Company Quick10K Filing
Value Line
Price25.55 EPS1
Shares10 P/E20
MCap247 P/FCF30
Net Debt-5 EBIT18
TEV242 TEV/EBIT13
TTM 2019-10-31, in MM, except price, ratios
10-Q 2021-01-31 Filed 2021-03-12
10-Q 2020-10-31 Filed 2020-12-11
10-Q 2020-07-31 Filed 2020-09-11
10-K 2020-04-30 Filed 2020-07-28
10-Q 2020-01-31 Filed 2020-03-12
10-Q 2019-10-31 Filed 2019-12-13
10-Q 2019-07-31 Filed 2019-09-13
10-K 2019-04-30 Filed 2019-07-26
10-Q 2019-01-31 Filed 2019-03-13
10-Q 2018-10-31 Filed 2018-12-12
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10-Q 2017-10-31 Filed 2017-12-11
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10-Q 2016-10-31 Filed 2016-12-13
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10-K 2016-04-30 Filed 2016-07-15
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10-Q 2015-10-31 Filed 2015-12-11
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10-K 2015-04-30 Filed 2015-07-22
10-Q 2015-01-31 Filed 2015-03-13
10-Q 2014-10-31 Filed 2014-12-12
10-Q 2014-07-31 Filed 2014-09-11
10-K 2014-04-30 Filed 2014-07-21
10-Q 2014-01-31 Filed 2014-03-13
10-Q 2013-10-31 Filed 2013-12-12
10-K 2013-04-30 Filed 2013-07-26
10-Q 2013-01-31 Filed 2013-03-13
10-Q 2012-10-31 Filed 2012-12-14
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10-K 2012-04-30 Filed 2012-07-27
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10-Q 2011-10-31 Filed 2011-12-09
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10-Q 2010-10-31 Filed 2010-12-14
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8-K 2020-10-09
8-K 2020-04-17
8-K 2019-10-07
8-K 2018-10-19
8-K 2018-10-09
8-K 2018-01-19

VALU 10Q Quarterly Report

Part I - Financial Information Item 1. Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies:
Note 2 - Investments:
Note 4 - Supplementary Cash Flows Information: Reconciliation of Cash, Cash Equivalents, and Restricted Cash:
Note 14 - Concentration: During The Nine Months Ended January 31, 2021, 32.1% of Total Publishing Revenues of $30,668,000 Were Derived From A Single Customer.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex_233251.htm
EX-31.2 ex_233252.htm
EX-32.1 ex_233253.htm

Value Line Earnings 2021-01-31

Balance SheetIncome StatementCash Flow
1058463422102012201420172020
Assets, Equity
2016128402012201420172020
Rev, G Profit, Net Income
151050-5-102012201420172020
Ops, Inv, Fin

10-Q 1 valu20210131_10q.htm FORM 10-Q valu20210131_10q.htm
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended January 31, 2021

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________________________________ to __________________________________

 

Commission File Number: 0-11306

 

 

logo.jpg

VALUE LINE, INC.

(Exact name of registrant as specified in its charter)

 

New York 13-3139843
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
   
551 Fifth Avenue, New York, New York 10176-0001
(Address of principal executive offices) (Zip Code)

                                                                                          

(212) 907-1500

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of each Exchange on which registered

Common stock, $0.10 par value per share

VALU

The Nasdaq Capital Market

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐                   

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐     Accelerated filer ☐       Non-accelerated filer ☒

Smaller reporting company ☐     Emerging growth company ☐    

      

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ 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 March 10, 2021
Common stock, $0.10 par value per share 9,574,187 shares

                                    

 

 
 

 

 

logo.jpg

 

VALUE LINE, INC.

 

TABLE OF CONTENTS

 

       
     

Page No.

PART I. FINANCIAL INFORMATION

       

Item 1.

 

Consolidated Condensed Financial Statements

 
       
   

Consolidated Condensed Balance Sheets as of January 31, 2021 and April 30, 2020

3

       
   

Consolidated Condensed Statements of Income for the three and nine months ended January 31, 2021 and January 31, 2020

4

       
   

Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended January 31, 2021 and January 31, 2020

5

       
   

Consolidated Condensed Statements of Cash Flows for the nine months ended January 31, 2021 and January 31, 2020

6

       
   

Consolidated Condensed Statement of Changes in Shareholders’ Equity for the nine months ended January 31, 2021

7

       
   

Consolidated Condensed Statement of Changes in Shareholders’ Equity for the nine months ended January 31, 2020

8

       
   

Notes to Consolidated Condensed Financial Statements

9

       

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

       

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

29

   

 

 

Item 4.

 

Controls and Procedures

31

       

PART II. OTHER INFORMATION

       

Item 1.

 

Legal Proceedings

31

       

Item 1A.

 

Risk Factors

31

       

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

32

       

Item 4.

 

Mine Safety Disclosures

32

       

Item 5.

 

Other Information

32

       

Item 6.

 

Exhibits

33

       
   

Signatures

34

 

 

 

 

 

Part I - Financial Information

Item 1. Financial Statements

 

Value Line, Inc.

Consolidated Condensed Balance Sheets

(in thousands, except share amounts)

 

   

Jan. 31,

   

April 30,

 
   

2021

   

2020

 
   

(unaudited)

         

Assets

               

Current Assets:

               
Cash and cash equivalents (including short term investments of $15,286 and $2,115, respectively)   $ 16,182     $ 4,954  

Securities available-for-sale

    23,517       29,204  
Accounts receivable, net of allowance for doubtful accounts of $37 and $38, respectively     4,523       4,438  

Receivable from clearing broker

    -       608  

Prepaid expenses and other current assets

    1,211       1,321  

Total current assets

    45,433       40,525  
                 

Long term assets:

               

Investment in EAM Trust

    60,919       59,165  

Restricted money market investments

    469       469  

Property and equipment, net

    8,613       9,500  

Capitalized software and other intangible assets, net

    133       69  

Total long term assets

    70,134       69,203  
                 

Total assets

  $ 115,567     $ 109,728  
                 

Liabilities and Shareholders' Equity

               

Current Liabilities:

               

Accounts payable and accrued liabilities

  $ 1,892     $ 2,057  

Accrued salaries

    944       1,145  

Dividends payable

    2,012       2,019  

Accrued taxes on income

    37       1,043  

Payable to clearing broker

    -       588  

Loan obligation-short term

    583       194  

Operating lease obligation-short term

    1,041       925  

Unearned revenue

    18,111       18,854  

Total current liabilities

    24,620       26,825  
                 

Long term liabilities:

               

Unearned revenue

    5,340       5,884  

Loan obligation-long term

    1,748       2,137  

Operating lease obligation-long term

    7,663       8,492  

Deferred income taxes

    12,627       12,851  

Total long term liabilities

    27,378       29,364  

Total liabilities

    51,998       56,189  
                 

Shareholders' Equity:

               
Common stock, $0.10 par value; authorized 30,000,000 shares; issued 10,000,000 shares     1,000       1,000  

Additional paid-in capital

    991       991  

Retained earnings

    66,604       56,450  
Treasury stock, at cost (420,360 shares and 383,279 shares, respectively)     (7,002 )     (5,957 )

Accumulated other comprehensive income, net of tax

    1,976       1,055  

Total shareholders' equity

    63,569       53,539  
                 

Total liabilities and shareholders' equity

  $ 115,567     $ 109,728  

 

The accompanying notes are an integral part of these consolidated condensed financial statements.

 

3

 

 

Part I - Financial Information

 Item 1. Financial Statements

 

Value Line, Inc.

Consolidated Condensed Statements of Income

(in thousands, except share & per share amounts)

(unaudited)

 

   

For the Three Months Ended

   

For the Nine Months Ended

 
   

January 31,

   

January 31,

 
   

2021

   

2020

   

2021

   

2020

 
                                 

Revenues:

                               

Investment periodicals and related publications

  $ 6,830     $ 7,108     $ 20,823     $ 21,090  

Copyright fees

    3,300       3,695       9,845       9,410  

Total publishing revenues

    10,130       10,803       30,668       30,500  
                                 

Expenses:

                               

Advertising and promotion

    837       748       2,709       2,393  

Salaries and employee benefits

    4,716       4,523       13,778       13,299  

Production and distribution

    1,189       1,198       3,854       3,608  

Office and administration

    1,105       1,205       3,630       3,417  

Total expenses

    7,847       7,674       23,971       22,717  

Income from operations

    2,283       3,129       6,697       7,783  
                                 

Revenues and profits interests in EAM Trust

    4,734       3,455       12,592       9,384  

Income from securities transactions, net

    424       167       1,705       451  

Income before income taxes

    7,441       6,751       20,994       17,618  

Income tax provision

    1,412       1,799       4,792       4,765  

Net income

  $ 6,029     $ 4,952     $ 16,202     $ 12,853  
                                 

Earnings per share, basic & fully diluted

  $ 0.63     $ 0.51     $ 1.69     $ 1.33  
                                 
                                 

Weighted average number of common shares

    9,589,093       9,640,949       9,604,869       9,652,805  

 

The accompanying notes are an integral part of these consolidated condensed financial statements. 

