Item 2. PROPERTIES.
On June 4, 1993, the Company entered into a new lease agreement for approximately 80,000 square feet that provided for the relocation of its office space to 220 East 42nd Street, New York, New York. The Company owns a distribution facility of approximately 23,OOO square feet in North Bergen, New Jersey. The primary purpose of this location is the distribution of the Company's publication products. Compupower leases its approximately 8,OOO - -square foot-office and computer facility in Secaucus, New Jersey. The Company believes the capacity of these facilities is sufficient to meet the Company's current and expected future requirements.
Item 3.
Item 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the stockholders during the fourth quarter of the fiscal year ended April 30, l995.
Part II
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Registrant's Common Stock is traded in the over-the-counter market. The approximate number of record holders of the Registrant's Common Stock at April 3O, l995 was 990. Over-the-counter price quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The range of the bid and asked quotations and the dividends paid on these shares during the past two fiscal years were as follows:
Item 6.
Item 6. SELECTED FINANCIAL DATA.
Earnings per share for each of the fiscal years shown below are based on the weighted average number of shares outstanding.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Operating Results
The Company's fiscal 1995 earnings were the fourth highest historical earnings results. This accomplishment comes after three consecutive years of record earnings. Net earnings for the fiscal year ended April 30, 1995 were $23,168,000 or $2.32 per share compared with net earnings of $28,902,000 or $2.90 per share for fiscal year 1994 and net earnings of $27,723,000 or $2.78 per share for fiscal year 1993. The decrease in net earnings for fiscal 1995 from the fiscal 1994 level was primarily due to a decline in Income from Securities Transactions (formerly called Investment Income) of $7,047,000, including losses of $4,980,000 related to the Company's strategy of realizing capital losses in order to reduce income taxes. The $1,550,000 expended in support of The Value Line Cash Fund also contributed to the decrease.
Revenues of $79,094,000 for fiscal 1995 compare to revenues of $82,050,000 and $78,401,000 for the twelve months ended April 30, 1994 and 1993, respectively. Publication revenues of $55,912,000 for the fiscal year ended April 30, 1995 decreased 3.3% from fiscal 1994. The decrease in publications revenues is primarily a result of the decline in subscription levels for the Value Line Investment Survey due to the uncertain financial market conditions that existed during the first three quarters of fiscal 1995. Revenues from the Company's publications for fiscal 1994 of $57,830,000 increased 3.0% from fiscal 1993 with the increase largely attributable to a higher average level of subscriptions to the Value Line Investment Survey. Investment management fees and services revenues of $23,182,000 for the fiscal year ended April 30, 1995 decreased 4.3% from the fiscal 1994 level. The decrease in fiscal 1995 was primarily a result of a 6.5% decline in the average annual assets under management in the Value Line mutual funds during the fiscal year. Mutual fund net assets under management at April 30, 1995 were approximately equal to the net assets under management at April 30, 1994. Investment management fees and services revenues for fiscal 1994 increased $1,945,000 or 8.7% from the 1993 levels as a result of an increase in the average level of assets under management in the Company's mutual funds. Mutual fund assets under management at fiscal year end 1994 increased during the year from $2.9 billion to $3.0 billion.
Expenses for the fiscal year ended April 30, 1995, exclusive of the non-recurring expense of $1,550,000, were $47,884,000, a decrease of $1,702,000 or 3.4% over last year's level of $49,586,000. Advertising expenses of $14,749,000 for the twelve months ended April 30, 1995 decreased $3,596,000 from expenses of $18,345,000 for the comparable period in fiscal 1994. The decrease in advertising expenses resulted from management's decision to cut back marketing expenditures during uncertain financial market conditions and increase sales efforts during improved financial market conditions. Salaries and employee benefit expenses of $18,935,000 for the twelve months of fiscal 1995 were $1,662,000 above the prior level of $17,273,000 primarily as a result of the additional staff in support of the Mutual Fund Survey and the cost of replacement staff and recruiting fees at Compupower and the Company's investment management and research divisions. Office and administration expenses of $8,003,000 increased $838,000 or 11.70% from the prior year's level as a result of a $445,000 increase in depreciation and amortization expenses associated with the new office facility and the computer hardware upgrade, $315,000 of accelerated amortization resulting from a decision to upgrade the fulfillment software at Compupower and an increase in professional fees. These increases were offset by a reduction in rent expense of $767,000 or 34% and the receipt of $617,000 in partial settlement of a lawsuit. Fiscal 1994 expenses also include the receipt of $408,000 of proceeds from a partial settlement of this lawsuit. Expenses for fiscal 1994 increased $1,852,000 as compared with fiscal 1993. The net increase is a result of increased advertising for the Value Line Investment Survey, the promotional effort and associated personnel costs incurred in launching the Value Line Mutual Fund Survey, offset by a $3,050,000 expense incurred in fiscal 1993 related to the Company's relocation.
