stock held in treasury at April 30, 1995, 6,250 shares were
held for exercise of stock options.
Value Line, Inc.
Notes to Consolidated Financial Statements
Note 9-Treasury Stock:
Treasury stock, at cost, for the three years ended April 30, 1995, consists
of the following:
Shares Amount
------ ------
(in thousands)
Balance May 1, 1992 29,100 $560
Exercise of incentive stock options (500) (10)
------ -----
Balance April 30, 1993 28,600 550
Exercise of incentive stock options (3,950) (76)
------ -----
Balance April 30, 1994 24,650 474
Exercise of incentive stock options - -
------ -----
Balance April 30, 1995 24,650 $474
====== =====
The Company's Board of Directors authorized the purchase of up to 1,000,000
shares of the Company's common stock from time to time in negotiated
transactions.
Note 10-Securities Sold under Agreements to Repurchase:
On June 28, 1994, the Company entered into short-term agreements to
repurchase certain securities sold. These agreements were entered into to
repurchase the Federal National Mortgage Association Floating Rate Notes due
August 5, 1997 (FNMA), par value $30,325,000, and Federal Farm Credit Bank
Floating Rate Notes due February 12, 1997 (FFCB), par value $10,000,000,
stated in Note 4. The outstanding balance of the obligations under the
repurchase agreements in the aggregate amount of $36,977,000 accrue interest
at a stated annual interest rate of 6.3125% and mature on May 5, 1995
($27,899,000) with respect to the FNMA and May 12, 1995 ($9,095,000) for the
obligation to repurchase the FFCB securities. The Company intends to
refinance these obligations on a short term basis.
Note 11-Lease Commitments:
On June 4, 1993, the Company entered into a 15 year lease agreement that
provides new primary office space, replacing the previous lease that expired
during the second quarter of fiscal year 1994. 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 inception of the
lease.
Value Line, Inc.
Notes to Consolidated Financial Statements
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)
1996 $1,703
1997 1,565
1998 1,536
1999 1,784
2000 1,827
Thereafter 15,175
-------
$23,590
=======
Rental expense for the years ended April 30, 1995, 1994 and 1993 under
operating leases covering office space was $1,481,000, $2,248,000 and
$2,422,000, respectively.
Note 12-Relocation Cost:
In fiscal 1994, the Company relocated its corporate office facility to a
new location within New York City. Included in Relocation expense in the
Consolidated Statements of Income and Retained Earnings in 1993 is the
estimated operating cost of the second facility during the estimated period
of construction, the disposal and clean-up expenses at the previously
occupied office site and the charges related to the acceleration of
depreciable lives of the Company's office and computer equipment that was
replaced in connection with the relocation.
Note 13-Term Loan Facility:
The Company has repaid its $3,000,000 obligation and terminated the bank
term loan agreement during fiscal 1995. The agreement provided for
collateralization and the maintenance of certain ratios and net worth
limitations. At April 30, 1994, the bank held marketable securities with a
market value of $7,031,000 as collateral against the loan. These securities
were sold during fiscal 1995 with the proceeds used to repay the bank
obligation.
Interest charged on the loan was at the bank's prime lending rate which
averaged 7.5%, 6.1% and 6.1% for the years ended April 30, 1995, 1994 and
1993, respectively. Interest expense for the years ended April 30, 1995,
1994 and 1993 was $119,000, $183,000 and $195,000, respectively.
Value Line, Inc.
Notes to Consolidated Financial Statements
Note 14-Business Segments:
The Company operates in two business segments: Investment periodicals and
Publications, and Investment Management. Identifiable assets consisted of:
April 30,
------------------
1995 1994
------ ------
(in thousands)
Identifiable assets:
Investment periodicals and
publications $11,788 $12,385
Investment management 208,930 182,960
Corporate assets 44,280 4,976
-------- --------
Total $264,998 $200,321
======== ========
Revenues and income from operations were as follows:
Years ended April 30,
-------------------------
1995 1994 1993
------- ------- -------
(in thousands)
Revenues:
Investment periodicals and
publications $56,041 $58,005 $56,221
Intersegment revenues (129) (175) (94)
------- ------- -------
55,912 57,830 56,127
Investment management 23,183 24,220 22,274
-------- -------- --------
Consolidated revenues $79,095 $82,050 $78,401
======== ======== ========
Income from operations:
Investment periodicals and
publications $15,397 $17,285 $18,652
Investment management 14,264 15,179 12,015
-------- -------- --------
Consolidated income from operations $29,661 $32,464 $30,667
======== ======== ========
Note 15-Net Capital:
The Company's wholly owned broker/dealer 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 and requires that aggregate indebtedness, as defined,
shall not exceed fifteen times net capital, as defined. Additionally,
dividends may only be declared if aggregate indebtedness is less than twelve
times net capital.