 

4

 

 

Part I - Financial Information

Item 1. Financial Statements

 

Value Line, Inc.

Consolidated Condensed Statements of Comprehensive Income

(in thousands)

(unaudited)

 

   

For the Three Months Ended

   

For the Nine Months Ended

 
   

January 31,

   

January 31,

 
   

2021

   

2020

   

2021

   

2020

 
                                 
                                 

Net income

  $ 6,029     $ 4,952     $ 16,202     $ 12,853  
                                 

Other comprehensive income (loss), net of tax:

                               

Change in unrealized gains (losses) on securities, net of taxes

    947       (30 )     921       332  

Other comprehensive income (loss)

    947       (30 )     921       332  

Comprehensive income

  $ 6,976     $ 4,922     $ 17,123     $ 13,185  

 

The accompanying notes are an integral part of these consolidated condensed financial statements.

 

5

 

 

Part I - Financial Information

Item 1. Financial Statements

 

Value Line, Inc.

Consolidated Condensed Statements of Cash Flows

(in thousands)

(unaudited)

 

   

For the Nine Months Ended

 
   

January 31,

 
   

2021

   

2020

 

Cash flows from operating activities:

               

Net income

  $ 16,202     $ 12,853  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    963       202  

Realized gains on sales of equity securities

    (1,162 )     -  

Non-voting revenues interest in EAM Trust

    (11,113 )     (8,389 )

Non-voting profits interest in EAM Trust

    (1,479 )     (995 )

Distributions received from EAM Trust

    10,838       8,397  

Deferred income taxes

    (202 )     370  

Deferred rent obligation

    (713 )     78  

Changes in operating assets and liabilities:

               

Unearned revenue

    (1,287 )     (1,787 )

Accounts payable & accrued expenses

    (164 )     (318 )

Accrued salaries

    (201 )     (164 )

Accrued taxes on income

    (1,352 )     (182 )

Prepaid and refundable income taxes

    -       158  

Prepaid expenses and other current assets

    110       294  

Accounts receivable

    (85 )     (3,661 )

Total adjustments

    (5,847 )     (5,997 )

Net cash provided by operating activities

    10,355       6,856  
                 

Cash flows from investing activities:

               

Purchases of equity securities classified as available-for-sale

    (8,524 )     (1,716 )

Purchases of fixed income securities classified as available-for-sale

    (2,497 )     (6,931 )

Proceeds from sales of equity securities classified as available-for-sale

    7,684       -  

Proceeds from sales of fixed income securities classified as available-for-sale

    11,431       5,223  

Acquisition of property and equipment

    (26 )     (2 )

Expenditures for capitalized software

    (114 )     -  

Net cash provided by/(used in) investing activities

    7,954       (3,426 )
                 

Cash flows from financing activities:

               

Purchase of treasury stock at cost

    (1,045 )     (572 )

Receivable from clearing broker

    608       -  

Payable to clearing broker

    (588 )     -  

Dividends paid

    (6,056 )     (5,796 )

Net cash used in financing activities

    (7,081 )     (6,368 )

Net change in cash and cash equivalents

    11,228       (2,938 )

Cash, cash equivalents and restricted cash at beginning of period

    5,423       6,962  

Cash, cash equivalents and restricted cash at end of period

  $ 16,651     $ 4,024  

 

The accompanying notes are an integral part of these consolidated condensed financial statements.

 

6

 

 

Part I - Financial Information

Item 1. Financial Statements

 

 Value Line, Inc.

 Consolidated Condensed Statement of Changes in Shareholders' Equity

 For the Nine Months Ended January 31, 2021

 (in thousands, except share amounts)

 (unaudited)

 

   

Common stock

   

Additional paid-in-

   

Treasury stock

   

Retained

   

Accumulated other

comprehensive

         
   

Shares

   

Amount

   

capital

   

Shares

   

Amount

   

earnings

   

income

   

Total

 

Balance at April 30, 2020

    10,000,000     $ 1,000     $ 991       (383,279 )   $ (5,957 )   $ 56,450     $ 1,055     $ 53,539  
                                                                 

Net income

                                            16,202               16,202  

Change in unrealized gains on securities, net of taxes

                                                    921       921  

Purchase of treasury stock

                            (37,081 )     (1,045 )                     (1,045 )

Dividends declared

                                            (6,048 )             (6,048 )

Balance at January 31, 2021

    10,000,000     $ 1,000     $ 991       (420,360 )   $ (7,002 )   $ 66,604     $ 1,976     $ 63,569  

 

Dividends declared per common share were $0.21 for the three months ending July 31, 2020, October 31, 2020 and January 31, 2021.

 

The accompanying notes are an integral part of these consolidated condensed financial statements.

 

7

 

Part I - Financial Information

 Item 1. Financial Statements

 

Value Line, Inc.

Consolidated Condensed Statement of Changes in Shareholders' Equity

For the Nine Months Ended January 31, 2020

(in thousands, except share amounts)

(unaudited)

 

   

Common stock

   

Additional paid-in

   

Treasury Stock

   

Retained

   

Accumulated Other

Comprehensive

         
   

Shares

   

Amount

   

capital

   

Shares

   

Amount

   

earnings

   

income

   

Total

 

Balance at April 30, 2019

    10,000,000     $ 1,000     $ 991       (336,439 )   $ (4,743 )   $ 48,598     $ 1,678     $ 47,524  
                                                                 

Net income

                                            12,853               12,853  

Change in unrealized gains on securities, net of taxes

                                                    332       332  

Purchase of treasury stock

                            (24,016 )     (572 )                     (572 )

Dividends declared

                                            (5,791 )             (5,791 )

Balance at January 31, 2020

    10,000,000     $ 1,000     $ 991       (360,455 )   $ (5,315 )   $ 55,660     $ 2,010     $ 54,346  

 

Dividends declared per common share were $0.20 for the three months ending July 31, 2019, October 31, 2019 and January 31, 2020.

 

The accompanying notes are an integral part of these consolidated condensed financial statements.

 

 
8

Value Line, Inc.

Notes to Consolidated Condensed Financial Statements

January 31, 2021

(Unaudited)

 

 

Note 1 - Organization and Summary of Significant Accounting Policies:

 

Value Line, Inc. ("Value Line" or "VLI", and collectively with its subsidiaries, the “Company”) is incorporated in the State of New York. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. The Company's core business is producing investment periodicals and their underlying research and making available certain Value Line copyrights, Value Line trademarks and Value Line Proprietary Ranks and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. The Company maintains a significant investment in Eulav Asset Management LLC ("EAM") from which it receives a non-voting revenues interest and a non-voting profits interest. EAM was established to provide investment management services to the Value Line Mutual Funds ("Value Line Funds" or the "Funds").

 

The Consolidated Condensed Balance Sheets as of January 31, 2021 and April 30, 2020, which have been derived from the unaudited interim Consolidated Condensed Financial Statements and the audited Consolidated Financial Statements, respectively, were prepared following the interim reporting requirements of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying Unaudited Interim 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 audited financial statements and footnotes contained in the Company's Annual Report on Form 10-K for the fiscal year ended April 30, 2020 filed with the SEC on July 28, 2020 (the “Form 10-K”). Results of operations covered by this report may not be indicative of the results of operations for the entire year.

 

Use of Estimates:

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates.

 

Principles of Consolidation:

 

The Company follows the guidance in the Financial Accounting Standards Board's ("FASB") Topic 810 “Consolidation” to determine if it should consolidate its investment in a variable interest entity ("VIE"). A VIE is a legal entity in which either (i) equity investors do not have sufficient equity investment at risk to enable the entity to finance its activities independently or (ii) the equity holders at risk lack the obligation to absorb losses, the right to receive residual returns or the right to make decisions about the entity’s activities that most significantly affect the entity's economic performance. A holder of a variable interest in a VIE is required to consolidate the entity if it is determined that it has a controlling financial interest in the VIE and is therefore the primary beneficiary. The determination of a controlling financial interest in a VIE is based on a qualitative assessment to identify the variable interest holder, if any, that has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) either the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The accounting guidance requires the Company to perform an ongoing assessment of whether the Company is the primary beneficiary of a VIE and the Company has determined it is not the primary beneficiary of a VIE (see Note 3).

 

In accordance with FASB's Topic 810, the assets, liabilities, and results of operations of subsidiaries in which the Company has a controlling interest have been consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company holds a significant non-voting revenues interest (excluding distribution revenues) and a significant non-voting profits interest in EULAV Asset Management, a Delaware statutory trust (“EAM” or “EAM Trust”). The Company relied on the guidance in FASB's ASC Topics 323 and 810 in its determination not to consolidate its investment in EAM and to account for such investment under the equity method of accounting. The Company reports the amount it receives for its non-voting revenues and non-voting profits interests as a separate line item below operating income in the Consolidated Condensed Statements of Income.

