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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Value Line, Inc.    VALU

VALUE LINE, INC.

(VALU)
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VALUE LINE : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

09/11/2020 | 05:15pm EST

Cautionary Statement Regarding Forward-Looking Information




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



? maintaining revenue from subscriptions for the Company's digital and print

published products;

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


  ? protecting intellectual property rights;

? dependence on non-voting revenues and non-voting profits interests in EULAV

Asset Management, a Delaware statutory trust ("EAM" or "EAM Trust"), which

    serves as the investment advisor to the Value Line Funds and engages in
    related distribution, marketing and administrative services;

? fluctuations in EAM's and third party copyright assets under management due to

broadly based changes in the values of equity and debt securities, redemptions

by investors and other factors;

? possible changes in the valuation of EAM's intangible assets from time to

time;

? generating future revenues or collection of receivables from significant

    customers;


  ? dependence on key personnel;

? competition in the fields of publishing, copyright and investment management,

along with associated effects on the level and structure of prices and fees,

and the mix of services delivered;

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

? availability of free or low cost investment data through discount brokers or

    generally over the internet;


  ? terrorist attacks, cyber attacks and natural disasters;

? the coronavirus pandemic, which has drastically affected markets, employment,

and other economic conditions, and may have additional unpredictable impacts

    on employees, suppliers, customers, and operations;


  ? other possible epidemics;

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

? other risks and uncertainties, including but not limited to the risks

described in Item 1A,

"Risk Factors" of the Company's Annual Report on Form 10-K for the year ended

April 30, 2020 and in Part II, Item 1A of this Quarterly Report on Form 10-Q

for the period ended July 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.

19

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Executive Summary of the Business




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



The Company's target audiences within the investment research field are
individual investors, colleges, libraries, and investment management
professionals. Individuals come to Value Line for complete research in a single
package.  Institutional licensees consist of corporations, financial
professionals, colleges, 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)
as well as the Value Line copyrights, Value Line Proprietary Ranking System
results, and other proprietary information, consolidate into one segment called
Publishing.


Asset Management and Mutual Fund Distribution Businesses




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



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Business Environment


The long business expansion, which began following the serious and extended recession of 2008-2009, came to a sudden and abrupt end earlier this year due to the outbreak of COVID-19. That disease has led to more than six million infections and over 180,000 deaths across the United States.




The deadly infection also would wreak havoc on our nation's economy, causing
many businesses to close for a time, others to operate at low and unprofitable
levels, and still more to shutter permanently due to social distancing mandates
and the weakened finances of many consumers. The consequent recession has
resulted in massive layoffs and a double-digit percentage unemployment rate. The
nation's gross domestic product, in response, contracted to a moderate degree
during the opening three months of this year and then by an historic 31.7% in
the second quarter. In trying to effectively respond to this crisis, the U.S.
Government passed and implemented a massive fiscal stimulus program. Efforts to
secure additional funding, however, have thus far met with partisan stalemate.
On the monetary side, the Federal Reserve has cut the federal funds rate target
to near zero, initiated a massive program of asset purchases, and more recently
indicated that it would be more flexible with regard to inflation targets, so as
not to dampen efforts to turn the economy around on a long-term basis.



Not only did the long economic expansion grind to a halt earlier this year, but
so too did the historic bull market, which at its peak had seen the Dow Jones
Industrial Average reach the doorstep of 30,000. Then, after the market's brief,
but painful, reversal investors, emboldened by the actions taken by Washington
and the Fed, and cheered by the initial reopening of a majority of the country's
businesses, quickly regained their stride. In fact, within weeks, the shortest
bear market in history was over and a new bull market had begun. Since
that turnaround, the S&P 500 Index and the NASDAQ have soared to record highs
and the Dow has followed close behind.



