SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM ___________ TO
Commission file number 0-439
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American Locker Group Incorporated
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(Exact name of business issuer as specified in its charter)
Delaware 16-0338330
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(State of other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
608 Allen Street, Jamestown, NY 14701
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(Address of principal executive offices)
(716)664-9600
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No Not Applicable
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APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's class of common
stock equity as of the latest practicable date: May 7, 2003.
Common Stock $1.00 par value - 1,517,146
Transitional Small Business Disclosure (check one) Yes No X
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Part I - Financial Information
Item 1 - Financial Statements
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2003 2002
---- ----
Assets
Current assets:
Cash and cash equivalents $ 1,780,257 $ 2,002,225
Accounts and notes receivable, less allowance
for doubtful accounts of $339,000 in 2003
and $333,000 in 2002 3,965,876 4,166,972
Inventories 6,128,696 6,020,966
Prepaid expenses 436,764 104,115
Prepaid income taxes 188,245 234,008
Deferred income taxes 579,137 579,137
-------------------- -------------------
Total current assets 13,078,975 13,107,423
Property, plant and equipment:
Land 500,500 500,500
Buildings 3,451,282 3,444,688
Machinery and equipment 11,674,956 11,611,883
-------------------- -------------------
15,626,738 15,557,071
Less allowance for depreciation (10,533,201) (10,296,881)
-------------------- -------------------
5,093,537 5,260,190
Goodwill 6,155,204 6,155,204
Deferred income taxes 18,152 18,152
Other assets 163,280 192,447
Notes receivable, long - term 301,200 301,200
------------------- -------------------
Total assets $ 24,810,348 $ 25,034,616
==================== ===================
2
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2003 2002
---- ----
Liabilities and stockholders' equity
Current liabilities:
Line of credit $ - $ 25,000
Accounts payable 1,747,735 1,740,763
Commissions, salaries, wages and taxes thereon 235,722 602,792
Other accrued expenses 732,686 739,309
Current portion of long-term debt 1,630,000 1,630,000
------------------- --------------------
Total current liabilities 4,346,143 4,737,864
Long-term liabilities:
Long-term debt 7,976,824 8,303,813
Pension, benefits and other long-term liabilities 124,161 118,230
------------------- --------------------
8,100,985 8,422,043
Stockholders' equity:
Common stock, $1 par value:
Authorized shares - 4,000,000
Issued shares - 1,709,146 in 2003 and 2002,
Outstanding shares - 1,517,146 in 2002 and 2001 1,709,146 1,709,146
Retained earnings 13,100,008 12,670,948
Treasury stock at cost (192,000 shares
in 2003 and 2002) (2,112,000) (2,112,000)
Accumulated other comprehensive loss (333,934) (393,385)
------------------- --------------------
Total stockholders' equity 12,363,220 11,874,709
------------------- --------------------
Total liabilities and stockholders' equity $ 24,810,348 $ 25,034,616
=================== ====================
See accompanying notes.
3
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
Three Months Ended March 31,
2003 2002
---- ----
Net sales $ 8,831,748 $ 9,254,050
Cost of products sold 6,089,412 6,395,937
-------------------- ------------------
2,742,336 2,858,113
Selling, administrative and general expenses 1,958,687 1,491,389
-------------------- ------------------
783,649 1,366,724
Interest income 6,025 24,152
Other (expense) income--net 57,733 62,994
Interest expense (148,081) (180,335)
-------------------- ------------------
Income before income taxes 699,326 1,273,535
Income taxes 270,266 496,738
-------------------- ------------------
Net income $ 429,060 $ 776,797
==================== ==================
Earnings per share of common stock:
Basic $ .28 $ .38
==================== ==================
Diluted $ .28 $ .37
==================== ==================
Dividends per share of common stock: $ 0.00 $ 0.00
==================== ==================
See accompanying notes.
4
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31,
2003 2002
---- ----
Operating activities
Net income $ 429,060 $ 776,797
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 210,709 246,905
Deferred taxes - 127,772
Change in assets and liabilities:
Accounts and notes receivable 211,811 310,301
Inventories (107,730) (500,947)
Prepaid expenses (332,649) (24,632)
Accounts payable and accrued expenses (367,934) (63,590)
Pension and other benefits 5,931 (346,834)
Income taxes 45,875 (440,393)
--------------------- ------------------
Net cash provided by operating activities 95,073 85,379
Investing activities
Purchase of property, plant and equipment (11,807) (78,092)
Payment for other assets - (100,000)
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Net cash used in investing activities (11,807) (178,092)
Financing activities
Debt repayment (326,989) (349,968)
Line of credit repayment (25,000) -
--------------------- ------------------
Net cash used in financing activities (351,989) (349,968)
Effect of exchange rate changes on cash 46,755 (2,704)
--------------------- ------------------
Net decrease in cash (221,968) (445,385)
Cash and cash equivalents at beginning of period 2,002,225 4,579,034
--------------------- ------------------
Cash and cash equivalents at end of period $ 1,780,257 $ 4,133,649
===================== ==================
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 149,200 $ 181,800
===================== ==================
Income taxes $ 225,000 $ 809,000
===================== ==================
See accompanying notes.