 

Revenue Recognition:

 

Depending upon the product, subscription fulfillment for Value Line periodicals and related publications is available in print or digitally, via internet access. The length of a subscription varies by product and offer received by the subscriber. Generally, subscriptions are offered as annual subscriptions. Subscription revenues, net of discounts, are recognized ratably on a straight line basis when the product is served to the client over the life of the subscription. Accordingly, the amount of subscription fees to be earned by fulfilling subscriptions after the date of the balance sheets are shown as unearned revenue within current and long-term liabilities.

 

Copyright fees are derived from providing certain Value Line trademarks and the Value Line Proprietary Ranks to third parties under written agreements for use in selecting securities for third party marketed products, including unit investment trusts, annuities and exchange traded funds ("ETFs"). The Company earns asset-based copyright fees upon delivery of the product to the customer as specified in the individual agreements. Revenue is recognized monthly and received either quarterly or in advance over the term of the agreement and, because it is asset-based, will fluctuate as the market value of the underlying portfolio increases or decreases in value.

 

Investment in Unconsolidated Entities:

 

The Company accounts for its investment in its unconsolidated entity, EAM, using the equity method of accounting in accordance with FASB’s ASC 323. The equity method is an appropriate means of recognizing increases or decreases measured by GAAP in the economic resources underlying the investments. Under the equity method, an investor recognizes its share of the earnings or losses of an investee in the periods for which they are reported by the investee in its financial statements rather than in the period in which an investee declares a dividend or distribution. An investor adjusts the carrying amount of an investment for its share of the earnings or losses recognized by the investee.

 

9

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

The Company’s “interests” in EAM, the investment adviser to and the sole member of the distributor of the Value Line Funds, consist of a "non-voting revenues interest" and a "non-voting profits interest" in EAM as defined in the EAM Trust Agreement. The non-voting revenues interest entitles the Company to receive a range of 41% to 55%, based on the amount of EAM’s adjusted gross revenues, excluding EULAV Securities' distribution revenues (“Revenues Interest”). The non-voting profits interest entitles the Company to receive 50% of EAM's profits, subject to certain limited adjustments as defined in the EAM Trust Agreement (“Profits Interest”). The Revenues Interest and at least 90% of the Profits Interest are to be distributed each quarter to all interest holders of EAM, including Value Line. The Company's Revenues Interest in EAM excludes participation in the service and distribution fees of EAM's subsidiary EULAV Securities. The Company reflects its non-voting revenues and non-voting profits interests in EAM as non-operating income under the equity method of accounting. Although the Company does not have control over the operating and financial policies of EAM, pursuant to the EAM Trust Agreement, the Company has a contractual right to receive its share of EAM's revenues and profits.

 

Recent Accounting Pronouncements:

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This ASU requires that, for leases longer than one year, a lessee recognize in the statements of financial position a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. It also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. The Company adopted this ASU in May 2019 under a modified retrospective approach (see Note 12).

 

On June 21, 2018, the United States Supreme Court reversed the 1992 ruling in Quill, which protected firms delivering items by common carrier into a state where it had no physical presence from having to collect sales tax in such state. Since then, states' legislative efforts to increase business tax collections have continually expanded. The Company has  integrated the effects of the various state laws into its operations and continues to do so.

 

Valuation of Securities:

 

The Company's securities classified as cash equivalents and available-for-sale consist of shares of money market funds that invest primarily in short-term U.S. Government securities and investments in equities including ETFs and are valued in accordance with the requirements of the Fair Value Measurements Topic of the FASB's ASC 820. The securities classified as available-for-sale reflected in the Consolidated Balance Sheets are valued at market and unrealized gains and losses, net of applicable taxes, are reported as a separate component of shareholders' equity. Realized gains and losses on sales of the securities classified as available-for-sale are recorded in earnings as of the trade date and are determined on the identified cost method.

 

The Company classifies its securities available-for-sale as current assets to properly reflect its liquidity and to recognize the fact that it has liquid assets available-for-sale should the need arise.

 

Market valuations of securities listed on a securities exchange and ETF shares are based on the closing sales prices on the last business day of each month. The market value of the Company's fixed maturity U.S. Government debt securities is determined utilizing publicly quoted market prices. Cash equivalents consist of investments in money market funds that invest primarily in U.S. Government securities valued in accordance with rule 2a-7 under the 1940 Act.

 

The Fair Value Measurements Topic of FASB's ASC defines fair value as the price that the Company would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market for the investment. The Fair Value Measurements Topic established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the information that market participants would use in pricing the asset or liability, including assumptions about risk. Examples of risks include those inherent in a particular valuation technique used to measure fair value such as the risk inherent in the inputs to the valuation technique. Inputs are classified as observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

 

The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical investments

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments)

 

The following summarizes the levels of fair value measurements of the Company’s investments:

 

    As of January 31, 2021  

($ in thousands)

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Cash equivalents

  $ 15,286     $ -     $ -     $ 15,286  

Securities available-for-sale

    23,517       -       -       23,517  
    $ 38,803     $ -     $ -     $ 38,803  

 

10

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

   

As of April 30, 2020

 

($ in thousands)

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Cash equivalents

  $ 2,115     $ -     $ -     $ 2,115  

Securities available-for-sale

    29,204       -       -       29,204  
    $ 31,319     $ -     $ -     $ 31,319  

 

The Company had no other financial instruments such as futures, forwards and swap contracts. For the periods ended January 31, 2021 and April 30, 2020, there were no Level 2 nor Level 3 investments. The Company does not have any liabilities that are subject to fair value measurement.

 

Advertising expenses:

 

The Company expenses advertising costs as incurred.

 

Income Taxes:

 

The Company computes its income tax provision in accordance with the Income Tax Topic of the FASB's ASC. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been reflected in the Consolidated Condensed Financial Statements. Deferred tax liabilities and assets are determined based on the differences between the book values and the tax bases of particular assets and liabilities, using tax rates currently in effect for the years in which the differences are expected to reverse. The Company adopted the provisions of ASU 2015-17, Income taxes (Topic 740) during the first quarter of fiscal 2018 and now classifies all deferred taxes as long-term liabilities on the Consolidated Condensed Balance Sheets.

 

The Income Tax Topic of the FASB's ASC establishes for all entities, a minimum threshold for financial statement recognition of the benefit of positions taken in filing tax returns (including whether an entity is taxable in a particular jurisdiction), and requires certain expanded tax disclosures. As of January 31, 2021, management has reviewed the tax positions for the years still subject to tax audit under the statute of limitations, evaluated the implications, and determined that there is no material impact to the Company's 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 period. Any shares that are reacquired during the period are weighted for the portion of the period that they are outstanding. The Company does not have any potentially dilutive common shares from outstanding stock options, warrants, restricted stock, or restricted stock units.

 

Cash and Cash Equivalents:

 

For purposes of the Consolidated Condensed 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 January 31, 2021 and April 30, 2020, cash equivalents included $15,286,000 and $2,115,000, respectively, for amounts invested in money market mutual funds that invest in short term U.S. government securities.

 

 

Note 2 - Investments:

 

Securities Available-for-Sale:

Investments held by the Company and its subsidiaries are classified as securities available-for-sale in accordance with FASB's ASC 320, Investments - Debt and Equity Securities. All of the Company's securities classified as available-for-sale were readily marketable or had a maturity of twelve months or less and are classified as current assets on the Consolidated Condensed Balance Sheets.

 

Equity Securities:

 

Equity securities classified as available-for-sale on the Consolidated Condensed Balance Sheets, consist of ETFs held for dividend yield that attempt to replicate the performance of certain equity indexes and ETFs that hold preferred shares primarily of financial institutions.

 

As of January 31, 2021 and April 30, 2020, the aggregate cost of the equity securities classified as available-for-sale, which consist of investments in the SPDR Series Trust S&P Dividend ETF (SDY), First Trust Value Line Dividend Index ETF (FVD), Invesco Financial Preferred ETF (PGF), ProShares Trust S&P 500 Dividend Aristocrats ETF (NOBL), iShares Preferred & Income Securities ETF (PFF), and other Exchange Traded Funds and common stock equity securities was a combined total of $14,880,000 and $12,877,000, respectively, and the fair value was $17,516,000 and $14,125,000, respectively.

 

Proceeds from sales of equity securities classified as available-for-sale during the nine months ended January 31, 2021 were $7,684,000 and the related capital gains of $1,162,000 were reclassified from Accumulated Other Comprehensive Income in the Consolidated Condensed Balance Sheet to the Consolidated Condensed Statement of Income. The increase in gross unrealized gains on equity securities classified as available-for-sale of $1,388,000, net of deferred taxes of $361,000 was included in Shareholders' Equity at January 31, 2021. There were no sales or proceeds from sales of equity securities during the nine months ended January 31, 2020. The increase in gross unrealized gains on equity securities classified as available-for-sale of $523,000, net of deferred taxes of $240,000 was included in Shareholders' Equity on the Consolidated Condensed Balance Sheet at January 31, 2020.

 

The changes in the value of equity securities investments are recorded in Other Comprehensive Income in the Consolidated Condensed Financial Statements. Realized gains and losses are recorded as of the trade date in the Consolidated Condensed Statements of Income when securities are sold, mature or are redeemed. As of January 31, 2021 and April 30, 2020, accumulated other comprehensive income included unrealized gains of $2,636,000 and $1,248,000, net of deferred taxes of $685,000 and $324,000, respectively.

