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EXCEL - IDEA: XBRL DOCUMENT - INTERNATIONAL BALER CORPFinancial_Report.xls
EX-31.1 - I, D. ROGER GRIFFIN, CERTIFY THAT: - INTERNATIONAL BALER CORPibal10q07312014ex31_1.htm
EX-31.2 - IBAL10Q07312014EX31_2 - INTERNATIONAL BALER CORPibal10q07312014ex31_2.htm
EX-32.1 - CERTIFICATION - INTERNATIONAL BALER CORPibal10q07312014ex32_1.htm
EX-32.2 - CERTIFICATION - INTERNATIONAL BALER CORPibal10q07312014ex32_2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________

FORM 10-Q

_________________

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: July 31, 2014

or

¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

_________________

International Baler Corporation

(Exact name of registrant as specified in its charter)

_________________

Delaware 0-14443 13-2842053
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation or Organization) File Number)

Identification No.)

 

5400 Rio Grande Avenue, Jacksonville, FL  32254

(Address of Principal Executive Offices) (Zip Code)

 

904-358-3812

(Registrant’s telephone number, including area code)

 

N/A
(Former name or former address and former fiscal year, if changed since last report)

_________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ¨     No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer  ¨ Accelerated filer  ¨ Non-accelerated filer  ¨ Smaller reporting company  x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes  ¨     No  x

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes  ¨     No  ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  5,183,895 shares of common stock at August 31, 2014.

 
 

INTERNATIONAL BALER CORPORATION

TABLE OF CONTENTS


                          

      PAGE
       
PART I.  FINANCIAL INFORMATION 2
       
  ITEM 1.  FINANCIAL STATEMENTS  
    Balance Sheets as of July 31, 2014, (unaudited) and October 31, 2013 2
       
    Statements of Income for the three months and nine months ended July 31, 2014 and 2013 (unaudited) 3
       
    Statement of Changes in Stockholders’ Equity for the nine months ended July 31, 2014 (unaudited) 4
       
    Statements of Cash Flows for the nine months ended July 31, 2014 and 2013 (unaudited). 5
       
    Notes to Financial Statements (unaudited) 6
       
  ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
       
  ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 9
       
  ITEM 4. CONTROLS AND PROCEDURES 10
       
PART II. OTHER INFORMATION 11
       
  ITEM 1. LEGAL PROCEEDINGS 11
       
  ITEM 5. OTHER INFORMATION 11
       
  ITEM 6. EXHIBITS 11
       
SIGNATURES 12
       
CERTIFICATIONS 13

 

 

 

 

 

 

 

 

 

 

 

 

-1-
 

PART I. FINANCIAL INFORMATION

 

ITEM 1.              FINANCIAL STATEMENTS

 

INTERNATIONAL BALER CORPORATION
BALANCE SHEETS
       
    July 31, 2014    October 31, 2013 
   Unaudited      
ASSETS          
Current assets:          
  Cash and cash equivalents  $1,151,530   $1,877,256 
  Accounts receivable, net of allowance for doubtful accounts          
           of $39,764 at July 31, 2014 and $45,764 at October 31, 2013   4,856,062    2,466,887 
  Inventories   6,534,297    5,960,365 
  Prepaid expense and other current assets   93,855    98,792 
  Deferred income taxes   71,128    71,128 
          Total current assets   12,706,872    10,474,428 
           
Property, plant and equipment, at cost:   3,234,433    3,096,560 
  Less: accumulated depreciation   2,081,411    1,972,631 
          Net property, plant and equipment   1,153,022    1,123,929 
           
Other assets:          
  Other assets   1,256    1,256 
  Deferred income taxes   8,495    8,495 
          Total other assets   9,751    9,751 
           
TOTAL ASSETS  $13,869,645   $11,608,108 
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
           
Current liabilities:          
  Revolving promissory note  $1,644,430   $1,648,649 
  Notes payable-current portion   8,873    —   
  Accounts payable   1,554,754    1,439,777 
  Accrued liabilities   556,058    659,096 
  Customer deposits   2,261,883    677,954 
          Total current liabilities   6,025,998    4,425,476 
           
