# Value Line Inc: Form 10-Q for the period ended Jan 31, 2020

- Company: [Value Line Inc](/companies/valu.md) (CIK 717720)
- Form: 10-Q
- Filed: 2020-03-12
- Accepted by EDGAR: Mar 12, 2020, 17:21 ET
- Period: 2020-01-31
- Accession: 0001437749-20-004901
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/717720/000143774920004901/valu20200131_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/717720/000143774920004901/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-01-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2019-11-01 to 2020-01-31 | $10.8m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Revenue | 9 months, 2019-05-01 to 2020-01-31 | $30.5m | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Operating income | 3 months, 2019-11-01 to 2020-01-31 | $3.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2019-05-01 to 2020-01-31 | $7.8m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2019-11-01 to 2020-01-31 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2019-05-01 to 2020-01-31 | $4.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2019-11-01 to 2020-01-31 | $5.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2019-05-01 to 2020-01-31 | $12.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2019-11-01 to 2020-01-31 | $0.51 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 9 months, 2019-05-01 to 2020-01-31 | $1.33 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2019-05-01 to 2020-01-31 | $6.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2019-05-01 to 2020-01-31 | $2.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2019-05-01 to 2020-01-31 | $5.8m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2019-05-01 to 2020-01-31 | $572.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-01-31 | $3.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-01-31 | $35.7m | us-gaap:AssetsCurrent |
| Total assets | at 2020-01-31 | $105.7m | us-gaap:Assets |
| Current liabilities | at 2020-01-31 | $23.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-01-31 | $51.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2020-01-31 | $54.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,764 characters.

### 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 outbreaks of novel coronavirus beginning in the U.S. in early 2020, which may affect market and economic conditions, along with unknown impacts on employees, customers, and aspects of operations;
- 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, 2019 and in Part II, Item 1A of this Quarterly Report on Form 10-Q for the period ended January 31, 2020; 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.

### 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 Ranking System results 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 the 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, libraries, and investment management professionals. Individuals come to Value Line for complete research in one package. Institutional licensees consist of corporations, financial professionals, colleges, and municipal libraries. Libraries and universities offer the Company’s detailed research to their patrons and students. Investment management professionals 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) and Value Line copyrights and 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 long business expansion, albeit likely to remain in place in the coming months, is nevertheless on shakier ground than it had been just weeks ago. The reason is the alarming spread of the coronavirus, a disease that began in China in late 2019 and has spread to scores of nations, afflicted tens of thousands of individuals, and cost the lives of several thousand victims.

The deadly disease has hit the world stage with ferocity, threatening growth in China, the rest of Asia, Europe, and the western world, including the United States. In response, the Federal Reserve voted to cut the federal funds rate target on March 3rd, by 50 basis points, or one half of a percentage point. That surprise reduction, coming a full two weeks before the next scheduled Federal Open Market Committee meeting, reflected the central bank's growing concerns about the impact the virus will have on domestic and global growth.

These concerns notwithstanding, we should be able to avoid a recession this year. But the margin for error is now much smaller, with GDP growth likely to hover around 1%, at best, in the opening half. In fact, should growth falter more than we now suspect, the Fed might reduce interest rates further. It also is possible that the government would try to take fiscal action, such as introducing spending initiatives or attempting another tax cut. But neither of these options would be easy in a partisan Washington during an election year.

Looking at the investment backdrop, there was an unsettling, but understandable, rise in financial market volatility as the first quarter wound down, with stocks suffering a sharp reversal and bond prices soaring, as investors sought the perceived safety of more secure assets. However, with the investment fundamentals still sound on the United States shores, especially on a longer-term basis, and with most previous exogenous shocks, especially those related to disease breakouts, having been handled by Wall Street with little lasting impact, it would seem prudent for investors to stay the course.