 

11

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

The carrying value and fair value of securities available-for-sale at January 31, 2021 were as follows:

 

           

Gross Unrealized

   

Gross Unrealized

         

($ in thousands)

 

Cost

   

Holding Gains

   

Losses

   

Fair Value

 

ETFs - equities

  $ 14,880     $ 2,646     $ (10 )   $ 17,516  

 

The carrying value and fair value of securities available-for-sale at April 30, 2020 were as follows:

 

 

           

Gross Unrealized

   

Gross Unrealized

         

($ in thousands)

 

Cost

   

Holding Gains

   

Losses

   

Fair Value

 

ETFs - equities

  $ 12,877     $ 1,317     $ (69 )   $ 14,125  

 

Government Debt Securities (Fixed Income Securities):

Fixed income securities consist of certificates of deposits and securities issued by federal, state and local governments within the United States. The aggregate cost and fair value at January 31, 2021 of fixed income securities classified as available-for-sale were as follows:

 

   

Amortized

   

Gross Unrealized

         

($ in thousands)

 

Historical Cost

   

Holding Gains

   

Fair Value

 

Maturity

                       

Due within 1 year

  $ 5,967     $ 34     $ 6,001  
Total investment in government debt securities   $ 5,967     $ 34     $ 6,001  

 

The aggregate cost and fair value at April 30, 2020 of fixed income securities classified as available-for-sale were as follows:

 

 

   

Amortized

   

Gross Unrealized

         

($ in thousands)

 

Historical Cost

   

Holding Gains

   

Fair Value

 

Maturity

                       

Due within 1 year

  $ 14,652     $ 177     $ 14,829  

Due 1 year through 5 years

    250       -       250  

Total investment in government debt securities

  $ 14,902     $ 177     $ 15,079  

 

Proceeds from maturities and sales of government debt securities classified as available-for-sale during the nine months ended January 31, 2021 and January 31, 2020, were $11,431,000 and $5,223,000, respectively. The decrease in gross unrealized gains of $143,000 on fixed income securities classified as available-for-sale net of deferred income tax benefit of $37,000, was included in Shareholders' Equity on the Consolidated Condensed Balance Sheet as of January 31, 2021. The increase in gross unrealized gains of $69,000 on fixed income securities classified as available-for-sale net of deferred income tax of $20,000, was included in Shareholders' Equity on the Consolidated Condensed Balance Sheet as of January 31, 2020. As of January 31, 2021 and April 30, 2020, accumulated other comprehensive income included unrealized gains of $34,000 and $177,000, net of deferred taxes of $9,000 and $46,000, respectively.

 

The average yield on the Government debt securities classified as available-for-sale at January 31, 2021 and April 30, 2020 was 2.34% and 2.27%, respectively.

 

Income from Securities Transactions:

 

Income from securities transactions was comprised of the following:

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

2021

    2020  

Dividend income

  $ 155     $ 95     $ 413     $ 247  

Interest income

    32       66       131       203  

Realized gain on sale of equity securities

    237       1       1,162       1  

Other

    -       5       (1 )     -  

Total income from securities transactions, net

  $ 424     $ 167     $ 1,705       451  

 

12

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

Investment in Unconsolidated Entities:

Equity Method Investment:

 

As of January 31, 2021 and April 30, 2020, the Company's investment in EAM Trust on the Consolidated Condensed Balance Sheets was $60,919,000 and $59,165,000, respectively.

 

The value of VLI’s investment in EAM at January 31, 2021 and April 30, 2020 reflects the fair value of contributed capital of $55,805,000 at inception which included $5,820,000 of cash and liquid securities in excess of working capital requirements contributed to EAM’s capital account by VLI, plus VLI's share of non-voting revenues and non-voting profits from EAM less distributions, made quarterly to VLI by EAM, during the period subsequent to its initial investment through the dates of the Consolidated Condensed Balance Sheets.

 

It is anticipated that EAM will have sufficient liquidity and earn enough profit to conduct its current and future operations so the management of EAM will not need additional funding.

 

The Company monitors its Investment in EAM Trust for impairment to determine whether an event or change in circumstances has occurred that may have a significant adverse effect on the fair value of the investment. Impairment indicators include, but are not limited to the following: (a) a significant deterioration in the earnings performance, asset quality, or business prospects of the investee, (b) a significant adverse change in the regulatory, economic, or technological environment of the investee, (c) a significant adverse change in the general market condition of the industry in which the investee operates, or (d) factors that raise significant concerns about the investee’s ability to continue as a going concern such as negative cash flows, working capital deficiencies, or noncompliance with statutory capital and regulatory requirements. EAM did not record any impairment losses for its assets during the fiscal years 2021 or 2020.

 

The components of EAM’s investment management operations, provided to the Company by EAM, were as follows:

 

   

Three Months Ended January 31,

    Nine Months Ended January 31,  

($ in thousands) (unaudited)

 

2021

   

2020

   

2021

   

2020

 

Investment management fees earned from the Value Line Funds, net of waivers shown below

  $ 7,827     $ 5,921     $ 21,318     $ 16,531  

12b-1 fees and other fees, net of waivers shown below

  $ 2,439     $ 2,210     $ 7,194     $ 6,275  

Other income

  $ 119     $ 89     $ 234     $ 147  

Investment management fee waivers and reimbursements

  $ 88     $ 15     $ 207     $ 233  

12b-1 fee waivers

  $ 168     $ 178     $ 490     $ 517  

Value Line’s non-voting revenues interest

  $ 4,104     $ 3,033     $ 11,113     $ 8,389  

EAM's net income (1)

  $ 1,260     $ 844     $ 2,958     $ 1,990  

 

(1) Represents EAM's net income, after giving effect to Value Line’s non-voting revenues interest, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

 

   

January 31,

   

April 30,

 

($ in thousands)

 

2021

   

2020

 
   

(unaudited)

         

EAM's total assets

  $ 64,357     $ 61,335  

EAM's total liabilities (1)

    (7,186 )     (4,192 )

EAM's total equity

  $ 57,171     $ 57,143  

 

(1) At January 31, 2021 and April 30, 2020, EAM's total liabilities included a payable to VLI for its accrued non-voting revenues interest and non-voting profits interest of $4,671,000 and $2,949,000, respectively.

 

 

Note 3 - Variable Interest Entity

 

The Company holds a non-voting revenues interest and a 50% non-voting profits interest in EAM, the adviser to the Value Line asset management and mutual fund distribution businesses. EAM is considered to be a VIE in relation to the Company. The Company makes its determination for consolidation of EAM as a VIE based on a qualitative assessment of the purpose and design of EAM, the terms and characteristics of the variable interests in EAM, and the risks EAM is designed to originate and pass through to holders of variable interests. Other than EAM, the Company does not have an interest in any other VIEs.

 

The Company has determined that it does not have a controlling financial interest in EAM because it does not have the power to direct the activities of EAM that most significantly impact its economic performance. Value Line does not hold any voting stock of EAM and it does not have any involvement in the day-to-day activities or operations of EAM. Although the EAM Trust Agreement provides Value Line with certain consent rights and contains certain restrictive covenants related to the activities of EAM, these are considered to be protective rights and therefore Value Line does not maintain control over EAM.

 

In addition, although EAM is expected to be profitable, there is a risk that it could operate at a loss. While all of the profit interest shareholders in EAM are subject to variability based on EAM’s operations risk, Value Line’s non-voting revenues interest in EAM is a preferred interest in the revenues of EAM, rather than a profits interest in EAM, and Value Line accordingly believes it is subject to proportionately less risk than other holders of the profits interests.

 

13

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

The Company has not provided any explicit or implicit financial or other support to EAM other than what was contractually agreed to in the EAM Trust Agreement. Value Line has no obligation to fund EAM in the future and, as a result, has no exposure to loss beyond its initial investment and any undistributed revenues and profits interests retained in EAM. The following table presents the total assets of EAM, the maximum exposure to loss due to involvement with EAM, as well as the value of the assets and liabilities the Company has recorded on its Consolidated Condensed Balance Sheets for its interest in EAM.

 

           

Value Line

 

($ in thousands)

 

VIE Assets

   

Investment in EAM Trust (1)

   

Liabilities

   

Maximum Exposure

to Loss

 

As of January 31, 2021 (unaudited)

  $ 64,357     $ 60,919     $ -     $ 60,919  

As of April 30, 2020

  $ 61,335     $ 59,165     $ -     $ 59,165  

 

(1) Reported within Long-Term Assets on the Consolidated Condensed Balance Sheets.

 

 

Note 4 - Supplementary Cash Flows Information:

 

Reconciliation of Cash, Cash Equivalents, and Restricted Cash:

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Condensed Statement of Cash Flows that sum to the total of the same such amounts shown in the Consolidated Condensed Statement of Cash Flows.

