-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BH7wcC3Z4y5Jt2jQllycTEr9D1A8k0WNP1jdj5NJzWjf8yL9prCCsBKjNCMCA3aZ BcpUrBxbDE3n1S4b+tSlPA== 0000898431-97-000085.txt : 19970329 0000898431-97-000085.hdr.sgml : 19970329 ACCESSION NUMBER: 0000898431-97-000085 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN LOCKER GROUP INC CENTRAL INDEX KEY: 0000008855 STANDARD INDUSTRIAL CLASSIFICATION: PARTITIONS, SHELVING, LOCKERS & OFFICE AND STORE FIXTURES [2540] IRS NUMBER: 160338330 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-00439 FILM NUMBER: 97566151 BUSINESS ADDRESS: STREET 1: 15 W SECOND ST CITY: JAMESTOWN STATE: NY ZIP: 14701 BUSINESS PHONE: 7166649600 MAIL ADDRESS: STREET 1: 15 WEST SECOND STREET CITY: JAMESTOWN STATE: NY ZIP: 14701 FORMER COMPANY: FORMER CONFORMED NAME: AVM CORP DATE OF NAME CHANGE: 19850520 10KSB 1 U. S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-KSB [X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [Fee Required] For the fiscal year ended December 31, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from ________ to __________ Commission file number 0-439 American Locker Group Incorporated - ------------------------------------------------------------------------------ (Name of small business issuer in its charter) Delaware 16-0338330 - ------------------------------------------------------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 608 Allen Street, Jamestown, New York 14702-1000 - ------------------------------------------------------------------------------ Address of principal executive offices) (Zip Code) Issuer's telephone number 1-716-664-9600 Securities registered under Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered None Securities registered under Section 12(g) of the Exchange Act: Common Stock Par Value $1.00 Per Share - ------------------------------------------------------------------------------ (Title of class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 for the past 90 days. Yes X No . Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $22,517,589. Issuers aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of March 24, 1997: $5,524,853. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 796,501 shares common stock ($1.00 par value) as of March 24, 1997. DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive Proxy Statement for the Annual Stockholders' Meeting to be held May 20, 1997, are incorporated by reference into Part III. Transitional Small Business Disclosure Form (check one): Yes X No 2 PART I ITEM 1. DESCRIPTION OF BUSINESS American Locker Group Incorporated (the "Company") is engaged primarily in the sale and rental of coin, key and electronically controlled checking lockers and related locks and the sale of plastic centralized mail and parcel distribution lockers. The key controlled checking lockers are sold to the recreational and transportation industries, bookstores, military posts, law enforcement agencies, libraries and for export. The electronically controlled lockers are sold for use as secure storage in the business environment and the electronically controlled, coin operated lockers are sold for use in transportation industry and other uses. The plastic mail and parcel distribution lockers are sold to the United States Postal Service ("USPS") for use in centralized mail and parcel delivery in new housing and industrial developments. The Company is an engineering, assembling and marketing enterprise which also manufactures its own mechanical locks for use in its products. The Company was incorporated on December 15, 1958, as a subsidiary of its former publicly-owned parent. In April 1964, the Company's shares were distributed to the stockholders of its former parent, and it became a publicly-held corporation. From 1965 to 1989, the Company acquired and disposed of a number of businesses including the disposition of its original voting machine business. In October 1988, the Company sold the checking locker business at its then remaining major airport locations and in November 1993 sold its last locker concession in the United States. One of the Company's subsidiaries is a party to a Manufacturing Agreement with Signore, Inc., formerly a wholly owned subsidiary of the Company, to furnish fabricating, assembly and shipping services. The Agreement, which became effective January 1, 1990, has been extended and now is for a term expiring June 30, 2000. The Agreement provides that the cost to the Company for these services be equal to Signore's standard cost divided by 80%. Business Segment Information The Company, including its foreign subsidiary, is engaged in one business: sale and rental of coin and key or electronically controlled checking lockers and locks and the sale of plastic centralized mail and parcel distribution lockers. The checking lockers are fabricated by Signore and are marketed in the United States by the Company's wholly-owned subsidiary, American Locker Security Systems, Inc. ("ALSSI"). Lockers for the Canadian market are manufactured by Signore with locks supplied from ALSSI. Lockers are marketed in Canada by the Canadian Locker Company, Ltd. ("Canadian Locker"), a wholly-owned subsidiary. These sales are made outright, through salaried employees and distributors, to customers who need storage facilities requiring a key controlled lock system in the recreational, governmental and institutional type industries. Canadian Locker also owns and 3 operates coin operated lockers in air, bus and rail terminals and retail locations in Canada. ALSSI manufactures the lock system, which is coin or key controlled and operated, for use in lockers previously sold by ALSSI. ALSSI also provides nationwide and Canadian maintenance and repair services with respect to coin operated lockers previously sold by ALSSI. The Company has developed a coin operated baggage cart system and is operating the system at one major Canadian airport, and