Income from Securities Transactions of $8,659,000 for the fiscal year ended April 30, 1995 decreased by $7,047,000 or 44.87% from $15,706,000 at April 30, 1994. In addition to a $764,000 decrease in capital gains produced by the Hedge, Tilt and Stem portfolios, the Company also incurred losses of $4,980,000 related to its tax planning strategy. Sales of mutual fund shares, unrelated to the tax planning strategy, have produced $326,000 of capital losses this year as compared to a $101,000 gain last fiscal year. The decline was largely the result of a decision to liquidate an investment in one of the Company's mutual funds during the latter part of fiscal 1995 in order to redeploy these assets in other investment vehicles. Investment income in fiscal 1994 was $15,706,000, an increase of 10.4% from fiscal 1993. The increase was principally a result of a higher level of capital gains from the Company's portfolio of marketable securities.
Liquidity and Capital Resources
The Company has liquid resources which are used in its business totaling $208,324,000 at April 30, 1995. In addition to $90,311,000 in working capital, the Company has marketable securities with a market value of $118,013,000, that, although classified as non-current assets are also readily marketable as the need for capital arises. The Company has entered into agreements to sell and repurchase U.S. Government Agency debt securities included in working capital with a market value of $39,099,000 at April 30, 1995. The repurchase obligations of $36,994,000 have been entered into on a short term basis. The securities, currently available for sale, mature during calendar year 1997 and are readily marketable should management decide to liquidate the Company's holdings and related obligations. The Company's cash position, including its investment in The Value Line Cash Fund has increased $30,696,000 at April 30, 1995 largely as a result of the liquidation of certain of the Company's equity and fixed income holdings in the Value Line Mutual Funds. The holdings in these funds were sold primarily to realize certain tax benefits during fiscal 1995.
Management believes that the Company's cash and other liquid asset resources used in its business, together with future cash flows from operations, will be sufficient to finance current and forecasted operations.
Management anticipates no significant borrowing requirements during fiscal 1995 other than the short term refinancing of the repurchase obligations.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the registrant and its subsidiaries are included as a part of this Form lO-K:
Page Numbers Reports of independent accountants 21 Consolidated balance sheets--April 3O, 1995 and 1994 23 Consolidated statements of income and retained earnings --years ended April 3O, 1995, 1994 and 1993 24 Consolidated statements of cash flows --years ended April 3O, 1995, 1994 and 1993 25 Notes to the consolidated financial statements 26 Supplementary schedules 35
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements with the independent accountants on accounting and financial disclosure matters.
Part III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, l995, except that the information pertaining to Executive Officers is set forth in Part I herein under the caption "Executive Officers of the Registrant."
Item 11.
Item 11. EXECUTIVE COMPENSATION.
Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1995.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1995.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is incorporated herein by reference to the annual proxy statement to be filed with the Securities and Exchange Commission within 12O days after April 3O, 1995.
Part IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements See Item 8.
2. Schedules Schedule I - Marketable Securities. Schedule XIII - Other Investments.
All other Schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits
3.1 Articles of Incorporation of the Company, as amended through April 17, 1983 are incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 3.1 filed with the Securities and Exchange Commission on April 7, 1983. 10.8 Form of tax allocation arrangement between the Company and AB&Co. incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 10.8 filed with the Securities and Exchange Commission on April 7, 1983. 10.9 Form of Servicing and Reimbursement Agreement between the Company and AB&Co., dated as of November 1, 1982 incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 10.9 filed with the Securities and Exchange Commission on April 7, 1983. 10.10 Value Line, Inc. Profit Sharing and Savings Plan incorporated by reference to the Registration Statement - Form S-1 of Value Line, Inc. Part II, Item 16.(a) 10.10 filed with the Securities and Exchange Commission on April 7, 1983. 10.13 Lease for the Company's premises at 220 East 42nd Street, New York, N.Y. incorporated by reference to the Annual Report on Form 10K for the year ended April 30, 1994. 20.10 Subsidiaries of the Registrant.
(b) Reports on Form 8-K.
No matters were reported on Form 8-K.