### Results of Operations for the Three and Nine Months Ended January 31, 2020 and January 31, 2019

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

*($ in thousands, except earnings per share)*

|  | Three Months Ended January 31, 2020 | 2019 | Change | Nine Months Ended January 31, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Income from operations | $3,129 | $1,413 | 121.4% | $7,783 | $4,443 | 75.2% |
| Non-voting revenues and non-voting profits interests from EAM Trust | 3,455 | 2,210 | 56.3% | 9,384 | 6,865 | 36.7% |
| Income from operations plus non-voting revenues and non-voting profits interests from EAM Trust | $6,584 | $3,623 | 81.7% | $17,167 | $11,308 | 51.8% |
| Operating expenses | $7,674 | $7,639 | 0.5% | $22,717 | $22,631 | 0.4% |
| Income from securities transactions, net | $167 | $140 | 19.3% | $451 | $377 | 19.6% |
| Income before income taxes | $6,751 | $3,763 | 79.4% | $17,618 | $11,685 | 50.8% |
| Net income | $4,952 | $2,451 | 102.0% | $12,853 | $8,857 | 45.1% |
| Earnings per share | $0.51 | $0.25 | 104.0% | $1.33 | $0.91 | 46.2% |

During the nine months ended January 31, 2020, the Company’s income from operations of $7,783,000 was $3,340,000 or 75.2% above income from operations of $4,443,000 during the nine months ended January 31, 2019. During the nine months ended January 31, 2020, there were 9,652,805 average common shares outstanding as compared to 9,688,681 average common shares outstanding during the nine months ended January 31, 2019. For the nine months ended January 31, 2020, operating expenses were well controlled and were comparable to those during the nine months ended January 31, 2019. During the nine months ended January 31, 2020, the Company’s net income of $12,853,000, or $1.33 per share, was $3,996,000 or 45.1% above net income of $8,857,000, or $0.91 per share, for the nine months ended January 31, 2019. During the three months ended January 31, 2020, the Company’s net income of $4,952,000, or $0.51 per share, was 102.0% above net income of $2,451,000, or $0.25 per share, for the three months ended January 31, 2019. During the three months ended January 31, 2020, the Company’s income from operations of $3,129,000 was 121.4% above income from operations of $1,413,000 during the three months ended January 31, 2019. The largest factors in the increases in net income and income from operations during the three and nine months ended January 31, 2020, compared to the prior fiscal year were an increase in copyright fees, an increase from revenues and profits interests in EAM Trust and well controlled overall expenses.

#### Total operating revenues

*($ in thousands)*

| Investment periodicals and related publications: | Three Months Ended January 31, 2020 | 2019 | Change | Nine Months Ended January 31, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Print | $3,273 | $3,304 | -0.9% | $9,563 | $10,076 | -5.1% |
| Digital | 3,835 | 3,897 | -1.6% | 11,527 | 11,679 | -1.3% |
| Total investment periodicals and related publications | 7,108 | 7,201 | -1.3% | 21,090 | 21,755 | -3.1% |
| Copyright fees | 3,695 | 1,851 | 99.6% | 9,410 | 5,319 | 76.9% |
| Total publishing revenues | $10,803 | $9,052 | 19.3% | $30,500 | $27,074 | 12.7% |

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, 2020 Print | Digital | 2019 Print | Digital | Nine Months Ended January 31, 2020 Print | Digital | 2019 Print | Digital |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| New Sales | 7.5% | 13.6% | 11.5% | 14.8% | 9.8% | 14.2% | 14.4% | 13.8% |
| Renewal Sales | 92.5% | 86.4% | 88.5% | 85.2% | 90.2% | 85.8% | 85.6% | 86.2% |
| 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, 2020 new sales of digital publications slightly increased as a percent of the total gross digital sales versus the prior fiscal year due to an increase in new Institutional gross sales of digital publications. During the nine months ended January 31, 2020 new sales of print publications decreased as a percent of the total gross print sales versus the prior fiscal year due to the timing of advertising.

*($ in thousands)*

|  | As of January 31, 2020 | As of April 30, 2019 | As of January 31, 2019 | Change Jan-20 vs. Apr-19 | Jan-20 vs. Jan-19 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Unearned subscription revenue (current and long-term liabilities) | $23,696 | $25,483 | $23,899 | -7.0% | -0.8% |

Unearned subscription revenue as of January 31, 2020 is comparable to January 31, 2019 and is 7% below April 30, 2019. Variation is to be expected due to the level and timing of advertising for order generation, the volume of new orders and timing of renewal orders, direct mail campaigns and large Institutional Sales orders. Unearned subscription revenue typically peaks at April 30th (the end of the Company’s fiscal year).

