SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(Amendment No. 1)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For The Quarterly Period Ended September 30, 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
American Locker Group Incorporated
----------------------------------------------------------
(Exact name of business issuer as specified in its charter)
Delaware 16-0338330
- ------------------------------- ----------------------------------
(State of other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
608 Allen Street, Jamestown, NY 14701
----------------------------------------
(Address of principal executive offices)
(716) 664-9600
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] 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.
1
EXPLANATORY NOTE
This amendment to the Quarterly Report on Form 10-Q for the quarter ended
September 30, 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 and nine months ended September 30, 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 for the nine months ended September 30, 2004 from
$2,558,536 as first reported to $2,907,736, and a decrease in cost of products
sold for such period from $27,154,032 as first reported to $26,454,940 and an
increase in inventories as of September 30, 2004 from $4,956,558 as first
reported to $5,538,558. These adjustments result from inventory costing errors.
As a result, cost of goods sold was overstated and inventory values were
understated in the three months and nine months ended September 30, 2004. In
addition, the Company has reclassified purchase discounts in the amount of
$57,182 for the third quarter of 2004, $117,092 for the nine months ended
September 30, 2004, $33,958 for the third quarter of 2003 and $89,318 for the
nine months ended September 30, 2003. These reclassifications reduce 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
September 30, 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.
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
(RESTATED)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents $ 5,635,665 $ 3,597,990
Accounts and notes receivable, less allowance for doubtful
accounts of $111,000 in 2004 and $371,000 in 2003 5,577,050 4,682,946
Inventories 5,538,558 5,458,865
Prepaid expenses 148,769 118,819
Prepaid income taxes 4,182 --
Deferred income taxes 729,546 729,546
------------- ------------
Total current assets 17,633,770 14,588,166
Property, plant and equipment:
Land 500,500 500,500
Buildings 3,454,527 3,456,766
Machinery and equipment 11,608,639 12,137,813
------------- ------------
15,563,666 16,095,079
Less allowance for depreciation (10,958,052) (11,092,999)
------------- ------------
4,605,614 5,002,080
Goodwill 6,155,204 6,155,204
Deferred income taxes 53,756 53,756
Other assets 15,941 74,274
------------- ------------
Total assets $ 28,464,285 $ 25,873,480
============= ============
3
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
(RESTATED)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,527,951 $ 1,713,010
Commissions, salaries, wages and taxes thereon 263,631 573,762
Other accrued expenses 1,173,588 658,405
Income taxes payable 1,041,154 148,218
Current portion of long-term debt 1,321,316 1,641,316
------------- ------------
Total current liabilities 5,327,640 4,734,711
Long-term liabilities
Long-term debt 5,677,674 6,664,171
Pension, benefits and other long-term liabilities 373,331 312,458
------------- ------------
6,051,005 6,976,629
Stockholders' equity:
Common stock, $1 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 17,725,816 14,818,080
Treasury stock at cost (192,000 shares in 2004 and 2003) (2,112,000) (2,112,000)
Accumulated other comprehensive loss (352,134) (367,898)
------------- ------------
Total stockholders' equity 17,085,640 14,162,140
------------- ------------
Total liabilities and stockholders' equity $ 28,464,285 $ 25,873,480
============= ============
See accompanying notes.
4
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
2004 2003
------------- ------------
(RESTATED)
Net Sales $ 37,882,548 $ 28,177,583
Cost of products sold 26,454,940 19,571,037
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Gross profit 11,427,608 8,606,546
Selling, administrative and general expenses 6,365,848 5,958,793
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5,061,760 2,647,753
Interest income 22,966 30,709
Other (expense) income - net 49,844 63,468
Interest expense (364,578) (402,463)
------------- ------------
Income before income taxes 4,769,992 2,339,467
Income taxes 1,862,256 902,496
------------- ------------
Net income $ 2,907,736 $ 1,436,971
============= ============
Earnings per share of common stock:
Basic $ 1.89 $ .95
============= ============
Diluted $ 1.86 $ .93
============= ============
Dividends per share of common stock: $ 0.00 $ 0.00
============= ============
See accompanying notes.