has sold several cart systems for use in American airports. The Company has developed a polycarbonate all-weather parcel locker for the United States Postal Service, and has shipped over 129,000 of the units from March 1989 through March 24, 1997. A Cluster Box Unit, i.e. (combination letter box), is a plastic parcel unit for the United States Postal Service which has been approved and field tested. In November, 1994 the Company negotiated a contract to sell Type Three CBUs in quantity to the United States Postal Service. As of March 24, 1997, Cluster Box Units with aggregate invoice prices in excess of $22,000,000 have been shipped pursuant to this contract and subsequent contracts. Components of these units are made by outside vendors and the units are assembled by ALSSI. The units are sold directly by ALSSI to the United States Postal Service. Additional information with respect to business segment data, including significant customers, is disclosed in Note 9 of the financial statements included in Item 7 of this Form 10-KSB. Competition While the Company is not aware of any reliable trade statistics, it believes that its subsidiaries, ALSSI and Canadian Locker are the dominant suppliers of key controlled checking lockers in the United States and Canada. However, the Company faces more active competition from several other manufacturers of locker products sold to the United States Postal Service and other purchasers. Raw Materials Present sources of supplies and raw materials incorporated into the Company's metal and plastic lockers and locks are generally considered to be adequate and are currently available in the market place. The Company's supplier of polycarbonate plastic which is used in the parcel lockers and CBU's entered this market in March 1992 and is presently supplying this raw material which meets strict specifications imposed by the United States Postal Service. In the event the present supplier declines to continue to supply this material, the Company would be required to seek an alternate source of supply. The Company's metal lockers are manufactured by Signore pursuant to the Manufacturing Agreement, except for the locks which are manufactured by ALSSI. 4 Patents The Company owns a number of patents, none of which it considers material to the conduct of its business. Employees The Company actively employed 134 individuals as of December 31, 1996, in its businesses of whom 40 are in Canada. The Company considers its relations with its employees to be satisfactory, none of whom are represented by a union. Research and Development The Company engages in research and development activities relating to new and improved products as an incident of its normal manufacturing operations in conjunction with the continuing operations. It expended $44,634, $148,527, and $75,473, in 1996, 1995 and 1994, respectively, for such activity in its continuing businesses, which does not include new product development costs. Compliance with Environmental Laws and Regulations Based on the information available to it, except as noted below, the Company believes that it is in compliance with present federal, state and local environmental laws and regulations. By letter dated June 29, 1994, counsel for Gowanda Electronics ("Gowanda") informed the Company that Gowanda intended to pursue claims against the Company for costs and damages allegedly incurred by Gowanda as a result of environmental contamination at Gowanda's property in Gowanda, New York (the "Property"). The Property was sold by a predecessor of the Company, the AVM Corporation, to Gowanda in 1978. According to Gowanda, groundwater and soil at the Property exhibit contamination with petroleum products, solvents, and metals. Gowanda stated that the Company was responsible for this contamination and, therefore, is liable to Gowanda for past and future remediation costs under the Comprehensive Environmental Response, Compensation and Liability Act, the New York Navigation Law, and various common law theories. Gowanda also stated that it will seek additional damages from the Company if the environmental conditions at the Property prevent Gowanda's potential sale of the Property. In July 1994, the Company was notified by the Department of Law of the State of New York that the State of New York believes that the Company, Bristol-Myers Squibb Company, Inc., General Electric, Inc., Pass & Seymour, Inc. and R. E. Dietz are liable for past and future investigation and remediation costs related to the site in Pompey, New York, previously operated by Solvent Savers, Inc. as a spent solvent recovery facility. The defense of this suit has been assumed by the Company's insurance carrier, with a reservation of rights. 5 General Backlog of orders is not significant in the Company's business as shipments usually are made shortly after orders are received. The Company's sales do not have marked seasonal variations. During 1996, 1995 and 1994, one customer, the USPS, accounted for 61.8%, 61.2%, and 45.8% of net sales, respectively. The loss of this customer could adversely affect the Company's operations. Executive Officers of the Company Year First Assumed Name Age Office Held with Company Position - ------------------------------------------------------------------------------ Harold J. Ruttenberg 82 Chairman of the Board, 1973 Chief Executive Officer, and Treasurer Roy J. Glosser 36 President and Chief 1996 Operating Officer Messrs. H. J. Ruttenberg, has been employed in his positions for more than five years, and Mr. Glosser assumed his position in May 1996. Prior to that date, Mr. Glosser served as Vice President - Operations of the Company since 1992 and has been employed by the Company since 1992 in operations and product development. Prior to that time, Mr. Glosser served as product manager of Acu-Rite Inc., an electronic manufacturing firm. There are no arrangements or understandings pursuant to which any of the officers were elected as officers, except for an employment contract between the Company and Roy J. Glosser. Except as provided in such employment contract, all officers hold office for one year and until their successors are elected and qualified; provided, however, that any officer is subject to removal with or without cause, at any time, by a vote of the majority of the Board of Directors. There have been no events under any bankruptcy act, no criminal proceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any executive officer during the past five years. 