Value Line - 10-Q quarterly report FY

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Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

The Company had working capital as of October 31, 2006 of $67,102,000. Cash and short-term securities as of October 31, 2006 totaled $79,148,000.

The Company’s cash flow from operations of $4,256,000 for the six months ended October 31, 2006 was 45% lower than fiscal 2006’s cash flow of $7,732,000. The decrease in cash flow from operations was primarily due to the timing of payments for advertising and promotion, purchases of trading securities and an increase in accounts receivable primarily resulting from higher licensing sales. Net cash outflows of $5,526,000 from investing activities during the first six months of fiscal 2007 primarily resulted from purchases of fixed income securities. This compared to net cash inflows of $1,257,000 from investing activities last fiscal year.

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.

Investment periodicals and related publications revenues of $22,915,000 for the first six months of fiscal year 2007 were $1,158,000 or 5% below comparable publications revenues of $24,073,000 for the prior fiscal year. Investment periodicals and related publications revenues of $11,374,000 for the second quarter of fiscal year 2007 were 4% below comparable publications revenues of $11,898,000 for the second quarter of prior fiscal year. For the first six months of fiscal 2007 print subscription revenues of $17,358,000 were down $1,172,000 or 6% compared to $18,529,000 for the 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 $5,557,000 for the first six months of fiscal 2007 were level with electronic publications revenues for the same period last fiscal year. Within electronic publications revenues are revenues generated by institutional subscribers and retail subscribers. Institutional revenues increased $276,000 or 15%, while revenues from retail subscribers were down $262,000 or 7%. 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 six months of fiscal 2007 of $3,578,000 were up $1,685,000 or 89% compared to $1,893,000 last fiscal year. Licensing fees for the second quarter of fiscal 2007 of $1,767,000 were up 75% compared to $1,008,000 for the second quarter last fiscal year.

Investment management fees and services revenues of $15,643,000 for the six months ended October 31, 2006 were down $267,000, or 2%, compared to the prior fiscal year’s revenues of $15,910,000. Investment management fees and services revenues of $7,604,000 for the second quarter ended October 31, 2006 were 6% below revenues of $8,096,000 for the second quarter last fiscal year. During the six months ended October 31, 2006 investment advisory fees were up 8% primarily due to an increase in the net assets of the Value Line Funds, which was partially offset by fee waivers for certain of the Value Line Funds at October 31, 2006. Total mutual funds net assets as of October 31, 2006 were approximately $3.6 billion compared to $3.48 billion at last quarter end, July 31, 2006, and $3.32 billion as of October 31, 2005.

Operating expenses for the six months ended October 31, 2006 of $23,206,000 were 4% below expenses of $24,243,000 for the previous fiscal year. Total advertising and promotional expenses of $7,051,000 for the first six months of fiscal 2007 were 16% above the prior year’s expenses of $6,076,000. 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 $9,166,000 for the six months ended October 31, 2006 were 7% below expenses of $9,858,000 for the prior fiscal year. Production and distribution expenses for the period ended October 31, 2006 of $3,605,000 were level with last fiscal year. In the first six 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 six months of fiscal 2007 of $3,384,000 were 28% below the prior fiscal year’s expenses of $4,707,000. The decline in administrative expenses was primarily due to a decrease in professional fees.

For the six months ended October 31, 2006, the Company’s income from securities transactions of $1,238,000 was 74% above securities transactions income of $713,000 last fiscal year. The Company’s income from securities transactions of $645,000 for the second quarter of fiscal 2007 was 51% above income of $428,000 for the second quarter last year. Income from securities transactions for the first six months of fiscal 2007 included dividend and interest income of $1,205,000, which was 66% above dividend and interest income of $728,000 for the comparable period of the prior fiscal year due to higher interest rates.

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.

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 and liabilities 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 highly 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.