  Notes payable-long term   31,523    —   
          Total liabilities   6,057,521    4,425,476 
           
Commitments and contingencies (Note 8)          
           
Stockholders' equity:          
  Preferred stock, par value $.0001,          
        10,000,000 shares authorized, none issued   —      —   
  Common stock, par value $.01,          
        25,000,000 shares authorized;  6,429,875 shares          
        issued at July 31, 2014 and October 31, 2013   64,299    64,299 
  Additional paid-in capital   6,419,687    6,419,687 
  Retained earnings   2,009,548    1,380,056 
    8,493,534    7,864,042 
           
   Less:  Treasury stock, 1,245,980 shares          
                   at July 31, 2014 and October 31, 2013, at cost   (681,410)   (681,410)
           
           Total stockholders' equity   7,812,124    7,182,632 
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $13,869,645   $11,608,108 
           
See accompanying notes to financial statements. 
-2-
 

INTERNATIONAL BALER CORPORATION
STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
JULY 31, 2014 AND 2013
UNAUDITED
             
    
   Three Months  Nine Months
          
    2014    2013    2014    2013 
Net sales:                    
     Equipment  $5,287,654   $2,664,441   $10,786,076   $8,466,872 
     Parts and service   770,963    500,057    2,004,665    1,525,079 
Total net sales   6,058,617    3,164,498    12,790,741    9,991,951 
                     
Cost of sales   4,644,763    2,662,221    10,153,153    8,280,272 
                     
Gross profit   1,413,854    502,277    2,637,588    1,711,679 
                     
                     
Operating expense:                    
     Selling expense   215,744    221,505    725,802    720,524 
     Administrative expense   359,612    233,369    921,375    732,257 
Total operating expense   575,356    454,874    1,647,177    1,452,781 
                     
Operating income   838,498    47,403    990,411    258,898 
                     
Other income (expense):                    
     Interest income   843    171    5,743    741 
     Interest expense   (8,975)   —      (26,662)   (3,604)
Total other income  (expense)   (8,132)   171    (20,919)   (2,863)
                     
                     
Income before income taxes   830,366    47,574    969,492    256,035 
                     
Income tax provision   289,000    18,000    340,000    97,500 
                     
Net income  $541,366   $29,574   $629,492   $158,535 
                     
                     
Income (loss) per share, basic and diluted  $0.10   $0.01   $0.12   $0.03 
                     
Weighted average number of shares outstanding   5,183,895    5,183,895    5,183,895    5,183,895 
                     
                     
See accompanying notes to financial statements.

 

 

 

 

 

 

 

 

 

-3-
 

INTERNATIONAL BALER CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JULY 31, 2014
UNAUDITED
                      
                      
    Common Stock             Treasury Stock      
                                    
    NUMBER                                
    OF         ADDITIONAL          NUMBER         TOTAL 
   SHARES    PAR    PAID-IN    RETAINED    OF         STOCKHOLDERS' 
    ISSUED    VALUE    CAPITAL    EARNINGS    SHARES    COST    EQUITY 
                                    
Balance at October 31, 2013   6,429,875   $64,299   $6,419,687   $1,380,056    1,245,980   $(681,410)  $7,182,632 
                                    
Net Income   —      —      —      629,492    —      —      629,492 
                                    
Balance at July 31, 2014   6,429,875   $64,299   $6,419,687   $2,009,548    1,245,980   $(681,410)  $7,812,124 
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
See accompanying notes to financial statements. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-4-
 

INTERNATIONAL BALER CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 2014 AND 2013
UNAUDITED
       
       
    2014    2013 
           
Cash flow from operating activities:          
  Net income  $629,492   $158,535 
  Adjustments to reconcile net income to net cash used in          
  operating activities:          
     Depreciation and amortization   108,780    103,871 
     Provision for doubtful accounts   (6,000)   —   
     Changes in operating assets and liabilities:          
       Accounts receivable   (2,383,175)   (72,076)
       Inventories   (573,932)   (2,345,920)
       Prepaid expenses and other assets   4,937    28,978 
       Accounts payable   114,977    754,065 
       Accrued liabilities and deferred compensation   (103,038)   (185,195)
       Customer deposits   1,583,929    93,754 
           Net cash used in operating activities   (624,030)   (1,463,988)
           
