<Page> SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended July 31, 2001 Commission file number 0-11306 ------- VALUE LINE, INC. ---------------- (Exact name of registrant as specified in its charter) New York 13-3139843 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 East 42nd Street, New York, New York 10017-5891 - -------------------------------------------------------------------------------- (address of principal executive offices) (zip code) Registrant's telephone number including area code (212) 907-1500 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 2001 ----- ---------------------------- Common stock, $.10 par value 9,979,325 Shares ---------------- <Page> Part I - Financial Information Item 1. Financial Statements Value Line, Inc. Consolidated Balance Sheets (in thousands, except share amounts) (unaudited) <Table> <Caption> July 31, April 30, 2001 2001 --------- --------- <S> <C> <C> Assets Current Assets: Cash and cash equivalents (including short term investments of $71,353 and $86,094, respectively) $ 71,883 $ 86,424 Trading securities 32,318 15,360 Accounts receivable, net of allowance for doubtful accounts of $120 and $131, respectively 1,879 2,216 Receivable from affiliates 3,026 2,821 Prepaid expenses and other current assets 569 1,274 Deferred income taxes 742 742 --------- --------- Total current assets 110,417 108,837 Long term securities available for sale 149,009 148,784 Property and equipment, net 9,105 9,423 Capitalized software and other intangible assets, net 3,622 3,948 --------- --------- Total assets $ 272,153 $ 270,992 ========= ========= Liabilities and Shareholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 4,421 $ 5,716 Accrued salaries 1,415 2,291 Dividends payable 2,495 2,494 Accrued taxes payable 2,041 423 --------- --------- Total current liabilities 10,372 10,924 Unearned revenue 39,010 39,526 Deferred income taxes 20,258 20,194 Deferred charges 72 142 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 967 963 Retained earnings 165,520 163,416 Treasury stock, at cost (20,675 shares on 7/31/01, and 21,075 on 4/30/01) (398) (406) Accumulated other comprehensive income, net of tax 35,352 35,233 --------- --------- Total shareholders' equity 202,441 200,206 --------- --------- Total liabilities and shareholders' equity $ 272,153 $ 270,992 ========= ========= </Table> The accompanying notes are an integral part of these financial statements. 2 <Page> Part I - Financial Information Item 1. Financial Statements Value Line, Inc. Consolidated Statements of Income (in thousands except per share amounts) (unaudited) <Table> <Caption> For the three months ended July 31, July 31, 2001 2000 ------- ------- <S> <C> <C> Revenues: Investment periodicals and related publications $13,330 $14,059 Investment management fees & svcs 9,510 10,496 ------- ------- Total revenues 22,840 24,555 ------- ------- Expenses: Advertising and promotion 5,591 5,152 Salaries and employee benefits 5,884 6,019 Production and distribution 2,079 1,808 Office and administration 1,999 2,210 ------- ------- Total expenses 15,553 15,189 ------- ------- Income from operations 7,287 9,366 Income from securities trans., net 266 1,191 ------- ------- Income before income taxes 7,553 10,557 Provision for income taxes 2,954 4,332 ------- ------- Net income $ 4,599 $ 6,225 ======= ======= Earnings per share, basic & fully diluted $ 0.46 $ 0.62 ======= ======= </Table> The accompanying notes are an integral part of these financial statements. 3 <Page> Part I - Financial Information Item 1. Financial Statements Value Line, Inc. Consolidated Statements of Cash Flows (in thousands) (unaudited) <Table> <Caption> For the three months ended July 31, July 31, 2001 2000 -------- -------- <S> <C> <C> Cash flows from operating activities: Net income $ 4,599 $ 6,225 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 761 802 Gains on sales of trading securities and securities held for sale (215) (716) Unrealized losses on trading securities 703 647 Changes in assets and liabilities: Decrease in unearned revenue (516) (1,964) Decrease in deferred charges (70) (69) Decrease in accounts payable and accrued expenses (1,295) (917) Decrease in accrued salaries (876) (808) Increase in accrued taxes payable 1,618 3,059 Decrease in prepaid expenses and other current assets 705 90 Decrease in accounts receivable 337 312 Increase in receivable from affiliates (205) (712) -------- -------- Total adjustments 947 (276) -------- -------- Net cash provided by operations 5,546 5,949 Cash flows from investing activities: Proceeds from sales of long term securities -- 24,572 Purchases of long term securities (42) (1,267) Proceeds from sales of trading securities 2,954 11,113 Purchases of trading securities (20,400) (11,111) Acquisition of property, and equipment (18) (91) Expenditures for capitalized software (99) (411) -------- -------- Net cash (used in)/provided by investing activities (17,605) 22,805 Cash flows from financing activities: Proceeds from sales of treasury stock 12 -- Dividends paid (2,494) (2,495) -------- -------- Net cash used in financing activities (2,482) (2,495) -------- -------- Net (decrease)/increase in cash and cash equivalents (14,541) 26,259 Cash and cash equivalents at beginning of year 86,424 47,933 -------- -------- Cash and cash equivalents at end of period $ 71,883 $ 74,192 ======== ======== </Table> The accompanying notes are an integral part of these financial statements. 