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 SEPTEMBER 30, 2001
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM TO
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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 of (IRS Employer Identification Number)
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:
Checkwhether 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: November 1, 2001.
Common Stock $1.00 par value - 2,049,546
Transitional Small Business Disclosure (check one) Yes No X
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1
Part I - Financial Information
Item 1 - Financial Statements
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
2001 2000
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 4,992,911 $ 3,696,359
Accounts and notes receivable, less allowance
for doubtful accounts of $251,000 in 2001
and $324,000 in 2000 5,121,576 4,633,422
Inventories 6,212,740 4,818,348
Prepaid expenses 186,794 45,209
Deferred income taxes 668,769 668,769
---------------- ---------------
Total current assets 17,182,790 13,862,107
Property, plant and equipment:
Land 500,500 500
Buildings 3,391,462 389,959
Machinery and equipment 11,748,778 10,378,983
---------------- ---------------
15,640,740 10,769,442
Less allowance for depreciation (9,608,725) (9,048,950)
---------------- ---------------
6,032,015 1,720,492
Goodwill 6,304,204 -
Other assets 320,833 -
---------------- ---------------
Total assets $ 29,839,842 $ 15,582,599
================ ===============
2
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
September 30, December 31,
2001 2000
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,866,500 $ 1,513,203
Commissions, salaries, wages and taxes thereon 162,383 323,769
Other accrued expenses 1,220,353 659,852
Federal, state and foreign income taxes payable 270,304 458,825
Current portion of long-term debt 1,630,000 200,000
--------------- --------------
Total current liabilities 5,149,540 3,155,649
Long-term liabilities:
Long-term debt 10,247,562 133,320
Pension, benefits and other long-term liabilities 555,921 470,375
Deferred income taxes 121,226 99,430
--------------- --------------
10,924,709 703,125
Stockholders' equity:
Common stock, $1 par value:
Authorized shares - 4,000,000
Issued shares - 2,511,026 in 2001, 2,511,550 in 2000
Outstanding shares - 2,049,546 in 2001,
2,062,540 in 2000 2,511,026 2,511,550
Other capital 561,708 565,331
Retained earnings 14,743,235 12,550,001
Treasury stock at cost (461,480 shares in 2001,
449,010 in 2000) (3,816,533) (3,717,603)
Accumulated other comprehensive income (233,843) (185,454)
--------------- --------------
Total stockholders' equity 13,765,593 11,723,825
--------------- --------------
Total liabilities and stockholders' equity $ 29,839,842 $ 15,582,599
=============== ==============
See accompanying notes.
3
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
Nine Months Ended September 30,
2001 2000
---- ----
Net sales $ 29,317,940 $ 26,908,239
Cost of products sold 21,015,425 19,027,225
----------------- ---------------
8,302,515 7,881,014
Selling, administrative and general expenses 4,801,871 4,869,352
----------------- ---------------
3,500,644 3,011,662
Interest income 124,447 142,442
Other (expense) income--net 263,058 174,097
Interest expense (283,144) (126,112)
----------------- ---------------
Income before income taxes 3,605,005 3,202,089
Income taxes 1,411,771 1,261,520
----------------- ---------------
Net Income $ 2,193,234 $ 1,940,569
================= ===============
Earnings per share of common stock:
Basic $ 1.07 $ 0.86
================= ================
Diluted $ 1.05 $ 0.85
================= ================
Dividends per share of common stock: $ 0.00 $ 0.00
================= ================
See accompanying notes.
4
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
Three Months Ended September 30,
2001 2000
---- ----
Net sales $ 11,375,429 $ 8,413,176
Cost of products sold 8,276,474 5,961,199
----------------- ---------------
3,098,955 2,451,977
Selling, administrative and general expenses 1,882,975 1,643,153
----------------- ---------------
1,215,980 808,824
Interest income 36,321 46,421
Other (expense) income--net 77,091 49,424
Interest expense (254,307) (18,861)
----------------- ---------------
Income before income taxes 1,075,085 885,808
Income taxes 422,593 352,160
----------------- ---------------
Net income $ 652,492 $ 533,648
================= ===============
Earnings per share of common stock:
Basic $ 0.32 $ 0.24
================= ===============
Diluted $ 0.31 $ 0.24
================= ===============
Dividends per share of common stock: $ 0.00 $ 0.00
================= ===============
See accompanying notes.