Cash flows from investing activities:          
   Proceeds from notes receivable from former Director   —      3,673 
   Purchase of property and equipment   (96,618)   (175,197)
           Net cash used in investing activities   (96,618)   (171,524)
           
Cash flows from financing activities          
   Payments on notes payable   (859)     
   Advances from revolving promissory note   400,000    468,494 
   Payments on revolving promissory note   (404,219)   —   
           Net cash (used in) provided by financing activities   (5,078)   468,494 
           
Net decrease in cash and cash equivalents   (725,726)   (1,167,018)
           
Cash and cash equivalents at beginning of period   1,877,256    1,719,140 
           
Cash and cash equivalents at end of period  $1,151,530   $552,122 
           
Supplemental disclosure of cash flow information:          
Cash paid during period for:          
    Interest  $26,662   $—   
    Income taxes   322,729    640,000 
           
Supplemental non cash investing activities:          
   Purchases of property and equipment  $137,874   $—   
   Equipment purchased under notes payable   (41,254)   —   
   Cash paid for property and equipment   96,620    —   
           
           
See accompanying notes to financial statements.

-5-
 

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Nature of Business:

International Baler Corporation (the “Company”) is a manufacturer of baling equipment which is designed to compress a variety of materials into bales for easier handling, shipping, disposal, storage, and for recycling.  Materials commonly baled include scrap metal, corrugated boxes, newsprint, aluminum cans, plastic bottles, and other solid waste.  More sophisticated applications include baling of textile materials, fibers and synthetic rubber. The Company offers a wide variety of balers, standard models as well as custom models, and conveyors to meet specific customer requirements.

 

The Company’s customers include recycling facilities, distribution centers, textile mills, and companies which generate the materials for baling and recycling.  The Company sells its products worldwide with annual sales outside the United States typically ranging from 10% to 35%.

 

2. Basis of Presentation:

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, they do not include all of the information in footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included.  Operating results for the nine-month period ended July 31, 2014 are not necessarily indicative of the results that may be expected for the year ending October 31, 2014. The accompanying balance sheet as of October 31, 2013 was derived from the audited financial statements as of October 31, 2013.           

 

3. Summary of Significant Accounting Policies:

 

(a) Accounts Receivable & Allowance for Doubtful Accounts:

 

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company reviews its allowance for doubtful accounts monthly including the analysis of historical trends, customer credit worthiness and the aging of receivables. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.                                         

 

(b) Inventories:

 

Inventories are stated at the lower of cost or market. Cost is determined by a method that approximates the first-in, first-out method. Work in process and finished goods are valued based on underlying costs to manufacture balers which include direct materials, direct and indirect labor, and overhead. The Company reviews inventory for obsolescence on a regular basis.

 

(c) Revenue Recognition:

 

The Company recognizes revenue when finished products and/or parts are shipped and the customer takes ownership and assumes the risk of loss. Revenue from installation services is recognized on completion of the service. The Company recognizes revenue from repair services in the period in which the service is provided.

 

(d)  Warranties and Service:

 

The Company typically warrants its products for one (1) year from the date of sale as to materials and six (6) months as to labor, and offers services for other required repairs and maintenance. Service is rendered by repairing or replacing parts at the Company’s Jacksonville, Florida facility, by on-site service provided by Company personnel who are based in Jacksonville, Florida or by local service agents who are engaged as needed. The Company maintains an accrued liability for expected warranty claims. The warranty accrual is based on historical warranty costs, the quantity and types of balers currently under warranty, and known warranty issues.

