UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q10-QSB
(Mark One)
[ X ] Quarterly report under SectionQUARTERLY REPORT UNDER SECTION 13 or 15(d) of the Securities Ex-
change Act ofOF THE SECURITIES EX-
CHANGE ACT OF 1934
For the quarterquarterly period ended OctoberJanuary 31, 20082009
[ ] Transition report under SectionTRANSITION REPORT UNDER SECTION 13 or 15(d) of the Securities Ex-
change Act ofOF THE SECURITIES EX-
CHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number: 000-05378
GEORGE RISK INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 84-0524756
(State of incorporation) (IRS Employers Identification No.)
802 South Elm St.
Kimball, NE 69145
(Address of principal executive offices) (Zip Code)
Registrant's(308) 235-4645
(Registrant's telephone number, including area code: (308) 235-4645code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Registrant's Common Stock outstanding, as of
December 15, 2008March 17, 2009 was 5,175,831.5,141,144.
Transitional Small Business Disclosure Format: Yes [ X ] No [ ]
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited financial statements for the three and sixnine month period
ended OctoberJanuary 31, 2008,2009, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJanuary 31, April 30,
20082009 2008
------------ ------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 3,376,0004,308,000 $ 4,072,000
Marketable securities (Note 2) 15,592,00015,368,000 17,533,000
Accounts receivable:
Trade, net of $50,000 doubtful
account allowance for 2008 and 2007 1,449,0001,031,000 1,509,000
Other 2,000 1,000
Note receivable, current 3,000 3,000
Income tax overpayment 719,000122,000 471,000
Inventories 3,154,000(Note 3) 3,072,000 3,100,000
Prepaid expenses 94,00089,000 103,000
Deferred income taxes 1,225,0001,383,000 250,000
------------ ------------
Total Current Assets $25,614,000$25,378,000 $27,042,000
Property and Equipment, net at cost $ 789,000765,000 $ 831,000
Other Assets
Investment in Land Limited Partnership,
at cost 200,000 200,000
Projects in process 106,000131,000 68,000
Long-term receivable 60,000 60,000
Note receivable 11,00010,000 12,000
Other 0 1,000
------------ ------------
Total Other Assets $ 377,000401,000 $ 341,000
TOTAL ASSETS $26,780,000$26,544,000 $28,214,000
============ ============
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJanuary 31, April 30,
20082009 2008
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 98,00084,000 $ 67,000
Dividends payable 317,000 239,000
Accrued expenses
Payroll and other expenses 212,000244,000 321,000
Property taxes 2,000 0
------------ ------------
Total Current Liabilities $ 627,000647,000 $ 627,000
Long-Term Liabilities
Deferred income taxes 60,00050,000 79,000
------------ ------------
Total Long-Term Liabilities $ 60,00050,000 $ 79,000
Stockholders' Equity
Convertible preferred stock, 1,000,000
shares authorized, Series 1-noncumulative,
$20 stated value, 25,000 shares authorized,
4,100 issued and outstanding 99,000 99,000
Common stock, Class A, $.10 par value,
10,000,000 shares authorized, 8,502,832
shares issued and outstanding 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income (1,340,000)(1,390,000) (67,000)
Retained earnings 27,647,00027,475,000 27,788,000
Treasury stock, 3,327,0013,333,798 and 3,326,551
shares, at cost (2,899,000)(2,923,000) (2,898,000)
------------ ------------
Total Stockholders' Equity $26,093,000$25,847,000 $27,508,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,780,000$26,544,000 $28,214,000
============ ============
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENTS
Three months SixNine months Three months SixNine months
ended ended ended ended
OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31,
2009 2009 2008 2008 2007 2007
---------------------------------------------------
Net Sales $ 2,470,0001,825,000 $ 4,914,0006,739,000 $ 3,007,0002,572,000 $ 6,246,0008,818,000
Less: cost of goods sold (1,175,000) (2,371,000) (1,483,000) (3,014,000)(1,086,000) (3,457,000) (1,396,000) (4,410,000)
------------ ------------ ------------ ------------
Gross Profit $ 1,295,000739,000 $ 2,543,0003,282,000 $ 1,524,0001,176,000 $ 3,232,0004,408,000
Operating Expenses:
General and
administrative 205,000 383,000177,000 560,000 188,000 362,000549,000
Selling 444,000 947,000 477,000 1,020,000434,000 1,381,000 500,000 1,520,000
Engineering 21,000 38,000 24,000 44,00022,000 61,000 19,000 64,000
Rent paid to related