5
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
2004 2003
------------- ------------
(RESTATED)
Net Sales $ 18,074,076 $ 9,514,300
Cost of products sold 12,836,134 6,625,869
------------- ------------
Gross profit 5,237,942 2,888,431
Selling, administrative and general expenses 2,144,298 2,039,170
------------- ------------
3,093,644 849,261
Interest income 13,376 19,468
Other (expense) income - net 30,491 (8,674)
Interest expense (135,169) (112,288)
------------- ------------
Income before income taxes 3,002,342 747,767
Income taxes 1,175,591 288,265
------------- ------------
Net income $ 1,826,751 $ 459,502
============= ============
Earnings per share of common stock:
Basic $ 1.19 $ .30
============= ============
Diluted $ 1.17 $ .30
============= ============
Dividends per share of common stock: $ 0.00 $ 0.00
============= ============
See accompanying notes.
6
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
2004 2003
------------- ------------
(RESTATED)
OPERATING ACTIVITIES
Net income $ 2,907,736 $ 1,436,971
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 565,704 646,647
Change in assets and liabilities:
Accounts and notes receivable (889,664) (143,570)
Inventories (28,682) 131,905
Prepaid expenses (29,708) (62,667)
Accounts payable and accrued expenses 18,556 (225,577)
Pension and other benefits 61,135 (170)
Income taxes 888,468 121,403
------------- ------------
Net cash provided by operating activities 3,493,545 1,904,942
INVESTING ACTIVITIES
Purchase of property, plant and equipment (161,460) (348,850)
------------- ------------
Net cash used in investing activities (161,460) (348,850)
FINANCING ACTIVITIES
Long-term debt payments (1,306,497) (1,300,276)
Line of credit repayment -- (25,000)
Proceeds from common stock issued -- 47,812
------------- ------------
Net cash used in financing activities (1,306,497) (1,277,464)
Effect of exchange rate changes on cash 12,087 117,158
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Net increase in cash 2,037,675 395,786
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 $ 5,635,665 $ 2,398,011
============= ============
See accompanying notes.
7
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 September 30, 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:
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
(RESTATED)
Numerator:
Net income available to common shareholders $ 2,907,736 $ 1,436,971
================== ==================
Denominator:
Denominator for basic earnings per share - weighted
average shares 1,534,146 1,519,856
Effect of Dilutive Securities:
Stock options 28,664 33,453
------------------ ------------------
Denominator for diluted earnings per share - adjusted
weighted average shares and assumed conversion 1,562,810 1,553,309
================== ==================
Basic earnings per common share $ 1.89 $ .95
================== ==================
Diluted earnings per common share $ 1.86 $ .93
================== ==================
8
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
(RESTATED)
Numerator:
Net income available to common shareholders $ 1,826,751 $ 459,502
================== ==================
Denominator
Denominator for basic earnings per share - weighted
average shares 1,534,146 1,525,276
Effect of Dilutive Securities:
Stock options 21,317 28,868
------------------ ------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversion 1,555,463 1,554,144
================== ==================
Basic earnings per common share $ 1.19 $ .30
================== ==================
Diluted earnings per common share $ 1.17 $ .30
================== ==================
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.
SEPTEMBER 30, DECEMBER 31,
2004 2003
------------- ------------
(RESTATED)
Raw materials $ 2,512,935 $ 2,271,930
Work-in-process 2,134,633 1,689,774
Finished goods 1,154,486 1,760,657
------------- ------------
5,802,054 5,722,361
Less allowance to reduce to LIFO basis (263,496) (263,496)
------------- ------------
$ 5,538,558 $ 5,458,865
============= ============
5. Total comprehensive income (as restated) consisting of net income and
foreign currency translation adjustment was $2,923,500 and $1,575,345 for
the nine months ended September 30, 2004 and 2003, respectively and
$1,879,659 and $456,221 for the three months ended September 30, 2004 and
September 30, 2003, respectively.