6 ITEM 2. DESCRIPTION OF PROPERTY The location and approximate floor space of the Company's principal plants, warehouses and office facilities are as follows ( * indicates leased facility): Approximate Floor Space Location Subsidiary In Sq. Ft. Products - -------- --------- ----------- -------- Jamestown, NY Principal Executive Office 37,000* Office space/ American Locker Company, Inc. Assembly and and American Locker Security Warehouse Systems, Inc. Pittsburgh, PA Executive Office 1,000* Office space Ellicottville, NY American Locker Security 12,800 Locks Systems, Inc. - Lock Shop Toronto, Canadian Locker Company, Ltd. 4,000* Coin- Ontario operated lockers and locks Toronto, Ontario Canadian Locker Company, Ltd. 3,000* Warehouse Elk Grove American Locker Security 9,900* Customer Village, IL Systems, Inc. service and lock repair ---------- TOTAL 67,700 ========== The Company believes that its facilities which are of varying ages and types of construction and the machinery and equipment utilized in such plants are in good condition and are adequate for its presently contemplated needs. All facilities are leased except for the Ellicottville facility. The leases on these properties terminate at various times from 1997 through 2001. 7 ITEM 3. LEGAL PROCEEDINGS Four female former employees of the Company have alleged in suits entitled Derr et al. v. American Locker Group, Inc., 94-CV-0515S(M), (US District Court for Western District of New York) that they were the victims of sex discrimination in their terminations and/or compensation and seeking unspecified damages. The Company has filed an answer denying all charges. Discovery is completed and the Company has filed a Motion for Summary Judgment on all counts. The Motion is under consideration by the Court. The Company intends to vigorously defend this matter. See "Item 1. Business - Compliance with Environmental Laws and Regulations." ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders, by means of solicitation of proxies or otherwise, during the fourth quarter of 1996. 8 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's shares of Common Stock (Par Value $1.00 per share) are not listed on any exchange, but are traded on the over-the-counter market and quotations are reported by the National Association of Security Dealers, Inc. through their Automated Quotation System (NASDAQ) on the National Market System. The trading symbol is ALGI. The following table shows the range of the low and high sale prices for each of the calendar quarters indicated. Per Common Share Market Price Dividend 1995 High Low Declared ---- ---- ---- -------- First Quarter $ 6 $5 $0.00 Second Quarter 9 8.25 0.00 Third Quarter 9.25 7.75 0.00 Fourth Quarter 13 8.50 0.00 -------- Total $0.00 Dividend 1996 High Low Declared ---- ---- ---- -------- First Quarter $13.50 $ 9.75 $0.00 Second Quarter 13.75 12.00 0.00 Third Quarter 15.75 10.75 0.00 Fourth Quarter 15.75 13.00 0.00 --------- Total $0.00 As of March 24, 1997, the Company had 1,527 security holders of record. By agreement with its principal lender, the Company's ability to declare future dividends is restricted. See Note 3 to the financial statements included in Item 7 of this Form 10-KSB. 9 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - 1996 Compared to 1995 1996 was an excellent year for the Company both in terms of sales and net income. Of the five most recent calendar years , 1996 was the second best in terms of sales and income, with the 1995 year being the best year. In 1996, consolidated sales of $22,517,589 decreased approximately 5% as compared to 1995 sales of $23,677,940 and the Company's net income decreased by 36%. Sales of the Company's plastic lockers decreased from $13,362,573 in 1995 to $12,658,767 in 1996. Revenues from the Company's other, non-plastic locker products decreased 4.4% from $10,315,367 in 1995 to $9,858,822 in 1996. Consolidated cost of sales as percentage of sales increased to 70.1% compared to 68.4% in 1995, providing a 1.7% decrease in gross margin. The slight decrease relates to the lower volumes and increased depreciation expense resulting from the Type One and Type Two CBU tooling. The Company's present contract with the United States Postal Service ("USPS") covering Outdoor Parcel Lockers ("OPL's") and all three types of Cluster Box Units ("CBU's") (Type One, Type Two and Type Three) was awarded on March 27, 1996 for a period of one year expiring on April 14, 1997. Under the terms of this contract the Company delivered approximately 6,800 CBU's and 12,400 OPL's through December 31, 1996. The USPS has notified the Company of its intent to renew this contract for a one year period expiring April 15, 1998. The Company is authorized and prepared to ship all three types of CBU's. Pricing and quantities under the contract renewal have not yet been finalized and are still subject to negotiation. Selling, administrative and general expenses of $4,989,497 during 1996 increased 2.6% from the $4,861,477 in 1995. The slight increase in selling, administrative and general expenses is the result of increased bad debt expense, group health insurance and was partially offset by lower compensation expense. Interest income in 1996 decreased from 1995 due to a decrease on the balance of notes receivable during 1996. Other income of $248,605 in 1996 increased slightly from the $244,769 recorded in 1995. Interest expense increased 25.6% in 1996 from the $166,289 recorded in 1995 due to increases in the average borrowings outstanding during the year, resulting from the $1,000,000 borrowing in March 1996 of long-term debt, and the average borrowing rate experienced during 1996. 