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Value Line Inc. Reports Operating Results (10-Q)

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Mar 13, 2009
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Value Line Inc. (VALU, Financial) filed Quarterly Report for the period ended 2009-01-31.

VALUE LINE INC.'s primary businesses are producing investment related periodical publications through its wholly-owned subsidiary Value Line Publishing Inc. and providing investment advisory services to mutual funds institutions and individual clients. Value Line Inc. has a market cap of $246.4 million; its shares were traded at around $24.68 with a P/E ratio of 8.4 and P/S ratio of 2.9. The dividend yield of Value Line Inc. stocks is 6.6%. Value Line Inc. had an annual average earning growth of 9.8% over the past 5 years.

Highlight of Business Operations:

For the nine months ended January 31, 2009 the Company s net income of $19,336,000 or $1.94 per share was $1,437,000 or 7% below net income of $20,773,000 or $2.08 per share for the nine months ended January 31, 2008. Net income for the three months ended January 31, 2009 of $3,732,000 or $0.38 per share was $4,739,000 or 56% below net income of $8,471,000 or $0.85 per share for the third quarter of the prior fiscal year. Operating income of $18,351,000 for the nine months ended January 31, 2009 was $9,367,000 or 34% below operating income of $27,718,000 last fiscal year. Operating income of $4,620,000 for the three months ended January 31, 2009 was $4,717,000 or 50% below operating income of $9,337,000 for the third quarter of the prior fiscal year. The Company s income from securities transactions of $11,643,000 for the nine months ended January 31, 2009 was 105% above last year s income of $5,683,000 due to the sale of the equity portfolio in the second quarter of fiscal year 2009. The Company redeployed the proceeds from the equity portfolio into short term fixed income investments or cash equivalents. For the three months ended January 31, 2009, income from securities transactions of $927,000 was down $3,170,000 or 77% from the same three months of the previous year. The third quarter of previous fiscal year third quarter included capital gains of $3,077,000. Shareholders equity of $79,862,000 at January 31, 2009 was 7% lower than shareholders equity of $85,469,000 at January 31, 2008.

For the nine months ended January 31, 2009 print publication revenues decreased $2,734,000 or 12% below last fiscal year for the reasons described above. Electronic publications revenues grew by $651,000 or 7% for the nine months ended January 31, 2009. The electronic revenues are broken down into institutional accounts and retail subscribers. For the nine months ended January 31, 2009, institutional revenues increased $1,102,000 or 26%, while revenues from retail subscribers were down $451,000 or 9% as compared to the nine months ended January 31, 2008. The decrease in electronic retail publications revenues is primarily attributable to the decrease in circulation within the Company s software products. Circulation of The Value Line Investment Analyzer decreased 24%, which resulted in a $338,000 decline in revenues from this product. The Company has successfully expanded its institutional sales marketing efforts and the increase in institutional revenues is a direct result of a focused effort to boost sales to colleges, libraries and money managers.

Licensing fee revenues have decreased $1,914,000 or 35% for the nine months ended January 31, 2009 as compared to the nine months ended January 31, 2008. As of January 31, 2009, total third party sponsored assets attributable to the licensing business represent $2.1 billion in various products. The broad and deep declines throughout the equity markets have significantly impacted assets of the third party sponsors attributable to the licensing business and resulted in lower asset based fees paid to the Company. While the third party sponsors continue to raise assets the broad market decline has eroded those assets as well as previous appreciation in existing assets. The Company is in discussion with new sponsors to increase products offered, but no new agreements have been signed in fiscal 2009. The Company believes the growth of the business is dependent upon the desire of third party marketers to use the Value Line trademarks and proprietary research for their products, signing new licensing agreements, and the marketplace s acceptance of new products. As stated in the past, Value Line believes it was an early entrant into this new market eight years ago. Today this market has significantly broadened as a result of product diversification and growth of the use of indexes by portfolio managers, and the Company and its third party sponsors face more competition in the marketplace.

As a result of the decline in assets under management, investment management fees and distribution services revenues for the nine months ended January 31, 2009 were $4,598,000 or 18% below the prior fiscal year. Management fees for the first nine months of fiscal year 2009 were down $3,427,000 or 18% as compared to the first nine months of fiscal year 2008. There was a net decrease of $950,000 or 18% in distribution services revenues. During the period, contractual fee waivers exist for certain of the Value Line Funds. For the nine months ended January 31, 2009 and 2008, 12b-1 fee waivers were $2,280,000 and $2,943,000, respectively. For the nine months ended January 31, 2009 and 2008, management fee waivers were $142,000 and $174,000, respectively. The Company and its subsidiaries have no right to recoup the previously waived management fees and 12b-1 fees. Separately managed accounts revenues decreased $222,000 or 24% for the nine months ended January 31, 2009 as compared to the nine months ended January 31, 2008 primarily due to market decline in the portfolios.

Expenses within the Company are categorized into advertising and promotion, salaries and employee benefits, production and distribution, and office and administration. Operating expenses of $36,045,000 for the nine months ended January 31, 2009 were $772,000 or 2% above operating expenses of $35,273,000 last fiscal year. Operating expenses of $11,236,000 for the three months ended January 31, 2009 were $507,000 or 4% below operating expenses of $11,743,000 for the third quarter of the prior fiscal year.

Advertising and promotion expenses for the nine months ended January 31, 2009 decreased $1,323,000 as compared to the first nine months ended January 31, 2008. Within the investment management segment, supermarket platform expenses associated with the distribution of the mutual funds decreased $559,000 or 13% below the prior year due to the decline in assets under management. In the last quarter, the Company reduced its print advertising promoting the mutual funds due to the volatility in the marketplace. For the nine months ended January 31, 2009, print advertising increased $126,000 from the nine months ended January 31, 2008. Within the publishing segment, costs associated with direct mail decreased $837,000 or 31% below last fiscal year, due to an ongoing targeted reduction in the overall number of pieces mailed year to year.

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