 

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

 

Cash and cash equivalents

  $ 16,182     $ 3,555  

Restricted cash

    469       469  

Total cash, cash equivalents, and restricted cash shown in the Consolidated Condensed Statement of Cash Flows

  $ 16,651     $ 4,024  

 

Income Tax Payments:

 

The Company made income tax payments as follows:

 

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

 

State and local income tax payments

  $ 1,139     $ 1,089  

Federal income tax payments to the Parent

    5,210       3,325  

 

 

Note 5 - 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 . For the nine months ended January 31, 2021 and January 31, 2020, the estimated profit sharing plan contributions, which are included as expenses in salaries and employee benefits in the Consolidated Condensed Statements of Income, were $586,000 and $423,000, respectively.

 

 

Note 6 - Comprehensive Income:

 

The FASB's ASC Comprehensive Income topic 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 otherwise would not be recognized in the calculation of net income.

 

As of January 31, 2021 and January 31, 2020, the Company held equity securities consisting primarily of ETFs with high relative dividend yields that are classified as securities available-for-sale on the Consolidated Condensed Balance Sheets. As of January 31, 2021 and January 31, 2020, the Company also held fixed income securities consisting of certificates of deposits and securities issued by the federal government within the United States that are classified as securities available-for-sale on the Consolidated Balance Sheets. The change in valuation of these securities, net of deferred income taxes, has been recorded in accumulated other comprehensive income in the Company's Consolidated Condensed Balance Sheets.

 

The components of comprehensive income included in the Consolidated Condensed Statements of Income and Changes in Shareholders' Equity for the nine months ended January 31, 2021 are as follows:

 

($ in thousands)

 

Amount Before

Tax

   

Tax

(Expense)/Benefit

   

Amount Net of Tax

 

Change in unrealized gains on securities

  $ 2,407     $ (626 )   $ 1,781  

Less: Gains realized in net income

    (1,162 )     302       (860 )
    $ 1,245     $ (324 )   $ 921  

 

14

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

The components of comprehensive income included in the Consolidated Condensed Statements of Income and Changes in Shareholders' Equity for the nine months ended January 31, 2020 are as follows:

 

($ in thousands)

 

Amount Before

Tax

   

Tax Expense

   

Amount Net of Tax

 

Change in unrealized gains on securities

  $ 592     $ (260 )   $ 332  
    $ 592     $ (260 )   $ 332  

 

 

Note 7 - Related Party Transactions:

 

Investment Management (overview):

 

The Company has substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Accordingly, the Company does not reports this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and receives non-voting revenues and non-voting profits interests, as discussed below.

 

Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, 2021, were $4.90 billion, 30.7% above total assets of $3.75 billion in the Value Line Funds managed and/or distributed by EAM at January 31, 2020.

 

The Company’s non-voting revenues and non-voting profits interests in EAM entitle it to receive quarterly distributions in a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business and 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Voting Profits Interest Holders receive the other 50% of residual profits of EAM. Distribution is not less than 90% of EAM’s profits payable each fiscal quarter under the provisions of the EAM Trust Agreement. Value Line’s percent share of EAM’s revenues is calculated each fiscal quarter. The applicable recent non-voting revenues interest percentage for the third quarter of fiscal 2021 was 52.48%.

 

EAM Trust - VLI's non-voting revenues and non-voting profits interests:

 

The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business. EAM currently has no separately managed account fees. The Company recorded income from its non-voting revenues interest and its non-voting profits interests in EAM as follows:

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

2021

   

2020

 

Non-voting revenues interest in EAM

  $ 4,104     $ 3,033     $ 11,113     $ 8,389  

Non-voting profits interest in EAM

    630       422       1,479       995  
    $ 4,734     $ 3,455     $ 12,592     $ 9,384  

 

At January 31, 2021, the Company's investment in EAM includes a receivable of $4,671,000 representing the quarterly distribution of the non-voting revenues share and non-voting profits share. That sum was subsequently paid to the Company.

 

Transactions with Parent:

 

During the nine months ended January 31, 2021 and January 31, 2020, the Company was reimbursed $272,000 and $259,000, respectively, for payments it made on behalf of and for services the Company provided to the Parent Company, Arnold Bernhard and Co., Inc. ("Parent"). There were no receivables from the Parent on the Consolidated Condensed Balance Sheets at January 31, 2021 and April 30, 2020.

 

The Company is a party to a tax-sharing arrangement with the Parent which allocates the tax liabilities of the two Companies between them. The Company made federal tax payments of $5,210,000 and $3.325,000 to the Parent during the nine months ended January 31, 2021 and January 31, 2020, respectively.

 

As of January 31, 2021, the Parent owned 90.13% of the outstanding shares of common stock of the Company.

 

 

Note 8 - Federal, State and Local Income Taxes:

 

In accordance with the requirements of the Income Tax Topic of the FASB's ASC, the Company's provision for income taxes includes the following:

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

2021

   

2020

 

Current tax expense:

                               

Federal

  $ 1,525     $ 1,347     $ 4,189     $ 3,480  

State and local

    108       300       805       915  

Current tax expense

    1,633       1,647       4,994       4,395  

Deferred tax expense (benefit):

                               

Federal

    153       154       177       100  

State and local

    (374 )     (2 )     (379 )     270  

Deferred tax expense (benefit):

    (221 )     152       (202 )     370  

Income tax provision

  $ 1,412     $ 1,799     $ 4,792     $ 4,765  

 

15

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

On December 22, 2017 H.R. 1, originally known as the Tax Cuts and Jobs Act (the "Tax Act"), was enacted. The Tax Act lowered the U.S. federal income tax rate ("Federal Tax Rate") from 35% to 21% effective January 1, 2018. Accordingly, the Company computes Federal income tax expense using the Federal Tax Rate of 21% in fiscal year 2021.

 

The overall effective income tax rates, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2021 and January 31, 2020 were 22.82% and 27.05%, respectively. The decrease in the effective tax rate during the quarter ended January 31, 2021 is primarily a result of a decrease in the state and local income taxes, primarily deferred income taxes, as a result of changes in state and local tax allocation factors in fiscal 2021. The Company's annualized overall effective tax rate fluctuates due to a number of factors, in addition to changes in tax law, including but not limited to an increase or decrease in the ratio of items that do not have tax consequences to pre-tax income, the Company's geographic profit mix between tax jurisdictions, taxation method adopted by each locality, new interpretations of existing tax laws and rulings and settlements with tax authorities.

 

Deferred income taxes, a liability, 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 long-term deferred tax liability are as follows:

 

   

January 31,

   

April 30,

 

($ in thousands)

 

2021

   

2020

 

Federal tax liability (benefit):

               

Deferred gain on deconsolidation of EAM

  $ 10,670     $ 10,669  

Deferred non-cash post-employment compensation

    (372 )     (372 )

Depreciation and amortization

    109       108  

Unrealized gain on securities held for sale

    561       299  

Right of Use Asset

    (193 )     (182 )

Deferred charges

    (155 )     (166 )

Other

    (345 )     (207 )

Total federal tax liability

    10,275       10,149  
                 

State and local tax liabilities (benefits):

               

Deferred gain on deconsolidation of EAM

    1,842       2,564  

Deferred non-cash post-employment compensation

    (64 )     (88 )

Depreciation and amortization

    18       44  

Unrealized gain on securities held for sale

    97       72  

Other

    458       110  

Total state and local tax liabilities

    2,351       2,702  

Deferred tax liability, long-term

  $ 12,626     $ 12,851  

 

At the end of each interim reporting period, the Company estimates the effective income tax rate to apply for the full fiscal year. The Company uses the effective income tax rate determined to provide for income taxes on a year-to-date basis and reflects the tax effect of any tax law changes and certain other discrete events in the period in which they occur.

 

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:

 

   

Nine Months Ended January 31,

 
   

2021

   

2020

 

U.S. statutory federal tax rate

    21.00 %     21.00 %

Increase (decrease) in tax rate from:

               

State and local income taxes, net of federal income tax benefit

    2.08 %     6.20 %

Effect of dividends received deductions

    (0.29 )%     (0.20 )%

Other, net

    0.03 %     0.05 %

Effective income tax rate

    22.82 %     27.05 %

 

The Company believes that, as of January 31, 2021, there were no material uncertain tax positions that would require disclosure under GAAP.

 

The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing agreement which requires it to make tax payments to the Parent equal to the Company's liability/(benefit) as if it filed a separate return. Beginning with the fiscal year ended April 30, 2017, the Company files combined income tax returns with the Parent on a unitary basis in certain states.

 

The Company’s federal income tax returns (included in the Parent’s consolidated returns) and state and city tax returns for fiscal years ended 2017 through 2019, are subject to examination by the tax authorities, generally for three years after they are filed with the tax authorities.