6. The following sets forth the components of net periodic benefit cost of
the Company's defined benefit pension plan for the nine months ended
September 30, 2004 and 2003:
9
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
Service cost $ 219,447 $ 185,486
Interest cost 173,970 154,763
Expected return on plan assets (163,110) (135,873)
Net actuarial loss 40,464 24,503
Amortization of prior service cost 1,131 1,131
------------------ ------------------
Net periodic benefit cost $ 271,902 $ 230,010
================== ==================
The following sets forth the components of net periodic benefit cost of
the Company's defined benefit pension plan for the three months ended
September 30, 2004 and 2003:
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
------------------ ------------------
Service cost $ 73,149 $ 61,829
Interest cost 57,990 51,588
Expected return on plan assets (54,370) (45,292)
Net actuarial loss 13,488 8,168
Amortization of prior service cost 377 377
------------------ ------------------
Net periodic benefit cost $ 90,634 $ 76,670
================== ==================
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.
10
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
FIRST NINE MONTHS 2004 VERSUS FIRST NINE MONTHS 2003
Overall Results and Outlook
2004 results improved compared to 2003, primarily due to increased shipments of
plastic and aluminum Cluster Box Units (CBUs) to the United States Postal
Service (USPS), and secondarily, due to increased sales of indoor mailboxes to
our distributor network by our Security Manufacturing (SMC) subsidiary. As
previously disclosed in our 10Q filing for the second quarter of 2004, in July,
2004 the Company received large, bulk orders for plastic and aluminum CBUs from
several USPS districts. During the third quarter of 2004 the Company shipped
over 7000 plastic CBUs and over 1500 aluminum CBUs in bulk to these USPS
districts. The bulk orders totaled in excess of $7,000,000 in sales value. These
orders were primarily in addition to the normal order flow we would have
expected in the third quarter and may not be indicative of future USPS order
patterns.
Net income increased by $1,471,000 in 2004 versus 2003 as a result of the
increased sales volume. Gross margins declined, 30.5% in 2003 as compared to
30.2% in 2004, due to rising material costs, changes in product mix, and labor
premiums to support the increased shipment volume. Earnings per share on a
diluted basis increased to $1.86 in 2004 versus $0.93 in 2003, as a result of
the increased net income.
In October 2004, the Company's contracts with the USPS were extended for a three
and one half month term expiring on February 28, 2005. Based on the increased
sales volume in 2004, the Company extended price reductions of approximately 1%
on all plastic and aluminum CBUs. If future USPS orders are consistent with 2004
levels these reductions in selling price will reduce income before income taxes
by approximately $280,000 on an annualized basis. We have been advised by the
USPS that it will, as in past years, seek bids with respect to these contracts
and that the Company has been pre-qualified to bid. The USPS has also advised
the Company that our current competitor (which has an existing USPS contract for
aluminum CBUs) has been pre-qualified to bid along with three new potential
competitors. The USPS has also indicated that it will upgrade the specification
that CBUs are designed to meet to increase resistance to mail theft. The Company
has reviewed drafts of the new specification and has initiated design efforts to
address the increased security requirements. If the USPS does issue a new
specification, the Company will incur increased capital expenditures to modify
or replace existing tooling. We can not predict the amount or timing of these
expenditures until the specification is finalized and our design solution is
built and tested. Based on current information from the USPS, we anticipate the
contracting process will be completed by December 31, 2004 but we can not
predict the outcome. The Company believes that its product line provides the
best value to the USPS when all factors including price, quality of design and
construction, long-term durability and service are considered. 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
11
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.
Net Sales
Sales for the first nine months of 2004 of $37,883,000 increased $9,705,000 or
34% compared to sales of $28,178,000 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 $22,028,000 in 2004 compared to $15,579,000 during 2003.
The increase in sales of Plastic CBUs from 2003 to 2004 is the result of
increased purchases by the USPS and increased sales to non-Postal customers.
Price reductions extended to the USPS in April of 2003 had an impact of reducing
sales by approximately $43,000 in the first nine months of 2004 versus the
comparable period in 2003.
Sales of metal, coin and key-only and electronically controlled lockers, and
aluminum CBUs were $15,855,000 for the first nine months of 2004 and $12,599,000
for the first nine months of 2003. This $3,256,000 increase consists of
additional sales of $3,611,000 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 69.8% in both 2004 and
2003. This ratio remained steady despite increases in aluminum and steel
material costs experienced during the first nine months of 2004 that have not
been passed through to customers in the form of price increases and also to
labor premiums incurred to support the increased shipment volumes.
