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, 2002
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 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:
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: April 24, 2002.
Common Stock $1.00 par value - 1,988,046
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,
2002 2001
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ASSETS
Current assets:
Cash and cash equivalents $ 4,133,649 $ 4,579,034
Accounts and notes receivable, less allowance
for doubtful accounts of $250,000 in 2002
and $249,000 in 2001 4,732,384 5,042,685
Inventories 7,314,458 6,813,511
Prepaid expenses 150,437 125,805
Prepaid income taxes 46,612 -
Deferred income taxes 570,731 570,731
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Total current assets 16,948,271 17,131,766
Property, plant and equipment:
Land 500,500 500,500
Buildings 3,446,190 3,441,616
Machinery and equipment 11,844,617 11,771,099
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15,791,307 15,713,215
Less allowance for depreciation (10,097,563) (9,879,825)
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5,693,744 5,833,390
Goodwill 6,405,204 6,405,204
Deferred income taxes - 73,393
Other assets 362,500 291,667
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Total assets $ 29,409,719 $ 29,735,420
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American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
March 31, December 31,
2002 2001
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,602,320 $ 1,348,396
Commissions, salaries, wages and taxes thereon 192,122 555,326
Other accrued expenses 885,980 895,274
Federal, state and foreign income taxes payable - 393,781
Current portion of long-term debt 1,630,000 1,630,000
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Total current liabilities 4,310,422 4,822,777
Long-term liabilities:
Long-term debt 9,598,719 9,948,687
Pension, benefits and other long-term liabilities 118,230 410,080
Deferred income taxes 54,379 -
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9,771,328 10,358,767
Stockholders' equity:
Common stock, $1 par value:
Authorized shares - 4,000,000
Issued shares - 2,504,526 in 2002 and 2001,
Outstanding shares - 2,043,046 in 2002 and 2001 2,504,526 2,504,526
Other capital 496,708 496,708
Retained earnings 16,387,159 15,610,362
Treasury stock at cost (461,480 shares
in 2002 and 2001) (3,816,533) (3,816,533)
Accumulated other comprehensive income (243,891) (241,187)
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Total stockholders' equity 15,327,969 14,553,876
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Total liabilities and stockholders' equity $ 29,409,719 $ 29,735,420
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See accompanying notes.
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American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
Three Months Ended March 31,
2002 2001
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Net sales $ 9,254,050 $ 8,116,568
Cost of products sold 6,395,937 5,704,225
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2,858,113 2,412,343
Selling, administrative and general expenses 1,491,389 1,447,968
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1,366,724 964,375
Interest income 24,152 56,009
Other (expense) income--net 62,994 78,403
Interest expense (180,335) (15,505)
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Income before income taxes 1,273,535 1,083,282
Income taxes 496,738 426,445
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Net income $ 776,797 $ 656,837
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Earnings per share of common stock:
Basic $ .38 $ 0.32
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Diluted $ .37 $ 0.32
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Dividends per share of common stock: $ 0.00 $ 0.00
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See accompanying notes.
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American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended March 31,
2002 2001
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OPERATING ACTIVITIES
Net income $ 776,797 $ 656,837
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 246,905 170,931
Deferred taxes 127,772 -
Change in assets and liabilities:
Accounts and notes receivable 310,301 566,041
Inventories (500,947) (1,722,326)
Prepaid expenses (24,632) (130,367)
Accounts payable and accrued expenses (63,590) (124,221)
Pension and other benefits (346,834) (68,658)
Income taxes (440,393) (458,825)
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Net cash provided by operating activities 85,379 (1,110,588)
INVESTING ACTIVITIES
Purchase of property, plant and equipment (78,092) (260,422)
Payment for other assets (100,000) -
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Net cash used in investing activities (178,092) (260,422)
FINANCING ACTIVITIES
Debt repayment (349,968) (50,001)
Common stock purchased and retired - (587)
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Net cash used in financing activities (349,968) (50,588)
Effect of exchange rate changes on cash (2,704) (41,573)
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Net decrease in cash (445,385) (1,463,171)
Cash and cash equivalents at beginning of period 4,579,034 3,696,359
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Cash and cash equivalents at end of period $ 4,133,649 $ 2,233,188
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Supplemental cash flow information: Cash paid during the period for:
Interest $ 181,785 $ 15,505
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Income taxes $ 809,359 $ 831,000
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See accompanying notes.
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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, 2002 are not necessarily indicative
of the results that may be expected for the year ended December 31, 2002.
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, 2001.
2. On July 6, 2001, the Company purchased 100% of the outstanding capital
stock of B.L.L. Corporation, d/b/a Security Manufacturing Corporation (SMC)
a privately held Texas corporation, and related real estate for
approximately $12,100,000 net of cash received. The purchase was financed
with long-term debt of approximately $11,900,000. Goodwill of approximately
$6,400,000 has been recorded in connection with the acquisition. See the
Company's Report on Form 8-K dated July 12, 2001, Report on Form 8-K/A
filed September 5, 2001, and Form 10-K for the year ended December 31, 2001
for more information regarding this acquisition. The operating results of
SMC have been included in the accompanying consolidated statements of
income for the three months ended March 31, 2002 and the assets and
liabilities of SMC are included in the accompanying consolidated balance
sheet at March 31, 2002 and December 31, 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 2,043,046 (2,062,474 in 2001) and 2,085,169 (2,078,179 in
2001) respectively for the three-month period ending March 31, 2002.