Now, the challenge will be for the economy to respond in kind. To be sure,
markets often lead changes in business direction by as much as six to
nine months. Therefore, it is entirely possible, even likely, that such activity
will respond affirmatively to the actions taken earlier by Washington and the
Fed and to the reopening efforts by private enterprise. Thus far, in fact, some
of the late-spring and summer business data have been encouraging, with housing
leading the way at this time. Job creation, often a lagging barometer, continues
to struggle, however. Overall, though, there figures to be enough positive
momentum in place for GDP to turn notably positive during the third and fourth
quarters of this year, but off of very low base following the deep contraction
from April through June 2020.



Results of Operations for the Three Months Ended July 31, 2020 and July 31, 2019




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



                                                       Three Months Ended July 31,
($ in thousands, except earnings per
share)                                               2020               2019           Change
Income from operations                      $       2,226$      2,025              9.9 %
Non-voting revenues and non-voting
profits interests from EAM Trust                    3,644              2,871             26.9 %
Income from operations plus non-voting
revenues and non-voting profits interests
from EAM Trust                              $       5,870$      4,896             19.9 %
Operating expenses                          $       8,102$      7,592              6.7 %
Income from securities transactions, net    $         958       $        141            579.4 %
Income before income taxes                  $       6,828$      5,037             35.6 %
Net income                                  $       5,117$      3,690             38.7 %
Earnings per share                          $        0.53$       0.38             39.5 %




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During the three months ended July 31, 2020, the Company's income from
operations of $2,226,000 was 9.9% above income from operations of $2,025,000
during the three months ended July 31, 2019. During the three months ended July
31, 2020, there were 9,616,721 average common shares outstanding as compared to
9,660,631 average common shares outstanding during the three months ended July
31, 2019. During the three months ended July 31, 2020, the Company's net income
of $5,117,000, or $0.53 per share, was 38.7% above net income of $3,690,000, or
$0.38 per share, for the three months ended July 31, 2019. The largest factors
in the increases in net income and income from operations during the three
months ended July 31, 2020, compared to the prior fiscal year were an increase
in copyright fees and an increase from revenues and profits interests in EAM
Trust.



Total operating revenues



                                                       Three Months Ended July 31,
($ in thousands)                                    2020                2019             Change
Investment periodicals and related
publications:
Print                                     $        3,194$       3,181                0.4 %
Digital                                            3,898               3,852                1.2 %
Total investment periodicals and
related publications                               7,092               7,033                0.8 %
Copyright fees                                     3,236               2,584               25.2 %
Total publishing revenues                 $       10,328$       9,617                7.4 %



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



                                   As of July 31,
                            2020                     2019
                      Print      Digital       Print      Digital
New Sales              17.1 %       14.8 %      12.1 %       21.0 %
Renewal Sales          82.9 %       85.2 %      87.9 %       79.0 %
Total Gross Sales     100.0 %      100.0 %     100.0 %      100.0 %




During the three months ended July 31, 2020 new sales of print publications
increased as a percent of the total gross print sales versus the prior fiscal
year due to an increase in new Telemarketing gross sales of print publications.
During the three months ended July 31, 2020 new sales of digital publications
decreased as a percent of the total gross digital sales versus the prior fiscal
year due to a decrease in new gross sales of Institutional digital publications.



                                                      As of April
                                   As of July 31,             30,      As of July 31,                Change
                                                                                            July-20          July-20
($ in thousands)                             2020            2020                2019     vs. Apr-20       vs. July-19
Unearned subscription revenue
(current and long-term
liabilities)                      $        23,344$    24,738$        23,494            -5.6 %            -0.6 %




Unearned subscription revenue as of July 31, 2020 is less than 1% below July 31,
2019 and is 5.6% below April 30, 2020. A certain amount of variation is to be
expected due to the volume of new orders and timing of renewal orders, direct
mail campaigns and large Institutional Sales orders. The institutional side felt
the effects of the coronavirus recession and market volatility.



