SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(Amendment No. 1)
(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, 2004
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)
Indicate by check mark 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 ( ) No (X)
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes ( ) No (X)
As of July 1, 2005 there were outstanding 1,534,146 shares of the
registrant's Common Stock, $1 par value.
EXPLANATORY NOTE
This amendment to the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004 (the "Form 10-Q") of American Locker Group, Inc. (the "Company")
is being filed in order to restate the consolidated financial statements for the
three months ended March 31, 2004 and 2003 and to make corresponding changes to
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations, and Item 4, Controls and Procedures. The restated financial
statements reflect, among other things, an increase in net income from $538,420
as first reported to $630,820, and a decrease in cost of products sold from
$6,601,334 as first reported to $6,412,469 and an increase in inventories from
$6,982,637 as first reported to $7,136,637. These adjustments result from
inventory costing errors. As a result, cost of goods sold was overstated and
inventory values were understated in the quarter ended March 31, 2004. In
addition, the Company has reclassified purchase discounts in the amount of
$34,864 for the first quarter of 2004 and $23,028 for the first quarter of 2003,
reducing cost of sales and other income. As set forth in Item 4 of this Form
10-Q/A and more fully described in Item 9A of the Annual Report on Form 10-K
filed by the Company with respect to the year ended December 31, 2004, the
Company has determined that its disclosure controls and procedures were not
effective as of March 31, 2004. As described in such report on Form 10-K, the
Company has adopted and is implementing changes to its system of disclosure
controls and internal controls.
No attempt has been made in this Form 10-Q/A to update other disclosures
presented in the Form 10-Q, except as required to reflect the effects of the
restatement. This Form 10-Q/A does not reflect events occurring after the filing
of the Form 10-Q or modify or update those disclosures, including the exhibits
to the Form 10-Q affected by subsequent events. Information not affected by the
restatement is unchanged and reflects the disclosures made at the time of the
original filing of the Form 10-Q. This Form 10-Q/A includes, however, as
Exhibits 31.1, 31.2 and 32.1 new certifications of the Company's Chief Executive
Officer and principal accounting officer, as required by applicable rules.
Accordingly, this Form 10-Q/A should be read in conjunction with the Company's
filings made with the Securities and Exchange Commission subsequent to the
filing of the Form 10-Q, including any amendments to those filings.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
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(RESTATED)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 1,964,117 $ 3,597,990
Accounts and notes receivable, less allowance for doubtful
accounts of $111,000 in 2004 and $371,000 in 2003 4,977,776 4,682,946
Inventories 7,136,637 5,458,865
Prepaid expenses 287,570 118,819
Prepaid income taxes 17,832 --
Deferred income taxes 729,546 729,546
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Total current assets 15,113,478 14,588,166
Property, plant and equipment:
Land 500,500 500,500
Buildings 3,456,362 3,456,766
Machinery and equipment 11,485,771 12,137,813
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15,442,633 16,095,079
Less allowance for depreciation (10,614,199) (11,092,999)
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4,828,434 5,002,080
Goodwill 6,155,204 6,155,204
Deferred income taxes 53,756 53,756
Other assets 45,108 74,274
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Total assets $ 26,195,980 $ 25,873,480
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AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2004 2003
-------------- --------------
(RESTATED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 1,978,722 $ 1,713,010
Commissions, salaries, wages and taxes thereon 319,886 573,762
Other accrued expenses 711,804 658,405
Income taxes payable 61,600 148,218
Current portion of long-term debt 1,641,316 1,641,316
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Total current liabilities 4,713,328 4,734,711
Long-term liabilities
Long-term debt 6,335,558 6,664,171
Pension, benefits and other long-term liabilities 367,218 312,458
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6,702,776 6,976,629
Stockholders' equity:
Common stock, $1.00 per value:
Authorized shares - 4,000,000
Issued shares - 1,726,146 in 2004 and 2003
Outstanding shares - 1,534,146 in 2004 and 2003 1,726,146 1,726,146
Other capital 97,812 97,812
Retained earnings 15,448,900 14,818,080
Treasury stock at cost (192,000 shares in 2004 and 2003) (2,112,000) (2,112,000)
Accumulated other comprehensive loss (380,982) (367,898)
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Total stockholders' equity 14,779,876 14,162,140
Total liabilities and stockholders' equity $ 26,195,980 $ 25,873,480
============== ==============
See accompanying notes.
