UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report under Section 13 or 15(d) of the Securities Ex-
change Act of 1934
For the quarter ended OctoberJuly 31, 20102011
[ ] Transition report under Section 13 or 15(d) of 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)
(308) 235-4645
(Registrant's telephone number, including area code)
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, 2010September 13, 2011 was 5,054,665.5,047,370.
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 six monththree-month period ended
OctoberJuly 31, 2010,2011, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJuly 31, April 30,
2010 20102011 2011
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 4,789,0005,518,000 $ 3,641,0005,254,000
Investments and securities 18,756,000 19,607,00019,377,000 19,512,000
Accounts receivable:
Trade, net of $11,365$27,511 and $19,700$5,053
doubtful account allowance 1,262,000 1,295,0001,958,000 1,574,000
Other 1,000 01,000
Note receivable, current 9,000 11,000
Income tax overpayment 280,000 216,0006,000 5,000
Inventories 1,691,000 1,968,0002,089,000 1,854,000
Prepaid expenses 42,000 142,000153,000 151,000
Deferred current income taxes 190,000 266,000127,000 166,000
------------ ------------
Total Current Assets $27,020,000 $27,146,000$29,229,000 $28,517,000
Property and Equipment, net, at cost 690,000 733,000771,000 639,000
Other Assets
Investment in Limited Land Partnership,
at cost 210,000 200,000218,000 218,000
Projects in process 167,000 112,00069,000 213,000
Note receivable 3,000 7,000-- 1,000
------------ ------------
Total Other Assets $ 380,000287,000 $ 319,000432,000
TOTAL ASSETS $28,090,000 $28,198,000$30,287,000 $29,588,000
============ ============
GEORGE RISK INDUSTRIES, INC.
BALANCE SHEETS
OctoberJuly 31, April 30,
2010 20102011 2011
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 106,00090,000 $ 57,000128,000
Dividends payable 485,000 395,000483,000 483,000
Accrued expenses:
Payroll and related expenses 213,000 198,000270,000 212,000
Property taxes 2,000 --
Income tax payable 326,000 36,000
------------ ------------
Total Current Liabilities $ 804,0001,171,000 $ 650,000859,000
Long-Term Liabilities
Aircraft ownership deposit payable 5,000 5,000
Deferred income taxes 57,000 75,00061,000 53,000
------------ ------------
Total Long-Term Liabilities $ 62,00066,000 $ 80,00058,000
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 173,000 13,000(112,000) 281,000
Retained earnings 27,743,000 28,102,00029,907,000 29,115,000
Treasury stock, 3,445,1173,455,362 and 3,438,3523,451,857
shares, at cost (3,377,000) (3,332,000)(3,430,000) (3,410,000)
------------ ------------
Total Stockholders' Equity $27,224,000 $27,468,000$29,050,000 $28,671,000
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $28,090,000 $28,198,000$30,287,000 $29,588,000
============ ============
GEORGE RISK INDUSTRIES, INC.