#### Investment periodicals and related publications revenues

Investment periodicals and related publications revenues of $21,090,000, which included an extra week of servings for the weekly print products decreased 3.1%, (3.9% excluding the extra week of print products servings) during the nine months ended January 31, 2020, as compared to the prior fiscal year. Revenues from investment periodicals and related publications revenues of $7,108,000, for the three months ended January 31, 2020 decreased 1.3%, (4.0% excluding the extra week of print products servings) as compared to the third quarter ended January 31, 2019. The Company continued activity to attract new subscribers through various marketing channels, primarily direct mail, e-mail, and by the efforts of our sales personnel. Total product line circulation at January 31, 2020 was 7.0% below total product line circulation at January 31, 2019. During the nine months ended January 31, 2020 Institutional Sales department generated total sales orders of $9,443,000 and the retail telemarketing sales team generated total sales orders of $5,912,000.

Print publication revenues of $9,563,000, which included an extra week of servings for the weekly print products decreased 5.1%, (7% excluding the extra week of print products servings) during the nine months ended January 31, 2020 as compared to the prior fiscal year as a result of a 7.0% decline in total print circulation in fiscal 2020. Revenues from the print publications of $3,273,000, for the three months ended January 31, 2020 decreased 0.9%, (6.8% excluding the extra week of print products servings) as compared to the third quarter ended January 31, 2019. Total digital circulation at January 31, 2020 was 7.1% below total digital circulation at January 31, 2019 and digital publications revenues of $11,527,000 during the nine months ended January 31, 2020 were only 1.3 % below the prior fiscal year, as higher-priced subscriptions were generally retained.

Value Line serves primarily individual and professional investors in stocks, who pay generally 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 reliable, 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 during the second quarter were new features in the *Value Line Research Center*, one of which is the new Value Line ETFs service. A new monthly publication *Value Line Information You Should Know Wealth Newsletter* was introduced during the third quarter of fiscal 2020, and features of the *Value Line Research Center* and *The Value Line Fund Advisor Plus* services were enhanced.

The Value Line Proprietary Ranking System results (the “Ranking System”), a component of the Company’s flagship product, *The Value Line Investment Survey*, is also utilized in the Company’s copyright business. The Ranking System is made available to EAM for specific uses without charge. The Ranking System is designed to be predictive over a six to twelve month period. During the six month period ended January 31, 2020, the combined Ranking System “Rank 1 & 2” stocks’ increase of 3.4% outperformed the Russell 2000 Index’s decrease of 2.5% during the comparable period. During the twelve month period ended January 31, 2020, the combined Ranking System “Rank 1 & 2” stocks’ increase of 14.5% outperformed to the Russell 2000 Index’s increase of 7.6% during the comparable period.

#### Copyright fees

During the nine months ended January 31, 2020, copyright fees of $9,410,000 were 76.9% above those during the corresponding period in the prior fiscal year. The largest of the individual ETFs active under Value Line’s copyright program has again earned a five star overall Morningstar rating. The Company has negotiated with the sponsor of the largest exchange traded fund (“ETF”) in the program the 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 will be critical to this projection.

Total assets in the Value Line Funds managed and/or distributed by EAM at January 31, 2020, were $3.75 billion, which is $1.07 billion, or 40%, above total assets of $2.68 billion in the Value Line Funds managed and/or distributed by EAM at January 31, 2019. 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 eleven Funds over the twelve month period ended January 31, 2020.

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 issued by The Guardian Insurance & Annuity Company, Inc. (“GIAC”).

#### Value Line Mutual Funds

*($ in millions)*

|  | As of January 31, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: |
| Variable annuity assets ("GIAC") | $412 | $380 | 8.4% |
| All other open end equity and hybrid fund assets | 3,232 | 2,191 | 47.5% |
| Total equity and hybrid funds | 3,644 | 2,571 | 41.7% |
| Fixed income funds | 107 | 107 | 0.0% |
| Total EAM managed net assets | $3,751 | $2,678 | 40.07% |

The Value Line Fund shareholders are provided a money market fund investment managed by Federated Government Obligations Fund.