                                                                            

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Investment periodicals and related publications revenues




Investment periodicals and related publications revenues of $7,092,000 which
included an extra week of servings for the weekly print products increased 0.8%
(decreased 1.9% excluding the extra week of print products servings), during the
three months ended July 31, 2020, as compared to the prior fiscal year. The
Company continued activity to attract new subscribers through various marketing
channels, primarily direct mail, e-mail, and the efforts of our sales personnel.
Total product line circulation at July 31, 2020 was 1.4% below total product
line circulation at July 31, 2019. During the three months ended July 31, 2020,
the Institutional Sales department generated total sales orders of $2,996,000
and the retail telemarketing sales team generated total sales orders of
$1,903,000.



Total print circulation at July 31, 2020 was 2.2% below the total print
circulation at July 31, 2019. Print publication revenues of $3,194,000 during
the three months ended July 31, 2020 increased 0.4% (decreased 5.6% excluding
the extra week of print products servings), as compared to the prior fiscal
year. Total digital circulation at July 31, 2020 was slightly below total
digital circulation at July 31, 2019 and digital publications revenues of
$3,898,000 during the three months ended July 31, 2020 were 1.2% above the prior
fiscal year.



Value Line serves primarily individual and professional investors in stocks, who
pay mostly on annual subscription plans, for basic services or as much as
$100,000 or more annually for comprehensive premium quality research, not
obtainable elsewhere. The ongoing goal of adding new subscribers has led us to
experiment with varying terms for our independent, proprietary research
including periods of intensive promotion of "starter" services and publications.
Further, new services and new features for existing services are regularly under
consideration and development. Prominently introduced thus far in 2020 were new
features in the Value Line Research Center, such as The New Value Line ETFs
Service. A new monthly publication Value Line Information You Should Know Wealth
Newsletter was introduced in January 2020, and features of the Value Line
Research Center and The Value Line Fund Advisor Plus services were enhanced.



The Value Line Proprietary Ranks (the "Ranking System"), a component of the
Company's flagship product, The Value Line Investment Survey, are 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
July 31, 2020, the combined Ranking System "Rank 1 & 2" stocks' decrease of 2.1%
compared to the Russell 2000 Index's decrease of 8.3% during the comparable
period. During the twelve month period ended July 31, 2020, the combined Ranking
System "Rank 1 & 2" stocks' increase of 1.2% outperformed the Russell 2000
Index's decrease of 6.0% during the comparable period.



Copyright fees



During the three months ended July 31, 2020, copyright fees of $3,236,000 were
25.2% 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 is critical to this projection.



Investment management fees and services - (unconsolidated)




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



                                                                              23

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Total assets in the Value Line Funds managed and/or distributed by EAM at July
31, 2020, were $4.3 billion, which is $900 million, or 26%, above total assets
of $3.4 billion in the Value Line Funds managed and/or distributed by EAM at
July 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 ten Funds over the twelve month period
ended July 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.



Value Line Mutual Funds



                                                           As of July 31,
($ in millions)                                       2020        2019      Change
Variable annuity assets ("GIAC")                   $   410$   416        -1.4 %
All other open end equity and hybrid fund assets     3,800       2,899        31.1 %
Total equity and hybrid funds                        4,210       3,315        27.0 %
Fixed income funds                                     106         107        -0.9 %
Total EAM managed net assets                       $ 4,316$ 3,422       26.13 %



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

In July 2020, the Value Line VIP Equity Advantage Fund was closed and liquidated.