5
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
2001 2000
---- ----
OPERATING ACTIVITIES
Net income $ 2,193,234 $ 1,940,569
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 588,942 560,539
Deferred taxes 1,400
Change in assets and liabilities:
Accounts and notes receivable 217,549 (786,904)
Inventories 99,408 (178,379)
Prepaid expenses (112,942) 72,404
Accounts payable and accrued expenses 183,969 (387,558)
Pension and other benefits (89,454) 64,827
Income taxes (362,521) (4,308)
--------------- -------------
Net cash provided by operating activities 2,719,585 1,281,190
INVESTING ACTIVITIES
Purchase of business and related real estate (12,083,711) -
Purchase of property, plant and equipment (657,098) (185,839)
Payment for other assets, net of liability recorded (75,000) -
--------------- -------------
Net cash used in investing activities (12,815,809) (185,839)
FINANCING ACTIVITIES
Proceeds from long-term debt 11,926,682 -
Debt repayment (382,440) (1,650,003)
Common stock purchased for treasury (98,930) (352,987)
Common stock purchased and retired (4,147) (1,834)
Proceeds from common stock issued - 16,412
--------------- -------------
Net cash provided by (used in) financing activities 11,441,165 (1,988,412)
Effect of exchange rate changes on cash (48,389) (24,485)
--------------- -------------
Net increase (decrease) in cash 1,296,552 (917,546)
Cash and cash equivalents at beginning of period 3,696,359 3,285,983
--------------- -------------
Cash and cash equivalents at end of period $ 4,992,911 $ 2,368,437
=============== =============
Supplemental cash flow information: Cash paid during the period for:
Interest $ 185,048 $ 124,957
=============== =============
Income taxes $ 1,774,000 $ 1,253,089
=============== =============
See accompanying notes.
6
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 nine-month period ended September 30, 2001 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2001.
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, 2000.
2. On July 6, 2001, the Company entered into and consummated a Stock and Real
Estate Purchase Agreement pursuant to which the Company purchased 100% of
the outstanding capital stock of B.L.L. Corporation, d/b/a Security
Manufacturing Corporation a privately held Texas corporation, for
$9,100,000. The Company incurred transaction related costs of approximately
$210,000. Of the $9,100,000 purchase price, $8,140,000 was paid at closing
and $960,000 is payable over three years. The Company also purchased
related real estate from the owners of B.L.L. Corporation for cash
consideration of $3,500,000. The purchase price of the stock and the
related real estate was funded with cash on hand, the three-year note
payable of $960,000 described above and the proceeds of additional term
loan borrowings of approximately $11,000,000. Goodwill of approximately
$6,300,000 has been recorded in connection with the acquisition. See the
Report on Form 8-K dated July 12, 2001 and the Report on Form 8-K/A dated
filed September 5, 2001, by the Company for more information regarding this
acquisition. The operating results of B.L.L. Corporation have been included
in the accompanying consolidated statements of income from the July 6, 2001
acquisition date. The assets and liabilities of B.L.L. Corporation are
included in the accompanying consolidated balance sheet at September 30,
2001.
3. Provision for income taxes is based upon the estimated annual effective tax
rate.
4. Net income per common share is computed by dividing net income by the
weighted average number of shares outstanding, plus, when dilutive, the
common stock equivalents which would arise from the exercise of stock
options, during the periods. Basic and diluted weighted average shares
outstanding were 2,049,546 (2,246,355 in 2000) and 2,085,469 (2,260,685 in
2000) respectively for the three-month period ending September 30, 2001.
During the nine months ended September 30, 2001, the Company paid $98,930
to purchase 12,470 shares of common stock. These shares are included as
treasury stock at September 30, 2001. Additionally, the Company purchased
and retired 424 shares of common stock for $3,560 during the nine months
ended September 30, 2001.
7
5. 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.
September 30, December 31,
2001 2000
---------------------------------------
Raw materials $ 3,523,103 $ 2,888,897
Work-in-process 1,764,486 1,541,110
Finished goods 1,523,179 986,369
---------------------------------------
6,810,768 5,416,376
Less allowance to reduce carrying value to
LIFO basis (598,028) (598,028)
---------------------------------------
$ 6,212,740 $ 4,818,348
=======================================
6. Total comprehensive income consisting of net income and foreign currency
translation adjustment was $2,144,845 and $1,916,084 for the nine months
ended September 30, 2001 and September 30, 2000 respectively.