-6-
 

Following is a tabular reconciliation of the changes in the warranty accrual for the nine-month period ended July 31:

             

    2014    2013 
Beginning balance  $60,000   $60,000 
Warranty service provided   (137,165)   (170,718)
New product warranties   135,000    169,337 
Changes to pre-existing warranty accruals   7,165    1,381 
Ending balance  $65,000   $60,000 

 

(e) Fair Value of Financial Instruments:

 

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and customer deposits, approximate their fair value due to the short-term nature of these assets and liabilities.

 

4. Related Party Transactions:

 

Leland E. Boren, a stockholder and director of the Company, is the owner of Avis Industrial Corporation (Avis). Mr. Boren controls 50.8% of the outstanding shares of the Company. Avis owns 100% of The American Baler Company, a competitor of the Company. On January 1, 2014, Avis acquired The Harris Waste Management Group, Inc., also a competitor of the Company. On August 5, 2014 Avis acquired IPS Balers, Inc. in Baxley, Georgia, another competitor of the Company.  These baler companies operate independent of each other.  The Company had no equipment sales to, or purchases from, these companies for the nine months ended July 31, 2014 or in fiscal year ended October 31, 2013.

 

5. Inventories:

 

  Inventories consisted of the following:

             

    July 31, 2014    October 31, 2013 
Raw materials  $1,830,593   $1,796,661 
Work in process   3,613,544    3,964,544 
Finished goods   1,090,160    199,160 
   $6,534,297   $5,960,365 

 

6. Debt:

 

The Company has a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana that was entered into on January 7, 2013.  The line of credit allows the Company to borrow at an interest rate equal to the sum of the LIBOR Rate applicable to each interest period plus 2.24%. The line of credit is secured by all assets of the Company and has a term of two years.  The line of credit had an outstanding balance of $1,644,430 at July 31, 2014 and $1,648,649 at October 31, 2013.

 

In July 2014 the Company financed a service truck by entering into a loan agreement with Ford Credit for $41,254.  The note has a term of forty-eight months at an interest rate of 3.8%.  Principal payments for fiscal years ending October 31, are scheduled as follows:

 

 2014   $2,346 
 2015    9,849 
 2016    10,223 
 2017    10,612 
 2018    8,224 
 Total   $41,254 

 

 

 

-7-
 

7. Income Taxes:

 

Tax assets are recognized in the balance sheet if it is more likely than not that they will be realized on future tax returns. Factors considered included, historical results of operations, volatility of the economic conditions and projected earnings based on current operations. Based on this evidence, it is more likely than not that the deferred tax assets would be realized. Accordingly, there is no valuation allowance as of July 31, 2014and at October 31, 2013.  However, if it is determined that all or part of the deferred tax assets will not be used in the future, an adjustment to the deferred tax assets would be charged against net income in the period such determination is made.  As of July 31, 2014 and October 31, 2013, net deferred tax assets were $79,623.

 

8. Commitments and Contingencies:

 

The Company, in the ordinary course of business, is subject to claims made, and from time to time is named as a defendant in legal proceedings relating to the sales of its products. The Company believes that the reserves reflected in its financial statements are adequate to pay losses and loss adjustment expenses which may result from such claims and proceedings; however, such estimates may be more or less than the amount ultimately paid when the claims are settled.  In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

 

On August 26, 2010, the Company was served with a wrongful death lawsuit filed by the Estate of a former employee who was injured in a workplace accident while an employee of the Company.  The accident occurred in September 2008. The Plaintiff has demanded $2,500,000 to settle this claim.  The Company and its insurance company are vigorously defending this case. A motion to dismiss the Complaint was granted without prejudice in January 2012, allowing the Plaintiff the ability to file an amended Complaint.  In May 2013 and January 2014, the Company deposed certain individuals related to the Plaintiff and the Plaintiff deposed a representative of the Company in July 2014.  The Company filed a Motion For Summary Judgment to have the Complaint dismissed.

 

While the outcome of this lawsuit is uncertain, based upon information currently available, the Company believes it is highly unlikely that the results of this claim against the Company will have a material adverse effect on the Company’s financial position, results of operations or cash flows.  The Company has accrued the amount of its insurance deductible in relation to this lawsuit.