INCOME STATEMENTS
Three months Six months Three months Six months
ended ended ended ended
OctoberFOR THE THREE MONTHS ENDED JULY 31, October2011 AND 2010
July 31,
October 31, October 31,2011 2010
2010 2009 2009
--------------------------------------------------------------- ------------
(unaudited) (unaudited)
Net Sales $ 2,177,0002,598,000 $ 4,184,000 $ 1,877,000 $ 3,840,0002,007,000
Less: costCost of goods sold (1,094,000) (2,323,000) (1,181,000) (2,323,000)
------------ ------------Goods Sold (1,191,000) (1,229,000)
------------ ------------
Gross Profit $ 1,083,0001,407,000 $ 1,861,000 $ 696,000 $ 1,517,000778,000
Operating Expenses:
General and administrative 202,000 384,000Administrative 206,000 181,000
348,000
Selling 383,000 774,000 428,000 831,000Sales 341,000 391,000
Engineering 20,000 37,000 18,000 32,00016,000 17,000
Rent paidPaid to related
partiesRelated Parties 11,000 23,000 11,000 23,000
------------ ------------
------------ ------------
Total Operating Expenses $ 616,000574,000 $ 1,218,000 $ 638,000 $ 1,234,000600,000
Income From Operations 467,000 643,000 58,000 283,000833,000 178,000
Other Income (Expense)
Other 4,000 7,000 134,000 136,000Income 8,000 2,000
Dividend and interest
income 137,000 320,000 159,000 343,000Interest Income 192,000 182,000
Gain (loss)(Loss) on investments (43,000) (99,000) 26,000 (74,000)
Gain (loss) on saleSale of assets 0 0 7,000 7,000
------------ ------------Investments 379,000 (56,000)
------------ ------------
$ 98,000579,000 $ 228,000 $ 326,000 $ 412,000128,000
Income Before Provisions for Income Tax 565,000 871,000 384,000 695,000Taxes 1,412,000 306,000
Provisions for Income Taxes
Current Expense 292,000 89,000
Deferred Tax Current expense (185,000) (274,000) (109,000) (217,000)
Deferred tax benefit
(expense) 25,000 57,000 (6,000) (5,000)
------------ ------------Expense 328,000 (32,000)
------------ ------------
Total Income Tax Expense $ (160,000)620,000 $ (217,000) $ (115,000) $ (222,000)57,000
Net Income $ 405,000792,000 $ 654,000 $ 269,000 $ 473,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.20
per share) $(1,013,000) $(1,013,000)
Common Stock ($0.17
per share) $ (880,000) $ (880,000)
Income249,000
Basic and Diluted Earnings Per Share of
Common Stock:
Basic $0.08 $0.13 $0.05 $0.09
Assuming Dilution $0.08 $0.13 $0.05 $0.09Stock $ 0.16 $ 0.05
Weighted Average Number of Common Shares
Outstanding:
Basic 5,060,248 5,061,570 5,076,805 5,091,550
Diluted 5,080,748 5,082,070 5,097,305 5,112,050Outstanding 5,048,365 5,062,892
GEORGE RISK INDUSTRIES, INC.
STATEMENTSSTATEMENT OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
Three months Six months Three months Six months
ended ended ended ended
OctoberJuly 31,
October 31, October 31, October 31,2011 2010
2010 2009 2009
-------------------------------------------------------------------------------
(unaudited) (unaudited)
Net Income $ 405,000792,000 $ 654,000 $ 269,000 $ 473,000
------------ ------------249,000
------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding gains (losses)
arising during period 502,000 149,000 408,000 1,314,000(564,000) (355,000)
Reclassification adjustment for (gains) lossesgains
(losses) included in net income 40,000 125,000 (117,000) 37,000(114,000) 85,000
Income tax expense related to other
comprehensive income (227,000) (115,000) (122,000) (565,000)
------------ ------------283,000 113,000
------------ ------------
Other Comprehensive Income (Loss) $ 315,000(395,000) $ 159,000 $ 169,000 $ 786,000(157,000)
Comprehensive Income (Loss) $ 720,000397,000 $ 813,000 $ 438,000 $ 1,259,000
============ ============92,000
============ ============
GEORGE RISK INDUSTRIES, INC.