5
Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q. Accordingly, the condensed financial statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company's management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of such
condensed financial statements have been included. Operating results for
the three-month period ended March 31, 2003 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2003.
The consolidated balance sheet at December 31, 2002 has been derived from
the audited financial statements at that date, but does not include all of
the financial information and footnotes required by generally accepted
accounting principles for complete financial statements. For further
information, refer to the Company's consolidated financial statements and
the notes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 2002.
2. Provision for income taxes is based upon the estimated annual effective tax
rate.
3. The Company reports earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." The following
table sets forth the computation of basic and diluted earnings per common
share:
Three Months Ended March Three Months Ended March
31, 2003 31, 2002
-------- --------
Numerator:
Net income available to common shareholders $ 429,060 $ 776,797
============== ==============
Denominator:
Denominator for basic earnings per share -
weighted average shares 1,517,146 2,043,046
Effect of Dilutive Securities:
Stock options 34,921 42,123
-------------- --------------
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversion 1,552,067 2,085,169
============== ==============
Basic earnings per common share $ 0.28 $ 0.38
Diluted earnings per common share $ 0.28 $ 0.37
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4. Inventories are valued at the lower of cost or market. Cost is determined
by using the last-in, first-out method for substantially all of the
inventories.
March 31, December 31,
2003 2002
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Raw materials $ 2,689,683 $ 1,572,946
Work-in-process 1,891,590 1,901,263
Finished goods 1,965,689 2,965,023
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6,546,962 6,439,232
Less allowance to reduce to LIFO basis (418,266) (418,266)
----------------------------------------------
$ 6,128,696 $ 6,020,966
==============================================
5. Total comprehensive income consisting of net income and foreign currency
translation adjustment was $488,511 and $774,093 for the three months ended
March 31, 2003 and March 31, 2002 respectively.
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Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
FIRST THREE MONTHS 2003 VERSUS FIRST THREE MONTHS 2002
Sales for the first three months of 2003 of $8,832,000 decreased $422,000 or 5%
compared to sales of $9,254,000 during the same period in 2002. Plastic locker
sales to the United States Postal Service (USPS) totaled $4,482,000 in 2003
compared to $5,287,000 during 2002. Plastic Cluster Box Units (CBUs) sales were
$4,339,000 in 2003 compared to $5,083,000 during 2002. The decrease in sales of
Plastic CBUs of $744,000 from 2002 to 2003 is the result of decreased purchases
from the USPS. The Company also believes that the decline in its sales levels of
CBUs is the result of changes in purchasing practices by the USPS from district
level purchasing to a local post office level. Sales of Outdoor Parcel Lockers
(OPLs) were $143,000 in 2003 compared to $204,000 in 2002, as a result of lower
purchase levels by the USPS. Sales of metal, mechanical and electronic lockers,
which include the Company's luggage cart business, were $4,350,000 for the three
months of 2003 compared to $3,967,000 for the first three months of 2002. This
$382,000 increase consists of additional sales of $177,000 made by the Company's
subsidiary, Security Manufacturing Corporation (SMC), as well as increases in
sales of vending equipment for shopping carts and airport luggage carts. This
increase was offset by declines in luggage cart and other services at airport
terminals. The Company's contract to provide luggage cart services at the
Toronto International Airport expired in November 2002, and was not renewed by
the Company. The company continues to provide luggage cart services at one
terminal of the Detroit International Airport.
The Company believes that the long-term outlook for CBU volume remains favorable
in light of the continued USPS commitment to the CBU program and its resulting
operating cost reduction benefits. In April 2003, the Company's contract with
the USPS was renewed for a one-year term expiring on April 15, 2004. The
contract covers all four types of Plastic CBUs, aluminum CBUs and the OPL. The
contract contained price reductions ranging from zero to approximately 2%
depending on the CBU or OPL type. As previously disclosed, total CBU demand is
influenced by a number of factors over which the Company has no control,
including but not limited to: USPS budgets, policies and financial performance,
domestic new housing starts, postal rate increases, and the weather as these
units are installed outdoors. The Company believes its CBU product line,
including the acquired line of aluminum CBUs made by the Company's new
subsidiary, SMC, continues to represent the best value when all factors
including price, quality of design and construction, long-term durability and
service are considered.