 

On December 26, 2013 the Company was served with a civil action filed by Georgetown Paper Stock of Rockville, Inc. for breach of warranties.  The Plaintiff has demanded $338,248 plus interest and costs to settle this claim.  The Company intends to defend this lawsuit and has filed a counterclaim against the plaintiff for $40,916 along with reimbursement of expense and lost profits.  In the third quarter ended July 31, 2014, the Company deposed various individuals related to the Plaintiff and the Plaintiff deposed two individuals of the Company.  The Company has filed a Motion for Summary Judgment to have the Complaint dismissed. 

 

While the outcome of this lawsuit is uncertain, based upon the information currently available, the Company believes it is highly unlikely that the results of this claim against the Company will have a material adverse effect on the Company’s financial position, results of operations and cash flows.

 

 

ITEM 2.               MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND                         RESULTS OF OPERATIONS

 

The following discussion should be read together with our unaudited 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, 2013, 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, 2014, the Company had net sales of $6,058,617, compared to net sales of $3,164,498 in the third quarter of fiscal 2013, an increase of 91.5%. The increase in sales was the result of the timing of shipments in the Company’s open order backlog.  The Company shipped eight synthetic rubber balers in the third quarter of 2014 while in the third quarter of fiscal 2013, the Company shipped two synthetic rubber balers.

 

-8-
 

The Company had net income of $541,366 in the third quarter of fiscal 2014, compared to net income of $29,574 in the third quarter of 2013.  The net income was the result of the higher level of shipments in the third quarter of the current fiscal year offset by higher administrative costs for directors fees and legal fees. 

 

Results of Operations:  Nine Month Comparison

 

The Company had net sales of $12,790,741 in the first nine months of fiscal 2014, compared to net sales of $9,991,951 in the same period of fiscal 2013, an increase of 28.0%.  The increase in sales was primarily the result of higher shipments of synthetic rubber balers in the first nine months of 2014. 

 

The Company had a net income of $629,492 in the first nine months of 2014 compared to net income of $158,535 in the first nine months of 2013. Gross profit and gross profit margins were higher in the first nine months of 2014.  Selling and administrative expenses were also higher in the first nine months of 2014.

 

The sales order backlog was approximately $11,800,000 at July 31, 2014 and $8,700,000 at July 31, 2013.

 

Financial Condition and Liquidity:

 

Net working capital at July 31, 2014 was $6,680,874 as compared to $6,048,952 at October 31, 2013. 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 2014 were 69.0 days, as compared to 34.7 days in the first nine months of fiscal 2013. The increase in Days Sales Outstanding in the first nine months of fiscal 2014 was the result of a delayed payment due to a customer’s requirement for an additional electrical panel on the conveyors purchased from the Company.  The Company is confident that this situation will be resolved shortly.  DSO is calculated by dividing the total of the month-end net accounts receivable balances for the period by nine, and dividing that result by the average day’s sales for the period (period sales ÷ 273).

 

During the nine months ended July 31, 2014 and 2013, the Company made additions to plant and equipment of $137,873 and $175,197, respectively.

 

The Company has a $1,650,000 line of credit agreement with First Merchants Bank of Muncie, Indiana that was entered into on January 7, 2013. The line of credit allows the Company to borrow at an interest rate equal to the sum of the LIBOR Rate applicable to each interest period plus 2.24%.  The line of credit is secured by all assets of the Company and has a term of two years.

 

The line of credit had an outstanding balance of $1,644,430 at July 31, 2014 and $1,648,649 at October 31, 2013.

 

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 overhead costs.

 

Forward Looking Statements

Certain statements in this Report contain forward-looking statements within the meaning of Section 21B of the Securities and Exchange Act of 1934, as amended. These forward-looking statements represent the Company’s present expectations or beliefs concerning future events.  The Company cautions that such statements are necessarily based on certain assumptions which are subject to risks and uncertainties including, but not limited to, changes in general economic conditions and changing competition which could cause actual results to differ materially from those indicated.