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED MARCH 31
2004 2003
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(RESTATED)
Net Sales $ 9,554,307 $ 8,831,748
Cost of products sold 6,412,469 6,066,384
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Gross profit 3,141,838 2,765,364
Selling, administrative and general expenses 2,006,661 1,958,687
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1,135,177 806,677
Interest income 5,433 6,025
Other (expense) income - net 7,790 34,705
Interest expense (115,749) (148,081)
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Income before income taxes 1,032,651 699,326
Income taxes 401,831 270,266
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Net income $ 630,820 $ 429,060
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Earnings per share of common stock:
Basic $ .41 $ .28
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Diluted $ .41 $ .28
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Dividends per share of common stock: $ 0.00 $ 0.00
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See accompanying notes.
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31
2004 2003
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(RESTATED)
OPERATING ACTIVITIES
Net income $ 630,820 $ 429,060
Adjustments to reconcile net income to net cash provided
by (used in) provided by operating activities:
Depreciation and amortization 217,789 210,709
Change in assets and liabilities:
Accounts and notes receivable (297,557) 211,811
Inventories (1,625,441) (107,730)
Prepaid expenses (168,807) (332,649)
Accounts payable and accrued expenses 64,502 (367,934)
Pension and other benefits 54,455 5,931
Income taxes (104,646) 45,875
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Net cash (used in) provided by operating activities (1,228,885) 95,073
INVESTING ACTIVITIES
Purchase of property, equipment and vehicles (67,366) (11,807)
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Net cash used in investing activities (67,366) (11,807)
FINANCING ACTIVITIES
Debt repayment (328,613) (326,989)
Line of credit repayment -- (25,000)
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Net cash used in financing activities (328,613) (351,989)
Effect of exchange rate changes on cash (9,009) 46,755
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Net decrease in cash (1,633,873) (221,968)
Cash and cash equivalents at beginning of period 3,597,990 2,002,225
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,964,117 $ 1,780,257
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See accompanying notes.
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, 2004 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2004.
The consolidated balance sheet at December 31, 2003 has been derived from
the audited financial statements at the 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, 2003.
2. Provision for income taxes is based upon the estimated annual effective
tax rate.
3. The Company reports earnings per share in accordance with the 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 THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
2004 2003
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(RESTATED)
Numerator:
Net income available to common shareholders $ 630,820 $ 429,060
=============== ===============
Denominator:
Denominator for basic earnings per share - weighted
average shares 1,534,146 1,517,146
Effect of Dilutive Securities:
Stock options 21,144 34,921
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Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversion 1,555,290 1,552,067
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Basic earnings per common share $ .41 $ .28
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Diluted earnings per common share $ .41 $ .28
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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,
2004 2003
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(RESTATED)
Raw materials $ 2,607,457 $ 1,760,657
Work-in-process 1,932,826 1,689,774
Finished goods 2,859,850 2,271,930
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7,400,133 5,722,361
Less allowance to reduce to LIFO basis (263,496) (263,496)
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$ 7,136,637 $ 5,458,865
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5. Total comprehensive income (as restated) consisting of net income and
foreign currency translation adjustment was $617,736 and $488,511 for the
three months ended March 31, 2004 and March 31, 2003, respectively.