At April 30, 1995, Value Line Securities', Inc. net capital, as defined, of
$39,331,748 exceeded required net capital by $38,550,090 and the ratio of
aggregate indebtedness to net capital was .30 to 1.
Value Line, Inc.
Notes to Consolidated Financial Statements
Note 16-Financial Instruments with Off-Balance-Sheet Risk and
Concentration of Credit Risk:
The Company executes, as agent, securities transactions on behalf of the
Value Line mutual funds. If either the mutual fund or a counterparty 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.
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, 1995, the underlying notional value of such
commitments was $5,942,625. Risk arises from the potential inability of
counterparties to meet the terms of their contracts and from movements in
securities values. The Company limits its credit risk associated with such
instruments by entering exclusively into exchange traded futures contracts.
No single customer accounted for a significant portion of the Company's
sales in 1995, 1994 or 1993, nor accounts receivable for 1995 or 1994.
Note 17-Estimated Fair Value of Financial and Derivative Instruments:
Statement of Accounting Standards No. 119, "Disclosure About Derivative
Financial Instruments and Fair Value of Financial Instruments," requires
disclosure of information regarding derivative instruments, which include
financial index futures contracts.
Derivative instruments held for trading purposes are reflected at fair
value at April 30, 1995. The fair value and the average fair value of
derivative instruments at April 30, 1995 and for the year then ended consists
of liabilities of $332,925 and $50,102, respectively.
Net trading gains related to equity securities aggregated $5,227,790 for
the year ended April 30, 1995. Net trading losses related to derivative
financial instruments amounted to $570,552 for the year ended April 30, 1995.
Note 18-Mutual Fund Support Expenses:
On June 28, 1994, the Company purchased, as part of its investment
management operations for which it receives fee income, U.S. Government
Agency notes with a market value as of that date of $38,615,000 from the
Value Line Cash Fund, for which it is the investment adviser. In order to
maintain a $1.00 per share net asset value, as part of the same
transaction, the Company reimbursed the Value Line Cash Fund $1,550,000 for
losses the Fund incurred on the sale which the Company may recoup in the
future.
Value Line, Inc.
----------------
Schedule I - Marketable Securities
Shares Common Stock Name Cost Market
- ------ ----------------- ---- ------
10,500 ADC Telecommunications, Inc $276,121 $346,500
3,000 AFLAC Inc. 109,728 123,750
7,600 AT&T Corp 351,275 385,700
9,400 Abbott Laboratories 259,045 370,125
5,050 Advanta Corp "A" 125,408 175,488
10,500 Air Express Int'l Corp 224,555 246,750
3,400 Airgas Inc. 89,552 76,075
3,000 Allied Products Corp 47,430 58,500
5,400 Allied-Signal 189,677 213,975
8,700 Amer Bankers Ins Group Inc. 243,925 275,138
5,200 American International Group, Inc. 462,683 555,100
5,400 Ametek, Inc. 96,950 87,750
900 Amgen, Inc. 51,975 65,419
1,000 Amoco Corp 60,205 65,625
4,900 Andrew Corp 80,578 242,550
3,500 Anheuser-Busch Cos., Inc. 187,930 203,438
4,400 Apple Computer, Inc. 185,238 168,300
5,200 Applebees International Inc. 114,400 114,400
2,000 Applied Power Inc. Class "A" 49,620 52,750
19,900 Archer-Daniels-Midland Co. 378,483 363,175
6,300 Autodesk, Inc. 242,200 214,597
2,500 Automatic Data Processing, Inc. 140,813 160,625