parties 12,000 28,00039,000 12,000 28,00040,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 682,000645,000 $ 1,396,0002,041,000 $ 701,000719,000 $ 1,454,0002,173,000
Income From Operations 613,000 1,147,000 823,000 1,778,00094,000 1,241,000 457,000 2,235,000
Other Income (Expense)
Other 6,000 9,000 (2,000) 1,000 3,000 1,000 2,000
Dividend and interest
income 184,000 393,000 196,000 401,000208,000 603,000 254,000 655,000
Gain (loss) on sale of
investments (394,000) (544,000) 50,000 146,000(938,000) (112,000) 34,000
Gain (loss) on sale of
assets 0 0 15,0000 15,000
------------ ------------ ------------ ------------
$ (209,000)(180,000) $ (148,000)(326,000) $ 262,000140,000 $ 564,000705,000
Income Before Provisions
for Income Tax 404,000 999,000 1,085,000 2,342,000(86,000) 915,000 597,000 2,940,000
Provisions for Income Tax
Current expense (114,000) (338,000) (325,000) (723,000)Expense 217,000 557,000 324,000 1,048,000
Deferred tax benefit
(expense) 55,000 78,000 (5,000) (41,000)expense
(benefit) (132,000) (210,000) (54,000) (13,000)
------------ ------------ ------------ ------------
Total Income Tax Expense $ (59,000) $ (260,000) $ (330,000) $ (764,000)85,000 347,000 270,000 1,035,000
Net Income $ 345,000(171,000) $ 739,000568,000 $ 755,000327,000 $ 1,578,0001,905,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.17
per share) $0 (880,000) $ (880,000) $ (907,000) $0 (907,000)
Income Per Share of Common Stock:Stock (Note 5):
Basic $0.07 $0.14 $0.14 $0.30
Assuming Dilution $0.07 $0.14 $0.14 $0.29and diluted $(0.03) $0.11 $0.06 $0.36
Weighted Average Number of
Common Shares Outstanding:
Basic 5,175,998 5,176,098 5,334,878 5,335,2725,173,372 5,175,189 5,333,116 5,334,553
Diluted 5,196,498 5,196,598 5,355,378 5,355,7725,193,872 5,195,689 5,353,616 5,355,053
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF COMPREHENSIVE INCOME
Three months SixNine months Three months SixNine months
ended ended ended ended
OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31, OctoberJanuary 31,
2009 2009 2008 2008 2007 2007
----------------------------------------------------
Net Income $ 345,000(171,000) $ 739,000568,000 $ 755,000327,000 $ 1,578,0001,905,000
------------ ------------ ------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding
gains (losses) arising
during period (1,861,000) (2,581,000) 419,000 153,000(466,000) (3,047,000) (650,000) (497,000)
Reclassification adjustment
for (gains) losses included
in net income 258,000 393,000 (41,000) (126,000)380,000 772,000 73,000 (52,000)
Income tax expense related
to other comprehensive
income 670,000 915,000 (158,000) (11,000)36,000 951,000 241,000 229,000
------------ ------------ ------------ ------------
Other Comprehensive
Income $ (933,000) $(1,273,000)(50,000) $(1,324,000) $ 220,000(336,000) $ 16,000(320,000)
Comprehensive Income $ (588,000)(221,000) $ (534,000)(756,000) $ 975,000(9,000) $ 1,594,0001,585,000
============ ============ ============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
SixNine months SixNine months
ended ended
OctoberJanuary 31, OctoberJanuary 31,
2009 2008
2007
-------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 739,000568,000 $ 1,578,0001,905,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 82,000 86,000123,000 128,000
(Gain) loss on sale of investments 544,000 (146,000)938,000 (34,000)
(Gain) loss on salessale of assets 0 (15,000)
Deferred income taxes (78,000) 41,000(210,000) (13,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 59,000 194,000478,000 495,000
Inventories (54,000) 48,00028,000 3,000
Prepaid expenses 9,000 8,00013,000 53,000
Other receivables (1,000) 03,000
Income tax overpayment (248,000) (240,000)349,000 (150,000)
Increase (decrease) in:
Accounts payable 31,000 (29,000)17,000 (52,000)
Accrued expenses (109,000) 33,000(75,000) (68,000)
------------ ------------
Net cash provided by (used in) operating
activities $ 974,0002,228,000 $ 1,558,0002,255,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured (38,000) 54,000
Proceeds from sale of assets 0 17,000(63,000) 49,000
(Purchase) of property and property/equipment (39,000) (172,000)(56,000) (173,000)
Proceeds from sale of marketable securities 1,000 1,163,00098,000 3,542,000
(Purchase) of marketable securities (792,000) (2,078,000)
(Loans) made to employees 0 (25,000)(1,146,000) (4,784,000)
Collections of loans to employees 2,000 10,000
(Purchase)3,000 1,000
Purchase of treasury stock (2,000) (12,000)(26,000) (32,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (868,000) $(1,043,000)$(1,190,000) $(1,397,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (802,000) (829,000)