STATEMENTSSTATEMENT OF CASH FLOWS
Six months SixFor the three months
ended ended
OctoberJuly 31,
October 31,2011 2010
2009
---------------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 654,000792,000 $ 473,000249,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 75,000 80,00037,000 37,000
(Gain) loss on sale of investments 99,000 74,000
(Gain) loss on sales of assets 0 (7,000)(379,000) 56,000
Reserve for bad debts 9,000 (56,000)21,000 5,000
Reserve for obsolete inventory 23,000 64,0008,000 31,000
Deferred income taxes (56,000) 5,000328,000 (31,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 24,000 241,000(406,000) 79,000
Inventories 254,000 524,000(243,000) 236,000
Prepaid expenses 90,000 (5,000)
Other receivables 1,000 0(2,000) 56,000
Income tax overpayment (64,000) (67,000)-- 88,000
Increase (decrease) in:
Accounts payable 49,000 (5,000)(37,000) 1,000
Accrued expenses 14,000 (60,000)60,000 62,000
Income tax payable 290,000 --
------------ ------------
Net cash provided by (used in) operating
activities $ 1,172,000469,000 $ 1,261,000869,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured (55,000) (58,000)& purchased 145,000 (31,000)
Proceeds from receipt of insurance claim -- 132,000
(Purchase) of property and equipment (32,000) (28,000)(169,000) (17,000)
Proceeds from sale of marketable securities 1,558,000 225,0008,000 1,554,000
(Purchase) of marketable securities (532,000) (2,364,000)
Collections(169,000) (419,000)
(Loans) made to employees (2,000) --
Collection of loans to employees 6,000 2,000 3,000
(Purchase) of treasury stock (46,000) (225,000)(20,000) (20,000)
------------ ------------
Net cash provided by (used in) investing
activities $ 899,000 $(2,448,000)(205,000) $ 1,202,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (923,000) (784,000)
------------ ------------
Net cash provided by (used in) financing
activities $ (923,000)-- $ (784,000)--
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 1,148,000 $(1,971,000)264,000 $ 2,071,000
Cash and cash equivalents, beginning of
period $ 3,641,0005,254,000 $ 4,671,0003,641,000
------------ ------------
Cash and cash equivalents, end of period $ 4,789,0005,518,000 $ 2,700,0005,712,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $ 336,000 $ 320,000$0 $0
Interest expense $ 0 $ 0
Cash receipts for:
Income taxes $ 0 $ 38,000$0 $0
GEORGE RISK INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBERJULY 31, 20102011
Note 1 Unaudited Interim Financial Statements
The accompanying financial statements have been prepared in accordance
with the instructions for Form 10-Q and do not include all of the informationinform-
ation and footnotes required by generally accepted accounting principles for
com-
pletecomplete financial statements. It is suggested that these condensed financialfinan-
cial statements be read in conjunction with the financial statements and
notes thereto included in the Company's April 30, 20102011 annual report on Form
10-K. In the opinion of management, all adjustments, consisting only of
normal re-
curringrecurring adjustments considered necessary for a fair presentation,
have been included. Operating results for any quarter are not necessarily
indicative 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.
Refer to Note 7, Fair Value Measurements, for additional information on the
fair value measurements for all assets and liabilities, including invest-
ments, that are measured at fair value in these financial statements.
Avail-
able -for-saleAvailable-for-sale investments in debt securities mature between December 2010August 2011
and June 2042. 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 stockholder's equity.
Dividend and interest income are accrued as earned.
As of OctoberJuly 31, 2010,2011, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 9,465,0009,322,000 $ 199,000144,000 $ (76,000)(107,000) $ 9,588,000
Federal agency mortgage
backed9,359,000
Corporate bonds $ 81,000 $ 2,000 $ -- $ 83,000
Equity securities $ 75,0009,169,000 $ 294,000 $ (526,000) $ 8,937,000
Money markets/CDs $ 998,000 $ -- $ -- $ 75,000
Corporate bonds $ 180,000 $ 12,000 $ -- $ 192,000
Equity securities $ 7,606,000 $ 579,000 $ (416,000) $ 7,769,000
Money markets/CDs $ 1,132,000 $ -- $ -- $ 1,132,000998,000
------------ ------------ ------------ ------------
Total $18,458,000$19,570,000 $ 790,000440,000 $ (492,000) $18,756,000(633,000) $19,377,000
In accordance with US GAAP, 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 Company 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 did not record any
impairment losses for the quarter ended July 31, 2011 and recorded impairment
losses of $3,000$7,000 for the quarter ended OctoberJuly 31, 2010 and $11,000 for the
six months ended October 31, 2010. As for the corresponding periods last
year, $34,000 worth of impairment loss was recorded for the quarter, while
$89,000 of loss was recorded for the six months ended October 31, 2009.
The following table shows the investments with unrealized losses that
are not deemed to be other-than-temporarily impaired, aggregated by invest-
ment category and length of time that individual securities have been in a
continuous unrealized loss position, at OctoberJuly 31, 2010.2011.
Less than 12 months 12 months or greater Total
----------------------- --------------------- ---------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Loss Value Loss Value Loss
...........................................................................