Consolidated cost of sales as a percentage of sales was 68.9% in 2003 compared
to 69.1% in 2002.
Selling, administrative and general expenses were $1,959,000 during the first
quarter of 2003, an increase of $468,000 from $1,491,000 during the first
quarter of 2002. This increase is due primarily to a one-time reduction of
$319,000 in 2002 as the result of the reversal of a liability which existed
under the Supplemental Executive Retirement Plan due to the death in the first
quarter of 2002 of the only current beneficiary under the Plan. The increase was
also impacted by a 2003 charge of $65,000 for a severance agreement relating to
a terminated management
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employee at SMC, as well as increased engineering costs in 2003 relating to
product development. Selling, administrative and general expenses were 22% and
16% of first quarter sales in 2003 and 2002, respectively.
Interest expense for 2003 was $148,000 compared to $180,000 for 2002. The
decrease resulted from lower outstanding debt during 2003 compared to 2002.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's liquidity is reflected in the ratio of current assets to current
liabilities or current ratio and its working capital. The current ratio was 3.01
to 1 at March 31, 2003 and 2.77 to 1 at December 31, 2002. Working capital, the
excess of current assets over current liabilities, was $8,733,000 at March 31,
2003, an increase of $363,000 over $8,370,000 at December 31, 2002. Cash
provided by operating activities was $95,000 and $85,000 during the first three
months of 2003 and 2002, respectively.
The Company anticipates that cash on hand and cash generated from operations in
2003 will be adequate to fund working capital needs, capital expenditures and
debt payments. However, if necessary, the Company has a $3,000,000 revolving
bank line of credit available to assist in satisfying future operating cash
needs, no amount is outstanding under the line of credit at March 31, 2003.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
There are no recently issued accounting standards that the Company believes will
have a material impact on its financial position or results of operations.
Safe Harbor Statement under the Private Securities Litigation Reform Act Of 1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations, and intentions are subject to
change at any time at the discretion of the Company, (ii) the Company's plans
and results of operations will be affected by the Company's ability to manage
its growth and inventory, (iii) the risk that the Company's contract with the
USPS will not be renewed, and (iv) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
Item 4. Controls and Procedures
As of March 31, 2003, an evaluation was performed under the supervision and with
the participation of the Company's management, including the chief executive
officer and principal accounting officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Company's management, including the
9
chief executive officer and principal accounting officer, concluded that the
Company's disclosure controls and procedures were effective as of March 31,
2003. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to March 31, 2003.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
99.1 Certification of Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification of Principal Accounting Officer
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2003.
10
S I G N A T U R E
-----------------
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN LOCKER GROUP INCORPORATED
(Registrant)
/s/ Roy J. Glosser
------------------------------------------------
Roy J. Glosser
President, Chief Operating Officer and Treasurer
Date: May 13, 2003
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11
CERTIFICATION
I, Edward F. Ruttenberg, Chairman and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of American Locker Group
Incorporated.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
12
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003
/s/ Edward F. Ruttenberg
---------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
13
CERTIFICATION
I, Wayne L. Nelson, Principal Accounting Officer and Assistant Secretary certify
that:
1. I have reviewed this quarterly report on Form 10-Q of American Locker Group
Incorporated.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
14
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003
/S/ WAYNE L. NELSON
-----------------------------------
Wayne L. Nelson
Principal Accounting Officer
And Assistant Secretary
- -----------------------------
- -----------------------------
Exhibit Index
(a) Exhibits.
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.2 Certification of Principal Accounting Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
15
EXHIBIT 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Locker Group Incorporated
(the "Company") on Form 10-Q for the quarterly period ended September 30, 2002,
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), the undersigned, in the capacities and on the date indicated below,
hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
/S/EDWARD F. RUTTENBERG
----------------------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
Dated: May 13, 2003
A signed original of this written statement required by Section 906 has
been provided to American Locker Group Incorporated and will be retained by
American Locker Group Incorporated and furnished to the Securities and Exchange
Commission or its staff upon request.
16
EXHIBIT 99.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Locker Group
Incorporated (the "Company") on Form 10-Q for the quarterly period ended
September 30, 2002, as filed with the Securities and Exchange Commission on the
date hereof (the "Report"), the undersigned, in the capacities and on the date
indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
/S/ WAYNE L. NELSON
-----------------------------------
Wayne L. Nelson
Principal Accounting Officer
and Assistant Secretary
Dated: May 13, 2003
A signed original of this written statement required by Section 906 has been
provided to American Locker Group Incorporated and will be retained by American
Locker Group Incorporated and furnished to the Securities and Exchange
Commission or its staff upon request.