As of July 31, 2020, 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 and Capital Appreciation Fund continue 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 three
months ended July 31, 2020, before interest holder distributions, included total
investment management fees earned from the Value Line Funds of $6,310,000, 12b-1
fees and other fees of $2,301,000 and other income of $110,000. For the same
period, total investment management fee waivers were $43,000 and 12b-1 fee
waivers for three Value Line Funds were $157,000. During the three months ended
July 31, 2020, EAM's net income was $728,000 after giving effect to Value Line's
non-voting revenues interest of $3,280,000, 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 three
months ended July 31, 2019, before interest holder distributions, included total
investment management fees earned from the Value Line Funds of $5,147,000, 12b-1
fees and other fees of $1,979,000 and other income of $53,000. For the same
period, total investment management fee waivers were $109,000 and 12b-1 fee
waivers for three Value Line Funds were $173,000. During the three months ended
July 31, 2019, EAM's net income was $566,000 after giving effect to Value Line's
non-voting revenues interest of $2,588,000, but before distributions to voting
profits interest holders and to the Company in respect of its 50% non-voting
profits interest.



                                                                              24

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As of July 31, 2020, three of the Value Line Funds have all or a portion of the
12b-1 fees being waived, and one fund has partial investment management fee
waivers in place. Although, under the terms of the EAM Declaration of Trust, the
Company no longer receives or shares in the revenues from 12b-1 distribution
fees, the Company could benefit from the fee waivers to the extent that the
resulting reduction of expense ratios and enhancement of the performance of the
Value Line Funds attracts new assets.



The Value Line equity and hybrid funds' assets represent 88.0%, variable annuity
funds issued by GIAC represent 9.5%, and fixed income fund assets represent
2.5%, respectively, of total fund assets under management ("AUM") as of July 31,
2020. At July 31, 2020, equity, hybrid and GIAC variable annuities AUM increased
by 27.0% and fixed income AUM decreased by 0.9% as compared to fiscal 2020.



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 first quarter of fiscal 2021 was 51.77%.



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



                                    Three Months Ended July 31,
($ in thousands)                     2020           2019      Change
Non-voting revenues interest   $    3,280$  2,588        26.7 %
Non-voting profits interest           364            283        28.6 %
                               $    3,644$  2,871        26.9 %




Operating expenses



                                      Three Months Ended July 31,
($ in thousands)                       2020           2019      Change
Advertising and promotion        $    1,055$    943        11.9 %
Salaries and employee benefits        4,508          4,385         2.8 %
Production and distribution           1,273          1,165         9.3 %
Office and administration             1,266          1,099        15.2 %
Total expenses                   $    8,102$  7,592         6.7 %



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




Advertising and promotion



During the three months ended July 31, 2020, advertising and promotion expenses
of $1,055,000 increased 11.9% as compared to the prior fiscal year primarily due
to a $63,000 increase in media marketing expenses and institutional sales
promotion and a $74,000 increase in direct mail expenses.



                                                                            

25

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Salaries and employee benefits




During the three months ended July 31, 2020, salaries and employee benefits of
$4,508,000 increased 2.8% above the prior fiscal year primarily due to an
increase in Profit Sharing employee retirement benefits during fiscal 2021
partially offset by a 5.5% decrease in salaries and employee benefits in the
Information Technology department ("IT"), reflecting completion of certain
initiatives to upgrade operating systems.



Production and distribution



During the three months ended July 31, 2020, production and distribution
expenses of $1,273,000 increased 9.3% above the prior fiscal year. During the
three months ended July 31, 2020, an increase of $98,000 was attributable to
costs related to production support of the Company's website, maintenance of the
Company's publishing and application software and operating systems as compared
to fiscal 2020. During the three months ended July 31, 2020, production and
distribution expenses increased due to an extra week of servings for the weekly
print products in fiscal 2021.



Office and administration



During the three months ended July 31, 2020, office and administrative expenses
of $1,266,000 increased 15.2% above the prior fiscal year. The increase during
the three months ended July 31, 2020 was primarily a result of an increase in
professional fees and bank service costs in fiscal 2021.



Concentration


During the three months ended July 31, 2020, 31.3% of total publishing revenues of $10,328,000 were derived from a single customer.