As of January 31, 2020 and January 31, 2019, five 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 continues stellar performance as the top performing balanced fund of any allocation funds in Morningstar’s allocation categories. The Value Line Mid-Cap Focused Fund, the Value Line Small Cap Opportunities Fund and the Value Line Capital Appreciation Fund have been named “Category Kings” in *The Wall Street Journal (“Journal”)* in multiple months in recent years. In 2019 the Value Line Mid-Cap Focused Fund reached the *Journal’s* Winner’s Circle for U.S. equity funds.

#### 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, 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.

The overall results of EAM’s investment management operations during the nine months ended January 31, 2019, before interest holder distributions, included total investment management fees earned from the Value Line Funds of $12,277,000, 12b-1 fees and other fees of $5,056,000 and other income of $153,000. For the same period, total investment management fee waivers were $329,000 and 12b-1 fee waivers for three Value Line Funds were $483,000. During the nine months ended January 31, 2019, EAM's net income was $1,610,000 after giving effect to Value Line’s non-voting revenues interest of $6,060,000, but before distributions to voting profits interest holders and to the Company in respect of its 50% non-voting profits interest.

The Value Line equity and hybrid funds’ assets represent 86.2%, variable annuity funds issued by GIAC represent 11.0%, and fixed income fund assets represent 2.8%, respectively, of total fund assets under management (“AUM”) as of January 31, 2020. At January 31, 2020, equity, hybrid and GIAC variable annuities AUM increased by 41.7% and fixed income AUM were comparable to fiscal 2019.

#### EAM - The Company’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, 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 2020 was 51.03%.

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

*($ in thousands)*

|  | Three Months Ended January 31, 2020 | 2019 | Change | Nine Months Ended January 31, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Non-voting revenues interest | $3,033 | $1,997 | 51.9% | $8,389 | $6,060 | 38.4% |
| Non-voting profits interest | 422 | 213 | 98.1% | 995 | 805 | 23.6% |
|  | $3,455 | $2,210 | 56.3% | $9,384 | $6,865 | 36.7% |

### Operating expenses

*($ in thousands)*

|  | Three Months Ended January 31, 2020 | 2019 | Change | Nine Months Ended January 31, 2020 | 2019 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Advertising and promotion | $748 | $893 | -16.2% | $2,393 | $2,455 | -2.5% |
| Salaries and employee benefits | 4,523 | 4,417 | 2.4% | 13,299 | 13,164 | 1.0% |
| Production and distribution | 1,198 | 1,226 | -2.3% | 3,608 | 3,809 | -5.3% |
| Office and administration | 1,205 | 1,103 | 9.2% | 3,417 | 3,203 | 6.7% |
| Total expenses | $7,674 | $7,639 | 0.5% | $22,717 | $22,631 | 0.4% |

Expenses within the Company are categorized into advertising and promotion, salaries and employee benefits, production and distribution, office and administration.

Operating expenses of $22,717,000 during the nine months ended January 31, 2020 were comparable to those during the nine months ended January 31, 2019. Production and distribution expense categories decreased 5.3% as a result of cost controls and a decline in amortization of internally developed software during the nine months ended January 31, 2020. Operating expenses of $7,674,000 during the three months ended January 31, 2020 were comparable to those during the three months ended January 31, 2019.

#### Advertising and promotion

During the three and nine months ended January 31, 2020, advertising and promotion expenses of $748,000 and $2,393,000, respectively, decreased 16.2% and 2.5% as compared to the prior fiscal year. During the nine months ended January 31, 2020, an increase in media marketing expenses and institutional sales promotion was offset by a 22.4% decrease in direct mail expenses and a 5.1% decrease in sales commissions as compared to fiscal 2019.