(c) Exhibits.
Subsidiaries of the Registrant, Exhibit 22 attached.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 1O-K for the fiscal year ended April 3O, 1995, to be signed on its behalf by the undersigned, thereunto duly authorized.
VALUE LINE, INC. (Registrant)
By: /s/ Jean Bernhard Buttner ____________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/Jean Bernhard Buttner ____________________________ Jean Bernhard Buttner Principal Executive Officer
By: /s/ Stephen R. Anastasio ____________________________ Principal Financial and Accounting Officer
Dated: July 18, 1995
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 1O-K for the fiscal year ended April 3O, 1995, to be signed on its behalf by the undersigned as Directors of the Registrant.
/s/Jean Bernhard Buttner /s/William S. Kanaga - ------------------------ -------------------- Jean Bernhard Buttner William S. Kanaga
/s/Arnold Van H. Bernhard /s/Howard A. Brecher - ------------------------- -------------------- Arnold Van H. Bernhard Howard A. Brecher
/s/Harold Bernard, Jr. /s/Samuel Eisenstadt - ---------------------- -------------------- Harold Bernard, Jr. Samuel Eisenstadt
/s/W. Scott Thomas /s/David T. Henigson - ------------------ -------------------- W. Scott Thomas David T. Henigson
Dated: July 18, 1995
Exhibit 22
Subsidiaries of the Registrant ------------------------------
Percentage of Voting Securities State of Owned By Incorporation Registrant ------------- -----------
Compupower Corporation Delaware 99.9%
Value Line Securities, Inc. New York l00%
The Vanderbilt Advertising Agency, Inc. New York l00%
Value Line Publishing, Inc. New York 100%
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Value Line, Inc.
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income and retained earnings and of cash flows present fairly, in all material respects, the financial position of Value Line, Inc. and its subsidiaries at April 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended April 30, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide reasonable basis for the opinion expressed above.
Our audits of the consolidated financial statements referred to above also included an audit of the Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP - ------------------------ PRICE WATERHOUSE LLP
New York, New York June 26, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the registration statement on Form S-8 (No. 2-90593) of our report dated June 26, 1995 relating to the consolidated financial statements of Value Line, Inc. and subsidiaries for the years ended April 30, 1995 and 1994, which appears on page 22 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears in this Form 10-K.
/S/ PRICE WATERHOUSE LLP - ------------------------ PRICE WATERHOUSE LLP
New York, New York July 26, 1995
Value Line, Inc. Consolidated Balance Sheets (in thousands, except share amounts)
The accompanying notes are an integral part of these financial statements.
Value Line, Inc. Consolidated Statements of Cash Flows (in thousands)
The accompanying notes are an integral part of these financial statements.
Value Line, Inc. Consolidated Statements of Income and Retained Earnings (in thousands, except per share amounts)
The accompanying notes are an integral part of these financial statements.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 1-Organization and Summary of Significant Accounting Policies:
Value Line, Inc. (the "Company") is incorporated in New York State and carries on the investment periodicals and related publications and investment management activities formerly performed by Arnold Bernhard & Co., Inc. (the "Parent") which owns approximately 80% of the issued and outstanding common stock of the Company.
Principles of consolidation: The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Revenue recognition: Subscription revenues are recognized ratably over the terms of the subscriptions which range from three months to three years. Accordingly, the amount of subscription fees to be earned by servicing subscriptions after the date of the balance sheet is shown as unearned revenue. The unearned revenue shown on the balance sheet is a noncurrent deferred credit. This classification recognizes that the fulfillment of this commitment will require the use of significantly less current assets than the amount of the unearned revenues and, accordingly, combining it with current liabilities would significantly understate the liquidity position of the Company.
Investment management fees are recorded as revenue as the related services are performed.
Securities Sold Under Agreements to Repurchase:
The Company has entered into agreements to sell and repurchase U.S. Government Agency debt securities. The securities are recorded at market value and are included in "Short-term securities available for sale" on the Consolidated Balance Sheets.
Valuation of Securities:
Effective May 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). As a result of adopting SFAS 115, the Company changed the method by which it values its long-term securities portfolio, which consists of shares of the Value Line Mutual Funds, and short-term securities portfolio, which the Company classifies as available for sale, from the lower of aggregate cost or market to market value. Unrealized gains and losses on these securities are reported, net of applicable taxes, as a separate component of Shareholders' Equity. Realized gains and losses on sales of the securities are recorded in earnings on trade date and are determined on the identified cost method. SFAS 115 cannot be retroactively applied to the financial statements of periods prior to May 1, 1994.