Income from Securities Transactions, net




During the three months ended July 31, 2020 and July 31, 2019, the Company's
income from securities transactions, net, primarily derived from dividend and
interest income, was $958,000 and $141,000, respectively. Proceeds from
maturities and sales of government debt securities classified as
available-for-sale during the three months ended July 31, 2020 and July 31,
2019, were $3,464,000 and $2,973,000, respectively. Proceeds from sales of
equity securities classified as available-for-sale during the three months ended
July 31, 2020 were $4,637,000. Gains on the sales of equity securities
classified as available-for-sale were reclassified from other comprehensive
income in the Consolidated Condensed Balance Sheet in the amount of $783,000
during the three months ended July 31, 2020. There were no sales or proceeds
from sales of equity securities during the three months ended July 31, 2019.



Effective income tax rate



The overall effective income tax rates, as a percentage of pre-tax ordinary
income for the three months ended July 31, 2020 and July 31, 2019 were 25.06%
and 26.74%, respectively. The decrease in the effective tax rate during the
quarter ended July 31, 2020 is primarily a result of a decrease in the state and
local income taxes as a result of changes in state and local tax allocation
factors in fiscal 2021. The Company's annualized overall effective tax rate
fluctuates due to a number of factors, in addition to changes in tax law,
including but not limited to an increase or decrease in the ratio of items that
do not have tax consequences to pre-tax income, the Company's geographic profit
mix between tax jurisdictions, taxation method adopted by each locality, new
interpretations of existing tax laws and rulings and settlements with tax
authorities.



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



Liquidity and Capital Resources




The Company had working capital, defined as current assets less current
liabilities, of $15,121,000 as of July 31, 2020 and $13,700,000 as of April 30,
2020. These amounts include short-term unearned revenue of $17,739,000 and
$18,854,000 reflected in total current liabilities at July 31, 2020 and April
30, 2020, respectively. Cash and short-term securities were $38,442,000 and
$34,158,000 as of July 31, 2020 and April 30, 2020, respectively.



The Company's cash and cash equivalents include $7,146,000 and $2,115,000 at
July 31, 2020 and April 30, 2020, respectively, invested primarily in 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 $5,426,000 during the
three months ended July 31, 2020 compared to cash outflows from operating
activities of $102,000 during the three months ended July 31, 2019. The increase
in cash inflows from fiscal 2020 to fiscal 2021 is primarily attributable to
timing of the receipt of copyright fees as compared to the prior fiscal year and
the increase in net income during the three months ended July 31, 2020.



Cash from investing activities




The Company's cash outflows from investing activities of $611,000 during the
three months ended July 31, 2020 compared to cash outflows from investing
activities of $648,000 for the three months ended July 31, 2019. Cash outflows
for the three months ended July 31, 2020 were lower than in fiscal 2020
primarily due to the proceeds received from the sales of equity and fixed income
securities partially offset by the additional equity securities investments in
fiscal 2021.



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Cash from financing activities




During the three months ended July 31, 2020, the Company's cash outflows from
financing activities were $2,000,000 and compared to cash outflows from
financing activities of $2,025,000 for the three months ended July 31, 2019.
There were no repurchases of the Company's common stock under the April 17, 2020
board approved common stock repurchase program during the fiscal quarter ended
July 31, 2020. During the three months ended July 31, 2019 cash outflows for
financing activities included $92,000 for the repurchase of 3,857 shares of the
Company's common stock under the October 19, 2019 board approved common stock
repurchase program. Quarterly dividend payments of $0.21 per share during fiscal
2021 aggregated $2,020,000 and compared to quarterly dividend payments of $0.20
per share during fiscal 2020 which aggregated $1,933,000.



At July 31, 2020 there were 9,616,721 common shares outstanding as compared to
9,659,704 common shares outstanding at July 31, 2019. The Company expects
financing activities to continue to include use of cash for dividend payments
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 July 31, 2020, and April 30, 2020, retained
earnings were $59,547,000 and $56,450,000, respectively, and liquid assets were
$38,442,000 and $34,158,000, 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.



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).



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.



                                                                            

28

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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.

© Edgar Online, source Glimpses

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