Municipal bonds
$ 864,000728,000 $ (12,000) $1,387,000(15,000) $3,545,000 $ (64,000)(92,000) $ 2,251,0004,273,000 $ (76,000)(107,000)
Equity securities
$1,481,000$1,835,000 $(112,000) $2,044,000 $(292,000) $ (140,000) $1,698,000 $(276,000)3,879,000 $ 3,179,000 $ (416,000)(404,000)
----------- ---------------------- ----------- ---------- ------------ ------------
Total
$2,345,000$2,563,000 $(127,000) $5,589,000 $(384,000) $ (152,000) $3,085,000 $(340,000)8,152,000 $ 5,430,000 $ (492,000)(511,000)
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 OctoberJuly 31, 2010.2011
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-
dividual holdings, and because of the recent decline in the stock market,
does not consider these investments to be other-than-temporarily impaired at
OctoberJuly 31, 2010.2011.
Note 3 Inventories
At OctoberInventories at July 31, 2010, inventories2011, consisted of the following:
Raw Materials $ 1,170,0001,517,000
Work in Process 498,000577,000
Finished Goods 216,000190,000
------------
$ 1,884,0002,284,000
Less: allowance for obsolete inventory (193,000)(195,000)
------------
Net Inventories $ 1,691,0002,089,000
============
Note 4 Business Segments
The following is financial information relating to industry segments:
For the quarter ended
OctoberJuly 31,
2011 2010 2009
---------------------------
Net revenue:
Security alarm products 1,974,000 1,703,0002,279,000 1,797,000
Other products 203,000 174,000319,000 210,000
------------ ------------
Total net revenue $ 2,177,0002,598,000 $ 1,877,0002,007,000
Income from operations:
Security alarm products 423,000 53,000731,000 159,000
Other products 44,000 5,000102,000 19,000
------------ ------------
Total income from operations $ 467,000833,000 $ 58,000178,000
Identifiable assets:
Security alarm products 2,612,000 2,545,0003,495,000 2,485,000
Other products 887,000 1,328,0001,201,000 916,000
Corporate general 24,591,000 23,135,00025,591,000 24,923,000
------------ ------------
Total assets $28,090,000 $27,008,000$30,287,000 $28,324,000
Depreciation and amortization:
Security alarm products 6,000 6,000
Other products 25,000 24,000 26,000
Corporate general 8,000 8,0006,000 7,000
------------ ------------
Total depreciation and amortization $ 38,00037,000 $ 40,00037,000
Capital expenditures:
Security alarm products 11,000 2,000-- --
Other products 0 0169,000 5,000
Corporate general 4,000 15,000-- 12,000
------------ ------------
Total capital expenditures $ 15,000169,000 $ 17,000
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 OctoberJuly 31, 2010
-------------------------------------------2011
----------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- ------------------------- ---------
Net Income $ 405,000
===========792,000
=============
Basic EPS $ 405,000 5,060,248792,000 5,048,365 $ 0.080.1569
Effect of dilutive securities:
Convertible preferred stock 0-- 20,500 -----------(0.0007)
------------- ------------------------- ----------
Diluted EPS $ 405,000 5,080,748792,000 5,068,865 $ 0.080.1562
For the sixthree months ended OctoberJuly 31, 2010
-----------------------------------------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- ------------------------- ---------
Net Income $ 654,000
===========249,000
=============
Basic EPS $ 654,000 5,061,570249,000 5,062,892 $ 0.130.0492
Effect of dilutive securities:
Convertible preferred stock 0-- 20,500 -----------(0.0002)
------------- ------------------------- ----------
Diluted EPS $ 654,000 5,082,070249,000 5,083,392 $ 0.13
For the three months ended October 31, 2009
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 269,000
===========
Basic EPS $ 269,000 5,076,805 $ 0.05
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 269,000 5,097,305 $ 0.05
For the six months ended October 31, 2009
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 473,000
===========
Basic EPS $ 473,000 5,091,550 $ 0.09
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $ 473,000 5,112,050 $ 0.090.0490
Note 6 Retirement Benefit Plan
On January 1, 1998, the Company adopted the George Risk Industries, Inc.