------------ ------------
Net cash provided by (used in) financing
activities $ (802,000) $ (829,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (696,000)236,000 $ (314,000)29,000
Cash and cash equivalents, beginning of
period $ 4,072,000 $ 4,611,000
------------ ------------
Cash and cash equivalents, end of period $ 4,376,0004,308,000 $ 4,297,0004,640,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $ 586,000206,000 $ 902,0001,134,000
Interest expense $ 0 $ 0
Cash receipts for:
Income taxes $ 0 $ 06,000
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBERJANUARY 31, 20082009
Note 1 Unaudited Interim Financial Statements
The accompanying financial statements have been prepared in accordance
with the instructions for Form 10Q10QSB and do not include all of the informationinform-
ation and footnotes required by generally accepted accounting principals for
com-
pletecomplete financial statements. These financial statements should be read in
conjunction with the financial statements and notes contained in the com-
pany's annual report on Form 10KSB for the year ended April 30, 2008 with the
SEC. In the opinion of management, all adjustments, consisting only of nor-
mal recurring adjustments considered necessary for a fair presentation, have
been included. Operating results for any quarter are not necessarily in-
dicativeindic-
ative of the results for any other quarter or for the full year.
Note 2 Marketable Securities
The Company has investments in publicly traded equity securities as well
as certain state and municipal debt securities. These securities are class-
ified as available-for-sale securities, and are reported at fair value.
Available -for-sale investments in debt securities mature between December
2008April 2009
and August 2031. The Company uses the average cost method to determine the
cost of securities sold and the amount reclassified out of accumulated other
comprehensive income into earnings. Unrealized gains and losses are excluded
from earnings and reported separately as a component of stock-
holder'sstockholder's equity.
Dividend and interest income are accrued as earned.
As of OctoberJanuary 31, 2008,2009, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 8,464,0008,304,000 $ 11,000110,000 $ (438,000)(224,000) $ 8,037,0008,190,000
Federal agency mortgage
backed securities $ 375,000325,000 $ 1,0003,000 $ (1,000)0 $ 375,000328,000
Corporate bonds $ 469,000369,000 $ 0 $ (70,000)(38,000) $ 399,000331,000
Equity securities $ 6,998,0007,142,000 $ 128,000 $(1,933,000)105,000 $(2,345,000) $ 5,193,0004,902,000
Money markets/markets and CDs $ 1,589,0001,617,000 $ 0 $ (1,000)0 $ 1,588,0001,617,000
------------ ------------ ------------ ------------
Total $17,895,000$17,757,000 $ 140,000 $(2,443,000) $15,592,000218,000 $(2,607,000) $15,368,000
In accordance with SFAS 115, the Company evaluates all marketable
securities for other-than temporary declines in fair value, which are defined
as when the cost basis exceeds the fair value for approximately one year.
The Com-
panyCompany also evaluates the nature of the investment, cause of impairment
and number of investments that are in an unrealized position. When an other-
than-temporary decline is identified, the Company will decrease the cost of
the marketable security to the new fair value and recognize a real loss. The
investments are periodically evaluated to determine if impairment changes are
required. As a result of this standard, management recorded impairment
losses of $302,000$94,000 for the quarter ended OctoberJanuary 31, 20082009 and $405,000$499,000 for the
sixnine months ended OctoberJanuary 31, 2008.2009. As for the corresponding periods last
year, $2,000$16,000 worth of impairment loss was recorded for the quarter, while
$7,000$23,000 of loss was recorded for the sixnine months ended OctoberJanuary 31, 2008.
The following table shows the investments with unrealized losses that
are not deemed to be other-than-temporarily impaired, aggregated by investmentinvest-
ment category and length of time that individual securities have been in a
con-
tinuouscontinuous unrealized loss position, at OctoberJanuary 31, 2008.2009.
Less than 12 months 12 months or greater Total
----------------------- --------------------- ---------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Loss Value Loss Value Loss
...........................................................................