6. The following sets forth the components of net periodic benefit cost of
the Company's defined benefit pension plan for the three months ended
March 31, 2004 and 2003:
MARCH 31, MARCH 31,
2004 2003
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Service cost $ 73,149 $ 61,829
Interest cost 57,990 51,587
Expected return on plan assets (54,370) (45,291)
Net actuarial loss 13,488 8,168
Amortization of prior service cost 377 377
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Net periodic benefit cost $ 90,634 $ 76,670
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For additional information on the Company's defined benefit pension plan,
please refer to Note 7 of the Company's Consolidated Financial Statements
included in the 2003 Annual Report on Form 10-K.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
First Three Months 2004 Versus First Three Months 2003
Overall Results and Outlook
First quarter 2004 results improved over first quarter 2003, primarily on the
strength of increased sales of aluminum Cluster Box Units (CBUs) as well as
maintaining market share in the Plastic CBU area. The Company has maintained its
gross margins despite price reductions extended to the United States Postal
Service (USPS) and continued weakness in certain areas of the economy in which
the Company sells its products (including entertainment and leisure activity
facilities). Net income increased by $201,000 in 2004 versus 2003 as a result of
the increased sales volume, controlling of administrative and general expenses,
and decreases in interest expense. Earnings per share on a diluted basis
increased to $0.41 in 2004 versus $0.28 in 2003, as a result of the increased
net income.
The Company believes that the long-term outlook for sales of Cluster Box Units
(CBUs) 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 contracts with the USPS were renewed for a one-year term expiring
on April 15, 2004. These contracts were extended by the USPS in April 2004
through October 14, 2004. We have been advised that the USPS will, as in past
years, seek bids with respect to these contracts later in 2004. The current
contracts cover all four types of plastic CBUs, aluminum CBUs and the Outdoor
Parcel Locker (OPL). 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, postal purchasing practices and the
weather, as these units are installed outdoors. The Company believes its CBU
product line, including its aluminum CBUs represent the best value when all
factors including price, quality of design and construction, long-term
durability and service are considered.
Net Sales
Sales for the first three months of 2004 of $9,554,000 increased $722,000 or 8%
compared to sales of $8,832,000 during the same period in 2003. Plastic locker
sales to the USPS and developers or distributors for use in the delivery of U.S.
mail totaled $4,497,000 in 2004 compared to $4,482,000 during 2003. Plastic CBUs
sales were $4,386,000 in 2004 compared to $4,339,000 during 2003. Sales of
Outdoor Parcel Lockers (OPLs) were $111,000 in 2004 compared to $143,000 in
2003, as a result of lower purchase levels by the USPS. The modest increase in
sales of Plastic CBUs from 2003 to 2004 is the result of increased purchases
from the USPS, which offset price reductions, ranging from zero to 2% depending
on the CBU or OPL type, that became effective in April 2003. The price
reductions had an impact of reducing sales by approximately $52,000 in the first
quarter of 2004 versus the comparable period in 2003.
Sales of metal, coin and key-only and electronically controlled lockers, and
aluminum CBUs were $5,057,000 for the three months of 2004 and $4,350,000 for
the three months of 2003. This $707,000 increase consists of additional sales of
$740,000 made by the Company's subsidiary, Security Manufacturing Corporation
(SMC), offset by decreases in sales of other locker products, as well as the
termination of the Company's luggage cart services at the Detroit International
Airport in January 2004. The Company no longer provides any luggage cart rental
services.
Cost of Sales
Consolidated cost of sales as a percentage of sales was 67.1% in 2004 versus
68.7% in 2003.
Selling, Administrative and General Expenses
Selling, administrative and general expenses were $2,007,000 during the first
quarter of 2004, an increase of $48,000 from $1,959,000 during the first quarter
of 2003. The increase is primarily due to an increase of $61,000 in engineering
costs in 2004 compared to 2003 amounts, relating to product development. Certain
selling expenses increased due to increased sales, these were offset by a charge
of $65,000 in 2003 for a severance agreement relating to a terminated management
employee at SMC. Selling, administrative and general expenses were 21% and 22%
of first quarter sales in 2004 and 2003, respectively.
Interest Expense
Interest expense for 2004 was $116,000 compared to $148,000 for 2003. The
decrease resulted from lower outstanding debt during 2004 compared to 2003 as
the Company continues to make scheduled debt payments on its outstanding debt.