4 <Page> Part I - Financial Information Item 1. Financial Statements VALUE LINE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED JULY 31, 2001 (in thousands, except share amounts) (unaudited) <Table> <Caption> Common stock Accumulated Number Additional Other of paid-in Treasury Comprehensive Retained Comprehensive shares Amount capital Stock income earnings income Total --------- --------- --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Balance at May 1, 2001 9,978,925 $ 1,000 $ 963 ($ 406) $ 163,416 $ 35,233 $ 200,206 Comprehensive income Net income $ 4,599 4,599 4,599 Other comprehensive income, net of tax: Change in unrealized gains on securities 119 119 119 --------- Comprehensive income $ 4,718 ========= Exercise of stock options 400 4 8 12 Dividends declared (2,495) (2,495) --------- --------- --------- --------- --------- --------- --------- Balance at July 31, 2001 9,979,325 $ 1,000 $ 967 ($ 398) $ 165,520 $ 35,352 $ 202,441 ========= ========= ========= ========= ========= ========= ========= </Table> The accompanying notes are an integral part of these financial statements. 5 <Page> Part I - Financial Information Item 1. Financial Statements VALUE LINE, INC. STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE THREE MONTHS ENDED JULY 31, 2000 (in thousands, except share amounts) (unaudited) <Table> <Caption> Common stock Accumulated Number Additional Other of paid-in Treasury Comprehensive Retained Comprehensive shares Amount capital Stock income earnings income Total --------- --------- --------- --------- --------- --------- --------- --------- <S> <C> <C> <C> <C> <C> <C> <C> <C> Balance at May 1, 2000 9,978,625 $ 1,000 $ 959 ($ 411) $ 149,304 $ 60,014 $ 210,866 Comprehensive income Net income $ 6,225 6,225 6,225 Other comprehensive income, net of tax: Change in unrealized gains on securities (1,413) (1,413) (1,413) --------- Comprehensive income $ 4,812 ========= Dividends declared (2,495) (2,495) --------- --------- --------- --------- --------- --------- --------- Balance at July 31, 2000 9,978,625 $ 1,000 $ 959 ($ 411) $ 153,034 $ 58,601 $ 213,183 ========= ========= ========= ========= ========= ========= ========= </Table> The accompanying notes are an integral part of these financial statements. 6
HOROWITZ & ULLMANN, P.C. Certified Public Accountants 275 Madison Avenue New York, NY 10016 Telephone: (212) 532-3736 Facsimile: (212) 545-8997 E-mail: cpaz@horowitz-ullmann.com REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Value Line, Inc. New York, New York We have reviewed the accompanying consolidated balance sheet of Value Line, Inc. and its subsidiaries as of July 31, 2001 and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the three month periods ended July 31, 2001 and 2000. All information included in these financial statements is the representation of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquires of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of April 30, 2001 and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated July 12, 2001, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of April 30, 2001 is fairly stated in all material respects. September 14, 2001 7 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SIGNIFICANT ACCOUNTING POLICIES - NOTE 1: In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of normal recurring accruals except as noted below) considered necessary for a fair presentation. This report should be read in conjunction with the financial statements and footnotes contained in the Company's annual report on Form 10-K, dated July 30, 2001 for the fiscal year ended April 30, 2001. Results of operations covered by this report may not be indicative of the results of operations for the entire year. Cash and Cash Equivalents: The Company considers all cash hold at banks and invested in the Value Line money market funds with an original maturity of less than three months to be cash and cash equivalents. As of July 31, 2001 and April 30, 2001, cash equivalents included $71,122,000 and $86,011,000, respectively, invested in the Value Line money market funds. Valuation of Securities: The Company's long-term securities portfolio, which consists of shares of the Value Line Mutual Funds are valued at market value in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Unrealized gains and losses on these securities are reported, net of applicable taxes, as a separate component of Shareholders' Equity. Realized gains and losses on sales of the securities are recorded in earnings on trade date and are determined on the identified cost method. Trading securities, which consist of securities held by Value Line Securities, Inc., the Company's broker-dealer subsidiary, are valued at market with realized and unrealized gains and losses included in earnings. Advertising expenses: The Company expenses advertising costs as incurred. Earnings per Share, basic & fully diluted: Earnings per share are based on the weighted average number of shares of common stock outstanding during the period. 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. 8 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS MARKETABLE SECURITIES - NOTE 2: Trading Securities: Securities held by the Company and by Value Line Securities, Inc. had an aggregate cost of $32,770,000 and $14,981,000 and a market value of $32,318,000 and $15,360,000 at July 31, 2001 and April 30, 2001, respectively. Long-Term Securities Available for Sale: The aggregate cost of the long-term securities was $94,617,000 and $94,579,000 and the market value was $149,009,000 and $148,784,000 at July 31, 2001 and April 30, 2001, respectively. At July 31, 2001, the increase in gross unrealized appreciation on these securities of $183,000, net of deferred taxes of $64,000, was included in shareholders' equity. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - NOTE 3: Cash payments for income taxes were $1,330,000 and $1,273,000 during the three months ended July 31, 2001 and 2000, respectively. EMPLOYEES' PROFIT SHARING AND SAVINGS PLAN - NOTE 4: 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 was $345,000, for each of the three month periods ended July 31, 2001 and 2000, respectively. 9 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS COMPREHENSIVE INCOME - NOTE 5: Statement no. 130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net income. At July 31, 2001 and 2000, the Company held long term securities classified as available-for-sale. The decrease during the first three months ended July 31, 2001 in gross unrealized gains on these securities and the related deferred taxes was $183,000 and $64,000, respectively. The decrease during the first quarter of fiscal 2000 in gross unrealized gains on these securities and the related deferred taxes was $2,173,000 and $760,000, respectively. RELATED PARTY TRANSACTIONS - NOTE 6: The Company acts as investment adviser and manager for fifteen open-ended investment companies, the Value Line Family of Funds. 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 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 three months ended July 31, 2001 and 2000 investment management fees, 12b-1 service and distribution fees and brokerage commission income, net of clearing fees, amounted to $8,925,000 and $9,554,000, respectively. These amounts include service and distribution fees of $1,693,000 and $860,000, respectively. The related receivables from the funds for management advisory fees and 12b-1 service fees included in receivable from affiliates were $2,812,000 and $2,697,000 at July 31, 2001 and April 30, 2001, respectively. For the three months ended July 31, 2001 and 2000, the Company was reimbursed $146,324 and $143,508 respectively, for payments it made on behalf of and services it provided to Arnold Bernhard and Company, Inc. ("Parent"). At July 31, 2001 and April 30, 2001, receivable from affiliates included a receivable from the Parent of $45,000 and $46,000, respectively. For the three months ended July 31, 2001 and July 31, 2000, the Company made federal income tax payments to the Parent amounting to $250,000 and $300,000, respectively. 10 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FEDERAL, STATE AND LOCAL INCOME TAXES - NOTE 7: 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: <Table> <Caption> Three months ended July 31, 2001 2000 ------------------------------- (in thousands) <S> <C> <C> Current: Federal $2,692 $ 3,662 State and local 507 883 ------------------------------- 3,199 4,545 Deferred: Federal (246) (215) State and local 1 2 ------------------------------- (245) (213) ------------------------------- $ 2,954 $ 4,332 =============================== </Table> 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 asset/(liability) are primarily a result of unrealized gains on the Company's trading and long term securities portfolios. BUSINESS SEGMENTS - NOTE 8: 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. 11 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Disclosure of Reportable Segment Profit and Segment Assets <Table> <Caption> July 31, 2001 Publishing Investment Total Management Services <S> <C> <C> <C> Revenues from external customers $ 13,330 $ 9,510 $ 22,840 Intersegment revenues 17 -- 17 Income from securities transactions 41 225 266 Depreciation end amortization 731 16 747 Segment profit 3,511 3,790 7,301 Segment assets 19,143 251,876 271,019 Expenditures for segment assets 112 5 117 <Caption> July 31, 2000 Publishing Investment Total Management Services <S> <C> <C> <C> Revenues from external customers $14,059 $ 10,496 $ 24,555 Intersegment revenues 15 -- 15 Income from securities transactions 65 1,126 1,191 Depreciation and amortization 770 17 787 Segment profit 4,112 5,269 9,381 Segment assets 20,891 277,507 298,398 Expenditures for segment assets 311 90 401 </Table> 12 <Page> VALUE LINE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Reconciliation of Reportable Segment Revenues, Operating Profit and Assets <Table> <Caption> 2001 2000 <S> <C> <C> Revenues Total revenues for reportable segments $ 22,957 $ 24,570 Elimination of intersegment revenues (17) (15) ------------------------- Total consolidated revenues $ 22,840 $ 24,555 ========================= Segment profit Total profit for reportable segments $ 7,567 $ 10,572 Less: Depreciation related to corporate assets (14) (15) ------------------------- Income before income taxes $ 7,553 $ 10,557 ========================= Assets Total assets for reportable segments $ 271,019 $ 298,398 Corporate assets 1,134 658 ------------------------- Consolidated total assets $ 272,153 $ 299,056 ========================= </Table> 13 <Page> ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: LIQUIDITY AND CAPITAL RESOURCES: The Company had liquid resources, which are used in its business, of $249,054,000 at July 31, 2001. In addition to $100,045,000 of working capital, the Company had long-term securities available for sale with a market value of $149,009,000, that, although