In this Quarterly Report on Form 10-Q, the terms "Company," "we," "us," and
"our," refer to International Baler Corporation.
Forward Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. All
statements other than statements of historical fact, including statements
regarding industry prospects or future results of operations or financial
position, made in this Quarterly Report on Form 10-Q are forward-looking. We use
words such as anticipates, believes, expects, future, intends, and similar
expressions to identify forward-looking statements. Forward-looking statements
reflect management's current expectations and are inherently uncertain. Actual
results could differ materially for a variety of reasons, including, but not
limited to, changes in general economic conditions, changing competition and our
ability to market and sell our commercial and industrial balers. These risks and
uncertainties, as well as other risks and uncertainties, could cause our actual
results to differ significantly from management's expectations. The
forward-looking statements included in this Quarterly Report on Form 10-Q
reflect the beliefs of our management on the date of this Quarterly Report. We
undertake no obligation to update publicly any forward-looking statements for
The following discussion should be read together with our unaudited condensed
financial statements and the related notes thereto included in Part I, Item 1
"Financial Statements". For further information, refer to the Company's Annual
Report on Form 10-K for the year ended October 31, 2018, and the Management
Discussion and Analysis of Financial Condition and Results of Operations
included in this Form 10-Q.
Results of Operations: Three Month Comparison
In the third quarter ended July 31, 2019, the Company had net sales of
$2,407,124 compared to net sales of $2,021,957 in the third quarter of fiscal
2018. The higher net sales were the result of higher shipments of balers,
conveyors and parts in the third quarter of fiscal 2019 versus the same quarter
2018. The Company shipped twenty-eight balers and conveyors in the third quarter
of fiscal 2019 with an average price $59,871, compared to fifteen balers and
conveyors with an average price $92,535, in the third quarter of fiscal 2018.
The Company had an operating loss of $39,669 in the third quarter of fiscal
2019, compared to operating income of $5,465 in the third quarter fiscal 2018.
Gross profit was higher in the current quarter by $34,079 due to higher net
sales, however, this was offset by higher selling and administrative expenses.
The higher net income was the result of the Company recording $175,841 in other
income from insurance proceeds received from its crime insurance claim, (see
Results of Operations: Nine Month Comparison
The Company had net sales of $7,790,931 in the first nine months of fiscal 2019,
compared to net sales of $7,995,225 in the same period of 2018. The lower net
sales were the result of lower sales of auto-tie balers, eight in fiscal 2019
versus fifteen in the first nine months of 2018. This was partially offset by
higher sales of two-ram balers in the first nine months of 2019, six, versus
three in the first nine months of 2018. The Company's baler sales have been
slowed due to the lower prices of OCC (old corrugated cardboard) which have
dropped from over $170 per ton in July 2017 to under $30 per ton in July 2019.
Also, the activity in the rubber baler markets has slowed significantly in the
last three years.
The Company had a loss from operations of $64,412 in the first nine months of
fiscal 2019, compared to operating income of $240,628 in the first nine months
of fiscal 2018. The lower operating income was the result of lower net sales and
gross profit and higher selling and administrative expenses. Selling expenses
were higher due to the addition of one sales person and higher advertising
expenditures. Administrative expenses were higher due to the addition of a new
president, a position which had been held by the Company's chief financial
The sales order backlog was approximately $1,650,000 at July 31, 2019 and
$1,820,000 at July 31, 2018.
Financial Condition and Liquidity:
Net working capital at July 31, 2019 was $7,851,980 as compared to $7,851,219 at
October 31, 2018. The Company currently believes that it will have sufficient
cash flow to be able to fund operating activities for the next twelve months.
Average days sales outstanding (DSO) in the first nine months of fiscal 2019
were 23.0 days, as compared to 22.9 days in the first nine months of fiscal
2018. DSO is calculated by dividing the total of the month-end net accounts
receivable balances for the period by three, and dividing that result by the
average day's sales for the period (period sales ÷ 273).
During the nine months ended July 31, 2019 and 2018, the Company made additions
to plant and equipment of $244,580 and $91,813 respectively.
The Company has a $1,650,000 line of credit agreement with First Merchants Bank
of Muncie, Indiana which was renewed on May 15, 2019. The line of credit allows
the Company to borrow at an interest rate equal to the Wall Street Journal prime
rate minus 0.95%, adjusting daily. The line of credit is secured by all assets
of the Company and expires on May 15, 2020. The line of credit had no
outstanding balance at July 31, 2019 and at October 31, 2018.
In the event that the Company's line of credit would not be available, the
Company would pursue a line of credit from other sources, and take steps to
minimize expenditures, such as delaying capital expenditures and reducing
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