Municipal bonds
$2,764,000$1,675,000 $ (178,000) $3,894,000 $(176,000)(86,000) $2,083,000 $ 6,658,000(138,000) $3,758,000 $ (354,000)(224,000)
Federal agency mortgage backed securities
$ 75,000 -- -- -- $ 199,000 $ (1,000) $ 199,000 $ (1,000)75,000 --
Corporate bonds
$ 320,000283,000 $ (59,000)(36,000) $ 79,00048,000 $ (11,000)(2,000) $ 399,000331,000 $ (70,000)(38,000)
Equity securities
$3,194,000 $(1,399,000) $1,185,000 $(619,000) $ 4,379,000 $(2,018,000)
----------- ------------ ----------- ---------- ------------ ------------$2,300,000 $(1,257,000) $1,604,000 $(1,088,000) $3,904,000 $(2,345,000)
Total
$6,278,000 $(1,636,000) $5,357,000 $(807,000) $11,635,000 $(2,443,000)$4,333,000 $(1,379,000) $3,735,000 $(1,228,000) $8,068,000 $(2,607,000)
Municipal Bonds
The unrealized losses on the Company's investments in municipal bonds were
caused by interest rate increases. The contractual terms of these invest-
ments do not permit the issuer to settle the securities at a price less than
the amortized cost of the investment. Because the Company has the ability to
hold these investments until a recovery of fair value, which may be maturity,
the Company does not consider these investments to be other-than-temporarily
impaired at OctoberJanuary 31, 2008.2009
Federal Agency Mortgage-Backed Securities
The unrealized losses on the Company's investment in federal agency mortgage-
backed securities were caused by interest rate increases. The Company pur-
chased these investments at a discount relative to their face amount, and the
contractual cash flows of these investments are guaranteed by an agency of
the U.S. government. Accordingly, it is expected that the securities would
not be settled at a price less than the amortized cost of the Company's in-
vestment. Because the decline in market value is attributable to changes in
interest rates and not credit quality and because the Company has the ability
to hold these investments until a recovery of fair value, which may be ma-
turity,matur-
ity, the Company does not consider these investments to be other-than-
temporarilyother-than-temp-
orarily impaired at OctoberJanuary 31, 2008.2009.
Corporate Bonds
The Company's unrealized loss on investments in corporate bonds relates to
several bonds. The contractual term of these investments do not permit the
issuer to settle the security at a price less than the amortized cost of the
investment. Because the Company has the ability to hold these investments
until a recovery of fair value, which may be maturity, the Company does not
consider these investments to be other-than-temporarily impaired at Oct-
oberJan-
uary 31, 2008.2009.
Marketable Equity Securities
The Company's investments in marketable equity securities consist of a wide
variety of companies. Investments in these companies include growth, growth,
income, and foreign investment objectives. Management has evaluated the in-
dividualindividual
holdings, and because of the recent decline in the stock market, does not
consider these investments to be other-than-temporarily impaired at OctoberJan-
uary 31, 2008.2009.
Note 3 Inventories
At OctoberJanuary 31, 2008,2009, inventories consisted of the following:
Raw Materialsmaterials $ 2,014,0001,907,000
Work in Process 832,000process 866,000
Finished Goods 413,000goods 434,000
------------
$ 3,259,0003,207,000
Less: allowance for obsolete inventory (105,000)(135,000)
------------
Net InventoriesTotals $ 3,154,000
============3,072,000
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
OctoberThree Months Ended Nine Months Ended
January 31, January 31,
2009 2008 2007
---------------------------2009 2008
------------------------ ------------------------
Net revenue:
Security alarm
products 2,278,000 2,702,000$ 1,632,000 $ 2,325,000 $ 6,065,000 $ 7,629,000
Other products 192,000 305,000193,000 247,000 674,000 1,189,000
------------ ------------ ------------ ------------
Total net revenue $ 2,470,0001,825,000 $ 3,007,0002,572,000 $ 6,739,000 $ 8,818,000
Income from operations:
Security alarm
products 565,000 740,000$ 84,000 $ 413,000 $ 1,117,000 $ 1,934,000
Other products 48,000 83,00010,000 44,000 124,000 301,000
------------ ------------ ------------ ------------
Total income from
operations $ 613,00094,000 $ 823,000457,000 $ 1,241,000 $ 2,235,000
Identifiable assets:
Security alarm
products 3,262,000 4,577,000$ 3,740,000 $ 4,260,000 $ 3,740,000 $ 4,260,000
Other products 2,037,000 972,000967,000 888,000 967,000 888,000
Corporate general 21,481,000 23,086,00021,837,000 23,327,000 21,837,000 23,327,000
------------ ------------ ------------ ------------
Total identifiable
assets $26,780,000 $28,635,000$26,544,000 $28,475,000 $26,544,000 $28,475,000
Depreciation and amortization:
Security alarm
products $ 7,000 9,000$ 7,000 $ 21,000 $ 23,000
Other products 26,000 29,00027,000 78,000 82,000
Corporate general 8,000 7,0008,000 24,000 23,000
------------ ------------ ------------ ------------
Total depreciation and
amortization $ 41,000 $ 45,00042,000 $ 123,000 $ 128,000
