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 JulyOctober 31, 2014
[ ] 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).Act. Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the Registrant's Common Stock outstanding, as of
September 9,December 11, 2014 was 5,029,775.5,029,575.
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-monththree and six month period
ended JulyOctober 31, 2014, are attached hereto.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
JulyOctober 31, April 30,
2014 2014
------------ ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 6,622,0005,511,000 $ 5,872,000
Investments and securities 24,328,00024,514,000 23,904,000
Accounts receivable:
Trade, net of $0 and $4,588
doubtful account allowance 2,141,0002,052,000 2,034,000
Other 6,000 3,000
Inventories, net 2,236,0002,274,000 2,233,000
Prepaid expenses 105,00098,000 132,000
------------ ------------
Total Current Assets $35,438,000$34,455,000 $34,178,000
Property and Equipment, net, at cost 604,000665,000 625,000
Other Assets
Investment in Limited Land Partnership,
at cost 238,000253,000 238,000
Projects in process 58,00059,000 41,000
Other 1,000 1,000
------------ ------------
Total Other Assets $ 297,000313,000 $ 280,000
TOTAL ASSETS $36,339,000$35,433,000 $35,083,000
============ ============
See accompanying notes to the condensed financial statementsstatements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
JulyOctober 31, April 30,
2014 2014
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable, trade $ 95,000169,000 $ 109,000
Dividends payable 953,0001,099,000 953,000
Accrued expenses:
Payroll and related expenses 358,000305,000 278,000
Property taxes 3,000 --
Income tax payable 421,00044,000 75,000
Deferred incomincome taxes 815,000760,000 769,000
------------ ------------
Total Current Liabilities $ 2,645,0002,377,000 $ 2,184,000
Long-Term Liabilities
Deferred income taxes 91,000123,000 100,000
------------ ------------
Total Long-Term Liabilities $ 91,000123,000 $ 100,000
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, 8,502,881
shares issued and outstanding 850,000 850,000
Additional paid-in capital 1,736,000 1,736,000
Accumulated other comprehensive income 1,295,0001,215,000 1,222,000
Retained earnings 33,150,00032,561,000 32,417,000
Treasury stock, 3,473,1063,473,306 and 3,472,706
shares, at cost (3,527,000)(3,528,000) (3,525,000)
------------ ------------
Total Stockholders' Equity $33,603,000$32,933,000 $32,799,000
TOTAL LIABILITES AND STOCKHOLDERS' EQUITY $36,339,000$35,433,000 $35,083,000
============ ============
See accompanyingthe companying notes to the condensed financial statementsstatements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED JULY(Unaudited)
Three months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2014 AND 2013
July 31,
2014 2013 ------------ ------------
(unaudited) (unaudited)2013
---------------------------------------------------
Net Sales $ 2,998,0003,020,000 $ 2,670,0006,019,000 $ 2,920,000 $ 5,590,000
Less: Costcost of Goods Sold (1,513,000) (1,284,000)goods sold (1,288,000) (2,802,000) (1,308,000) (2,592,000)
------------ ------------ ------------ ------------