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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.
March 31, December 31,
2002 2001
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Raw materials $ 2,706,121 $ 2,898,908
Work-in-process 2,220,443 2,373,549
Finished goods 2,809,721 1,962,881
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7,736,285 7,235,338
Less allowance to reduce to LIFO basis (421,827) (421,827)
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$ 7,314,458 $ 6,813,511
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6. Total comprehensive income consisting of net income and foreign currency
translation adjustment was $774,093 and $615,264 for the three months ended
March 31, 2002 and March 31, 2001 respectively.
7. The Company adopted the goodwill impairment test provisions of Statement of
Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets," on January 1, 2002. During 2001, the Company adopted
the provision of SFAS No. 142 which prohibited the amortization of goodwill
associated with acquisitions made after June 30, 2001, in connection with
its acquisition of SMC on July 6, 2001. Under SFAS No. 142, goodwill is
reviewed for impairment at least annually at the reporting unit level. In
accordance with SFAS No. 142, the Company performed the required
transitional goodwill impairment test, which was based on cash flow and
earnings projections, during the first quarter of 2002 and concluded that
no impairment charge was required.
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Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
FIRST THREE MONTHS 2002 VERSUS FIRST THREE MONTHS 2001
Sales for the first three months of 2002 of $9,254,000 increased $1,137,000 or
14% compared to sales of $8,117,000 during the same period in 2001. Plastic
locker sales to the United States Postal Service (USPS) totaled $5,287,000 in
2002 compared to $5,616,000 during 2001. Plastic Cluster Box Units (CBUs) sales
were $5,082,000 in 2002 compared to $5,281,000 during 2001. The decrease in
sales of Plastic CBUs of $199,000 from 2001 to 2002 is the result of product mix
as a lower priced CBU was introduced in mid 2001, and price reductions of 3% to
5% that became effective in April 2001 on existing CBU models. The number of
CBUs shipped in the first quarter of 2002 was consistent with 2001 levels. Sales
of Outdoor Parcel Lockers (OPLs) were $204,000 in 2002 compared to $335,000 in
2001, 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 $3,967,000 for the first three months of 2002 compared to
$2,501,000 in 2001. This $1,466,000 increase consists of additional sales of
$1,721,000 made by the Company's new subsidiary, Security Manufacturing
Corporation (SMC), offset by a decrease from other products and services
including the luggage cart business at the Detroit Metropolitan Airport. The
decrease is the result of lower demand across various markets.
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's share of the CBU market has increased during
2001 and 2002, in part due to its acquisition of SMC, one of its prior
competitors. 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 69.1% in 2002 compared
to 70.3% in 2001. The improvement in 2002 is due to higher margins obtained from
SMC and stable margins for other products.
Selling, administrative and general expenses were $1,491,000 during the first
quarter of 2002, an increase of 3% or $43,000 from $1,448,000 in 2001. This
increase is due primarily to SMC expenses of $344,000 offset by a one time
reduction of $319,000 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. This one time
reduction increased first quarter 2002 basic and diluted earnings per share by
$.09. Selling, administrative
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and general expenses were 16% and 17% of first quarter sales in 2002 and 2001,
respectively.
Interest expense for 2002 was $180,000 compared to $16,000 for 2001. The
increase resulted from the Company's increased debt to finance the acquisition
of SMC 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 3.93
to 1 at March 31, 2002 and 3.55 to 1 at December 31, 2001. Working capital, the
excess of current assets over current liabilities, was $12,638,000 at March 31,
2002, an increase of $329,000 over $12,309,000 at December 31, 2001. Cash
provided by operating activities was $85,000 during the first three months of
2002, compared to cash used in operating activities of $1,111,000 during the
first three months of 2001. 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 cash generated from operations in 2002 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, 2002.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, on January 1, 2002. During 2001, the
Company adopted the provision of SFAS No. 142 which prohibited the amortization
of goodwill associated with acquisitions made after June 30, 2001, in connection
with its acquisition of SMC on July 6, 2001. Under SFAS No. 142, goodwill is
reviewed for impairment at least annually at the reporting unit level. In
accordance with SFAS No. 142, the Company will complete a transitional goodwill
impairment test by June 30, 2002 and does not anticipate recognizing an
impairment loss.
The Company adopted Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).
SFAS No. 144 supercedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, but retains its
fundamental provisions for recognition and measurement of the impairment of
long-lived assets to be held and used and those to be disposed of by sale. There
was no impact upon adoption of SFAS No. 144.
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)
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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 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2002.
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S I G N A T U R E
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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
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Edward F. Ruttenberg
Chairman and Chief Executive Officer
Date: May 3, 2002
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