4,700 Avery Dennison Corp 157,073 190,938
3,000 Baldor Elec Co 74,055 88,500
4,100 Becton, Dickinson & Co 192,546 228,575
5,600 Bed Bath & Beyond Inc. 145,600 116,900
4,400 Belo (A. H.) Corp. Del. Series 239,645 264,550
8,200 Bergen Brunswig Corp. Class "A" 219,780 194,750
12,900 Big B, Inc. 181,463 187,050
9,500 Bio-Rad Labs Inc. Cl 'A' 219,115 274,313
13,900 Black & Decker Corp 317,354 417,000
8,000 Blount, Inc. Class "A" 248,480 357,000
4,000 Boston Scientific Corp 99,240 109,000
3,800 Briggs & Stratton Corp 122,778 133,475
5,200 Browning-Ferris Industries Inc. 162,094 171,600
3,100 Burlington Northern, Inc. 181,675 184,450
7,100 Butler Manufacturing Co 202,943 285,775
6,800 CDI Corp 143,269 174,250
4,000 CPI Corp 82,240 67,000
4,000 CTS Corp 106,782 132,500
6,200 CUC International, Inc. 214,210 252,650
7,100 Campbell Soup Co. 317,701 363,875
3,000 Canandaigua Wine Inc. Cl "A" 110,250 129,000
6,000 Capital Cities/ ABC, Inc. 422,116 507,000
6,000 Cardinal Health Inc. 230,000 276,750
8,200 Cascade Corp 101,943 131,200
12,300 Caseys General Stores Inc. 184,150 212,175
2,600 Caterpillar Inc. 111,354 152,100
2,400 Century Tel Enterprises 74,372 71,400
12,200 Ceridian Corporation 368,744 420,900
5,100 Circus Circus Enterprises, Inc. 162,356 168,938
Value Line, Inc.
----------------
Schedule I - Marketable Securities
Shares Common Stock Name Cost Market
- ------ ----------------- ---- ------
3,800 Citicorp 130,777 176,225
3,900 Clark Equipment Co 194,281 333,450
8,200 Clayton Homes, Inc. 133,742 138,375
400 Coastal Corp 11,412 11,900
11,000 Coca-Cola Co 473,518 639,375
12,300 Coca-Cola Enterprises Inc. 233,326 275,213
6,000 Coherent, Inc. 102,750 175,128
5,700 Colgate Palmolive Co., Inc. 376,378 400,425
9,000 Commercial Intertech Corp 175,110 199,125
4,100 Computer Associates Int'l., Inc. 178,413 263,938
2,000 Computer Sciences Corp 80,165 98,750
5,000 Consolidated Freightways, Inc. 122,800 127,500
10,100 Consolidated Stores Corp 183,111 172,963
3,800 Cooper Tire & Rubber Co 99,264 93,100
3,900 Cordis Corp 205,900 279,825
5,800 Crown Cork & Seal Inc. 211,275 247,950
1,100 Cummins Engine Inc. 47,110 49,225
23,800 Danaher Corp 554,790 708,050
4,300 Danka Business Sys PLC (ADR) 108,038 117,713
1,900 Deere & Co 155,620 155,800
4,100 Dionex Corp. 161,950 170,150
5,700 Disney (Walt) Co. 302,232 315,638
12,593 Dollar General Corp 248,699 292,787
6,300 Donaldson Co., Inc. 141,591 156,713
2,000 Dover Corp 128,370 130,000
3,300 Du Pont (E.I.) de Nemours & Co Inc. 192,174 217,388
12,000 Dynatech Corp 165,000 210,000
5,100 Echlin Inc. 187,844 186,150
17,700 Equifax Inc. 491,526 573,038
10,000 Esterline Technologies Corp 137,582 168,750
3,200 FMC Corp 187,534 196,400
4,100 Fabri-Centers of America, Inc. 74,095 75,850
4,400 Fifth Third Bancorp 233,125 211,750
2,900 Fiserv Inc. 71,150 76,850
5,300 Fluor Corp 240,959 272,950
8,000 General Electric Co 303,524 448,000
6,000 General Motors Corp 258,580 270,750
5,300 Gillette Co 354,585 434,600
5,000 Glaxo PLC (ADR) 112,175 118,125
1,800 Great Lakes Chemical Corp 107,824 105,750
5,700 Green Tree Financial Corp 98,629 232,988
5,100 HBO & Co 191,230 233,325
15,200 Halliburton Co 540,336 583,300
13,500 Handy & Harman 200,468 202,500
6,100 Helca Mng Co 60,933 64,813
6,600 Hercules, Inc. 248,195 329,175
13,000 Heritage Media Corp Cl. "A" 212,244 331,500
2,600 Hewlett-Packard Co 130,566 171,925
4,400 Hilgiger Tommy Corp Ord 89,507 101,200
2,400 Home Depot, (The), Inc. 91,082 100,200
3,300 Hon Industries Inc. 99,474 86,625
Value Line, Inc.