Gross Profit $ 1,485,0001,732,000 $ 1,386,0003,217,000 $ 1,612,000 $ 2,998,000
Operating Expenses:
General and
Administrative 194,000 184,000administrative 218,000 412,000 177,000 361,000
Sales 492,000 460,000463,000 956,000 423,000 883,000
Engineering 19,000 12,00021,000 41,000 13,000 25,000
Rent Paidpaid to Related Partiesrelated
parties 5,000 9,000 5,000 10,000
------------ ------------ ------------ ------------
Total Operating Expenses $ 710,000707,000 $ 661,0001,418,000 $ 618,000 $ 1,279,000
Income From Operations 775,000 725,0001,025,000 1,799,000 994,000 1,719,000
Other Income (Expense)
Other 0 1,000 10,000
Interest Expense - (8,000)0 2,000
Dividend and Interest Income 153,000 166,000interest
income 136,000 289,000 141,000 307,000
Gain (Loss)(loss) on
Saleinvestments 128,000 265,000 121,000 139,000
Gain (loss) on sale
of Investments 136,000 18,000assets 0 0 127,000 127,000
------------ ------------ ------------ ------------
$ 290,000264,000 $ 186,000555,000 $ 389,000 $ 575,000
Income Before Provisions
for Income Taxes 1,065,000 911,000Tax 1,289,000 2,354,000 1,383,000 2,294,000
Provisions for Income TaxesTax
Current Expense 349,000 285,000expense (233,000) (583,000) (413,000) (699,000)
Deferred tax expense (benefit) (16,000) (48,000)benefit
(expense) (35,000) (18,000) 13,000 62,000
------------ ------------ ------------ ------------
Total Income Tax Expense $ 333,000(268,000) $ 237,000(601,000) $ (400,000) $ (637,000)
Net Income $ 732,0001,021,000 $ 674,000
Basic and Diluted Earnings1,753,000 $ 983,000 $ 1,657,000
============ ============ ============ ============
Cash Dividends
Common Stock ($0.32
per share) $(1,609,000) $(1,609,000)
Common Stock ($0.30
per share) $(1,510,000) $(1,510,000)
Income Per Share of Common Stock $ 0.15 $ 0.13Stock:
Basic $0.20 $0.35 $0.20 $0.33
Assuming Dilution $0.20 $0.35 $0.19 $0.33
Weighted Average Number of
Common Shares Outstanding 5,029,910 5,033,843Outstanding:
Basic 5,029,642 5,029,776 5,032,109 5,032,976
See the accompanying notes to the condensed financial statementsstatements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED(Unaudited)
JulyThree months Six months Three months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2014 2014 2013 ---------------------------
(unaudited) (unaudited)2013
----------------------------------------------------
Net Income $ 732,0001,021,000 $ 674,0001,753,000 $ 983,000 $ 1,657,000
------------ ------------ ------------ ------------
Other Comprehensive Income, net of tax
Unrealized gain (loss) on securities:
Unrealized holding
gains (losses) arising
during period 273,000 (32,000)366,000 639,000 565,000 532,000
Reclassification adjustment
for gains (losses) included
in net income (146,000) 8,000(503,000) (649,000) (102,000) (94,000)
Income tax expensebenefit (expense)
related to other comprehensivecom-
prehensive income (53,000) 10,00057,000 4,000 (194,000) (183,000)
------------ ------------ ------------ ------------
Other Comprehensive
Income (Loss) $ 74,000(80,000) $ (14,000)(6,000) $ 269,000 $ 255,000
Comprehensive Income (Loss) $ 806,000941,000 $ 660,0001,747,000 $ 1,252,000 $ 1,912,000
============ ============ ============ ============
See accompanying notes to the condensed financial statementsstatements.