 

16

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

 

Note 9 - Property and Equipment:

 

Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the remaining terms of the leases. For income tax purposes, depreciation of furniture and equipment is computed using accelerated methods and buildings and leasehold improvements are depreciated over prescribed extended tax lives. Property and equipment, net, on the Consolidated Condensed Balance Sheets was comprised of the following:

 

   

January 31,

   

April 30,

 

($ in thousands)

 

2021

   

2020

 
                 

Building and leasehold improvements

  $ 1,013     $ 1,013  

Operating lease - right-of-use asset

    7,784       8,550  

Furniture and equipment

    4,073       4,047  
      12,870       13,610  

Accumulated depreciation and amortization

    (4,257 )     (4,110 )

Total property and equipment, net

  $ 8,613     $ 9,500  

 

 

Note 10 - Accounting for the Costs of Computer Software Developed for Internal Use:

 

The Company has adopted the provisions of the Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of Computer Software Developed for Internal Use". SOP 98-1 requires companies to capitalize as long-lived assets many of the costs associated with developing or purchasing software for internal use and amortize those costs over the software's estimated useful life in a systematic and rational manner. Such costs, when incurred, are capitalized and amortized over the expected useful life of the asset, normally 3 to 5 years. Total amortization expenses during the nine months ended January 31, 2021 and January 31, 2020, were $49,000 and $52,000, respectively.

 

During the nine months ended January 31, 2021, the Company  capitalized  $114,000 related to third party programmers' costs.  The Company  did not incur and did not capitalize expenditures related to third party programmers' costs during the nine months ended January 31, 2020.    

 

 

Note 11 - Treasury Stock and Repurchase Program:

 

On April 17, 2020, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of shares of the Company’s common stock up to an aggregate purchase price of $2,000,000. The repurchases may be made from time to time on the open market at prevailing market prices, in negotiated transactions off the market, in block purchases or otherwise. The repurchase program may be suspended or discontinued at any time at the Company’s discretion and has no set expiration date.

 

Treasury stock, at cost, consists of the following:

 

(in thousands except for shares and cost per share)

 

Shares

   

Total Cost Assigned

   

Average Cost per Share

   

Aggregate Purchase Price Remaining Under the Program

 

Balance as of April 30, 2020

    383,279     $ 5,957     $ 15.54     $ 2,000  

Purchases effected in open market during the quarters ended:

                               
                                 

July 31, 2020

    -       -       -       2,000  

October 31, 2020

    15,670       422       26.96       1,578  

January 31, 2021

    21,411       623       29.10       955  

Balance as of January 31, 2021

    420,360     $ 7,002     $ 16.66     $ 955  

 

 

Note 12 - Leases:

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”. This ASU requires that, for leases longer than one year, a lessee recognize in the statements of financial position a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. It also requires that for finance leases, a lessee recognize interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. The firm adopted this ASU in May 2019 under a modified retrospective approach.

 

The Company adopted ASU 2016-02 using a modified retrospective transition approach as of the Effective Date as permitted by the amendments in ASU 2018-11, which provides an alternative modified retrospective transition method. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (i.e. May 1, 2019). The Company has elected to employ the transitionary relief offered by the FASB and, therefore, has not reassessed (1) whether existing or expired contracts contain a lease, (2) lease classification for existing or expired leases or (3) the accounting for initial direct costs that were previously capitalized.

 

The Company leases office space in New York, NY and a warehouse and appurtenant office space in Lyndhurst, NJ. The Company has evaluated these leases and determined that they are operating leases under the definitions of the guidance of ASU 2016-02.

 

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received.

 

On May 1, 2019, the Company recorded a right-of-use asset in the amount of $9,575,000, which represents the lease liability of $10,340,000 adjusted for previously recorded unamortized lease incentives in the amount of $765,000. The right-of-use asset is amortized over the remaining lease term in the amount equal to the difference between the calculated straight-line expense of the total lease payments less the monthly interest calculated on the remaining lease liability. As of January 31, 2021, the Company had a long-term lease asset of $7,784,000 recorded in property and equipment in its Consolidated Condensed Balance Sheets.

 

17

Value Line, Inc.
Notes to Consolidated Condensed Financial Statements
January 31, 2021
(Unaudited)

 

The Company recognizes lease expense, calculated as the remaining cost of the lease allocated over the remaining lease term on a straight-line basis. Lease expense is presented as part of continuing operations in the consolidated condensed statements of income. The Company recognized $1,125,000 in lease expenses in both fiscal years 2021 and 2020 during the nine months ended January 31, 2021 and January 31, 2020, respectively.

 

For the nine months ended January 31, 2021, the Company paid $1,070,000 in rent relating to the leases. As a payment arising from an operating lease, the $1,070,000 is classified within operating activities in the consolidated condensed statements of cash flows.

 

The Company’s leases generally do not provide an implicit interest rate, and therefore the Company estimated an incremental borrowing rate, or IBR, as of the commencement date, to determine the present value of its operating lease liabilities. The IBR is defined under ASC 842 as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The following table reconciles the undiscounted future minimum lease payments to the total operating lease liabilities recognized on the Consolidated Condensed Balance Sheet as of January 31, 2021:

 

Fiscal years ended April 30,

 

(in thousands)

 

2021  *

 

    362  

2022

    1,506  

2023

    1,597  

2024

    1,634  

2025

    1,428  

Thereafter

    3,837  

Total undiscounted future minimum lease payments

    10,364  

Less: difference between undiscounted lease payments & the present value of future lease payments

    1,660  

Total operating lease liabilities

    8,704  

 

* Excludes the nine months ended January 31, 2021

 

 

 

Note 13 - Restricted Cash and Deposits:

 

Restricted Money Market Investment in the noncurrent assets on the Consolidated Condensed Balance Sheet at January 31, 2021, includes $469,000, which represents cash invested in a bank money market fund securing a letter of credit ("LOC") in the amount of $469,000 issued to the sublandlord as a security deposit for the Company's New York City leased corporate office facility. Effective October 3, 2021, the LOC and restricted cash will be reduced to $305,000 according to the lease agreement.

 

 

Note 14 - Concentration:

 

During the nine months ended January 31, 2021, 32.1% of total publishing revenues of $30,668,000 were derived from a single customer.

 

 

Note 15 - Concentration of Credit Risk:

 

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of January 31, 2021 and January 31, 2020, the Company had $3,289,000 and $1,782,000, respectively, in excess of the FDIC insured limit. Management has concluded the excess does not represent a material risk, based on the creditworthiness of the counter parties.

 

 

Note 16 - Paycheck Protection Program Loan:

 

Shortly after declaration of a pandemic and "lockdowns" of numerous non-essential businesses, the Company in April of 2020 executed a note and received a loan (the "PPP Loan") from JP Morgan Chase Bank under the Paycheck Protection Program ("PPP") which was established under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the U.S. Small Business Administration. In April 2020, the Company received the PPP Loan of $2,331,365. The proceeds from the PPP Loan were used in accordance with the terms of the CARES Act program, as described further below.

 

The term of the PPP Loan is two years. The interest rate on the PPP Loan is 1.00%. Payments of principal and interest are deferred until ten months after the loan covered period (twenty four weeks after receipt of the loan). Pursuant to the terms of the CARES Act, the proceeds of the PPP Loan may be used for payroll costs, mortgage interest, rent or utility costs. The promissory note evidencing the PPP Loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under such PPP Loan, collection of all amounts owing from the respective Borrower, filing suit and obtaining judgment against the respective Borrower.

 

Under the terms of the CARES Act, Borrowers can apply for and be granted forgiveness for all or a portion of the PPP Loan. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during a period not to exceed a twenty-four week period after loan origination and the maintenance or achievement of certain employee levels. No assurance is provided that a Borrower will obtain forgiveness under any relevant PPP Loan in whole or in part.

 
 

 

18

 

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Cautionary Statement Regarding Forward-Looking Information

 

This report contains statements that are predictive in nature, depend upon or refer to future events or conditions (including certain projections and business trends) accompanied by such phrases as “believe”, “estimate”, “expect”, “anticipate”, “will”, “intend” and other similar or negative expressions, that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, as amended. Actual results for Value Line, Inc. (“Value Line” or “the Company”) may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the following:

 

 

maintaining revenue from subscriptions for the Company’s digital and print published products;

 

changes in market and economic conditions, including global financial issues;

 

protecting intellectual property rights;

 

dependence on non-voting revenues and non-voting profits interests in EULAV Asset Management, a Delaware statutory trust (“EAM” or “EAM Trust”), which serves as the investment advisor to the Value Line Funds and engages in related distribution, marketing and administrative services;

 

fluctuations in EAM’s and third party copyright assets under management due to broadly based changes in the values of equity and debt securities, redemptions by investors and other factors;

 

possible changes in the valuation of EAM’s intangible assets from time to time;

 

generating future revenues or collection of receivables from significant customers;

 

dependence on key personnel;

 

competition in the fields of publishing, copyright and investment management, along with associated effects on the level and structure of prices and fees, and the mix of services delivered;

 

the impact of government regulation on the Company’s and EAM’s businesses;

 

availability of free or low cost investment data through discount brokers or generally over the internet;

 

terrorist attacks, cyber attacks and natural disasters;

 

the coronavirus pandemic, which has drastically affected markets, employment, and other economic conditions, and may have additional unpredictable impacts on employees, suppliers, customers, and operations;

 

other possible epidemics;

 

changes in prices of materials and other inputs required by the Company;

 

other risks and uncertainties, including but not limited to the risks described in Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended April 30, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q for the period ended January 31, 2021; and other risks and uncertainties arising from time to time.