1995 Compared to 1994 In 1995, consolidated sales of $23,677,940 increased 50% over 1994 sales of $15,766,423 and 10 the Company substantially increased its profitability. Sales of the Company's plastic lockers increased 103% from $6,573,247 in 1994 to $13,362,573 in 1995. Plastic lockers were sold to the USPS under a contract received in November 1994 pursuant to which the Company provides plastic parcel lockers ("CBU's") to the USPS. Revenues from the Company's other, non-plastic locker products increased 12%, from $9,193,176 in 1994 to $10,315,367 in 1995. Consolidated cost of sales as a percentage of sales dropped to 68.4% in 1995 compared to 69.5% in 1994, providing a 1% increase in gross margin. The slight increase in gross margin relates to the sales mix which included higher sales on plastic lockers and lower sales on metal lockers. The Company's contract with the USPS regarding Type Three CBU's terminated on April 14, 1996. Under the terms of this contract the Company sold approximately 2,800 and 9,200 Type Three CBU's in 1994 and 1995, respectively. As noted below, the Company and the USPS have entered into a new one year contract, effective April 15, 1996 covering Outdoor Parcel Lockers (OPL) and Cluster Box Units (CBU) Type Three as well as Type One and Type Two. The new contract gives the Company a minimum order of 1,424 units of the OPL's and 6,000 units of the CBU's. Earnings for 1996 may decrease over 1995 result due to the uncertainty concerning the number of units the USPS may take under the new contract, the slightly lower margins anticipated on the Type Three CBU's and the increased depreciation expense resulting from the Type One and Type Two tools. On March 27, 1996, the Company was awarded a contract by the USPS to deliver Outdoor Parcel Lockers (OPL's) and all three types of Cluster Box Units (Type One, Type Two and Type Three) for a period of one year commencing on April 15, 1996. Terms of the contract specify that the Company will provide 60% of the USPS requirements for all four products on a nationwide basis, with guaranteed minimum quantities of 1,424 OPL's and 6,000 in the aggregate of Type One, Type Two and Type Three CBU's during the contract period. The contract also contains standard provisions allowing the USPS to extend the term of the contract for up to four option years as well as provisions allowing early termination for convenience by the USPS. Under this contract, margins on the OPL are expected to increase over 1995 levels and margins on the Type Three CBU's are expected to decrease compared to 1995 margins. The contracted prices are pending USPS audit. The contract further provides that once a specified number of CBU's and OPL's are shipped, the purchase price for additional units will be reduced by a specified amount. The Company does not expect sales of the CBU's and OPL's during 1996 to reach the level where such price reductions would come into effect, although it is possible that such levels could be reached during 1997 or, if the USPS elects to exercise its renewal options under the contract, in later years. Selling, administrative and general expenses of $4,861,477 during 1995 increased 6% from the $4,594,679 recorded in 1994. The slight increase in selling, administrative and general expenses is the result of the Company's continued growth in sales, offset in part by the Company's continuing efforts to downsize its administrative overhead costs by effectively consolidating administrative job responsibilities and reducing the level of corporate staff. Interest income in 1995 increased from 1994 due to an increase in the balance of notes receivable during 1995. 11 Other income of $244,769 in 1995 increased from the $164,814 recorded in 1994. Other income in 1995 included an increase in cash discounts earned. Interest expense increased slightly, $1,658 in 1995 from $164,631 in 1994 due to an increase in the average borrowing rate experienced in 1995 compared to 1994. 12 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 2.47 to 1 and 1.71 to 1 at the end of 1996 and 1995, respectively. Working capital, or the excess of current assets over current liabilities, was $5,165,135 at December 31, 1996 and $3,459,221 at December 31, 1995. The increase in working capital resulted primarily from the business activity with the USPS in 1995 and 1996. The USPS accelerated payments to the Company during 1996 causing accounts receivable to decrease $461,028 during 1996. In 1996, the Company's operations generated $472,535 in cash from operating activities. Principally, operating cash was utilized to fund the increase in inventory $564,015, to pay income taxes, to meet scheduled debt payments, to purchase equipment and to repurchase stock. The Company also has a $3,000,000 line-of-credit available to assist in satisfying future operating cash needs, if required. However, the Company anticipates that it will generate positive cash flow from operations in 1997. In 1996, the Company continued to make principal payments on the term loan at the rate of $50,000 per month and the outstanding balance of this loan is $1,300,000 as of December 31, 1996. Also at December 31, 1996, the Company has an outstanding balance of $1,125,000 under a $3,000,000 line-of-credit with its principal bank. The Company's policy is to maintain modern equipment and adequate capacity. During 1996, 1995 and 1994, the Company expended $234,000, $1,232,600 an $197,000, respectively, for capital additions. Capital expenditures in 1996 and 1995 were financed principally from operations. In addition, 1997 capital expenditures are also expected to be financed from