#### Salaries and employee benefits

During the three and nine months ended January 31, 2020, salaries and employee benefits of $4,523,000 and $13,299,000, respectively, increased 2.4% and 1.0% above the prior fiscal year. In fiscal 2020 salaries and employee benefits in the Information Technology department (“IT”) decreased 1.3%, reflecting completion of certain initiatives to upgrade operating systems.

#### Production and distribution

During the three and nine months ended January 31, 2020, production and distribution expenses of $1,198,000 and $3,608,000, respectively, decreased 2.3% and 5.3% below the prior fiscal year. During the nine months ended January 31, 2020, a $48,000 decrease was related to production support of the Company’s website, maintenance of the Company’s publishing and application software and operating systems in fiscal year 2020 and a decrease of $62,000 was attributable to a decline in amortization of internally developed software costs related to digital security and publication production software as compared to fiscal 2019. In fiscal 2020 printing and distribution costs decreased $40,000 due to a 7.0% decrease in print circulation during the nine months ended January 31, 2020.

#### Office and administration

During the three and nine months ended January 31, 2020, office and administrative expenses of $1,205,000 and $3,417,000, respectively, increased 9.2% and 6.7% above the prior fiscal year. The increase of $170,000 during the nine months ended January 31, 2020 was a result of operating lease amortization expense in fiscal 2020 due to a change in lease accounting standard ASU 2016-02,"Leases (Topic 842)".

#### Concentration

During the nine months ended January 31, 2020, 30.85% of total publishing revenues of $30,500,000 were derived from a single customer.

#### Income from Securities Transactions, net

During the nine months ended January 31, 2020 and January 31, 2019, the Company’s income from securities transactions, net, primarily derived from dividend and interest income, was $451,000 and $377,000, respectively. Proceeds from maturities and sales of government debt securities classified as available-for-sale during the nine months ended January 31, 2020 and January 31, 2019, were $5,223,000 and $4,638,000, respectively. There were no sales or proceeds from sales of equity securities during the nine months ended January 31, 2020 or January 31, 2019.

#### Effective income tax rate

The overall effective income tax rates, as a percentage of pre-tax ordinary income for the nine months ended January 31, 2020 and January 31, 2019 were 27.05% and 24.20%, respectively. The increase in the effective tax rate during the quarter ended January 31, 2020 is primarily a result of an increase in the state and local income taxes as a result of changes in state and local tax legislation and the effect from lowering of the New York City tax allocation factor on deferred taxes in fiscal 2019. 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.

#### Leases

The FASB issued ASU 2016-02,"Leases (Topic 842)", in February 2016. ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. ASU 2016-02 also requires certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

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 net present value 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 net present value of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received.

### Liquidity and Capital Resources

The Company had working capital, defined as current assets less current liabilities, of $11,836,000 as of January 31, 2020 and $6,014,000 as of April 30, 2019. These amounts include short-term unearned revenue of $18,216,000 and $20,008,000 reflected in total current liabilities at January 31, 2020 and April 30, 2019, respectively. Cash and short-term securities were $29,400,000 and $28,321,000 as of January 31, 2020 and April 30, 2019, respectively.

The Company’s cash and cash equivalents include $2,739,000 and $5,617,000 at January 31, 2020 and April 30, 2019, respectively, invested primarily at commercial banks and in Money Market Funds at brokers, which operate under Rule 2a-7 of the 1940 Act and invest primarily in short-term U.S. government securities.

#### Cash from operating activities

The Company had cash inflows from operating activities of $6,856,000 during the nine months ended January 31, 2020 compared to cash inflows from operating activities of $5,367,000 during the nine months ended January 31, 2019. The increase in cash inflows from fiscal 2019 to fiscal 2020 is primarily attributable to increase in net income and increase in distributions from EAM.

#### Cash from investing activities

The Company’s cash outflows from investing activities of $3,426,000 during the nine months ended January 31, 2020 compared to cash outflows from investing activities of $1,090,000 for the nine months ended January 31, 2019. Cash outflows for the nine months ended January 31, 2020 were higher than in fiscal 2019 primarily due to the additional equity securities investments and an increase in purchases of fixed income securities in fiscal 2020.