 

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors which may involve external factors over which we may have no control or changes in our plans, strategies, objectives, expectations or intentions, which may happen at any time at our discretion, could also have material adverse effects on future results. Except as otherwise required to be disclosed in periodic reports required to be filed by public companies with the SEC pursuant to the SEC's rules, we have no duty to update these statements, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, current plans, anticipated actions, and future financial conditions and results may differ from those expressed in any forward-looking information contained herein.

 

In this report, “Value Line,” “we,” “us,” “our” refers to Value Line, Inc. and “the Company” refers to Value Line and its subsidiaries unless the context otherwise requires.

 

19

 

Executive Summary of the Business

 

The Company's core business is producing investment periodicals and their underlying research and making available certain Value Line copyrights, Value Line trademarks and Value Line Proprietary Ranks and other proprietary information, to third parties under written agreements for use in third-party managed and marketed investment products and for other purposes. Value Line markets under well-known brands including Value Line®, the Value Line logo®, The Value Line Investment Survey®, Smart Research, Smarter Investing and The Most Trusted Name in Investment Research®. The name "Value Line" as used to describe the Company, its products, and its subsidiaries, is a registered trademark of the Company. Effective December 23, 2010, EULAV Asset Management Trust (“EAM”) was established to provide investment management services to the Value Line Funds, institutional and individual accounts and provide distribution, marketing, and administrative services to the Value Line® Mutual Funds ("Value Line Funds"). The Company maintains a significant investment in EAM from which it receives payments in respect of its non-voting revenues and non-voting profits interests.

 

The Company’s target audiences within the investment research field are individual investors, colleges, government entities including public libraries, and investment management professionals. Individuals come to Value Line for complete research in a single package. Institutional licensees consist of corporations, financial professionals, colleges, government agencies, and municipal libraries. Libraries and universities offer the Company’s detailed research to their patrons and students. Investment management professionals and other institutional customers use the research and historical information in their day-to-day businesses. The Company has a dedicated department that solicits institutional subscriptions.

 

Payments received for new and renewal subscriptions and the value of receivables for amounts billed to retail and institutional customers are recorded as unearned revenue until the order is fulfilled. As the orders are fulfilled, the Company recognizes revenue in equal installments over the life of the particular subscription. Accordingly, the subscription fees to be earned by fulfilling subscriptions after the date of a particular balance sheet are shown on that balance sheet as unearned revenue within current and long-term liabilities.

 

The investment periodicals and related publications (retail and institutional) as well as the Value Line copyrights, Value Line Proprietary Ranking System results, and other proprietary information, consolidate into one segment called Publishing.

 

Asset Management and Mutual Fund Distribution Businesses

 

The business of EAM is managed by its trustees each owning 20% of the voting profits interest in EAM and by its officers subject to the direction of the trustees. The Company’s non-voting revenues and non-voting profits interests in EAM entitle it to receive a range of 41% to 55% of EAM’s revenues (excluding distribution revenues) from EAM’s mutual fund and separate account business and 50% of the residual profits of EAM (subject to temporary increase in certain limited circumstances). The Voting Profits Interest Holders will receive the other 50% of residual profits of EAM. Distribution is not less than 90% of EAM’s profits payable each fiscal quarter under the provisions of the EAM Trust Agreement.

 

Business Environment

 

The nation's economy, which endured a series of historic ups and downs over the past year, as the world battled the worst global pandemic since 1918, has begun to recover significantly. For the most part, this nascent comeback is being led by the housing, retailing, and manufacturing sectors, but restrained by the frustrating slow and uneven pace of job creation.

 

This optimistic case assumes that the progress being made in quelling COVID-19 will continue. In addition to further progress on the pandemic front, the nation anticipates additional support from Congress and the continuing monetary support from the Federal Reserve, which is being promised.

 

20

 

Currently, the Dow Jones Industrial Average, the S&P 500 Index, and the NASDAQ Composite each recently hit an all-time high. Moreover, this more than decade-long bull market seems as though it will endure, aided by historically low interest rates, past and prospective fiscal support, and evident strong earnings improvement.

 

Recently, though, investor fears of rising inflation have started to creep back in after a long absence. Such concerns are being engendered by the faster pace of economic improvement, a recent uptick in producer, or wholesale, prices, and expectations of significant additional fiscal spending. This led to a sharp recovery in yields on 10-year Treasury notes and 30-year Treasury bonds. For now, we believe these inflation worries are overblown, and that the economic recovery will prove to be of insufficient magnitude to seriously unsettle the inflation outlook.

 

Results of Operations for the Three and Nine Months Ended January 31, 2021 and January 31, 2020

 

The following table illustrates the Company’s key components of revenues and expenses.

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands, except earnings per share)

 

2021

   

2020

   

Change

   

2021

   

2020

   

Change

 

Income from operations

  $ 2,283     $ 3,129       -27.0 %   $ 6,697     $ 7,783       -14.0 %

Non-voting revenues and non-voting profits interests from EAM Trust

    4,734       3,455       37.0 %     12,592       9,384       34.2 %

Income from operations plus non-voting revenues and non-voting profits interests from EAM Trust

  $ 7,017     $ 6,584       6.6 %   $ 19,289     $ 17,167       12.4 %

Operating expenses

  $ 7,847     $ 7,674       2.3 %   $ 23,971     $ 22,717       5.5 %

Income from securities transactions, net

  $ 424     $ 167       153.9 %   $ 1,705     $ 451       278.0 %

Income before income taxes

  $ 7,441     $ 6,751       10.2 %   $ 20,994     $ 17,618       19.2 %

Net income

  $ 6,029     $ 4,952       21.7 %   $ 16,202     $ 12,853       26.1 %

Earnings per share

  $ 0.63     $ 0.51       23.5 %   $ 1.69     $ 1.33       27.1 %

 

During the nine months ended January 31, 2021, the Company’s net income of $16,202,000, or $1.69 per share, was 26.1% above net income of $12,853,000, or $1.33 per share, for the nine months ended January 31, 2020. During the nine months ended January 31, 2021, the Company’s income from operations of $6,697,000 was 14.0% below income from operations of $7,783,000 during the nine months ended January 31, 2020. The largest factors in the increase in net income during the nine months ended January 31, 2021, compared to the prior fiscal year, were an increase in copyright fees, an increase from revenues and profits interests in EAM Trust, and an increase in realized capital gains on sales of securities available for sale.

 

During the nine months ended January 31, 2021, there were 9,604,869 average common shares outstanding as compared to 9,652,805 average common shares outstanding during the nine months ended January 31, 2020.

 

During the three months ended January 31, 2021, the Company’s net income of $6,029,000, or $0.63 per share, was 21.7% above net income of $4,952,000, or $0.51 per share, for the three months ended January 31, 2020. During the three months ended January 31, 2021, the Company’s income from operations of $2,283,000 was 27.0% below income from operations of $3,129,000 during the three months ended January 31, 2020.

 

21

 

Total operating revenues

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

Change

   

2021

   

2020

   

Change

 

Investment periodicals and related publications:

                                               

Print

  $ 2,896     $ 3,273       -11.5 %   $ 9,054     $ 9,563       -5.3 %

Digital

    3,934       3,835       2.6 %     11,769       11,527       2.1 %

Total investment periodicals and related publications

    6,830       7,108       -3.9 %     20,823       21,090       -1.3 %

Copyright fees

    3,300       3,695       -10.7 %     9,845       9,410       4.6 %

Total publishing revenues

  $ 10,130     $ 10,803       -6.2 %   $ 30,668     $ 30,500       0.6 %

 

Within investment periodicals and related publications, subscription sales orders are derived from print and digital products. The following chart illustrates the changes in the sales orders associated with print and digital subscriptions.

 

Sources of subscription sales         

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 
   

2021

   

2020

   

2021

   

2020

 
   

Print

   

Digital

   

Print

   

Digital

   

Print

   

Digital

   

Print

   

Digital

 

New Sales

    13.3 %     16.4 %     7.5 %     13.6 %     14.5 %     15.7 %     9.8 %     14.2 %

Renewal Sales

    86.7 %     83.6 %     92.5 %     86.4 %     85.5 %     84.3 %     90.2 %     85.8 %

Total Gross Sales

    100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %

 

During the nine months ended January 31, 2021 new sales of print and digital publications increased as a percent of the total gross print and digital sales versus the prior fiscal year due to an increase in new Telemarketing gross sales of print and digital publications. During the nine months ended January 31, 2021 renewal sales of print and digital publications decreased as a percent of the total gross digital sales versus the prior fiscal year due to a decrease in new gross sales of Institutional print publications as customer migration to digital services continues gradually.

 

   

As of

January 31,

   

As of

April 30,

   

As of January 31,

   

Change

 

($ in thousands)

 

2021

   

2020

   

2019

   

Jan-21 vs.

Apr-20

   

Jan-21 vs.