Retirement Savings Plan (the "Plan")"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)401 (k)
of the Internal Revenue Code of 1986, as amended. Matching contributions by
the Company of approximately $3,000 were paid during each quarterthe quarters ending
OctoberJuly 31, 20102011 and 2009. Likewise, the Company paid matching contributions
of approximately $6,000 and $5,000 during each six-month period ending
October 31, 2010, and 2009, respectively. There were no discretionary con-
tributions paid during either the quarters or six-month periods ending OctoberJuly 31, 2011 and 2010, and 2009, respectively.re-
spectively.
Note 7 Fair Value Measurements
Generally accepted accounting principles in the United States of America
(US GAAP) defines fair value as the price that would be received from selling
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. When determining the fair value
measurements for assets and liabilities, which are required to be recorded at
fair value, we consider the principal or most advantageous market in which we
would transact and the market-based risk measurements or assumptions that
market participants would use in pricing the asset or liability, such as in-
herent risk, transfer restrictions, and credit risk.
US GAAP establishes a fair value hierarchy that prioritizes the inputs
to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (level 1 measurements) and the lowest priority to un-
observable inputs (level 3 measurements). The levels of the fair value
hierarchy under US GAAP are described below:
Level 1 - Valuation is based upon quoted prices for identical in-
struments traded in active markets.
Level 2 - Valuation is based upon quoted prices for similar in-
struments in active markets, quoted prices for identical
or similar instruments in markets that are not active,
and model-based valuation techniques for which all sig-
nificant assumptions are observable in the market.
Level 3 - Valuation is generated from model-based techniques that
use significant assumptions not observable in the market.
These unobservable assumptions reflect our own estimates
of assumptions that market participants would use in
pricing the asset or liability. Valuation techniques
include use of option pricing models, discounted cash
flow models and similar techniques.
Marketable Securities
- ---------------------
As of OctoberJuly 31, 2010,2011, our investments consisted of publicly traded equity
securities as well as certain state and municipal debt securities. Our
marketable securities are valued using third-party broker statements. The
value of the majority of securities is derived from quoted market inform-
ation. The inputs to the valuation are generally classified as Level 1 given
the active market for these securities, however, if an active market does not
exist, the inputs are recorded at a lower level in the fair value hierarchy.
Fair Value Hierarchy
- --------------------
The following tables set forth our assets and liabilities measured at fair
value on a recurring basis and a non-recurring basis by level within the fair
value hierarchy. As required by US GAAP, assets and liabilities are
classified in their entirety based on the lowest level of input that is
significant to the fair value measurement.
Assets Measured at Fair Value on a Recurring Basis
as of OctoberJuly 31, 20102011
---------------------------------------------------
Level 1 Level 2 Level 3 Total
------- ------- ------- -------
Assets:
Marketable
Securities $18,756,000$10,018,000 $ 09,359,000 $ 0 $18,756,000
------------ ---------- ---------- -------------- $19,377,000
----------- ----------- ----------- -----------
Total fair value of
assets measured on a
recurring basis $18,756,000$10,018,000 $ 09,359,000 $ 0 $18,756,000-- $19,377,000
=========== =========== =========== ===========
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'Company's audited
financial statements and discussion for the fiscal year ended April 30, 2010.2011.
Liquidity and capital resources
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Operating
- ---------
Net cash increased $1,148,000$264,000 during the quarter ended July 31, 2011 as com-
pared to an increase of $2,071,000 during the corresponding quarter last
year. Accounts receivable increased $406,000 for the six months ended Octoberquarter ending July 31,
2010,
while,2011 compared with a $79,000 decrease for the same periodquarter last year, netyear. The in-
crease in cash decreased $1,971,000.
Accountsflow for accounts receivable decreased $24,000 for the current six months and de-
creased $241,000 forperiod is a re-
flection of increased sales. At the same period last year. At Octoberquarter ended July 31, 2010, 79.16%2011, 63.69% of
the receivables wereare considered current (less than 45 days) and 2.61%while 4.95% of the
total wereare over 90 days past due. Inventory decreased $254,000 forThis is in comparison to having 78.15% of
the receivables considered current and 4.06% over 90 days past due at July
31, 2010. Inventories increased $243,000 during the current six months, while it also decreased $524,000 for the same periodquarter as com-
pared to a $236,000 decrease last year. The main reason for the smaller decrease in cash expenditures towards
inventory is that sales have startedManagement has had to increase its
raw material purchases as a result of the increase in sales and the company has used up
someprice of
raw materials keeps rising. At the overstock it had for the last couple of years. Changes in pre-
paid expenses in regards to cash flow increased by $90,000 for the six months
ending Octoberquarter ended July 31, 2010. Conversely, changes2011 there was a
$2,000 increase in prepaid expenses, in regards
to cash flow increased by $5,000 for the six-month ending Octoberwhile at July 31, 2009.