Capital expenditures:
Security alarm
products $ 3,000 $ 0 27,000$ 3,000 $ 1,000
Other products 0 59,0000 21,000 144,000
Corporate general 10,00015,000 0 32,000 28,000
------------ ------------ ------------ ------------
Total capital
expenditures $ 10,00018,000 $ 86,0000 $ 56,000 $ 173,000
Note 5 Earnings per Share
Basic and diluted earning per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended OctoberJanuary 31, 20082009
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 345,000(171,000)
===========
Basic EPS $ 345,000 5,175,998(171,000) 5,173,372 $ 0.07(0.033)
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 345,000 5,196,498(171,000) 5,193,872 $ 0.07(0.033)
For the sixnine months ended OctoberJanuary 31, 20082009
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 739,000568,000
===========
Basic EPS $ 739,000 5,176,098568,000 5,175,189 $ 0.140.110
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 739,000 5,196,598568,000 5,195,689 $ 0.140.109
For the three months ended OctoberJanuary 31, 2007
-------------------------------------------2008
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 755,000327,000
===========
Basic EPS $ 755,000 5,334,878327,000 5,333,116 $ 0.140.061
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 755,000 5,355,378327,000 5,353,616 $ 0.140.061
For the sixnine months ended OctoberJanuary 31, 2007
-------------------------------------------2008
--------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,578,000
===========$1,905,000
=========
Basic EPS $1,578,000 5,335,272$1,905,000 5,334,553 $ 0.300.357
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,578,000 5,355,772$1,905,000 5,355,053 $ 0.290.356
Note 6 Retirement Benefit Plan
On January 1, 1998, the Company adopted the George Risk Industries, Inc.
Retirement Savings Plan (the "Plan"). The Plan is a defined contribution
savings plan designed to provide retirement income to eligible employees of
the corporation. The Plan is intended to be qualified under Section 401(k)
of the Internal Revenue Code of 1986, as amended. Matching contributions by
the Company of approximately $4,000$3,000 and $3,000$4,000 were paid during each quarter
ending OctoberJanuary 31, 20082009 and 2007,2008, respectively. Likewise, the Company paid
matching contributions of approximately $6,000 and $7,000$9,000 during each six-
monththe nine-month period ending OctoberJan-
uary 31, 20082009 and 2007, respectively.$10,000 during the nine-month period ending January 31,
2008. There were no discretionary contributions paid during either the
quarters or six-monthnine-month periods ending OctoberJanuary 31, 20082009 and 2007,2008, respectively.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 2. Management Discussion and Analysis of Financial Condition and
Results of Operations
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached condensedcon-
densed consolidated financial statements, and with the George Risk
Industries' audited financial statements and discussion for the fiscal year
ended April 30, 2008.
Liquidity and capital resources
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Operating
- ---------
Net cash decreased $696,000increased $236,000 for the sixnine months ended OctoberJanuary 31, 2008,2009,
while, for the same period last year, net cash increased $29,000. Accounts
receivable decreased $314,000. Accounts re-
ceivable decreased $59,000$478,000 for the current sixnine months and decreased
$194,000$495,000 for the same period last year. At October 31, 2008, 80.25%The decreases in cash flow for
accounts receivable is a reflection of the receiv-
ablesdecreases in sales. At Jan-
uary 31, 2009, 86.1% of the receivables were considered current (less than 45
days) and 1.65%3.0% of the total were over 90 days past due. Inventory decreased $54,000For comparison,
79.9% of the receivables were current and 5.8% were past 90 days at Jan-
uary 31, 2008. Inventories increased $28,000 for the current sixnine months,
while it decreased $48,000$3,000 for the same period last year. The main
reasons for the increase in cash expenditures towards inventory is that the
actual costManagement has not
been able to slow down some of its "blanket order" purchase orders of raw
materials during the current fiscal year. Therefore, the stock of raw ma-
terials is more than it was for the same period last
year. The wire thathigher since we purchase for the leads on our security switches is
made with copper. The raw plastic we purchase to make our molded casings has
also risen substantially.have seen a decrease in sales. Changes in prepaid
expenses in regards to cash flow decreased by $9,000$13,000 and $8,000$53,000 for the
six-monthnine-month periods ending Oct-
oberJanuary 31, 2009 and 2008, and 2007, respectively. For the
current fiscal year, there have been income tax overpayments. Cash towards
income tax overpayment increased $248,000decreased $349,000 for the sixnine months ended OctoberJan-
uary 31, 2008 and2009, while it increased $240,000$150,000 for the same period last year.