#### Cash from financing activities

During the nine months ended January 31, 2020, the Company’s cash outflows from financing activities were $6,368,000 and compared to cash outflows from financing activities of $5,854,000 for the nine months ended January 31, 2019. Cash outflows for financing activities included $572,000 and $331,000 for the repurchase of 24,016 shares and 15,724 shares of the Company’s common stock under the October 19, 2018 and the September 19, 2012 board approved common stock repurchase programs, during fiscal years 2020 and 2019, respectively. Quarterly dividend payments of $0.20 per share during fiscal 2020 aggregated $5,796,000 and compared to quarterly dividend payments of $0.19 per share during fiscal 2019 which aggregated $5,523,000.

At January 31, 2020 there were 9,639,545 common shares outstanding as compared to 9,675,896 common shares outstanding at January 31, 2019. The Company expects financing activities to continue to include cash payments for dividends for the foreseeable future.

Management believes that the Company’s cash and other liquid asset resources used in its business together with the future cash flows from operations and from the Company’s non-voting revenues and non-voting profits interests in EAM will be sufficient to finance current and forecasted liquidity needs for the next twelve months. Management does not anticipate making any borrowings during the next twelve months. As of January 31, 2020, and April 30, 2019, retained earnings were $55,660,000 and $48,598,000, respectively, and liquid assets were $29,400,000 and $28,321,000, respectively.

### Seasonality

Our publishing revenues are comprised of subscriptions which are generally annual subscriptions. Our cash flows from operating activities are minimally seasonal in nature, primarily due to the timing of customer payments made for orders and subscription renewals. It is not believed that variations in timing of customer payments reflect any issues in financial reliability of customers.

### Off-balance sheet arrangements

We are not a party to any off-balance sheet arrangements, other than operating leases entered into in the ordinary course of business.

### 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).

In August 2016, the FASB issued Accounting Standards Update No. 2016-15, Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”), effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in ASU 2016-15 address eight specific cash flow issues and apply to all entities that are required to present a statement of cash flows under ASC Topic 230, Statement of Cash Flows. The Company has adopted ASU 2016-15 in the first quarter of fiscal 2019.

The FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In addition, ASU No. 2014-09 requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 supersedes most existing U.S. GAAP revenue recognition principles, and it permits the use of either the retrospective or cumulative effect transition method. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has adopted ASU No. 2014-09 in the first quarter of fiscal 2019, which does not have a material impact on the Company's consolidated condensed financial statements and related disclosures.

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)", effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods. This ASU requires that the reconciliation of the beginning-of-period and end-of-period amounts shown in the statement of cash flows include cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The Company has adopted ASU No. 2016-18 in the first quarter of fiscal 2019, which does not have a material impact on the Company's consolidated condensed financial statements and related disclosures.

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. The Company has integrated the effects of the various state laws into its operations and continues to do so.

### Critical Accounting Estimates and Policies

The Company prepares its Consolidated Condensed Financial Statements in accordance with Generally Accepted Accounting Principles as in effect in the United States (U.S. “GAAP”). The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent, and the Company evaluates its estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies reflect the significant judgments and estimates used in the preparation of its Consolidated Condensed Financial Statements.

## Market risk

As filed, 5,834 characters.

### Market Risk Disclosures

The Company’s Consolidated Condensed Balance Sheet includes a substantial amount of assets the fair values of which are subject to market risks. The Company’s market risks are primarily associated with interest rates and equity price risk. The following sections address the significant market risks associated with the Company’s investment activities.

### Interest Rate Risk

The Company’s strategy has been to acquire debt securities with low credit risk. Despite this strategy management recognizes and accepts the possibility that losses may occur. To limit the price fluctuation in these securities from interest rate changes, the Company’s management invests primarily in short-term obligations maturing within one year.

The fair values of the Company’s fixed maturity investments will fluctuate in response to changes in market interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by prepayment options, relative values of alternative investments, and other general market conditions.

Fixed income securities consist of certificates of deposits and securities issued by federal, state and local governments within the United States. As of January 31, 2020 and April 30, 2019 the aggregate cost of fixed income securities classified as available-for-sale were $12,872,000 and $11,163,000, respectively, and fair value was $12,984,000 and $11,206,000, respectively.