operations. At December 31, 1995, a valuation reserve of $74,900 existed on the deferred tax benefit of future tax deductions due to limitations on the carryforward and carryback provisions of the various states in which the Company operates. During 1996, this reserve was no longer needed. Impact of Inflation and Changing Prices Although inflation has slowed in recent years, it is still a factor in the economy and the Company continues to seek ways to mitigate its impact. To the extent permitted by competition, the Company passes increased costs on to its customers by increasing sales prices over time. The Company will continue to find ways to control the administrative overhead necessary to successfully run the business. By controlling these costs, the Company can continue to be competitively priced with other top quality locker manufacturers and distributors. The Company has used the LIFO method of accounting for its inventories since 1974. This method matches current costs with current revenues and during an inflationary period, reduces reported income but improves cash flow due to a reduction of taxes based on income. 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 13 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. 14 ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 15 Report of Independent Auditors Board of Directors and Stockholders American Locker Group Incorporated We have audited the accompanying statements of consolidated financial position of American Locker Group Incorporated and subsidiaries as of December 31, 1996 and 1995, and the related statements of consolidated income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the management of the Company. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Locker Group Incorporated and subsidiaries at December 31, 1996 and 1995, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Erie, Pennsylvania February 26, 1997 16 American Locker Group Incorporated and Subsidiaries Statements of Consolidated Financial Position December 31 1996 1995 --------------------------- Assets Current assets: Cash and cash equivalents $ 1,229,222 $ 1,080,487 Accounts and notes receivable, less allowance for doubtful 3,363,277 3,823,118 accounts of $386,309 in 1996 and $275,712 in 1995 Inventories 3,339,668 2,775,615 Prepaid expenses 97,917 143,978 Prepaid federal, state and foreign income taxes 28,986 - Deferred income taxes 619,096 536,319 --------------------------- Total current assets 8,678,166 8,359,517 Property, plant and equipment: Land 500 500 Buildings 505,970 496,196 Machinery and equipment 7,617,871 7,581,513 --------------------------- 8,124,341 8,078,209 Less allowances for depreciation and amortization 6,782,429 6,331,541 --------------------------- 1,341,912 1,746,668 ============================= Total assets $10,020,078 $10,106,185 ============================= 17 American Locker Group Incorporated and Subsidiaries Statements of Consolidated Financial Position (continued) December 31 1996 1995 -------------------------- Liabilities and stockholders' equity Current liabilities: Demand note payable $ 1,125,000 $ 1,400,000 Accounts payable: Trade 660,202 965,432 Related party 381,196 377,214 -------------------------- 1,041,398 1,342,646 Commissions, salaries, wages and taxes thereon 298,671 348,549 Other accrued expenses 447,962 376,643 Federal, state and foreign income taxes payable - 832,458 Current portion of long-term debt 600,000 600,000 --------------------------- Total current liabilities 3,513,031 4,900,296 Deferred income taxes 44,580 83,609 Long-term obligations: Long-term debt 700,000 300,000 Retirement benefits 271,690 232,584 Postretirement benefits 132,630 125,630 --------------------------- 1,104,320 658,214 Stockholders' equity: Common stock, $1 par value: Authorized shares -- 4,000,000 Issued and outstanding shares -- 800,024 in 1996 and 818,625 in 1995 800,024 818,625 Other capital 1,027,527 1,258,805 Retained earnings 3,645,183 2,500,351 Foreign currency translation adjustment (114,587) (113,715) ----------------------------- Total stockholders' equity 5,358,147 4,464,066 ============================= Total liabilities and stockholders' equity $10,020,078 $10,106,185 ============================= See accompanying notes. 18 American Locker Group Incorporated and Subsidiaries Statements of Consolidated Income Year ended December 31 1996 1995 1994 ---------------------------------------- Net sales $22,517,589 $23,677,940 $15,766,423 Cost of products sold 15,791,95 16,207,181 10,971,085 ---------------------------------------- 6,725,633 7,470,759 4,795,338 Selling, administrative and general expenses 4,989,497 4,861,477 4,594,679 ---------------------------------------- 1,736,136 2,609,282 200,659 Interest income 43,270 59,716 17,997 Other income - net 248,605 244,769 164,814 Interest expense (208,827) (166,289) (164,631) ---------------------------------------- Income before income taxes 1,819,184 2,747,478 218,839 Income taxes 674,352 956,909 74,600 ---------------------------------------- Net income $ 1,144,832 $ 1,790,569 $ 144,239 ======================================== Per share of common stock: Net income $ 1.41 $ 2.12 $ 0.17 ======================================== Dividends $ 0.00 $ 0.00 $ 0.00 ======================================== See accompanying notes. 19 American Locker Group Incorporated and Subsidiaries Statements of Consolidated Stockholders' Equity