Management paid income tax estimatedestimates based on prior year taxable income.income and
the company has not received its income tax refund from the state yet.
For the sixnine months ended OctoberJanuary 31, 2008,2009, accounts payable increased
$31,000,$17,000, and decreased $29,000 decrease$52,000 for the same period ended Oct-
oberJanuary 31, 2007.2008.
The current year increase is just a timing issue for when inventory and
supplies came in. More inventory arrived towards the end of the month of
January 2009, so there was an increase in accounts for the increases in the cost
of raw materials.payable. Accrued expenses
decreased $109,000$75,000 for the sixnine months ended OctoberJanuary 31, 2008, as it increased by $33,0002009, and these ex-
penses also decreased $68,000 for the same periodcorresponding nine months last year.
This bigger decrease for the current year is due to reduced sales commissions
and fewer employees.
Investing
- ---------
As for our investment activities, $39,000$56,000 was spent on purchases of property
and equipment during the current nine-month period and $173,000 was spent
during the current six-
month period and $172,000 was spent during the sixnine months ended OctoberJanuary 31, 2007.2008. Additionally, the Company continuescon-
tinues to purchase marketable securities, which include municipal bonds and
quality stocks. Cash spent on purchases of marketable securities for the
sixnine months ended OctoberJanuary 31, 20082009 was $792,000$1,146,000 and $2,078,000$4,784,000 was spent
for the corresponding period last year. In addition, proceeds from the sale
of marketable securities for the nine months ended January 31, 2009 were
$98,000 and $3,542,000 for the same period last year. We use "money manager"
accounts for most stock transactions. By doing this, the Company gives an
independent third party firm, who are experts in this field, permission to
buy and sell stocks at will. The Company pays a quarterly service fee based
on the value of the investments.investmnts. Furthermore, the Company continues to purchasepur-
chase back its common stock when the opportunity arises. For the sixnine months
ended OctoberJanuary 31, 2008,2009, the Company purchased $2,000$26,000 worth of treasury stock
and $10,000$32,000 worth was bought back for the sixnine months ended OctoberJanuary 31, 2007.2008.
We have been actively searching for stockholders that have been "lost" over
the years. The payment of dividends over the last five fiscal years has also
prompted many stockholders and/or their relatives and descendants to sell
back their stock to the Company.
Financing
- ---------
Cash flows from financing activities decreased by $802,000 for the sixnine
months ending OctoberJanuary 31, 2008.2009. That figure consists of the payment of
dividends during the second quarter. The company declared a dividend of
$0.17 per share of common stock on September 30, 2008 and these dividends
were paid by October 31, 2008. As for the prior year numbers, net cash used
in financing activities was $829,000 for the sixnine months ending OctoberJanuary 31,
2007.2008. A dividend of $0.17 per common share was also declared and paid during
the second fiscal quarter last year.
The following is a list of ratios to help analyze George Risk Industries'
performance:
For the quarter ended
OctoberJanuary 31,
2009 2008 2007
---------------------------
Working capital $ 24,987,00024,731,000 $ 26,703,00026,705,000
Current ratio 40.852 38.82339.224 46.806
Quick ratio 32.563 33.78632.005 40.369
Results of Operationsoperations
~~~~~~~~~~~~~~~~~~~~~
Net sales were $2,470,000$1,825,000 for the quarter ended OctoberJanuary 31, 2008,2009, which is a
17.9%29.04% decrease from the corresponding quarter last year. Year-to-date net
sales at January 31, 2009 were $4,914,000 at October 31, 2008,$6,739,000, which is a 21.3%23.58% decrease from
the same period last year. The Company is tied tohas seen decreases in sales as a re-
sult of the downturn in the housing industry and with
that industry not performing well over the last year or so, we are seeing a
decrease in our sales also.market. Cost of goods sold was 47.6%59.5% of
net sales for the quarter ended OctoberJanuary 31, 20082009 and 49.3%54.35% for the same
quarter last year. Year-to-date cost of goods sold percentages were 48.2%51.3%
for the current sixnine months and 48.3%50.0% for the corresponding sixnine months last
year. Having rel-
ativelyManagement has reduced labor hours and head count to lessen labor
costs, but not as fast as it should have to stay within the same percentagedesired range of
45 to 50% of the cost of goods sold from period to period shows
that we keep our costs in line. Our goal, as always, is to have a cost of
goods sold percentage somewhere between 45% and 50%. As a whole, our cost of
materials and direct labor fluctuate in proportion to how our sales vary.percentage.
