Value Line, Inc., (NASDAQ: VALU) reported results for its fiscal year ended April 30, 2012. The Company’s annual report on Form 10-K has been filed with the SEC and is available on the Company’s website @ www.valueline.com/About/corporate_filings.aspx. Shareholders may receive a hard copy, free of charge upon request. During the twelve months ended April 30, 2012, the Company’s net income of $6,925,000, or $0.70 per share compares to net income of $37,782,000, or $3.79 per share, for the twelve months ended April 30, 2011. The net income of the Company during the twelve months ended April 30, 2011 included $50,510,000 of pre-tax accounting (non-cash) gain and applicable deferred income taxes of $19,462,000 on the non-cash gain from deconsolidation of Value Line’s former investment management subsidiaries, EAM LLC and ESI on December 23, 2010 (the “Restructuring Transaction”, further explained below). The Company’s fiscal year ended April 30, 2012, was the first year for which revenues and operating income from its former investment management subsidiaries (EAM, LLC and ESI) were entirely excluded. During the fiscal year ended April 30, 2011, the Company recorded revenues and incurred expenses with respect to EAM and ESI for the period from May 1, 2010 to December 23, 2010. Moreover, when the Company deconsolidated EAM and ESI during last fiscal year, Generally Accepted Accounting Principles required that the Company record a one-time non-cash gain of $50,510,000 from the deconsolidation. Taken together, the exclusion of gross revenues from EAM and ESI in the current fiscal year, and the one-time $50,510,000 non-cash gain last fiscal year make year over year comparison difficult without a careful examination of the Company’s Consolidated Financial Statements and Notes to the Consolidated Financial Statements. Income from operations of $5,338,000 for the twelve months ended April 30, 2012, does not include the non-voting revenues and non-voting profits interests from EAM of $5,890,000, while income from operations for the twelve months ended April 30, 2011 of $8,533,000 includes $10,693,000 of advisory management fees and distribution fees from the former Value Line subsidiaries, EAM LLC and ESI, that performed the operations of the investment management business prior to the Restructuring Transaction. During the twelve months ended April 30, 2011, the net income and income from operations included restructuring expenses of $3,764,000, non-cash post-employment compensation expense of $1,770,000 related to the grant of a voting profits interest in EAM to a former employee, a $914,000 expense for the operating lease exit obligation related to EAM’s exit from the Company’s office facility and a $1,767,000 reduction in the estimated cost of administration of the Fair Fund created as part of the Settlement with the Securities and Exchange Commission (the “SEC”).
Income before income taxes, which is inclusive of the non-voting revenues and non-voting profits interests from EAM through April 30, 2012, was $11,298,000 as compared to $61,463,000 for the twelve months ended April 30, 2011, which included the aforementioned gain on Restructuring Transaction of $50,510,000.The Company achieved a number of business successes this year. These include:
- Recording another record for gross sales in the Institutional Sales division of the Company. This is the 5th consecutive year in which this division’s gross sales have grown to a new high. Institutional Sales division also launched a new website and held webinars specifically designed for institutional customers and prospects.
- We have also seen an increase in revenues from our Copyright Data business. Assets in these third-party managed products are at $3.4 billion.
- For Retail subscribers, we upgraded the www.valueline.com website to improve navigation and redesigned the “shopping cart” to make it even easier to subscribe.
- We dedicated significant resources, as reflected in capitalized software on the Company’s Balance Sheet, to internally and externally developed technology. Value Line is implementing a multi-year plan to improve computerized support for our array of products and seeks to launch improved digital products while controlling related operating costs. Our comprehensive efforts encompass infrastructure upgrades and development of more efficient ways to deliver our products to customers.
- Moreover, our technology development is focused on delivering an improved customer experience. One major step in this program was completed this year when we replaced our customer service software with a state of the art system to allow us to serve our print and digital subscribers more efficiently and to give us more flexibility in our pricing, and better ability to generate management information.
- Distributions received from EAM, the adviser of the Value Line Family of Mutual Funds, totaled nearly $6 million as the outstanding performance of several of the equity funds was recognized by the Wall Street Journal, Investor’s Business Daily and Kiplinger’s. In addition, two of the equity funds were awarded five stars by Morningstar.
In fiscal 2011, net income of $37,782,000 included $50,510,000 from a one-time, pre-tax non-cash accounting gain on the deconsolidation of Value Line’s former investment management subsidiaries. Shareholders’ equity of $32,314,000 at April 30, 2012, compared to shareholders’ equity of $33,254,000 at April 30, 2011. Retained earnings were $31,628,000 and cash and short term liquid assets were $15,923,000 at April 30, 2012. The change in shareholders’ equity reflects net earnings, regular cash dividends paid and the cost to repurchase 78,500 of the Company’s shares in fiscal 2012 at a cost of $946,000.Value Line, Inc. is a leading New York based provider of investment research. The Value Line Investment Survey is one of the most widely used sources of independent equities investment research. Value Line also publishes a range of proprietary investment research in both print and digital formats including our original research in the areas of Mutual Funds, Options and Convertible securities. Value Line’s acclaimed research also enables the Company to provide specialized products such as Value Line Select, Value Line Special Situations, Value Line Dividend Select, and copyright data, distributed under copyright agreements for fees, including certain proprietary ranking system information and other proprietary information used in third party products. Investment Management services are provided through its substantial non-controlling and non-voting interests in EULAV Asset Management, the investment adviser to The Value Line Family of Mutual Funds. Value Line’s products are available to individual investors at www.valueline.com or through 1-800-VALUELINE, while institutional-level services for professional investors, advisers, corporate, academic, municipal and legal libraries are offered at www.ValueLinePro.com. 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:
- dependence on key personnel;
- maintaining revenue from subscriptions for the Company’s digital and print published products;
- protection of intellectual property rights;
- changes in market and economic conditions, including global financial issues;
- 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 an investment advisor to the Value Line Funds and engages in related distribution, marketing and administrative services;
- fluctuations in EAM’s assets under management due to broadly based changes in the values of equity and debt securities, redemptions by investors and other factors, and the effect these changes may have on the valuation of EAM’s intangible assets;
- competition in the fields of publishing, copyright data and investment management;
- the impact of government regulation on the Company’s and EAM’s business;
- availability of free or low cost investment data through discount brokers or generally over the internet;
- the risk that, while the Company believes that the restructuring transaction that closed on December 23, 2010, achieved compliance with the requirements of the order issued by the SEC on November 4, 2009, the Company might be required to take additional steps which could adversely affect the Company’s results of operations or the Company’s financial condition;
- terrorist attacks, cyber security attacks and natural disasters;
- identifying and executing a suitable lease for replacement office space for the Company’s principal offices prior to expiration in May 2013 of the current, non-renewable lease at the Company’s current location;
- 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, 2012; and
- other risks and uncertainties arising from time to time.