GEORGE RISK INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the threeSix months Six months
ended Julyended
October 31, October 31,
2014 2013
---------------------------
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 732,0001,753,000 $ 674,0001,657,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 33,000 37,00071,000 76,000
(Gain) loss on sale of investments (137,000) (18,000)(265,000) (139,000)
(Gain) loss on sales of assets 0 (127,000)
Reserve for bad debts (5,000) 1,0003,000
Reserve for obsolete inventory 23,000 22,00010,000 40,000
Deferred income taxes (16,000) (49,000)19,000 (61,000)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (103,000) 150,000(14,000) 11,000
Inventories (25,000) 14,000(51,000) (9,000)
Prepaid expenses 28,000 (47,000)
Employee35,000 (45,000)
Other receivables (3,000) -0
Income tax overpayment - 282,0000 164,000
Increase (decrease) in:
Accounts payable (14,000) 16,00060,000 73,000
Accrued expenses 82,000 48,00027,000 (46,000)
Income tax payable 347,000 -(31,000) 0
------------ ------------
Net cash provided by (used in) operating
activities $ 942,0001,606,000 $ 1,130,0001,597,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Other assets manufactured & purchased (17,000)(18,000) 4,000
Proceeds from sale of assets 0 127,000
(Purchase) of property and equipment (12,000) (22,000)(111,000) (45,000)
Proceeds from sale of marketable securities 5,000 -21,000 2,000
(Purchase) of marketable securities (165,000) (128,000)
Collection(377,000) (229,000)
(Purchase) of long-term investment (15,000) 0
Collections of loans to employees - 2,0000 3,000
(Purchase) of treasury stock (3,000) (11,000)(4,000) (24,000)
------------ ------------
Net cash provided by (used in) investing
activities $ (192,000)(504,000) $ (155,000)(162,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (1,463,000) (1,372,000)
------------ ------------
Net cash provided by (used in) financing
activities $ - $ -$(1,463,000) $(1,372,000)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 750,000(361,000) $ 975,00063,000
Cash and cash equivalents, beginning of
period $ 5,872,000 $ 4,859,000
------------ ------------
Cash and cash equivalents, end of period $ 6,622,0005,511,000 $ 5,834,0004,922,000
============ ============
Supplemental Disclosure of Cash Flow
Information
Cash payments for:
Income taxes $0 $0$ 610,000 $ 530,000
Interest expense $0 $0$ 0 $ 8,000
Cash receipts for:
Income taxes $ 0 $ 0
See accompanying notes to the condensed financial statementsstatements.
GEORGE RISK INDUSTRIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JULYOCTOBER 31, 2014
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 inform-
ationinformation
and footnotes required by generally accepted accounting principles for completecom-
plete financial statements. It is suggested that these condensed finan-
cialfinancial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's April 30, 2014 annual report on Form 10-K.
In the opinion of management, all adjustments, consisting only of normal recurringre-
curring 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: Investments2 Marketable Securities
The Company has investments in publicly traded equity securities, corporatecor-
porate bonds, state and municipal debt securities, real estate investment
trusts, and money markets certificates of deposits and hedge funds. The investments in securities which include all investments except for the hedge
funds, are classifiedclassi-
fied as available-for-sale securities, and are reported at fair value.
Available-for-sale investments in debt securities mature between October 2014January 2015
and November 2048. 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 stockholders' equity.
Dividend and interest income are reported as earned.
The Company has elected to record the investments in hedge funds at cost
cost due to the small ownership percentage. These investments are reported at
an aggregate carrying amount of $727,000, as of July 31, 2014. Additionally,
the investments have been evaluated for impairment and have been determined to
not be impaired as of July 31, 2014.
As of JulyOctober 31, 2014, investments available-for-sale consisted of the
following:
Gross Gross
Cost Unrealized Unrealized Fair
Basis Gains Losses Value
------------ ------------ ------------ ------------
Municipal bonds $ 6,586,0006,550,000 $ 217,000132,000 $ (47,000)(59,000) $ 6,756,0006,623,000
Corporate bonds $ 30,000 $ 1,000 $ --- $ 31,000
Hedge Funds $ 727,000 $ - $ - $ 727,000
REITs $ 56,000 $ 9,0008,000 $ -(2,000) $ 65,00062,000
Equity securities $12,663,000$12,674,000 $ 2,162,0002,161,000 $ (116,000) $14,709,000(133,000) $14,702,000
Money markets/CDsmarkets $ 2,040,0003,096,000 $ --- $ --- $ 2,040,0003,096,000
------------ ------------ ------------ ------------
Total $22,102,000$22,406,000 $ 2,389,0002,302,000 $ (163,000) $24,328,000(194,000) $24,514,000
TheIn 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 evalu-
atesevaluates the nature of the investment, cause of impairment
and number of invest-
mentsinvestments that are in an unrealized position. When an
" other-than-temporary""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 anyan
impairment lossesloss of $8,000 for the quarter ended July 31,2014 andOctober 31, 2014. Likewise,
as for the corresponding period last year, management recorded an $18,000 impairmentim-
pairment loss for the quartersix months ended JulyOctober 31, 2013.