Trading securities, which consist of securities held by Value Line Securities, Inc., the Company's broker-dealer subsidiary, and certain adjustable rate preferred shares held by the Company, are valued at market with unrealized gains and losses included in earnings.
Goodwill: Goodwill represents the excess of the purchase price over the fair value of net assets acquired and is being amortized over a period of 40 years.
Value Line, Inc. Notes to Consolidated Financial Statements
Earnings per share: Earnings per share are based on the weighted average number of shares of common stock and common stock equivalents outstanding during each year.
Cash and Cash Equivalents: For purposes of the Consolidated Statements of Cash Flows, the Company considers all cash held at banks and short term liquid investments with an original maturity of less than three months to be cash and cash equivalents. As of April 30, 1995 and 1994, cash equivalents included $41,503,000 and $10,266,000, respectively, invested in the Value Line money market funds.
Reclassification: Certain prior year amounts disclosed in the Consolidated Financial Statements and Notes thereto have been reclassified to conform to current year presentation.
Note 2-Supplementary Cash Flow Information:
Cash payments for income taxes were $12,974,000, $20,171,000, and $18,123,000, in 1995, 1994 and 1993, respectively. Interest payments of $1,315,000, $183,000 and $201,000 were made in 1995, 1994, and 1993, respectively.
Note 3-Related Party Transactions:
The Company acts as investment adviser and manager for fifteen open-end investment companies known as the Value Line Family of Funds (see Note 4). The Company earns investment management fees calculated based upon the average daily net asset values of the respective funds. The Company also earns brokerage commission income, net of clearing fees, on securities transactions executed by Value Line Securities, Inc. on behalf of the funds and other advisory clients of the Company that are cleared on a fully disclosed basis through non-affiliated brokers. For the years ended April 30, 1995, 1994 and 1993, investment management fees and brokerage commission income, net of clearing fees, amounted to $17,782,000, $19,098,000 and $17,050,000, respectively. The related receivables from the funds for management advisory fees included in Receivable from affiliates in the Consolidated Balance Sheets were $1,352,000 and $1,379,000 at April 30, 1995 and 1994, respectively.
For the years ended April 30, 1995, 1994 and 1993, the Company was reimbursed $414,000, $454,000 and $309,000, respectively, for payments it made on behalf of and services it provided to the Parent. At April 30, 1995 and 1994, Receivable from affiliates included a receivable from the Parent of $257,000 and $36,000, respectively. For the years ended April 30, 1995, 1994 and 1993, the Company made federal income tax payments to to the Parent amounting to $10,225,000, $16,020,000 and $14,014,000, respectively. At April 30, 1995 and 1994, accrued taxes payable included $438,000 payable to and $92,000 receivable from the Parent, respectively. These data are in accordance with the tax sharing arrangement described in Note 6.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 4-Investments:
Trading Securities:
Securities held by Value Line Securities, Inc. had an aggregate cost of $40,767,000 and $39,475,000 and a market value of $48,187,000 and $43,549,000 at April 30, 1995 and April 30, 1994, respectively. The adjustable rate preferred stock securities held by Value Line, Inc. which were sold during fiscal 1995 are recorded at the lower of aggregate cost or market at April 30, 1994. The aggregate cost and market value of these securities at April 30, 1994 was $2,347,000 and $2,737,000, respectively.
Short-Term Securities Available for Sale:
Short-term securities available for sale consists of Value Line, Inc.'s holdings in the following securities:
Federal National Mortgage Association (FNMA), floating rate notes due August 5, 1997; par value $30,325,000.
Federal Farm Credit Bank (FFCB), floating rate notes due February 12, 1997; par value $10,000,000.
The market value of the Company's holdings in the FNMA and FFCB, which approximates cost, at April 30, 1995 was $29,438,000 and $9,661,000, respectively. These notes were purchased at a discount from their respective face values. The accretion of this discount has been included as an addition to the cost of the securities and reflected as interest income in the Consolidated Statements of Income and Retained Earnings.
Long-Term Securities Available for Sale:
The aggregate cost of the long-term securities was $104,749,000 and $121,626,000 and the market value was $118,013,000 and $127,993,000 at April 30, 1995 and April 30, 1994, respectively. At April 30, 1995, gross unrealized gains on these securities of $13,264,000, net of deferred taxes of $4,642,000, were included in shareholders' equity. Realized losses and the proceeds received from sales of these securities during the fiscal year ended April 30, 1995 were $5,306,000 and $46,934,000, respectively. At April 30, 1994, these securities were recorded at the lower of aggregate cost or market.