----------------
Schedule I - Marketable Securities
Shares Common Stock Name Cost Market
- ------ ----------------- ---- ------
10,650 Hudson Foods Inc Cl "A" 161,226 183,713
3,100 IBP, Inc. 100,506 114,700
9,000 IDEX Corp 237,773 300,375
3,400 IMC Global Inc. 159,154 167,025
8,000 Idex Corp 203,127 267,000
4,600 Illinois Tool Works Inc. 189,414 230,575
18,800 Illinova Corp 431,202 437,100
4,000 Informix Corp 104,000 157,500
6,300 Inland Steel Industries, Inc. 215,589 159,863
3,200 Intel Corp 129,344 327,600
4,000 International Alum Corp 102,052 138,000
6,900 International Business Machine 420,836 653,775
6,200 Intl Flavors & Fragrances Inc. 278,747 318,525
8,800 Invacare Corp 309,882 347,600
5,000 Itel Corp (New) 173,688 180,000
13,000 JLG Industries Inc. 229,425 260,000
9,600 Johnson & Johnson 462,555 624,000
3,700 Kellogg Co 207,774 234,950
3,000 Kelly Services, Inc. Class "A" 105,000 101,250
2,000 Kysor Industrial Corp 42,620 42,750
12,250 La Quinta Inns Inc. 269,795 365,969
4,900 Lancaster Colony Corp 143,325 170,275
3,200 Leggett & Platt, Inc. 126,992 123,200
4,600 Loral Corp 131,154 216,200
6,700 MBNA Corp 180,864 202,675
1,600 MGIC Invt Corp 67,848 67,800
23,200 Manpower, Inc. 653,055 774,300
11,130 Mark IV Industries, Inc. 210,311 200,340
6,500 Mattel, Inc. 132,282 154,375
6,000 Mc Donnell Douglas 153,452 372,000
22,700 McDonald's Corp 703,387 794,500
5,600 Media General, Inc. Class "A" 165,268 182,000
2,300 Medic Computer Sys Inc. 102,897 101,200
6,700 Medtronic Inc. 332,787 498,313
7,200 Mentor Graphics Corp 115,200 121,500
4,400 Merck & Co., Inc. 151,832 188,650
1,200 Micron Technology Inc. 63,936 98,700
3,800 Microsoft Corp 220,413 310,650
6,900 Midlantic Corp 237,475 251,850
9,900 Mirage Resorts Inc. 237,094 297,000
9,300 Modine Mfg Co 255,775 315,038
3,000 Molex Inc. 101,250 113,250
4,900 Motorola, Inc. 165,151 278,688
9,300 Mylan Laboratories Inc. 238,571 285,975
8,100 National Computer Sys Inc. 139,893 143,775
10,950 National Data Corp 182,301 203,944
5,100 Nationsbank Corp 261,303 255,000
4,700 Navistar International Corp 61,591 66,388
2,800 Nike, Inc. Class "B" 201,468 214,550
4,700 Northrop Grumman Corp 213,145 233,238
5,100 Norwest Corp 113,668 135,150
Value Line, Inc.