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 JulyOctober 31, 2014.
Less than 12 months 12 months or greater Total
----------------------- --------------------- ---------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Value Loss Value Loss Value Loss
...........................................................................
Municipal bonds
$1,411,000 $ 243,000(27,000) $ (3,000) $1,217,000737,000 $ (44,000)(55,000) $ 1,460,0002,148,000 $ (47,000)
REITs
$ - $ - $ - $ - $ - $ -(82,000)
Equity securities
$1,276,000 $ 962,000(82,000) $ (50,000) $1,003,000356,000 $ (66,000)(32,000) $ 1,965,0001,632,000 $ (116,000)(114,000)
----------- ---------------------- ----------- ---------- ------------ ------------
Total
$1,205,000$2,687,000 $ (53,000) $2,220,000 $(110,000)(109,000) $1,093,000 $ 3,425,000(87,000) $ (163,000)3,780,000 $ (196,000)
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 JulyOctober 31, 2014.
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. The individual holdings have been
evaluated, and due to management's plan to hold on toonto these investments for an
extended period, the Companycompany does not consider these investments to be other-than-temporarilyother-
than-temporarily impaired at JulyOctober 31, 2014.
Note 3 Inventories
Inventories at JulyAt October 31, 2014, inventories consisted of the following:
Raw Materials $ 1,666,0001,662,000
Work in Process 498,000475,000
Finished Goods 277,000329,000
------------
$ 2,441,0002,466,000
Less: allowance for obsolete inventory (205,000)(192,000)
------------
Net Inventories $ 2,236,0002,274,000
============
Note 4 Business Segments
The following is financial information relating to industry
segments:
For the quarter ended
JulyOctober 31,
2014 2013
---------------------------
Net revenue:
Security alarm products 2,551,000 2,276,0002,562,000 2,494,000
Other products 447,000 394,000458,000 426,000
------------ ------------
Total net revenue $ 2,998,0003,020,000 $ 2,670,0002,920,000
Income from operations:
Security alarm products 660,000 618,000869,000 849,000
Other products 115,000 107,000156,000 145,000
------------ ------------
Total income from operations $ 775,0001,025,000 $ 725,000994,000
Identifiable assets:
Security alarm products 4,062,000 3,575,0003,994,000 3,690,000
Other products 813,000 788,000885,000 804,000
Corporate general 31,464,000 28,746,00030,554,000 28,626,000
------------ ------------
Total assets $36,339,000 $33,109,000$35,433,000 $33,120,000
Depreciation and amortization:
Security alarm products 4,0003,000 4,000
Other products 24,000 28,00029,000 29,000
Corporate general 5,0006,000 5,000
------------ ------------
Total depreciation and amortization $ 33,00038,000 $ 37,00038,000
Capital expenditures:
Security alarm products 2,000 8,0000 3,000
Other products 10,000 -87,000 20,000
Corporate general - 14,00012,000 0
------------ ------------
Total capital expenditures $ 12,00099,000 $ 22,00023,000
Note 5 Earnings per Share
Basic and diluted earningearnings per share, assuming convertible preferred
stock was converted for each period presented, are:
For the three months ended JulyOctober 31, 2014
-----------------------------------------------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -------------- --------------------
Net Income $ 732,000
=============$1,021,000
===========
Basic EPS $1,021,000 5,029,642 $ 732,000 5,029,910 $ 0.14550.20
Effect of dilutive securities:
Convertible Preferred Stock --preferred stock 0 20,500
(0.0006)----------- ------------- -------------- ---------------------
Diluted EPS $1,021,000 5,050,142 $ 732,000 5,050,410 $ 0.14490.20
For the threesix months ended JulyOctober 31, 2013
----------------------------------------2014
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -------------- --------------------
Net Income $1,753,000
===========
Basic EPS $1,753,000 5,029,776 $ 0.35
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,753,000 5,050,276 $ 0.35
For the three months ended October 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $ 674,000
=============983,000
===========
Basic EPS $ 674,000 5,033,843983,000 5,032,109 $ 0.13390.20
Effect of dilutive securities:
Convertible Preferred Stock --preferred stock 0 20,500