Cash towards2010, there was a
$56,000 decrease. There was not an income tax overpayment increased $64,000 for the six monthsquarter
ended OctoberJuly 31, 2010 and it increased $67,0002011, while there was an $88,000 decrease in income tax over-
payment for the same periodcorresponding quarter last year. Management paid income tax
estimatedestimates based on prior year taxable in-
come.
Forincome.
At the six monthsquarter ended OctoberJuly 31, 2010,2011, accounts payable increased
$49,000, and decreased $5,000shows a decrease of
$37,000 as compared to a decrease of $1,000 for the same periodquarter the year
before. The change in cash in regards to accounts payable can vary. It
really depends on the time of the month the invoices are due, since the com-
pany pays all its invoices within the terms. Accrued expenses increased
$60,000 for the current quarter as compared to a $62,000 increase for the
quarter ended OctoberJuly 31, 2009.2010. The current increase is a reflection of higher costs of raw materialsdue to increased em-
ployment and the
need for more inventory since sales have increased. Accrued expensespayroll and commission dollars. Income tax payable in-
creased $14,000$290,000 for the six monthsquarter ended OctoberJuly 31, 2010, as it decreased by
$60,0002011, while there was no
payable on the books for the corresponding quarter the same period last year. The increase is due to elevated sales
commissions and more employees than last year.
Investing
-
---------
As for our investment activities, the Company has spent approximately
$32,000$169,000 on acquisitions of property and equipment for the current six-month period
and $28,000fiscal
quarter. In comparison with the corresponding quarter last year, there was
spentactivity of $17,000. The $169,000 represents an in-house mold, previously a
project in process, which was completed during the six months ended October 31, 2009.quarter. Additionally,
the Company continues to purchase marketable securities, which include
municipal bonds and quality stocks. Cash spent on purchases of mar-
ketablemarketable
securities for the six monthsquarter ended OctoberJuly 31, 20102011 was $532,000 and
$2,364,000 was$169,000 compared with
$419,000 spent forduring the corresponding period last year.quarter ended July 31, 2010. We continue to 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,
per-
missionpermission to buy and sell stocks at will. The Company pays a quarterly
service fee based on the value of the investments. Furthermore, the Company
con-
tinuescontinues to purchase back its common stock when the opportunity arises. For the
six monthsquarter ended OctoberJuly 31, 2010,2011, the Company purchased $46,000$20,000 worth of treasury
stock and $225,000also $20,000 worth was bought backof treasury stock for the six monthsquarter ended OctoberJuly 31,
2009.2010. We have been actively searching for stockholders that have been "lost"
over the years. The payment of dividends over the last six fis-
calseven fiscal years
has also prompted many stockholders and/or their relatives and descendants to
sell back their stock to the Company. We have also made pur-
chases of company stock on the open market.
Financing
- ---------
Cash flows from financing activities decreased by $923,000 for the six months
ending October 31, 2010. That figure consists of the payment of dividends
during the second quarter. The company declared a dividend of $0.20 per
share of common stock on September 30, 2010 and these dividends were paid by
October 31, 2010. As for the prior year numbers, net cash used in financing
activities was $784,000 for the six months ending October 31, 2009. A
dividend of $0.17 per common share was 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
OctoberJuly 31,
2011 2010 2009
---------------------------
Working capital $ 26,216,00028,058,000 $ 25,211,00026,673,000
Current ratio 33.607 38.57224.961 38.410
Quick ratio 30.854 34.11822.932 35.160
Results of Operations
~~~~~~~~~~~~~~~~~~~~~
Net sales were $2,177,000$2,598,000 for the quarter ended OctoberJuly 31, 2010,2011, which is a
15.98%an
increase of 29.44% from the corresponding quarter last year. Year-to-date netNet sales were $4,184,000 at Octoberfor
the quarter ended July 31, 2010 which is an 8.96% increase from
the same period last year. Sincewere $2,007,000. Even though the majority of
the Company's products are tied to the housing market, the increase in sales
is a result of the in-
creased growthCompany focusing on gaining market share in the housing market.industry.