For the years ended April 30, 1995, 1994 and 1993, total net income from securities consisted of $4,938,000, $5,094,000 and $5,244,000 of dividend income; $396,000, $11,789,000 and $9,159,000 of net capital gains; $1,912,000, $56,000 and $53,000 of interest income; and $1,865,000, $183,000 and $195,000 of related interest expense, respectively. Net income from securities also included $3,279,000 of unrealized gains for the year ended April 30, 1995 and $1,060,000 and $33,000 of unrealized losses on marketable securities for the years ended April 30, 1994 and 1993, respectively.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 5-Property and Equipment:
Property and equipment are carried at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets, or in the case of leasehold improvements, over the remaining terms of the leases. For income tax purposes, depreciation is computed using accelerated methods.
Property and equipment consisted of the following:
Note 6-Federal, State and Local Income Taxes:
The Company computes its tax in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
The provision for income taxes includes the following:
Value Line, Inc. Notes to Consolidated Financial Statements
Deferred taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. The tax effect of temporary differences giving rise to the Company's deferred tax (liability)/asset are as follows:
Included in accrued taxes payable in current liabilities in the Consolidated Balance Sheets are deferred federal tax liabilities of $1,373,000 and $401,000 at April 30, 1995 and 1994, respectively. Also included in accrued taxes payable are deferred state and local tax benefits of $413,000 and $271,000 at April 30, 1995 and 1994, respectively.
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rate to pretax income as a result of the following:
The Company is included in the consolidated federal income tax return of the Parent. The Company has a tax sharing arrangement which requires it to make tax payments to the Parent equal to the Company's liability as if it filed a separate return.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 7-Employees' Profit Sharing and Savings Plan:
Substantially all employees of the Company and its subsidiaries are members of the Value Line, Inc. Profit Sharing and Savings Plan (the "Plan"). In general, this is a qualified, contributory plan which provides for a discretionary annual Company contribution which is determined by a formula based upon the salaries of eligible employees and the amount of consolidated net operating income as defined in the Plan. Plan expense, included in salaries and employee benefits in the Consolidated Statements of Income and Retained Earnings, for the years ended April 30, 1995, 1994 and 1993 was $968,000, $1,470,000 and $1,159,000, respectively.
Note 8-Incentive Stock Options:
On April 17, 1993, the Incentive Stock Option Plan expired. On the date of expiration, 22,550 options available for grant were cancelled. Information on the 1983 Incentive Stock Option Plan for the three years ended April 30, 1995, is as follows:
Options outstanding at April 30, 1995 expire at various dates through March 2003. At April 30, 1995, 3,750 of the outstanding options were exercisable. Of the common stock held in treasury at April 30, 1995, 6,250 shares were held for exercise of stock options.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 9-Treasury Stock:
Treasury stock, at cost, for the three years ended April 30, 1995, consists of the following:
The Company's Board of Directors authorized the purchase of up to 1,000,000 shares of the Company's common stock from time to time in negotiated transactions.
Note 10-Securities Sold under Agreements to Repurchase:
On June 28, 1994, the Company entered into short-term agreements to repurchase certain securities sold. These agreements were entered into to repurchase the Federal National Mortgage Association Floating Rate Notes due August 5, 1997 (FNMA), par value $30,325,000, and Federal Farm Credit Bank Floating Rate Notes due February 12, 1997 (FFCB), par value $10,000,000, stated in Note 4. The outstanding balance of the obligations under the repurchase agreements in the aggregate amount of $36,977,000 accrue interest at a stated annual interest rate of 6.3125% and mature on May 5, 1995 ($27,899,000) with respect to the FNMA and May 12, 1995 ($9,095,000) for the obligation to repurchase the FFCB securities. The Company intends to refinance these obligations on a short term basis.
Note 11-Lease Commitments:
On June 4, 1993, the Company entered into a 15 year lease agreement that provides new primary office space, replacing the previous lease that expired during the second quarter of fiscal year 1994. The lease includes free rental periods as well as scheduled base rent escalations over the term of the lease. The total amount of the base rent payments is being charged to expense on the straight-line method over the term of the lease. The Company has recorded a Deferred charge on its Consolidated Balance Sheets to reflect the excess of annual rental expense over cash payments since inception of the lease.