(0.0005)----------- ------------- -------------- ---------------------
Diluted EPS $ 674,000 5,054,343983,000 5,052,609 $ 0.13340.19
For the six months ended October 31, 2013
-------------------------------------------
Income Shares Per-share
(Numerator) (Denominator) Amount
----------- ------------- -----------
Net Income $1,657,000
===========
Basic EPS $1,657,000 5,032,976 $ 0.33
Effect of dilutive securities:
Convertible preferred stock 0 20,500
----------- ------------- -----------
Diluted EPS $1,657,000 5,053,476 $ 0.33
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)401(k)
of the Internal Revenue Code of 1986, as amended. Matching contributions by
the Company of approximately $3,000$2,000 were paid during the quarter ending
October 31, 2014 and $2,000 was paid during the corresponding quarter the
prior fiscal year. Likewise, the Company paid matching contributions of
approximately $5,000 during the six-month period ending October 31, 2014 and
$5,000 during the six-month period ending October 31, 2013. There were no
discretionary contributions paid during either the quarters or six-month
periods ending JulyOctober 31, 2014 and 2013, respectively. There were no discretionary con-
tributions paid during the quarters ending July 31, 2014 and 2013, 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 inherentin-
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.
Investments and Marketable Securities
---------------------
As of JulyOctober 31, 2014, our investments consisted of money markets, publicly
traded equity securities andas well as certain state and municipal debt
securities. Our marketable securities are valued using third-party broker
statements. The value of the investmentsmajority of securities is derived from quoted
market information. 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, which is the case for municipal and corporate bonds,
the inputs are recorded asat Level 2.
Fair Value Hierarchy
--------------------
The following table setstables 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 JulyOctober 31, 2014
---------------------------------------------------
Level 1 Level 2 Level 3 Total
------- ------- ------- -------
Assets:
Municipal Bonds $ --- $ 6,756,0006,623,000 $ -- $ 6,756,0006,623,000
Corporate Bonds $ 31,000 $ -- $ -- $ 31,000
REITSREITs $ 65,00062,000 $ -- $ -- $ 65,00062,000
Equity Securities $14,709,000$14,702,000 $ -- $ -- $14,709,000$14,702,000
Money Markets and CDs $ 2,040,0003,096,000 $ -- $ -- $ 2,040,000
----------- ----------- ----------- -----------3,096,000
------------ ------------ ---------- ------------
Total fair value of
assets measured on a
recurring basis $16,845,000$17,891,000 $ 6,756,0006,623,000 $ -- $23,601,000
=========== =========== =========== ===========$24,514,000
============ ============ ========== ============
Note 8 Subsequent Events
None
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
This Quarterly Report on Form 10-Q, includes forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended
(the Securities Act) and Section 21E of the Securities Exchange Act of 1934,
as amended (the Exchange Act), which are subject to the "safe harbor" created
by those sections. Any statements herein that are not statements of
his-
toricalhistorical fact may be deemed to be forward-looking statements. For example,
words such as "may," "will," "could," "would," "should," "anticipate,"
"expect," "intend," "believe," "estimate," "project" or "continue," and the
negatives of such terms are intended to identify forward-looking statements.
The information included herein represents our estimates and assumptions as
of the date of this filing. Unless required by law, we undertake no obliga-
tion to update publicly any forward-looking statements, or to update the
reasons actual results could differ materially from those anticipated in
these forward-looking statements, even if new information becomes available
in the future.
The following discussion should be read in conjunction with the attached
condensed consolidated financial statements, and with the Company's audited
financial statements and discussion for the fiscal year ended April 30, 2014.