Jan-20

 

Unearned subscription revenue (current and long-term liabilities)

  $ 23,451     $ 24,738     $ 23,696       -5.2 %     -1.0 %

 

Unearned subscription revenue as of January 31, 2021 is 1.0% below January 31, 2020 and is 5.2% below April 30, 2020. A certain amount of variation is to be expected due to the volume of new orders and timing of renewal orders, direct mail campaigns and large Institutional Sales orders.

 

22

 

Investment periodicals and related publications revenues

 

Investment periodicals and related publications revenues of $20,823,000 decreased 1.3% during the nine months ended January 31, 2021, as compared to the prior fiscal year.  Total product line circulation at January 31, 2021 was 2.5% above total product line circulation at January 31, 2020, reversing a long term trend.  The Company actively attracted new subscribers to our services through increased marketing efforts, promoting add-on and multi-year purchases in addition to continuing direct mail, e-mail, and telephone efforts by our sales personnel.  During the nine months ended January 31, 2021, our Institutional Sales department generated total sales orders of $10,192,000 or 7.9% above the prior fiscal year and the retail telemarketing sales team generated total sales orders of $6,001,000 or 1.5% above the prior fiscal year.

 

Total print circulation at January 31, 2021 was 1.7% above the total print circulation at January 31, 2020. Print publication revenues of $9,054,000 during the nine months ended January 31, 2021 decreased 5.3% as compared to the prior fiscal year. Total digital circulation at January 31, 2021 was 3.6% above total digital circulation at January 31, 2020 and digital publications revenues of $11,769,000 during the nine months ended January 31, 2021 were 2.1% above the prior fiscal year.

 

During the three months ended January 31, 2021, investment periodicals and related publications revenues of $6,830,000 decreased 3.9% as compared to the investment periodicals and related publications revenues of $7,108,000 during the three months ended January 31, 2020 which included an extra week of servings for the weekly print products. Decrease would be 1.2% excluding the extra week of print products servings during the third quarter of the prior fiscal year. During the three months ended January 31, 2021, print publication revenues of $2,896,000 decreased 11.5%, (5.9% excluding the extra week of print products servings during the three months ended January 31, 2020) as compared to third quarter of the prior fiscal year.

 

Value Line serves primarily individual and professional investors in stocks, who pay mostly on annual subscription plans, for basic services or as much as $100,000 or more annually for comprehensive premium quality research, not obtainable elsewhere. The ongoing goal of adding new subscribers has led us to experiment with varying terms for our independent, proprietary research including periods of intensive promotion of “starter” services and publications. Further, new services and new features for existing services are regularly under consideration and development. Prominently introduced in the past year were new elements in the Value Line Research Center, such as The New Value Line ETFs Service. A new monthly publication Value Line Information You Should Know Wealth Newsletter was introduced as well, and features of the Value Line Research Center and The Value Line Fund Advisor Plus services were enhanced. The new Value Line M & A Service, seeking stocks of quality companies that may be merged or acquired, launched in the second quarter of fiscal 2021 and Value Line Climate Change Investing Service in the fourth.         

 

Copyright fees

 

During the nine months ended January 31, 2021, copyright fees of $9,845,000 were 4.6% above those during the corresponding periods in the prior fiscal year. The Company has negotiated with the sponsor of the largest exchange traded fund (“ETF”) in the program the phased restructuring of the Company’s asset based fees and overall fees of the ETF in light of the competitive market. The Company’s copyright fees may be reduced in the range of ten percent, although the level of assets under management in the ETF is critical to this projection, and it reached new highs in recent weeks subsequent to the third quarter ended January 31, 2021.

 

Investment management fees and services (unconsolidated)

 

The Company has substantial non-voting revenues and non-voting profits interests in EAM, the asset manager to the Value Line Mutual Funds. Since the Company’s interest is non-controlling and non-voting, the Company does not report this operation as a separate business segment, although it maintains a significant interest in the cash flows generated by this business and will receive ongoing payments in respect of its non-voting revenues and non-voting profits interests.

 

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Value Line Funds continue to succeed in assets growth, realizing net investor inflows for the past two years. Net assets in hybrid funds were up $1.15 billion at January 31, 2021. Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, 2021, were $4.90 billion, which is $1.15 billion, or 30.7%, above total assets of $3.75 billion in the Value Line Funds managed and/or distributed by EAM at January 31, 2020. The increase reflects successful investment selection capturing market appreciation and positive net flows for the Value Line Funds, partially offset by net redemptions in eight of the ten funds over the twelve month period ended January 31, 2021.

 

Shares of Value Line Strategic Asset Management Trust (“SAM”) and Value Line Centurion Fund (“Centurion”) are only distributed within certain variable annuity and variable life insurance contracts.

 

Value Line Mutual Funds

 

   

As of January 31,

 

($ in millions)

 

2021

   

2020

   

Change

 

Variable annuity assets ("GIAC")

  $ 411     $ 412       -0.2 %

All other open end equity and hybrid fund assets

    4,388       3,232       35.8 %

Total equity and hybrid funds

    4,799       3,644       31.7 %

Fixed income funds

    103       107       -3.7 %

Total EAM managed net assets

  $ 4,902     $ 3,751       30.7 %

 

The Value Line Fund shareholders are provided a money market fund investment managed by Federated Government Obligations Fund. In July 2020, the Value Line VIP Equity Advantage Fund with insignificant assets was closed and liquidated.

 

As of January 31, 2021, four of six Value Line equity and hybrid mutual funds, excluding SAM and Centurion, held an overall four or five star rating by Morningstar, Inc.

 

Several of the Value Line Funds have received national recognition. The Value Line Asset Allocation Fund and Capital Appreciation Fund continue stellar performance as the top performing balanced funds of any allocation funds in Morningstar’s allocation categories.

 

EAM Trust - Results of operations before distribution to interest holders

 

The overall results of EAM’s investment management operations during the nine months ended January 31, 2021, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $21,318,000, 12b-1 fees and other fees of $7,194,000 and other income of $234,000. For the same period, total investment management fee waivers were $207,000 and 12b-1 fee waivers for nine Value Line Funds were $490,000. During the nine months ended January 31, 2021, EAM's net income was $2,958,000 after giving effect to Value Line’s non-voting revenues interest of $11,113,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

 

The overall results of EAM’s investment management operations during the nine months ended January 31, 2020, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $16,531,000, 12b-1 fees and other fees of $6,275,000 and other income of $147,000. For the same period, total investment management fee waivers were $233,000 and 12b-1 fee waivers for three Value Line Funds were $517,000. During the nine months ended January 31, 2020, EAM's net income was $1,990,000 after giving effect to Value Line’s non-voting revenues interest of $8,389,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

 

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As of January 31, 2021, three of the Value Line Funds have all or a portion of the 12b-1 fees being waived, and one fund has partial investment management fee waivers in place. Although, under the terms of the EAM Declaration of Trust, the Company no longer receives or shares in the revenues from 12b-1 distribution fees, the Company could benefit from the fee waivers to the extent that the resulting reduction of expense ratios and enhancement of the performance of the Value Line Funds attracts new assets.

 

The Value Line equity and hybrid funds’ assets represent 89.5%, variable annuity funds issued by GIAC represent 8.4%, and fixed income fund assets represent 2.1%, respectively, of total fund assets under management (“AUM”) as of January 31, 2021. At January 31, 2021, equity, hybrid and GIAC variable annuities AUM increased by 31.7% and fixed income AUM decreased by 3.7% as compared to fiscal 2020.

 

EAM - The Companys non-voting revenues and non-voting profits interests

 

The Company holds non-voting revenues and non-voting profits interests in EAM which entitle the Company to receive from EAM an amount ranging from 41% to 55% of EAM's investment management fee revenues from its mutual fund and separate accounts business, and 50% of EAM’s net profits, not less than 90% of which is distributed in cash every fiscal quarter. The applicable recent non-voting revenues interest percentage for the third quarter of fiscal 2021 was 52.48%.

 

The Company recorded income from its non-voting revenues interest and its non-voting profits interest in EAM as follows:

 

   

Three Months Ended January31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

Change

   

2021

   

2020

   

Change

 

Non-voting revenues interest

  $ 4,104     $ 3,033       35.3 %   $ 11,113     $ 8,389       32.5 %

Non-voting profits interest

    630       422       49.3 %     1,479       995       48.6 %
    $ 4,734     $ 3,455       37.0 %   $ 12,592     $ 9,384       34.2 %

 

Operating expenses

 

   

Three Months Ended January 31,

   

Nine Months Ended January 31,

 

($ in thousands)

 

2021

   

2020

   

Change

   

2021

   

2020

   

Change

 

Advertising and promotion

  $ 837     $ 748       11.9 %   $ 2,709     $ 2,393       13.2 %

Salaries and employee benefits

    4,716       4,523       4.3 %     13,778       13,299       3.6 %

Production and distribution

    1,189       1,198       -0.8 %     3,854       3,608       6.8 %

Office and administration

    1,105       1,205       -8.3 %     3,630       3,417       6.2 %

Total expenses

  $ 7,847     $ 7,674