 

ITEM 3.               QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


The Company is exposed to changes in interest rates as a result of its financing activities,  including   its borrowings on the revolving line of credit facility. Based on the current level of borrowings, a  change in interest rates is not expected to have a material effect on operations or financial position.

 

-9-
 

ITEM 4.                CONTROLS AND PROCEDURES

 

Controls and Procedures

 

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As of the end of the period covered by this report, and under the supervision and with the participation of the management, including the Company’s Chief Executive Officer and Chief Financial Officer, management evaluated the effectiveness of the design and operation of these disclosure controls and procedures. Based on this evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

 

Management, with the participation of the Company’s principal executive and principal financial officers, assessed the effectiveness of the Company’s internal control over financial reporting as of July 31, 2014.  This assessment was performed using the criteria established under the Internal Control-Integrated Framework established by Committee of Sponsoring Organization of the Treadway Commission (“COSO”).

 

As part of a continuing effort to improve the Company’s business processes management is evaluating its internal controls and may update certain controls to accommodate any modifications to its business processes or accounting procedures.

 

Changes in Internal Control over Financial Reporting

 

The Company’s management, including CEO and CFO, confirm that there were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended July 31, 2014  that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-10-
 

PART II. OTHER INFORMATION

 

ITEM 1.               LEGAL PROCEEDINGS

 

On August 26, 2010, the Company was served with a wrongful death lawsuit filed by the Estate of a former employee who was injured in a workplace accident while an employee of the Company.  The accident occurred in September 2008. The Plaintiff has demanded $2,500,000 to settle this claim.  The Company and its insurance company are vigorously defending this case.  A motion to dismiss the Complaint was granted without prejudice in January 2012, allowing the Plaintiff the ability to file an amended Complaint and no further action has been taken by the Plaintiff.  In May 2013, the Company deposed the wife of the former employee in an effort to show this case lacks sufficient merit and file a motion for summary judgment.  In July 2014, a representative of the Company was deposed. 

 

In order for the Plaintiff to prevail and to circumvent Workers Compensation Immunity, the Plaintiff is required to prove that the Company knew with “virtual certainty” that the worker would be seriously injured or killed.  The elements proving this are very difficult to sustain and often courts rule in favor of employers on this issue. The Company filed a Motion For Summary Judgment to have the lawsuit dismissed.

 

On December 26, 2013 the Company was served with a civil action filed by Georgetown Paper Stock of Rockville, Inc. for breach of warranties.  The Plaintiff has demanded $338,248 plus interest and costs to settle this claim.  The Company intends to defend this lawsuit and has filed a counterclaim against the Plaintiff for $40,916 along with reimbursement of expenses and lost profits.

 

In the third quarter ended July 31, 2014, the Company deposed various individuals related to the Plaintiff and the Plaintiff deposed two individuals of the Company.  The Company has filed a Motion for Summary Judgment to have the Complaint dismissed.

 

While the outcome of this lawsuit is uncertain, based upon information currently available, the Company believes it is highly unlikely that the results of this claim against the Company will have a material adverse effect on the Company’s financial apposition, results of operations and cash flows.

 

 

ITEM 5.            OTHER INFORMATION

 

None.

 

ITEM 6.            EXHIBITS

 

              The following exhibits are submitted herewith:

 

 

Exhibit 31.1   Certification of D. Roger Griffin, Chief Executive Officer, pursuant to Rule 13a–14(a)/15d-14(a).
       
  31.2   Certification of William E. Nielsen, Chief Financial Officer, pursuant to Rule 13a–14(a)/15d-14(a).
       
  32.1   Certification of D. Roger Griffin, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
  32.2   Certification of William E. Nielsen, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

 

 

 

 

 

 

-11-
 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned there unto duly authorized.

 

Dated: September 10, 2014

             

                                                  

         INTERNATIONAL BALER CORPORATION     
       
     
    BY: /s/D. Roger Griffin  
    D. Roger Griffin  
    Chief Executive Officer  
       
       
       
    BY: /s/William E. Nielsen   
    William E. Nielsen  
    Chief Financial Officer