Executive Summary
~~~~~~~~~~~~~~~~~
The Company's performance remains steady through the first quarter,and second
quarters, showing strong sales and investment returns. Opportunities include continued
growth with our customers, as well as some of our distributors' customers
landing jobs that specified GRI Security products exclusively. Challenges in the
coming months continue to include the burden of regulatory requirements of
the AccountableAffordable Care Act, and the increase in the minimum wage requirements,
as well as selection and implementation of new hardware and software systems
which will enhance productivity and communication throughout the organization.organiza-
tion.
Results of Operations
~~~~~~~~~~~~~~~~~~~~~
* Net sales showed a 12.28%7.67% increase year-to-date over the same period in
the prior year due to strong sales in the southeast marketsof our E-Z Duct line and the Company's
on-goingCom-
pany's ongoing commitment to outstanding customer service.
* Cost of goods sold saw a small uptick from 48.09%remained steady throughout the six months ended
October 31, 2014 at 46.55% of sales, compared to 46.37% in the prior
year, to 50.47% in the current quarter, which just misses
Management's goal to keep labor and other manufacturing expenseskeeping well within the rangetarget of 45 toless than 50%. The Company continues to pursue new
vendors for quality raw materials at lower costs.
* Operating expenses were down slightly at 23.68% of net salesup approximately $139,000 for the quarterperiod ended
JulyOctober 31, 2014 as compared to 24.76% for the cor-
responding quartercorresponding period last year.
These costs are primarily due to new product development and increased
commissions directly related to the increase in sales. The Company
has been able to keep the operating expenses at less than 30% of net
sales over the last several years; however, the effects of the
AccountableAffordable Care Act pro-
vide a concern onand the State of Nebraska regulatory increase in
the minimum wage continue to provide concerns regarding the ability to
maintain this pattern.
* Income from operations for the quartersix months ended JulyOctober 31, 2014 was
at $775,000, which is$1,799,000, a 6.89%4.65% increase from the corresponding quarterperiod last
year, which had income from operations of $725,000.$1,719,000.
* Other income and expenses showed a $290,000 gain for the quarter
ended July 31, 2014 as compared to an $186,000 gain for the quarter
ended July 31, 2013, primarily duewere consistent when comparing to the
current six month period the prior year, with only a slight decrease
of approximately $20,000 in the current year. The majority of
activity in these accounts consists of investment interest, dividends,
and gain or loss on sale of investments.
* Provision for income taxes showed an increase of $96,000, up from
$237,000 in the quarter ended July 31, 2013 to $333,000 for the
quarter ended July 31, 2014.
* In turn,Overall net income for the quartersix month period ended JulyOctober 31, 2014 was
$732,000, an 8.6% increaseup $96,000, or 5.79%, from the corresponding quarter last year,
which showed net income of $674,000.same period in the prior year.
* Earnings per share for the quartersix months ended JulyOctober 31, 2014 were
$0.15$0.35 per common share and $0.13$0.33 per common share for the quarter ended
July 31, 2013.same period
in the prior year.
Liquidity and capital resources
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Operating
---------
* Net cash increased $750,000decreased $361,000 during the quartersix months ended JulyOctober 31,
2014 as compared to an increase of $975,000$63,000 during the corresponding
quarterperiod last year.
* Accounts receivable increased $103,000$14,000 for the quarter ending Julysix months ended October
31, 2014 compared with a $150,000an $11,000 decrease for the same quarterperiod last
year. The increase in accounts receivable is directly attributable
to an increase in sales as noNo accounts over 90 days were found to be uncollectible.
* Inventories increased $25,000 during the current quarter asand prior six month periods
showing an increase of $51,000 in the current period compared to a
$14,000$9,000 increase in the prior period. These increases are attributable
to the increasing sales trend over the same periods and some vendors'
price increases.
* Prepaid expenses saw a $35,000 decrease last year,for the current six months,
primarily due to the receipt of a large order of raw materials in the first quarter.
* At the quarter ended July 31, 2014 there was a $28,000 decrease in
prepaid expenses and at July 31, 2013, there was a $47,000 increase.
The current decrease is caused by the receipt of goods that had been prepaid upon
order. Conversely, the prior six months showed a $45,000 increase in
the first
quarter that the Company had previous prepaid for.expenses.