7. The following unaudited pro forma condensed statement of operations is
presented as if the acquisition of B.L.L. Corporation ("BLL") and related
real estate ("Real Estate") had occurred as of January 1, 2000. The pro
forma financial information is based on the historical financial
information of American Locker Group, Incorporated and BLL and the
historical transactions regarding Real Estate and should be read in
conjunction with those financial statements and notes thereto. In
management's opinion, all adjustments necessary to reflect the effects of
these transactions have been made. The condensed pro forma financial
information is not necessarily indicative of the financial position or
results of operations that actually would have occurred if such
transactions had been consummated on the dates described, nor does it
purport to represent the Company's results of operations for future
periods.
Nine months ended September 30,
2001 2000
---------------------------------
Total sales $ 32,230,000 $ 32,043,000
Net income $ 278,000 $ 2,141,000
Earnings per share - basic $ 1.11 $ .95
Earnings per share - diluted $ 1.09 $ .94
Common shares used in earnings
per share calculation - basic 2,055,833 2,261,867
Common shares used in earnings
per share calculation - diluted 2,082,671 2,279,358
8
The above financial information does not include amortization of goodwill that
was recorded in connection with the acquisition of B.L.L. Corporation. This due
to the provisions of Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," which was issued in July 2001. SFAS No.
142 requires that existing goodwill and certain intangible assets no longer be
amortized, but tested for impairment.
9
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
American Locker Group Incorporated and Subsidiaries
FIRST NINE MONTHS 2001 VERSUS FIRST NINE MONTHS 2000
Sales for the first nine months of 2001 of $29,318,000 increased $2,410,000 or
9% compared to sales of $26,908,000 during the same period in 2000. Plastic
locker sales to the United States Postal Service (USPS) totaled $19,201,000 in
2001 compared to $18,801,000 during 2000. Plastic Cluster Box Units (CBUs) sales
were $18,252,000 in 2001 compared to $17,832,000 during 2000. The increase in
sales of Plastic CBUs of $420,000 from 2000 to 2001 is the result of a sharp
increase during the third quarter of 2001 compared to the third quarter of 2000,
which offset a decline in Plastic CBU sales during the first six months of 2001
versus 2000. Sales of Outdoor Parcel Lockers (OPLs) were $949,000 in 2001
compared to $969,000 in 2000. Sales of metal, mechanical and electronic lockers,
which includes the Company's luggage cart business, were $10,117,000 for the
first nine months of 2001 compared to $8,107,000 for the first nine months of
2000, an increase of $2,010,000.. This $2,010,000 increase consists of
$1,270,000 from the Company's new subsidiary B.L.L. Corporation, d/b/a Security
Manufacturing Corporation, the remaining $740,000, which represents a 9%
increase from 2000 to 2001, relates to price increases, increased penetration in
the shopping center market and a general increase in demand across certain other
markets served.
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. The USPS decision to discontinue the purchase
of Neighborhood Delivery and Collection Box Units (NDCBUs) in 1999 has also had
a positive impact on the CBU market. The CBU is the modernization of the NDCBU
and is an integral part of the USPS delivery cost reduction program identified
as Centralized Delivery. 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, B.L.L
Corporation, continues to represent the best value when all factors including
price, quality of design and construction, long-term durability and service are
considered.
Cost of products sold as a percentage of sales was 71.7% during the nine months
of 2001 compared to 70.7% in the nine months of 2000.
For the first nine months of 2001, selling, general and administrative costs
decreased by $67,000 over the same period in 2000. The decrease primarily
relates to approximately $360,000 of expenses that were recorded as selling
expenses in 2000, whereas in 2001 these similar expenses are recorded as cost of
products sold. Selling, general and administrative expenses of $320,000 incurred
by B.L.L. Corporation during the period since the July 6, 2001 acquisition date
offset this decrease. Selling, general and administrative expense as a percent
of sales was 16.4% in 2001 compared to 18.1% in 2000.
10
Interest expense for the nine months of 2001 was $283,000 compared to $126,000
in the same period in 2000. The increase results from the Company's increased
debt to finance the acquisition of B.L.L. Corporation in July 2001.
THIRD QUARTER 2001 VERSUS THIRD QUARTER 2000
Third quarter sales were $11,375,000, an increase of $2,962,000 from the same
period in 2000. Plastic locker sales, including CBUs were $7,261,000 in the
third quarter of 2001, an increase of $1,423,000 or 24% over third quarter of
2000 sales of $5,838,000. Sales of metal, mechanical and electronic lockers were
$4,114,000 during the third quarter of 2001, $1,539,000 higher than 2000, of
which $1,272,000 represents sales of B.L.L. Corporation, the remaining $267,000
increase represents a 10% increase in third quarter 2001 versus third quarter
2000 sales.