No new long term debt was incurred during 2003 or 2004. The Company has made
debt payments of $1,630,000 during the twelve month period ended March 31, 2004.
Other Income - net
Other income - net consists primarily of service maintenance revenues, which
were $15,000 in 2004 and $26,000 in 2003.
Income Taxes
Income taxes increased in 2004 versus 2003 due to the increased income before
income taxes. The effective tax rate was 39% in 2004 and 2003.
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 3.2
to 1 at March 31, 2004 and 3.1 to 1 at December 31, 2003. Working capital, the
excess of current assets over current liabilities, was $10,400,000 at March 31,
2004, an increase of $547,000 over $9,853,000 at December 31, 2003.
Cash used in operating activities was $1,229,000 during the first three months
of 2004 compared to $95,000 of cash provided by operating activities in 2003.
The use of cash in 2004 relates primarily to replacing and increasing inventory
of plastic and aluminum CBUs that were below normal levels at December 31, 2003
in preparation for historically higher shipments as the
weather improves in most of the United States. Anticipating that USPS order
patterns and sales to other customers will be similar to previous years, the
Company expects that cash will be generated by operations for the balance of
2004.
The Company's policy is to maintain modern equipment and adequate capacity.
During the first quarter of 2004, the Company expended $67,000 for capital
additions. Currently, there are no significant capital projects forecasted by
the Company. It is expected that capital expenditures will be funded from cash
on hand or cash generated from operations in 2004.
The Company anticipates that cash on hand and cash generated from operations in
2004 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, 2004.
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 contracts with the
USPS will not be renewed or that that orders placed by the USPS under such
contracts will be substantially reduced, 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
The Company carried out an evaluation, under the supervision and with the
participation of its management, including its principal executive officer and
principal accounting officer, of the effectiveness of its disclosure controls
and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act,
as of March 31, 2004. These disclosure controls and procedures are designed to
provide reasonable assurance to the Company's management and board of directors
that information required to be disclosed by the Company in the reports that it
files under the Exchange Act is accumulated and communicated to its management
as appropriate to allow timely decisions regarding required disclosure. Based on
that evaluation, including all matters discussed in the paragraphs below, the
principal executive officer and principal accounting officer of the Company have
concluded that the Company's disclosure controls and procedures
as of March 31, 2004 were not effective, at the reasonable assurance level, to
ensure that (a) material information relating to the Company is accumulated and
made known to the Company's management, including its principal executive
officer and principal accounting officer, to allow timely decisions regarding
required disclosure and (b) is recorded, processed, summarized and reported
within the time periods specified in SEC's rules and forms. There were no
changes in the Company's internal control over financial reporting during the
first quarter of 2004.
Subsequent to the period covered by this Quarterly Report, management became
aware of an inventory costing error, requiring a restatement of financial
statements to reflect, among other things, increases in net income and inventory
and a decrease in cost of products sold. As a result, cost of goods sold was
overstated and inventory values were understated as of and for the quarter ended
March 31, 2004. After investigating this matter and consulting with the
Company's independent registered public accounting firm, the Company has
adjusted the interim financial statements to correct the inventory costing error
and has disclosed the impact of such changes in this Quarterly Report.
In addition, taking into account the communications dated May 11, 2005 and June
28, 2005 by the Company's independent registered public accounting firm to the
Audit Committee of the Board of Directors, management identified material
weaknesses in the Company's internal control over financial reporting with
respect to its fiscal year ended December 31, 2004. A description of those
material weaknesses and the Company's related remediation efforts is set forth
in Item 9A, Controls and Procedures, of the Company's Annual Report on Form 10-K
for its fiscal year ended December 31, 2004.
Part II. Other Information
Item 6. Exhibits.
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended
31.2 Certification of Principal Accounting Officer pursuant to Rule 13a-14(a)
and Rule 15d-14(a) of the Securities Exchange Act, as amended
32.1 Certification of Chief Executive Officer and Principal Accounting Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
SIGNATURE
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, Chief Executive Officer,
Chief Operating Officer and Treasurer
Date: July 27, 2005