* There was no income tax overpayment for the quarterperiod ended JulyOctober 31,
2014, while there was a decrease of $282,000$164,000 for the quarter ending
July 31, 2013. Assame period the
income tax overpayment has been eliminated,
it creates increases in the income tax payable/expenses.prior year.
* Accounts payable shows decrease of $14,000increases for both six month periods at $60,000
and $73,000, respectively. The company strives to pay all invoices
within terms, and the quarter ended
July 31, 2014 compared to an increase of $16,000 for the same quar-
ter the year before,variance in increases is primarily due to the
timing issues. All payables
are paid within terms.of receipt of products and payment of invoices.
* Accrued expenses increased $82,000$27,000 for the current quartersix month period as
com-
paredcompared to a $48,000 increase$46,000 decrease for the quartersix month period ended JulyOctober
31, 2013.
Investing
---------
* As for our investment activities, the Company spent approximately
$12,000$111,000 on acquisitions of property and equipment for the current fiscal quarter. Insix
month period, in comparison with the corresponding quartersix months last
year, where there was activity of $22,000.$45,000. In addition, the company
capitalized $10,000 worth of assets manufactured on site.
* Additionally, the Company continues to purchase marketable securities,
which include municipal bonds and quality stocks. CashDuring the six
month period ended October 31, 2014 there was quite of bit of buy/sell
activity in the investment accounts. Net cash spent on purchases of
marketable securities for the quartersix month period ended JulyOctober 31, 2014
was $165,000$377,000 compared to $128,000$229,000 spent duringin the quarter ended July 31, 2013.prior six month period.
We continue to use "money manager" accounts for most stock transactions.trans-
actions. 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.
* Furthermore, the Company continues to purchase back common stock when
the opportunity arises. For the quartersix month period ended JulyOctober 31,
2014, the Company purchased $3,000$4,000 worth of treasury stock, comparedas com-
pared to $11,000$24,000 in the same six months period the prior year.
Financing
---------
* Cash flows from financing activities decreased by $1,463,000 for the
six months ending October 31, 2014. That figure consists of the pay-
ment of dividends during the second quarter. The company declared a
dividend of $0.32 per share of common stock on September 30, 2014 and
these dividends were paid by October 31, 2014. As for the prior year
numbers, net cash used in financing activities was $1,372,000 for the
six months ending October 31, 2013. A dividend of $0.30 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
JulyOctober 31,
2014 2013
---------------------------
Working capital
(current assets - current liabilities) $ 32,793,00032,078,000 $ 30,514,00030,268,000
Current ratio
(current assets / current liabilities) 13.398 19.81314.495 16.889
Quick ratio
((cash + investments + AR) / current liabilities)
12.511 18.45113.495 15.661
New Product Development
~~~~~~~~~~~~~~~~~~~~~~~
The Company and its' engineering department perpetually workcontinue to develop enhancementsenhance-
ments to current product lines, develop new products which complement existing products,prod-
ucts, and look for products that are well suited to our distri-
butiondistribution network
and manufacturing capabilities. Items currently in the development process
include:
* Wireless contact switches, pool alarmalarms and environmental sensors are
in development
* Slim-line face plate for pool alarms that will also allow homeowner to
change the plate to match their decor
* High Security Switch
* Redesign of our Current Controller that will allow us to manufacture
a 15 amp version that would automatically turn on a whole room of
lights and a 220-volt version for international markets
* Redesign for the cover of the 29-Series terminal switch
* Twist lock for recessed steel door contacts, including biased for
high securityNew water sensor that will monitor water levels in livestock tanks and
sump pumps
* Fuel level monitor
Other Information
~~~~~~~~~~~~~~~~~
In addition to researching and developing new products, management is
always open to the possibility of acquiring a business or product line that
would comple-
mentcomplement our existing operations. Due to the Company's strong cash
position, management believes this could be achieved without the need for
outside financing. The intent is to utilize the equipment, marketing techniquestech-
niques and established customers to deliver new products and increase sales and profits.
