Value Line - 10-Q quarterly report FY

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The Company had working capital as of January 31, 2007 of $71,924,000. Cash and short term securities as of January 31, 2007 totaled $86,135,000. Within cash and short term securities, $47,657,000 is invested in the Value Line equity funds and $16,520,000 in the Value Line cash fund.

The Company’s cash flow from operations of $12,391,000 for the nine months ended January 31, 2007 was 12% higher than fiscal 2006’s cash flow of $11,047,000. The increase in cash flow from operations was primarily due to lower purchases of trading securities in fiscal 2007 compared to the prior fiscal year. Net cash outflows of $2,440,000 from investing activities during the first nine months of fiscal 2007 primarily resulted from purchases of fixed income securities. This compared to net cash inflows of $1,141,000 from investing activities last fiscal year. Cash used in financing activities of $7,985,000 for the nine months ended January 31, 2007 was 7% higher than fiscal 2006 since Value Line increased the dividend paid on common stock by 20% in fiscal 2007.

From time to time, the Parent has purchased additional shares of Value Line, Inc. in the market when and as the Parent has determined it to be appropriate. As stated several times in the past, the public is reminded that the Parent may make additional purchases from time to time in the future. For the quarter ended January 31, 2007, the Parent did not make any additional purchases of Value Line, Inc. shares.

Investment periodicals and related publications revenues of $34,462,000 for the first nine months of fiscal year 2007 were $1,501,000 or 4% below comparable publications revenues of $35,963,000 for the prior fiscal year. Investment periodicals and related publications revenues of $11,547,000 for the third quarter of fiscal year 2007 were 3% below comparable publications revenues of $11,890,000 for the third quarter of prior fiscal year. For the first nine months of fiscal 2007 print subscription revenues of $25,827,000 were down $1,896,000 or 7% compared to $27,723,000 last fiscal year. The decline in print revenues was attributable to the continuing trend of net reductions in circulation of the Company’s print publications. Electronic publications revenues of $8,635,000 for the first nine months of fiscal 2007 were $395,000 or 5% above electronic publications revenues of $8,240,000 for the same period last fiscal year. Within electronic publications revenues are revenues generated by institutional subscribers and retail subscribers. Institutional revenues increased $747,000 or 28%, while revenues from retail subscribers were down $352,000 or 6%. The decrease in electronic retail publications revenues was attributable primarily to the decrease in circulation within the Company’s software products.

Licensing fees for the first nine months of fiscal 2007 of $5,289,000 were up $1,954,000 or 59% compared to $3,335,000 last fiscal year. Licensing fees for the third quarter of fiscal 2007 of $1,711,000 were up 19% compared to $1,442,000 for the third quarter last fiscal year.

Investment management fees and services revenues of $23,446,000 for the nine months ended January 31, 2007 were down $714,000, or 3%, compared to the prior fiscal year’s revenues of $24,160,000. Investment management fees and services revenues of $7,803,000 for the third quarter ended January 31, 2007 were 5% below revenues of $8,250,000 for the third quarter last fiscal year. During the nine months ended January 31, 2007 investment management fees were up 7% primarily due to an increase in the net assets of the Value Line Funds, which is net of fee waivers for certain of the Value Line Funds at January 31, 2007. For the nine months ended January 31, 2007 and 2006, total management fee waivers are $191,318 and $0, respectively, and service and distribution fee waivers are $2,228,554 and $76,000, respectively.

Operating expenses for the nine months ended January 31, 2007 of $35,408,000 were 6% below expenses of $37,788,000 for the previous fiscal year. Total advertising and promotional expenses of $10,979,000 for the first nine months of fiscal 2007 were 11% above the prior year’s expenses of $9,902,000. The increase in advertising expenses resulted primarily from the increase in the frequency of marketing campaigns in fiscal 2007 for the Company’s investment periodicals and an increase in fees paid to third party intermediaries. Salaries and employee benefit expenses of $13,921,000 for the nine months ended January 31, 2007 were 5% below expenses of $14,605,000 for the prior fiscal year. Production and distribution expenses for the period ended January 31, 2007 of $5,268,000 were level with last fiscal year. In the first nine months of fiscal 2007 an increase in expenses due to the outsourcing of certain data collection services and an increase in U.S. postal rates were offset by lower paper and printing costs that resulted from a decrease in circulation of the print products. Office and administrative expenses for the first nine months of fiscal 2007 of $5,240,000 were 34% below the prior fiscal year’s expenses of $7,967,000. The decline in administrative expenses was primarily due to a decrease in professional fees.

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management is currently evaluating the impact the adoption of SFAS No. 157 will have on the Company’s financial statement disclosures.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48), which prescribes the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in interim periods, and disclosure for uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will adopt the provisions of FIN 48 at the beginning of fiscal year 2008. Management is evaluating the effect, if any, the adoption of FIN 48 will have on the Company’s financial statements.

Any forward-looking statements are made only as of the date hereof, and the Company undertakes no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise.

The Company’s Consolidated Condensed Balance Sheets include a substantial amount of assets whose fair values are subject to market risks. The Company’s significant market risks are primarily associated with interest rates and equity prices. The following sections address the significant market risks associated with the Company’s business activities.

The Company’s management prefers to invest in liquid debt securities with extremely low credit risk. The Company’s strategy is to acquire securities that are attractively priced in relation to the perceived credit risk. Management recognizes and accepts that losses may occur. To limit the price fluctuation in these securities from interest rate changes, the Company’s management invests primarily in short-term obligations maturing in 1 to 5 years.

The fair values of the Company’s fixed maturity investments will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by prepayment options, relative values of alternative investments, and other general market conditions.

The following table summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. Variations in market interest rates could produce significant changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table. Dollars are in thousands.

Management regularly monitors the maturity structure of the Company’s investments in fixed maturity debt obligations in order to maintain an acceptable price risk associated with changes in interest rates.

The carrying values of investments subject to equity price risks are based on quoted market prices or management’s estimates of fair value as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.

Value Line invests a significant amount of its assets in equity securities, primarily equity mutual funds managed by Value Line. Each of these mutual funds invests in a variety of equity positions of various companies thereby diversifying Value Line’s risk. Value Line has also utilized derivative financial instruments in the past to minimize market price risk, although no such derivative financial instruments were utilized during fiscal 2007 and 2006.

The table below summarizes Value Line’s equity price risks as of January 31, 2007 and April 30, 2006 and shows the effects of a hypothetical 30% increase and a 30% decrease in market prices as of those dates. The selected hypothetical changes do not reflect what could be considered the best or worst case scenarios. Dollars are in thousands.