Operating expenses were 27.6%35.34% of net sales for the quarter ended OctoberJanuary 31,
20082009 as compared to 23.3 %27.95% for the corresponding quarter last year. Year-to-
date operating expenses were 28.4%30.29% of net sales for the sixnine months ended
Oct-
oberJanuary 31, 2008,2009, while they were 23.3%24.64% for the same period last year. KeepingThe
increase in the percentages for operating expenses under 30% of net sales, as the company has been able to
achieve over the years, shows that management keeps a close eye onhas
not accounted for the slow down in sales as well has it should have. But
management has begun, in the fourth quarter, to cut labor costs for office
personnel in response to these ex-
penses from year to year.increased percentages. Income from operations
for the quarter ended Oct-
oberJanuary 31, 20082009 was at $613,000,$94,000, which is a 25.5% decrease79.4% de-
crease from the cor-
respondingcorresponding quarter last year, which had income from operationsoper-
ations of $823,000.$457,000. Income from operations for the sixnine months ended OctoberJan-
uary 31, 20082009 was at $1,147,000,$1,241,000, which is a 35.5%44.5% decrease from the corresponding sixcor-
responding nine months last year, which had income from operations of
$1,778,000.$2,235,000.
Other income and expenses showed losses of $209,000$180,000 and $148,000$326,000 for the
quarter and sixnine months ended OctoberJanuary 31, 2008, respectively.2009. The other in-
come and expense numbers for the cor-
responding periods last year also showedwere gains of $262,000$140,000 for the quarter and
$564,000$705,000 for the six monthsnine-months ending OctoberJanuary 31, 2007.2008. Dividend and interest
income was down 6.1%18.1% for the current quarter and was down 2%7.9% for the current six-monthnine-
month period when comparedcomparing to the same time periods last year. Gain and
loss on investments is where the biggest loss is in this category. ManagementManage-
ment wrote down $302,000$94,000 for impaired investments for the current quarter.
This is compared to writes downwrite downs of $2,000$16,000 for the same quarter last year.
For the year-to-date ended OctoberJanuary 31, 2008,2009, management wrote down $405,000$499,000
for impaired investments and $7,000$23,000 was wrotewritten down for the same period
last year.
Net incomeloss for the quarter ended OctoberJanuary 31, 20082009 was at $345,000,$171,000, a 54.3%
decrease152.3% de-
crease from the corresponding quarter last year, which showed net income of
$755,000.$327,000. Net income for the sixnine months ended OctoberJanuary 31, 20082009 was
$739,000,$568,000, a 53.2%70.2% decrease from the same period last year. Net income for the
sixnine months ended OctoberJanuary 31, 20072008 was $1,578,000.$1,905,000. Earnings per common share
for the quarter ended OctoberJanuary 31, 2008 were $0.072009 was $(0.03) per share and $0.14$0.11 per
share for the year-to-date numbers. EPS for the quarter and sixnine months
ended Oct-
oberJanuary 31, 2007 were $0.142008 was $0.06 per share and $0.30$0.36 per share, respectively.
New Product Developmentproduct information
~~~~~~~~~~~~~~~~~~~~~~~
Sales haveThe revamped window bar (pt # WB-30-42) has been strong and continue to increase on our HVAC Kits designed to
protect air conditioning coils. One of our large distributors is doing a
large customer promotion pairing the HVAC Kit with a complimentary product
from another manufacturer.
Our industrial track mount overhead switch is now in production for about a
month and all
seems to be going well with this new product. We expect sales to increase
considerably once the spring construction season starts.
Engineering continues to develop our wireless line. This includes pool
alarms, security sensors, and environmental sensors. A new, lower cost
hold-up switch and basementis selling very well. The window bar is now being developed. Discontinued
componentsa piece of extruded
aluminum that fits windows 30" - 42" and is secured by brackets with a sec-
urity switch on one end. These are popular for basement windows in North-
eastern US, and can also be used in attic vents and doors. A sister product,
a wire trip unit (pt # WT-01), uses a simple box plunger attached to one side
of the reason for havingwindow and is strung with wire to develop alternativesthe opposite side. If the wire is
cut or tampered, the plunger releases and sets off the alarm.
The new WVS (Water Value Shutoff) switch will be introduced at the Inter-
national Security Conference (ISC) trade show in Las Vegas, NV the first week
of April 2009. The WVS uses our 2600 water sensor to these two
products. We are also expanding our lineclose the water main if
a leak (or more than a leak) is detected. Features of water sensors, including the
Pump Gard and several custom products.