Foreign Currency Total Common Other Retained Translation Stockholders' Stock Capital Earnings Adjustment Equity ------------------------------------------------------------------------ Balance at January 1, 1994 . $ 871,423 $ 1,640,043 $ 565,543 $46,987 $3,030,022 Net income ............... -- -- 144,239 -- 144,239 Foreign currency translation ........... -- -- -- (87,990 (87,990) Stock options exercised .. 10,500 15,037 -- - 25,537 Common stock purchased and retired ............ (23,047) (83,110) -- -- (106,157) --------------------------------------------------------------------------- Balance at December 31, 1994 858,876 1,571,970 709,782 (134,977) 3,005,651 Net income ............... -- -- 1,790,569 -- 1,790,569 Foreign currency translation ............ -- -- -- 21,262 21,262 Common stock purchased and retired ............ (40,251) (353,416) -- -- (313,165) ---------------------------------------------------------------------------- Balance at December 31, 1995 818,625 1,258,805 2,500,351 (113,715) 4,464,066 Net income ............... -- -- 1,144,832 -- 1,144,832 Foreign currency translation ............ -- -- -- (872) (872) Common stock purchased and retired ........... (18,601) (231,278) -- -- (249,879) ---------------------------------------------------------------------------- Balance at December 31, 1996 $ 800,024 $ 1,027,527 $ 3,645,183 $ (114,587) $ 5,358,147 ============================================================================ See accompanying notes.
20 American Locker Group Incorporated and Subsidiaries Statements of Consolidated Cash Flows Year ended December 31 1996 1995 1994 -------------------------- ---------- Operating activities Net income $1,144,832 $1,790,569 $ 144,239 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 622,392 404,006 556,027 Gain on disposition of property, plant and equipment (20,224) (27,346) (31,214) Deferred income taxes (credits) (124,245) 46,000 (36,100) Retirement benefits 39,106 58,042 40,688 Postretirement benefits 7,000 9,120 6,065 Change in assets and liabilities: Accounts and notes receivable 461,028 384,683 (1,697,432) Inventories (564,015) (670,019) (346,440) Prepaid expenses 46,090 43,541 (55,058) Accounts payable and accrued expenses (280,424) (138,984) 659,425 Income taxes (859,005) 811,101 126,568 ----------- Net cash provided by (used in) operating activities 472,535 2,710,713 (633,232) Investing activities Purchase of property, plant and equipment (234,621) (1,232,604) (197,028) Proceeds from sale of property, plant andequipment 43,104 32,675 41,317 ----------- Net cash (used in) provided by investing activities (191,517) (1,199,929) (155,711) Financing activities Net (repayment) borrowings under line of credit (275,000) 200,000 400,000 Additional borrowings 1,000,000 -- 1,850,000 Debt repayments (600,000) (600,000) (1,350,000) Common stock purchased and (249,879) (353,416) (106,157) retired Stock options exercised -- -- 25,537 ----------- Net cash (used in) provided by financing activities (124,879) (753,416) 819,380 Effect of exchange rate changes on cash (7,404) 7,434 (32,377) ----------- Net increase (decrease) in cash 148,735 764,802 (1,940) Cash and cash equivalents at beginning of year 1,080,487 315,685 317,625 ----------- Cash and cash equivalents at end of year $ 1,229,222 $ 1,080,487 $ 315,685 =========== 21 Supplemental cash flow information: Cash paid during the year for: Interest $ 208,827 $ 160,60 $ 168,318 ======================================== Income taxes paid $1,650,823 $ 59,684 53,968 ======================================== See accompanying notes. 22 American Locker Group Incorporated and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 1. Summary of Significant Accounting Policies Consolidation and Business Description The consolidated financial statements include the accounts of American Locker Group Incorporated and its subsidiaries (the Company), all of which are wholly-owned. Intercompany accounts and transactions have been eliminated in consolidation. The Company is engaged in one business: coin and key or electronically controlled metal and plastic checking lockers and locks. The Company sells to customers throughout North America. Cash and Cash Equivalents Cash includes currency on hand and demand deposits with financial institutions. Cash equivalents are short-term, highly liquid investments both readily convertible to known amounts of cash and have original purchase maturities of three months or less. Inventories Inventories are valued principally at the lower of cost or market, cost determined by the last-in, first-out method. Properties and Depreciation Property, plant and equipment are stated at cost. Provisions for depreciation have been computed for accounting purposes by the straight-line and declining-balance methods based on estimated useful lives. Provisions for depreciation have been computed for tax purposes under accelerated tax methods. Net Income Per Share 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. Total shares used in the calculations amount to 808,102 in 1996, 845,356 in 1995 and 862,017 in 1994. 23 American Locker Group Incorporated and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 American Locker Group Incorporated and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996 1. Summary of Significant Accounting Policies (continued) Foreign Currency The assets and liabilities of the Company's foreign subsidiary are translated to U.S. dollars at current exchange rates. Revenue and expense accounts are translated at weighted average exchange rates prevailing during the year. Foreign currency gains and losses are included in determining net income for the period in which the exchange rate changes. Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and accrued liabilities approximate fair value due to the short-term maturities of these assets and liabilities. The interest rates on substantially all of the Company's bank borrowings are adjusted regularly to reflect current market rates. Accordingly, the carrying amounts of the Company's short-term and long-term borrowings also approximate fair value. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. 