classified as non-current assets, are also readily marketable should the need arise. The Company's cash flow from operations of $5,546,000 for the three months ended July 31, 2001 was 7% lower than fiscal 2001's cash flow of $5,949,000. The decrease was primarily due to the decline in operating income that resulted from the substantial decline in the financial markets offset partially by the slow down in the unearned revenue decline that resulted from new subscription sales orders. Net cash outflows from investing activities during the first three months of fiscal 2002 were $17,605,000 primarily as a result of the Company's decision to re-deploy its cash holdings into the Company's trading portfolio utilizing varied 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. RESULTS OF OPERATIONS: Revenues of $22,840,000 for the three months ended July 31, 2001 ranked the fifth highest during any first quarter period and were 7% below those during the same period last fiscal year. Net income for the three months ended July 31, 2001 of $4,599,000, or $.46 per share compares to net income of $6,225,000, or $.62 per share for the three months ended July 31, 2000. Operating income of $7,287,000 for the three months ended July 31, 2001, compares to operating income of $9,366,000 for the same period of last fiscal year. Subscription revenues of $13,330,000 were 5% below revenues of the same period of the prior fiscal year. The decrease in subscription revenues compared to the prior year is a result of a 6% combined decline in revenues from THE VALUE LINE INVESTMENT SURVEY and related products, The change in subscription revenues is primarily attributable to the continued difficult financial market conditions that investors face, with the NASDAQ index falling 46% during the past 12 months. In turn, demand for the Company's investment publications has been restrained. Recently, the Company experienced a marked turnaround in subscription activity as our promotional campaigns have been well received, with total new subscription orders increasing over 24% from the first quarter of the prior fiscal year. Investment management fees and services revenues of $9,510,000 for the three months ended July 31, 2001, were 9% below the prior fiscal year's revenues. The decline in the financial markets is also the primary reason for the lower investment management fees and services. Average assets under management in the Company's mutual funds were 9% below the prior year's average net assets. Operating expenses for the three months ended July 31, 2001 of $15,553,000 were 2% higher than last year's expenses of $15,189,000. The increase in expenses over the prior year was primarily attributable to additional advertising expenses for the mutual funds which Value Line is the advisor. The increase in mutual fund marketing expenses was partially offset by a significant decrease in media advertising, 14 <Page> ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: including television advertising for the Company's publications. The United States Postal Service raised postage rates approximately 10% and 2% effective January 1, 2001 and July 1, 2001, respectively, which has increased both direct mail marketing and product distribution expenses during the fiscal 2002. Salaries and employee benefit expenses of $5,884,000 were 2% below expenses of $6,019,000 recorded in the prior fiscal year. Production and distribution costs for the three months ended July 31, 2001 of $2,079,000 were 15% above expenses of $1,808,000 for the three months ended July 31, 2000. The increase in production expenses resulted from a reclassification, from administrative expenses, of maintenance costs and amortization of new product development expenditures for Version 2 of the Company's Website. 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 $1,999,000 were 10% below last year's expenses of $2,210,000. The net decrease in administrative expenses primarily resulted from the aforementioned reclassification of maintenance expenses and amortization of software development expenditures for Value Line's Internet site to production expenses. The Company's securities portfolios produced income of $266,000 for the three months ended July 31, 2001 compared to $1,191,000 during last fiscal year. The steady decline in the valuation of equity securities that started at the beginning of fiscal year 2001 and accelerated dramatically during the third quarter of last fiscal year has continued during the first quarter of fiscal 2002. The decline in the financial markets resulted in losses in the Company's trading portfolio of $488,000 during the three months ended July 31, 2001, versus a gain of $128,000 during the same period of last fiscal year. Dividend income from the Value Line mutual funds was 37% lower than the level during the first three months of fiscal 2001. 15 <Page> VALUE LINE, INC. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10Q report for the period ended July 31, 2001 to be signed on its behalf by the undersigned thereunto duly authorized. Value Line, Inc. (Registrant) Date: September 14, 2001 By: s/ Jean Bernhard Buttner ------------------------- Jean Bernhard Buttner Chairman & Chief Executive Officer Date: September 14, 2001 By: s/ Stephen R. Anastasio ------------------------- Stephen R. Anastasio Chief Accounting Officer Date: September 14, 2001 By: s/ David T. Henigson ---------------------------- David T. Henigson Vice President and Treasurer 16