The Company is accomplishing this by having excellent customer service and
being willing to make many customized parts. Cost of goods sold was 50.25%45.84%
of net sales for the quarter ended OctoberJuly 31, 20102011 and 62.9%61.24% for the same quarter
last year. Year-to-dateended July 31, 2010. Management continues to keep labor and other manufac-
turing expenses down and has reached the desired cost of goods sold percentages were 55.5% forpercent-
age range of 45 to 50%. Also, management raised prices at January 1, 2011.
This was the current six months and 60.5% forfirst overall price increase to take place in almost 10 years.
The price increase helps decrease the corresponding six months last year.
Management has been keeping labor and other manufacturing expenses in check
and with the increase in sales, the costscost of goodgoods sold percentages are on the
rise. Also, the actual expense for inventory has decreased because we are
using up excess inventory and new orders placed have been delayed.percentage.
Operating expenses were 28.3%22.1% of net sales for the quarter ended OctoberJuly 31,
20102011 as compared to 34.0 %29.9% for the corresponding quarter last year. Year-
to-date operating expenses were 29.1% of net sales forManage-
ment's goal is to always keep the six months ended
October 31, 2010, while they were 32.1% for the same period last year.
Keeping operating expenses around 30% or less of
net sales, as the companymanagement has been able to achieve over the years, shows that management keeps a close eye on
these expenses from year to year.years. Income from
operations for the quarter ended OctoberJuly 31, 20102011 was at $467,000,$833,000, which is a
705.17%367.98% increase from the corresponding quarter last year, which had income
from operations of $58,000.
Income from operations for the six months ended October 31, 2010 was at
$643,000, which is a 127.21% increase from the corresponding six months last
year, which had income from operations of $283,000.$178,000.
Other income and expenses showed gains of $98,000 and $228,000 for the quar-
ter and six months ended October 31, 2010, respectively. The other income
and expense numbers for last year also showed gains of $326,000a $579,000 gain for the quarter and $412,000ended July
31, 2011 as compared to having a $128,000 gain for the six months ending Octoberquarter ended July 31,
2009. Dividend
and interest2010. The main reason for the bigger gains in other income was down 13.84% for the current
quarter and was down
6.71% for the current six-month period when compared to the same time periods
last year. Gain and lossis that we had a $379,000 realized gain on investments is where the biggest loss is in this
category. Management did not have to write down as many impaired investments for the
current periods. It just happened that bonds matured and management
bought those bonds at premiums, so the loss is now posted on the books. For
the quarter ended October 31, 2010, management wrote down $3,000 for impaired
investments. This isas compared to writes down of $34,000a $56,000 realized loss for the samecorresponding quarter
last year. For the year-to-date ended October 31, 2010, management wrote
down $11,000 for impaired investments and $89,000 was wrote down for the same
period last year.
NetIn turn, net income for the quarter ended OctoberJuly 31, 20102011 was at
$405,000,$792,000, a 50.56%218.07% increase from the corresponding quarter last year, which
showed net income of $269,000. Net income$249,000. Earnings per share for the six monthsquarter ended
OctoberJuly 31, 2010 was $654,000,
a 38.27% increase from the same period last year. Net income for the six
months ended October 31, 2009 was $473,000. Earnings2011 were $0.16 per common share and $0.05 per common share for the
quarter ended OctoberJuly 31, 2010 were $0.08 per share and $0.13 per share
for the year-to-date numbers. EPS for the quarter and six months ended
October 31, 2009 were $0.05 per share and $0.09 per share, respectively.2010.
New Product Development
~~~~~~~~~~~~~~~~~~~~~~~
The new Hold-Up Switch (pt # HD-1) is now in production. The HD-1 requires
no key to reset and is jumper selectable for latching or non-latching. It is
tamper resistant, and can incorporate an end-of-line resistor.