Cost of products sold as a percentage of sales was 72.8% during the third
quarter of 2001, up from 70.9% during the third quarter of 2000. This is
primarily the result of approximately $120,000 of quarterly costs in 2000 being
recorded as selling, general and administrative expenses, whereas in 2001 these
similar costs are recorded as cost of products sold.
Selling, administrative and general expenses were 16.5% of net sales during the
third quarter of 2001 compared to 19.5% in the third quarter of 2000. The
percentage decrease in 2001 is due to the reclassification described in the
previous paragraph and due to the increased sales in 2001.
Interest expense in the third quarter of $254,000 increased from $19,000 in the
third quarter of 2000 due to the increased outstanding debt in 2001 to finance
the acquisition of B.L.L. Corporation in July 2001.
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 3.34
to 1 at September 30, 2001 and 4.39 to 1 at December 31, 2000, respectively.
Working capital, the excess of current assets over current liabilities, was
$12,033,000 at September 30, 2001, an increase of $1,327,000 over $10,706,000 at
December 31, 2000. Cash provided by operating activities was $2,720,000 during
the first nine months of 2001, compared to $1,281,000 provided by operating
activities for the same period in 2000. The Company's $3,000,000 line of credit
is available to assist in satisfying future working capital needs, if required.
The Company anticipates that its requirements for funds for operations and
capital expenditures will be provided principally from cash generated from
future operations. However, if necessary, the Company has a $3,000,000 revolving
bank line-of-credit available to assist in satisfying future operating cash
needs.
11
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets" in July 2001. SFAS No. 141, which is
effective for all companies as of June 30, 2001, requires the use of the
purchase method of accounting for all business combinations initiated after June
30, 2001. SFAS No. 142 requires that existing goodwill and certain intangible
assets no longer be amortized, but tested for impairment. SFAS No. 142 will be
effective for the Company's 2002 year, except that goodwill established in
connection with the acquisition described above, will not be amortized during
the remainder of 2001.
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, and (iii) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 30, 2001, the Company received a letter from the New York State
Department of Environmental Conservation (the "DEC") advising the Company that
it is a potentially responsible party with respect to environmental
contamination at a site located in Gowanda, New York, which was sold by the
Company to Gowanda Electronics Corp. prior to 1980. The letter from the DEC
states that a Remedial Investigation and Feasibility Study has been conducted at
the site and a remediation plan selected. Based on information currently
available, the Company believes that its potential liability with respect to
current action by the DEC with regard to this site will not have a material
affect on the financial condition of the Company. Defense of this matter has
been assumed by the Company's insurance carrier, subject to a reservation of
rights. As previously reported, the Company was in December 1998 named as a
defendant in a lawsuit titled "ROBERTA RAIPORT, ET AL. V. GOWANDA ELECTRONICS
CORP. AND AMERICAN LOCKER GROUP, INC." pending in the State of New York Supreme
Court, County of Cattaragus. The suit involves the same property as the DEC
matter described above. The company believes that its liability with respect to
this suit, if any, is diminimus. Therefore, based on the information currently
available, management does not believe the outcome of this suit will have a
substantial impact on the Company's operations or financial condition. Defense
of this case has been assumed by the Company's insurance carrier, subject to a
customary reservation of rights.
12
Item 5. Other Information
On July 6, 2001, the Company entered into and consummated a Stock and Real
Estate Purchase Agreement pursuant to which the Company purchased 100% of the
outstanding capital stock of B.L.L. Corporation, a privately held Texas
corporation, for $9,100,000. $8,140,000 of this amount was paid at closing and
$960,000 is payable over three years. The Company also purchased related real
estate from the owners of B.L.L. Corporation for cash consideration of
$3,500,000. The purchase price was funded with cash on hand, the three year note
payable of $960,000 noted above and the proceeds of additional term loan
borrowings of approximately $11,000,000. See the Report on Form 8-K dated July
12, 2001 and the Report on Form 8-K/A dated September 5, 2001, filed by the
Company for more information on this acquisition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. The Company filed a Report on Form 8-K dated July 12,
2001 disclosing the acquisition of all of the outstanding capital stock of
B.L.L. Corporation and the acquisition of certain related real estate from
the owners of B.L.L. Corporation. The Company filed a Report on Form 8-K/A
on September 5, 2001, which contained financial statements and other
financial information in connection with the acquisition of B.L.L.
Corporation and related real estate as disclosed in Form 8-K dated July 12,
2001.
13
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/Edward F. Ruttenberg
------------------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
Date: November 8, 2001
----------------------------------