Value Line, Inc. Notes to Consolidated Financial Statements
Future minimum payments, exclusive of forecasted increases in real estate taxes and wage escalations, under operating leases for office space, with remaining terms of one year or more, are as follows:
Rental expense for the years ended April 30, 1995, 1994 and 1993 under operating leases covering office space was $1,481,000, $2,248,000 and $2,422,000, respectively.
Note 12-Relocation Cost:
In fiscal 1994, the Company relocated its corporate office facility to a new location within New York City. Included in Relocation expense in the Consolidated Statements of Income and Retained Earnings in 1993 is the estimated operating cost of the second facility during the estimated period of construction, the disposal and clean-up expenses at the previously occupied office site and the charges related to the acceleration of depreciable lives of the Company's office and computer equipment that was replaced in connection with the relocation.
Note 13-Term Loan Facility:
The Company has repaid its $3,000,000 obligation and terminated the bank term loan agreement during fiscal 1995. The agreement provided for collateralization and the maintenance of certain ratios and net worth limitations. At April 30, 1994, the bank held marketable securities with a market value of $7,031,000 as collateral against the loan. These securities were sold during fiscal 1995 with the proceeds used to repay the bank obligation.
Interest charged on the loan was at the bank's prime lending rate which averaged 7.5%, 6.1% and 6.1% for the years ended April 30, 1995, 1994 and 1993, respectively. Interest expense for the years ended April 30, 1995, 1994 and 1993 was $119,000, $183,000 and $195,000, respectively.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 14-Business Segments:
The Company operates in two business segments: Investment periodicals and Publications, and Investment Management. Identifiable assets consisted of:
Revenues and income from operations were as follows:
Note 15-Net Capital:
The Company's wholly owned broker/dealer subsidiary, Value Line Securities, Inc., is subject to the net capital provisions of Rule 15c3-1 under the Securities Exchange Act of 1934, which requires the maintenance of minimum net capital of $100,000 and requires that aggregate indebtedness, as defined, shall not exceed fifteen times net capital, as defined. Additionally, dividends may only be declared if aggregate indebtedness is less than twelve times net capital.
At April 30, 1995, Value Line Securities', Inc. net capital, as defined, of $39,331,748 exceeded required net capital by $38,550,090 and the ratio of aggregate indebtedness to net capital was .30 to 1.
Value Line, Inc. Notes to Consolidated Financial Statements
Note 16-Financial Instruments with Off-Balance-Sheet Risk and Concentration of Credit Risk:
The Company executes, as agent, securities transactions on behalf of the Value Line mutual funds. If either the mutual fund or a counterparty fail to perform, the Company may be required to discharge the obligations of the nonperforming party. In such circumstances, the Company may sustain a loss if the market value of the security is different from the contract value of the transaction.
In the normal course of business, the Company enters into contractual commitments, principally financial futures contracts for securities indices. Financial futures contracts provide for the delayed delivery of financial instruments for which the seller agrees to make delivery at a specified future date, at a specified price or yield. The contract or notional amount of these contracts reflects the extent of involvement the Company has in these contracts. At April 30, 1995, the underlying notional value of such commitments was $5,942,625. Risk arises from the potential inability of counterparties to meet the terms of their contracts and from movements in securities values. The Company limits its credit risk associated with such instruments by entering exclusively into exchange traded futures contracts.
No single customer accounted for a significant portion of the Company's sales in 1995, 1994 or 1993, nor accounts receivable for 1995 or 1994.
Note 17-Estimated Fair Value of Financial and Derivative Instruments:
Statement of Accounting Standards No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments," requires disclosure of information regarding derivative instruments, which include financial index futures contracts.
Derivative instruments held for trading purposes are reflected at fair value at April 30, 1995. The fair value and the average fair value of derivative instruments at April 30, 1995 and for the year then ended consists of liabilities of $332,925 and $50,102, respectively.
Net trading gains related to equity securities aggregated $5,227,790 for the year ended April 30, 1995. Net trading losses related to derivative financial instruments amounted to $570,552 for the year ended April 30, 1995.
Note 18-Mutual Fund Support Expenses:
On June 28, 1994, the Company purchased, as part of its investment management operations for which it receives fee income, U.S. Government Agency notes with a market value as of that date of $38,615,000 from the Value Line Cash Fund, for which it is the investment adviser. In order to maintain a $1.00 per share net asset value, as part of the same transaction, the Company reimbursed the Value Line Cash Fund $1,550,000 for losses the Fund incurred on the sale which the Company may recoup in the future.