There are no known seasonal trends with any of GRI's products, since we
sell to distributors and OEM manufacturers. Our products are tied to the
housing industry and will fluctuate with building trends.
Recently Issued Accounting Pronouncements
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In July 2013, the FASB issued Accounting Standards Update No. 2013-11,
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carry-
forward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, ("ASU 2013-11"2013-
11"). The objective of this update is to eliminate the diversity in practice
in the presentation of an unrecognized tax benefit when a net operating loss
carryforward, a similar tax loss or a tax credit carryforward exists. The
amendments in this update require an entity to present an unrecog-
nizedunrecognized tax
benefit in the financial statements as a reduction to a deferred tax asset
for those instances described above, except in certain situations discussed
in the update. ASU 2013-11 is effective for fiscal years, and interim
periods within those years, beginning after December 15, 2013. The adoption
of this standard isdid not expected to have a material impact on the Company's financial
statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers. The objective of this update is to
provide a robust framework for addressing revenue recognition issues and,
upon its effective date, replaces almost all existing revenue recognition
guidance. This update is effective in annual reporting periods beginning
after December 15, 2016 and the interim periods within that year. The CompanyCom-
pany is evaluating the impact of this update on the Company's financial
statements.
GEORGE RISK INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures Aboutabout Market Risk
This disclosure does not apply.Not applicable
Item 4:4. Controls and Procedures
(a) Information required by Item 307
Our Chief Executive Officer and(also working as our Controller,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)13a-15(e) or 15d-15(e)) as of the end of the period covered by this
quarterly report, havehas concluded that our disclosure controls and procedures
are effective based on their evaluation of these controls and procedures requiredre-
quired by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) Information required by Item 308
This disclosure is not yet required.
Item 4A.4T. Controls and Procedures
Quarterly evaluationEvaluation of disclosure controls and procedures:
---------------------------------------------------------------------------------------------------------------------
Based on their evaluation of our disclosure controls and procedures (as definedde-
fined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of JulyOctober
31, 2014, our president and chief executive officer and our controller 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, sum-
marizedsummarized and reportedre-
ported 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 controller, as appropriate to
allow timely decisions regarding disclosure. A control system cannot provide
absolute assurance, however, that the objectives 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:
-----------------------------------------------------------------------------------------------------------
Previously, over the past year and a half, the Company stated that there was
a material weakness in internal control over financial reporting,
particularly as it relates to financial reporting and deferred taxes. This
was due to the rather sudden death of the Chief Executive Officer in February
2013. The com-
panycompany was not able to hire a controller until May 2014. With
the hiring of the Controller, the Company now believes that we meet the full
requirement for separation for financial reporting purposes.
GEORGE RISK INDUSTRIES, INC.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 1A. Risk Factors
Not applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information relating to the Company's
repurchase of common stock for the firstsecond quarter of fiscal year 2014.2013.
Period Number of shares repurchased
--------------------------------------------------------------------- ----------------------------
MayAugust 1, 2014 - MayAugust 31, 2014 -0-
June100
September 1, 2014 - JuneSeptember 30, 2014 400
July100
October 1, 2014 - JulyOctober 31, 2014 -0--
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures(Removed and Reserved)
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibit No. Description
----------- -----------
31 Certifications pursuant to Rule 13a-14(a)
31.1 Certification of the Chief Executive Officer 31.2 Certification(Principal
and Accounting Officer), as required by Section 302 of
the Controller
32 Certifications pursuant to 18 U.S.C 1350Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer 32.2 Certification(Principal
and Accounting Officer), as required by Section 906 of
the ControllerSarbanes-Oxley Act of 2002.
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 09-09-14Date: December 11, 2014 By: /s/ Stephanie M. Risk-McElroy
Stephanie M. Risk-McElroy
President, Chief Executive Officer, Chief
Financial Officer and Chairman of the Board
Date 09-09-14 By: /s/ Julie M. Schnell
Julie M. Schnell
Controller