Mold design is currently beinghas been completed and production started on our 700 Series
switches. This is a miniature surface-mountsurface mount contact switch with terminal
blocks. This has been requested by customers for some time and will be
the Company'sGRI's smallest surface mount terminal switch. TheSales have been strong with
nearly 13,000 sold since May 2011.
Splice and corner connecting pieces for the E-Z Duct Quarter Round line is in stock andRaceway
are currently being molded. We are also working on a line of connecting pieces
of splices and corners will soon be added.
Along with the dual terminal resistor packs the Companyplastic housing for our
very popular flat magnet (MF-875).
Engineering has also added a
single terminal version that incorporates one specified value resistor.
From more customer requests the Company has added a stubby version to our
3/4" and 1" steel door recessed contacts. These will be in the Company's
80RS-12 and 8080-TRS series switches.
Engineering is completing designnearly completed work on a garage door alert (DM-1) which
will monitor when the garage door has been left open and will automatically
shut the door - either by a timer functiontimed delay after each vehicle leaves the garage and/door has been opened
or closing at dusk. Management believesa set time every day. We believe this will be a good complimentary
productup sell
as mosta lot of home burglaries happengain access through a garage door that is left
open or unlocked.
Engineering is also working oncompleting new water sensors (WM2600-10 & WM-10P) made from a
monitoring device for gunsflexible cord. This design will contain multiple sensors to cover a larger
detection area such as along the wall of a computer or other moveable
merchandise. This alarmutility room. We hope
to launch both of these products in the next couple of weeks and they will have a wire run through the merchandise and
when someone wants to lookbe
promoted as our new products at the item,International Security Conference in New
York the alarm is disarmed for removalfirst week of the item and the reset. If the alarm is not reset or if the merchandise is
tampered with, the alarm will sound. Management anticipates that this
product will sell well to pawn shops, secondhand stores, flea markets, and
other types of retail outlets.November 2011.
Engineering is also looking to complete a design on an 110-volt110V Current
Controller which would work with our contact switches to secure the door of
a storage unit and also turn on the light when the door is opened.
Recently Issued Accounting Pronouncements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
There are no new accounting pronouncements that significantly affect the
Company.
Other Information
~~~~~~~~~~~~~~~~~
Management is always open to the possibility to acquire a business that would
complement our existing operations. This would require no outside financing.
The intent is to utilize the equipment, marketing techniques and established
customers to increase sales and profits.
There are no known seasonal trends with any of ourGRI's products, since we sell
to distributors and OEM manufacturers. TheOur products are tied to the housing
industry and will fluctuate with building trends.
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).3A. 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 OctoberJuly 31,
2010,2011, our president and chief executive officer and our chief financial
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 communicated to our
management, including our chief executive officer and our chief financial
officer, as appropriate to allow timely decisions regarding disclosure. A
control system cannot provide absolute assurance, however, that the ob-
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 con-
trols 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 finan-
cial reporting and the preparation of financial statements for external pur-
poses, in accordance with generally accepted accounting principles. Because
of inherent limitations, a system of internal control over financial re-
porting 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
become inadequate due to change in conditions, or that the degree of com-
pliance 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 manage-
ment concluded that as of OctoberJuly 31, 20102011 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
rulesSection
404 (c) of the SECSarbanes-Oxley Act of 2002, as amended, that permitpermits 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 inUnregistered Sales of Equity Securities Not applicable.and Use of Proceeds
The following table provides information relating to the Company's
repurchase of common stock for the first quarter of fiscal year 2012.
Period Number of shares repurchased
------------------------------- ----------------------------
May 1, 2011 - May 31, 2011 750
June 1, 2011 - June 30, 2011 2,755
July 1, 2011 - July 31, 2011 100
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Securities(Removed and Reserved)
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.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 OctoberJuly 31, 2010.2011.
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 12-15-201009-13-2011 By: /s/ KennethKen R. Risk
KennethKen R. Risk
President and Chairman of the Board
Date 12-15-201009-13-2011 By: /s/ Stephanie M. Risk
Stephanie M. Risk
Chief Financial Officer and Controller