While our competition continues to only carry the standard types of security
switches, we are increasingly seeing order for custom-built products. Our
competitors are discontinuing specialty products or are placing ordering
stipulations that distributors are not willing to meet. This is keeping the
GRI namethis device include a
voltage check on the forefront ofwater valve and sensor once a week. Every fourth week
it does a complete valve check on the voltage and closes and opens the valve
to make sure everything is in working order.
Engineering completed several programming updates on our customer's mindsdoor monitoring de-
vices. Work continues on the hold-up switch, the wireless line, and increases the
calls
coming into our factory.environmental sensors.
Recently Issued Accounting Pronouncementsissued accounting pronouncements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles". This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities
that are presented in conformity with generally accepted accounting prin-
ciples (GAAP) in the United States (the GAAP hierarchy). The statement will
become effective 60 days following the SEC's approval of the Public Company
Accounting Oversight Board amendments to AU Section 411, The Meaning of PresentPre-
sent Fairly in Conformity With Generally Accepted Accounting Principles.
Other Information
~~~~~~~~~~~~~~~~~
There are no known seasonal trends with any of our products, since we sell to
distributors and OEM manufacturers. The products are tied to the housing
industry and will fluctuate with building trends.
We are increasingly receiving notification that some of our off-shore com-
petitors are creating more purchasing demands and are no longer selling to
some of their smaller customers. We see this as an opportunity to create
more business. We hope to achieve this with our accomplished customer ser-
vice and our ability to customize products for customer's special needs.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 3. Controls and Procedures
(a) Information required by Item 307
Our Chief Executive Officer and our Chief Financial Officer, after evaluating
the effectiveness of the Company's "disclosure controls and procedures" (as
defined in the Securities Exchange Act of 1934 (Exchange Act) Rules 13a-15(e)
or 15d-15(e)) as of the end of the period covered by this quarterly report,
have concluded that our disclosure controls and procedures are effective
based on their evaluation of these controls and procedures required by para-
graph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Information required by Item 308
This disclosure is not yet required.
Item 3A(T). Controls and Procedures
Evaluation of disclosure controls and procedures:
- -------------------------------------------------
Based on their evaluation of our disclosure controls and procedures (as de-
fined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of Oct-
oberJan-
uary 31, 2008,2009, our president and chief executive officer and our chief financialfinan-
cial officer have concluded that our disclosure controls and procedures are
effective such that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is (i) recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and (ii) accumulated and communi-
catedcommunicated to our
management, including our chief executive officer and our chief financial
officer, as appropriate to allow timely decisions regarding dis-
closure.disclosure. A
control system cannot provide absolute assurance, however, that the objectivesob-
jectives of the control systems are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud,
if any, within a company have been detected.
Changes in internal controls over financial reporting:
- ------------------------------------------------------
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
Management's Annual Report on Internal Control over Financial Reporting:
- ------------------------------------------------------------------------
Our management is responsible for establishing and maintaining adequate in-
ternal control over financial reporting, as such term is defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was
designed to provide reasonable assurance regarding the reliability of fi-
nancial reporting and the preparation of financial statements for external
purposes, in accordance with generally accepted accounting principles. Be-
cause of inherent limitations, a system of internal control over financial
reporting may not prevent or detect misstatements. Therefore, even those
systems determined to be effective can provide no reasonable assurance of
achieving their control objectives. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may be-
come inadequate due to change in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal
accounting officer, conducted an evaluation of the effectiveness of our in-
ternal control over financial reporting using the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework. Based on its evaluation, our man-
agement concluded that as of October 31, 2008 our internal control over
financial reporting is effective.
This quarterly report does not include an attestation report of the Corpor-
ation's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by
the Corporation's registered public accounting firm pursuant to temporary
rules of the SEC that permit the Corporation to provide only the management's
report in this quarterly report.
GEORGE RISK INDUSTRIES, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
31. Certifications pursuant to Rule 13a-14(a)
31.1 Certification of the Chief Executive Officer
31.2 Certification of the Chief Financial Officer
32. Certifications pursuant to 18 U.S.C. 1350
32.1 Certification of the Chief Executive Officer
32.2 Certification of the Chief Financial Officer
B. Reports on Form 8-K
No 8-K reports were filed during the quarter ended OctoberJanuary 31, 2008.2009.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
George Risk Industries, Inc.
(Registrant)
Date 12-15-200803-17-2009 By: /s/ Kenneth R. Risk
Kenneth R. Risk
President and Chairman of the Board
Date 12-15-200803-17-2009 By: /s/ Stephanie M. Risk
Stephanie M. Risk
Chief Financial Officer and Controller