2. Inventories December 31 1996 1995 --------------------------- --------------------------- Finished products $ 982,888 $ 1,240,253 Work-in-process 1,742,320 1,414,994 Raw materials 1,625,633 1,395,058 --------------------------- --------------------------- 4,350,841 4,050,305 Less allowance to reduce carrying value to LIFO (1,011,173) (1,274,690) basis =========================== Net inventories $3,339,668 $2,775,615 =========================== In 1996, inventory quantities were reduced resulting in liquidations of LIFO inventory quantities carried at lower costs in prior years. The effect of this liquidation was to decrease cost of 24 products sold and increase net income by approximately $69,000 and $43,700 ($.05 per share). 25 3. Demand Note Payable and Long-Term Debt December 31 1996 1995 --------------------------- --------------------------- Note payable to bank, unsecured, due February 28, 1999, payable $50,000 per month with interest at prime plus 1/4% (8.50% at December 31, 1996) $1,300,000 $ 900,000 Less current portion 600,000 600,000 =========================== Long-term portion $ 700,000 $ 300,000 =========================== The credit agreement underlying the note payable to bank requires the maintenance of certain levels of net worth and working capital and requires the maintenance of a certain current ratio and ratio of liabilities to net worth. In addition, the note has restrictions on the payment of dividends. The Company was in compliance with these covenants at year end. Required principal payments on long-term obligations in each of the years through final maturity are as follows: 1997 - $600,000, 1998 - $600,000, 1999 - $100,000. At December 31, 1996, the Company had outstanding $1,125,000 under a $3,000,000 unsecured line of credit agreement with a bank. Such borrowings are repayable on demand with interest at the prime rate. The weighted average interest rate on outstanding short-term borrowings amounted to 8.3%, 8.8% and 6.7% in 1996, 1995 and 1994, respectively. On January 2, 1997, the Company made an $825,000 payment on the line of credit. Rent expense amounted to $351,222, $410,763 and $239,904 in 1996, 1995 and 1994, respectively. The Company leases several operating facilities and vehicles under noncancelable operating leases. Future minimum lease payments consist of the following at December 31, 1996: 1997 $ 277,062 1998 238,985 1999 240,518 2000 200,902 2001 168,096 ============== $ 1,125,563 ============== 26 4. Income Taxes Differences between accounting rules and tax laws cause differences between the bases of certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to the extent they are temporary, are recorded as deferred tax assets and liabilities. At December 31, 1995, a valuation reserve existed on the deferred state tax benefit of future deductions due to limitations on carryforward and carryback provisions of the various states in which the Company operates. During 1996, the valuation reserve was reversed. Significant components of the Company's deferred tax assets and liabilities at December 31 are as follows: 1996 1995 ------------------------ Deferred tax liabilities: Property, plant and equipment $178,461 $127,952 Prepaid expenses 17,209 25,761 ------------------------ Total deferred tax liabilities 195,670 153,713 Deferred tax assets: Postretirement benefits 60,252 61,052 Pension costs 108,676 93,033 Allowance for doubtful accounts 152,190 109,168 Accrued expenses 52,658 10,253 Other employee benefits 39,951 39,670 Inventory costs 341,599 353,284 Other 14,860 14,863 ------------------------ Total deferred tax assets 770,186 681,323 Valuation allowance for deferred tax assets - (74,900) ======================== Net deferred tax assets $ 574,516 $ 452,710 ======================== Current deferred tax asset $ 619,096 $ 536,319 Long-term deferred tax (liability) (44,580) (83,609) ======================== $ 574,516 $ 452,710 ======================== For financial reporting purposes, income before income taxes includes the following components: 1996 1995 1994 ------------------------------------ United States $1,802,858 $2,714,028 $195,836 Foreign 16,326 33,450 23,003 27 ==================================== $1,819,184 $2,747,478 $218,839 ==================================== 28 4. Income Taxes (continued) Significant components of the provision for income taxes are as follows: 1996 1995 1994 ------------------------------------ Current: Federal $670,960 $834,400 $ 79,000 State 118,437 117,900 19,700 Foreign 9,200 33,700 12,000 Prior year taxes - (75,091) - ------------------------------------ Total current 798,597 910,909 110,700 Deferred: Federal (105,608) 55,900 (48,100) State (18,637) (9,900) 12,000 ------------------------------------ (124,245) 46,000 (36,100) ==================================== $674,352 $956,909 $ 74,600 ==================================== The differences between the federal statutory rate and the effective tax rate as a percentage of income before taxes are as follows: 1996 1995 1994 ------------------------------------ Statutory income tax rate 35% 35% 35% State and foreign income taxes 3 1 (1) Tax credits - - (1) Permanent differences principally nontaxable income in 1996 and in 1995, and nondeductible expenditures in 1994 (1) (1) 3 Other - - (1) --- --- ---- 37% 35% 35% === === === 29 5. Pension Plans The Company and its subsidiaries have several defined benefit pension plans covering substantially all employees. Benefits for the salaried employees are based on specified percentages of the employees annual compensation. The plans for hourly employees provide benefits of stated amounts for each year of service. Effective January 1, 1995, the plans have been merged and are combined for reporting purposes. The plans' assets are invested in fixed interest rate group annuity contracts with an insurance company. Due to the funding status of the plans, the Company has not had to fund the plan since 1981. The summary of the components of net periodic pension expense are as follows: 1996 1995 1994 ------------------------------------ ------------------------------------ Service cost-benefits earned during the $161,276 $193,514 $192,700 period Interest cost on projected benefit 120,169 113,188 99,287 obligation Return on plan assets (127,945) (155,711) (133,729) Net amortization and deferral (114,394) (92,949) (117,570) ==================================== Net pension expense $ 39,106 $ 58,042 40,688 ==================================== The average discount rate used in determining the actuarial value of the projected benefit obligations was 7.25% in 1996 and 7.5% in 1995. The rates of future years' compensation levels was 5.25% in 1996 and 5.5% in 1995. The expected long-term rate of return on plan assets was 7.25% in 1996 and 7.5% in 1995. 