----------------
Schedule I - Marketable Securities
Shares Common Stock Name Cost Market
- ------ ----------------- ---- ------
1,900 Novellus Systems, Inc. 91,425 115,425
11,200 Oakwood Homes Corp 272,976 280,000
5,000 Omnicom Group Inc. 241,675 278,125
5,600 Pacific Scientific Co 120,336 118,300
7,000 Pall Corp 150,045 163,625
5,600 Paychex Inc. 205,275 266,700
7,700 Pepsico, Inc. 286,163 320,513
5,300 Pfizer, Inc. 415,544 459,113
6,000 Ply Gem Inds Inc. 120,360 99,750
12,500 Praxair Inc. 259,898 296,875
3,700 Premark International Inc. 146,650 178,525
6,500 Proctor & Gamble Co 360,156 454,188
3,000 Progressive Corp 97,914 113,250
5,400 Promus Cos Inc. 208,137 207,900
4,000 Reynolds & Reynolds Co. 82,370 106,000
7,800 Rite Aid Corp 179,793 181,350
2,000 Rogers Corp 70,870 107,000
3,300 SBC Communications Inc. 116,370 145,613
10,000 Safeway, Inc. 246,350 375,000
4,500 Schering-Plough Corp 304,723 339,188
5,000 Scientific-Atlanta, Inc. 117,175 113,750
3,200 Scott Paper Co 203,442 285,200
3,000 Silicon Graphics, Inc. 88,305 112,500
17,800 Smith Int'l Inc. 259,697 307,050
4,300 Sprint Corp 134,429 141,900
12,700 Standex International Corp 375,956 398,463
14,000 Staples, Inc. 326,700 337,750
3,000 Star Banc Corp 118,665 125,250
2,500 SunAmerica, Inc. 106,650 122,500
13,400 Sunbeam-Oster Co Inc. 330,504 289,775
3,400 Suntrust Banks, Inc. 149,302 184,450
12,900 Surgical Care Affiliates, Inc. 254,324 299,925
10,000 Symbol Technologies, Inc. 270,449 331,250
6,700 Sysco Corp 183,139 187,600
4,200 Tandem Computers Inc. 72,501 53,550
7,300 Tektronix Inc. 219,363 332,150
2,000 Tellabs Inc. 127,000 138,000
2,700 Tenneco Inc. 122,606 123,863
28,000 Terra Industries, Inc. 192,430 311,500
5,700 Thermo Instrument System Inc. 130,527 133,238
2,400 Toys "R" Us, Inc. 64,497 60,600
16,600 US Long Distance Corp 245,233 257,300
13,600 USF & G Corp 191,496 200,600
5,200 UST, Inc. 146,527 146,250
2,500 USX-U.S. Steel Group 82,075 76,250
15,100 Uniforce Temp Personnel Inc. 177,005 154,775
4,800 Union Carbide Corp 144,257 153,600
4,900 United Dominion Ind Ltd 87,622 98,613
10,200 United States Shoe Corp 185,377 284,325
4,000 Valmont Inds Inc. 72,000 86,000
5,986 Viacom Class "B" Common 116,411 274,608
Value Line, Inc.
----------------
Schedule I - Marketable Securities
Shares Common Stock Name Cost Market
- ------ ----------------- ---- ------
5,250 Vishay Intertechnology, Inc. 217,455 310,406
4,100 Volt Information Science Inc. 114,405 121,463
5,400 Waban Inc. 98,299 89,775
13,300 Wal-Mart Stores, Inc. 312,060 315,875
2,800 Walgreen Co 131,768 131,600
400 Warner-Lambert Co 31,362 31,900
6,700 Wellman Inc. 203,865 180,900
7,100 Whitman Corp 120,863 129,575
3,900 Wisconsin Cent Transn 165,492 222,546
4,000 Wolverine World Wide Inc. 90,740 134,000
4,600 Wrigley (Wm.) Jr. Co 172,020 204,125
1,000 York Intl Corp 35,905 41,000
-------------------------
Totals $40,766,381 $48,187,531
=========================
Value Line, Inc.
----------------
Schedule XIII - Other Security Holdings
Mutual Fund Holdings: Cost Market
- --------------------- ---- ------
The Value Line Fund, Inc. $16,148,022 $18,807,768
The Value Line Special Situations Fund, Inc. 3,717,464 5,249,230
The Value Line Income Fund, Inc. 4,262,322 5,049,596
Value Line Leveraged Growth Investors, Inc. 34,911,451 39,727,727
Value Line U.S. Government Securities Fund, Inc. 228,202 237,430
The Value Line Tax Exempt Fund, Inc. 10,729,473 10,902,606
Value Line Convertible Fund, Inc. 5,441,470 5,673,083
Value Line Aggressive Income Trust 1,986,687 1,946,786
Value Line New York Tax Exempt Trust 3,538,771 3,470,678
The Value Line Adjustable Rate U.S.
Government Securities Fund, Inc. 117,301 101,665
Value Line Small-Cap Growth Fund, Inc. 6,287,964 7,446,016
Value Line Asset Allocation Fund, Inc. 17,379,462 19,400,003
----------- -----------
Total $104,748,589 $118,012,588
=========== ===========