The following table summarizes the estimated effects of hypothetical increases and decreases in interest rates on assets that are subject to interest rate risk. It is assumed that the changes occur immediately and uniformly to each category of instrument containing interest rate risks. The hypothetical changes in market interest rates do not reflect what could be deemed best or worst case scenarios. Variations in market interest rates could produce significant changes in the timing of repayments due to prepayment options available. For these reasons, actual results might differ from those reflected in the table.

Fixed Income Securities

*(in thousands)*

| As of January 31, 2020 | Estimated Fair Value after Hypothetical Change in Interest Rates (bp = basis points) Fair Value | 6 mos. 50bp increase | 6 mos. 50bp decrease | 1 yr. 100bp increase | 1 yr. 100bp decrease |
| --- | ---: | ---: | ---: | ---: | ---: |
| Investments in securities with fixed maturities | $12,984 | $12,958 | $12,996 | $12,968 | $12,995 |
| As of April 30, 2019 |  |  |  |  |  |
| Investments in securities with fixed maturities | $11,206 | $11,109 | $11,248 | $11,149 | $11,265 |

Management regularly monitors the maturity structure of the Company’s investments in debt securities in order to maintain an acceptable price risk associated with changes in interest rates.

### Equity Price Risk

The carrying values of investments subject to equity price risks are based on quoted market prices as of the balance sheet dates. Market prices are subject to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic characteristics of the issuer, the relative price of alternative investments and general market conditions. Furthermore, amounts realized in the sale of a particular security may be affected by the relative quantity of the security being sold.

The Company’s equity investment strategy has been to acquire equity securities across a diverse industry group. The portfolio consists primarily of ETFs and select common stock holdings of blue chip companies with a concentration on large capitalization companies with high relative dividend yields. In order to maintain liquidity in these securities, the Company’s policy has been to invest in and hold in its portfolio, no more than 5% of the approximate average daily trading volume in any one issue. Additionally, the Company may purchase and hold non-leveraged ETFs whose performance inversely corresponds to the market value changes of investments in other ETF securities held in the equity portfolio for dividend yield.

As of January 31, 2020 and April 30, 2019, 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), Select Utilities Select Sector SPDR ETF (XLU), First Trust Value Line 100 ETF (FVL), ProShares Trust S&P 500 Dividend Aristocrats ETF (NOBL) and iShares Select Dividend ETF (DVY) and equites under EAM management held at Charles Schwab was $10,257,000 and $8,541,000, respectively, and the fair value was $12,861,000 and $10,622,000, respectively.

Equity Securities

*($ in thousands)*

|  |  | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity |
| --- | --- | ---: | --- | ---: | ---: |
| As of January 31, 2020 | Equity Securities and ETFs held for dividend yield | $12,861 | 30% increase | $16,720 | 5.61% |
|  |  |  | 30% decrease | $9,003 | -5.61% |

Equity Securities

*($ in thousands)*

|  |  | Fair Value | Hypothetical Price Change | Estimated Fair Value after Hypothetical Change in Prices | Hypothetical Percentage Increase (Decrease) in Shareholders’ Equity |
| --- | --- | ---: | --- | ---: | ---: |
| As of April 30, 2019 | Equity Securities and ETFs held for dividend yield | $10,622 | 30% increase | $13,809 | 5.30% |
|  |  |  | 30% decrease | $7,436 | -5.30% |

## Controls and procedures

As filed, 1,491 characters.

(a) The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

The Company’s management has evaluated, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, the effectiveness of the Company’s disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) The registrant’s Principal Executive Officer and Principal Financial Officer have determined that there have been no changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

## Risk factors

As filed, 206 characters.

There have been no material changes to the risk factors disclosed in Item 1A – Risk Factors in the Company’s Annual Report on Form 10-K for the year ended April 30, 2019 filed with the SEC on July 25, 2019.

Filed Mar 12, 2020.
Source: SEC EDGAR, the filing index for accession 0001437749-20-004901. Last ingested by Listed: Oct 24, 2026, 14:56 ET. No prices; not investment advice.