Selling, Administrative and General Expenses
Selling, administrative and general expenses were $6,366,000 during the first
nine months of 2004, an increase of $407,000 from $5,959,000 during the first
nine months of 2003. The increase is primarily due to an increase of $205,000 in
reserves for company-wide bonuses, $113,000 in increased engineering costs
relating to product development, as well as $114,000 incurred in June 2004
relating to an early retirement program covering three employees who elected to
retire. Annual savings going forward from these retirements are projected to
exceed $200,000. Also, certain selling expenses increased in 2004 due to
increased sales. Reductions were made in other discretionary areas to partially
offset these increases. 2003 expenses were impacted by a charge of $65,000 for a
severance agreement relating to a terminated management employee at SMC.
Selling, administrative and general expenses were 16.8% of sales for the first
nine months of 2004 versus 21.1% in the same period of 2003.
Interest Expense
Interest expense for 2004 was $365,000 compared to $402,000 for 2003. The
decrease
12
resulted from lower outstanding debt during 2004 compared to 2003 as the Company
continues to make scheduled payments on its outstanding debt. No new long-term
debt was incurred during 2004 or 2003. The Company reduced its outstanding debt
by $1,635,000 from September 30, 2003 to September 30, 2004.
Other Income - net
Other income - net consists primarily of service maintenance revenues, which
were $51,000 in 2004 and $84,000 in 2003. The decline in service maintenance
revenue is the result of fewer ongoing maintenance agreements.
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.
Third Quarter 2004 Versus Third Quarter 2003
Third quarter sales were $18,074,000 in 2004, an increase of $8,560,000 from the
same period in 2003. The increase was primarily related to increases in sales of
plastic and aluminum CBUs to the USPS. Plastic locker sales were $12,180,000 and
$5,442,000 in 2004 and 2003, respectively, an increase of $6,738,000. The
increase is the result of the factors discussed above. The balance of the
increase in sales is attributed to increases in sales of aluminum CBUs to the
USPS and our distributor network and increases in sales of indoor mailboxes to
our distributor network.
Cost of products sold as a percentage of sales was 71.0% during the third
quarter of 2004, compared to 69.6% during the second quarter of 2003. The
deterioration in 2004 is primarily due to rising material costs, labor premiums
related to meeting the USPS bulk orders and product mix.
Selling, administrative and general expenses were 11.8% of net sales during the
third quarter of 2004 compared to 21.4% in the third quarter of 2003. The
decreased percentage is due to the increased sales volume in the third quarter
of 2004.
Other income - net increased $39,000 during the third quarter of 2004 compared
to 2003. This caption consists primarily of service maintenance contracts.
Interest expense in the third quarter of 2004 of $135,000 increased from
$112,000 in 2003 as a result of rise in interest rates partially offset by the
reduction in outstanding debt.
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 3.3
to 1 at September 30, 2004 and 3.1 to 1 at December 31, 2003. Working capital,
the excess of current assets over current liabilities, was
13
$12,306,000 at September 30, 2004, an increase of $2,453,000 over $9,853,000 at
December 31, 2003.
Cash provided by operating activities was $3,494,000 during the first nine
months of 2004 compared to $1,905,000 of cash provided by operating activities
in 2003. This increase of cash in 2004 relates primarily to increased sales of
plastic and aluminum CBUs combined with reductions in finished goods inventory.
Anticipating that USPS order patterns and sales to other customers will be
similar to previous years, the Company expects that cash will continue to be
generated by operations for the balance of 2004, subject to the rate at which
finished goods inventory is replenished.
The Company's policy is to maintain modern equipment and adequate capacity.
During the first nine months of 2004, the Company expended $161,000 for capital
additions. The Company anticipates spending approximately $300,000 on new
machinery to expand production capacity in the balance of 2004. 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 September 30, 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
14
effectiveness of its disclosure controls and procedures, as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act, as of September 30, 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 September 30, 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 third 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
September 30, 2004 and the nine months ended September 30, 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.
15
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
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Edward F. Ruttenberg
Chairman, Chief Executive Officer,
Chief Operating Officer and Treasurer
Date: July 27, 2005
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