30 5. Pension Plans (continued) The following table sets forth the funded status and amounts recognized in the statements of consolidated financial position at December 1996 and 1995. 1996 1995 ------------------------ Actuarial present value of benefit obligations: Vested benefit obligation $1,544,146 $1,684,386 Non-vested benefit obligation 28,541 35,544 ======================== Accumulated benefit obligation $1,572,687 $1,719,930 ======================== Projected benefit obligation for service rendered to date $1,764,414 $1,848,946 Plan assets at fair value 1,876,393 2,106,280 ------------------------ Plan assets in excess of projected benefit obligations 111,979 257,334 Unrecognized net loss 250,095 471,847 Unrecognized prior service cost 1,330 1,597 Unrecognized net transition asset (635,094) (963,362) ======================== Net liability recognized in the statement of consolidated financial position $ (271,690) $ (232,584) ======================== 31 6. Postretirement Benefit Plans Other Than Pensions In addition to the Company's defined benefit plans, the Company provides a life insurance benefit to substantially all employees upon retirement. Retirees eligible to participate in this plan have their life insurance premiums paid on their behalf by the Company. The insurance premiums related to this plan are paid annually. The following table presents the plan's status reconciled with amounts recognized in the Company's statement of financial position: December 31 1996 1995 ------------------------ Accumulated postretirement benefit obligation: Retirees $ (59,941) $ (56,778) Fully eligible active plan participants (49,375) (46,770) Other active plan participants (17,114) (16,211) ------------------------ Accumulated postretirement benefit obligation (126,430) (119,759) Unrecognized net gain (6,200) (5,871) ======================== Accrued postretirement benefit cost $(132,630) $(125,630) ======================== Net periodic postretirement benefit cost includes the following components: December 31 1996 1995 1994 ------------------------------------ Service cost $ 1,474 $ 1,882 $ 1,882 Interest cost 6,971 8,238 8,238 Net gain (1,445) - - ------------------------------------ Net periodic postretirement benefit cost $ 7,000 $10,120 $10,120 ==================================== The weighted average discount rate used in determining the accumulated postretirement benefit obligations was 7.25% at December 31, 1996 and 8% at December 31, 1995. 32 7. Capital Stock and Stock Options The Certificate of Incorporation authorizes 4,000,000 shares of common stock and 1,000,000 shares of convertible preferred stock. In 1988, the Company adopted the American Locker Group Incorporated 1988 Stock Incentive Plan, permitting the Company to provide incentive compensation of the types commonly known as incentive stock options, stock options and stock appreciation rights. The price of option shares or appreciation rights granted under the plan shall be not less than the fair market value of common stock on the date of grant, and the term of the stock option or appreciation right shall not exceed ten years from date of grant. Upon exercise of a stock option, the option price shall be payable to the Company in cash, or at the discretion of the committee, in shares of common stock valued at the fair market value on the date of payment, or a combination thereof. Upon exercise of a stock appreciation right granted in connection with a stock option, the optionee shall surrender the option and receive payment from the Company of an amount equal to the difference between the option price and the fair market value of the shares applicable to the options surrendered on the date of surrender. Such payment may be in shares, cash or both at the discretion of the Company's Stock Option-Executive Compensation Committee. At December 31, 1996, 1995 and 1994, there were no stock appreciation rights outstanding under this plan. The Company follows APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related Interpretations in accounting for its Stock Option Plan. Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") requires the use of option valuation models to determine the fair value of employee stock options. The Company's net income and earnings per share amounts as reported would not have been significantly different if the provisions of SFAS No. 123 were used. 33 7. Capital Stock and Stock Options (continued) A summary of the Stock Incentive Plan stock options for the years ended December 31, 1996, 1995 and 1994 is as follows: Number of Shares Under Option Price ------------------------------ Option Per Share Aggregate ------------------------------------------ Outstanding - January 1, 1994 36,000 $2.875-$4.25 $112,437 Granted during the year - 0.00 - Exercised during the year (10,500) 2.875 (30,188) Cancellations - 0.00 - ---------- ----------- Outstanding - December 31.1994 25,500 $2.875-$4.25 82,249 Granted during the year - 0.00 - Exercised during the year - 0.00 - Cancellations - 0.00 - ----------- ----------- Outstanding - December 31, 1995 25,500 $2.875-$4.25 82,249 Granted during the year - 0.00 - Exercised during the year - 0.00 - Cancellations - 0.00 - ----------- ----------- Outstanding - December 31, 1996 25,500 $2.875-$4.25 $ 82,249 ============ ============ 8. Related Party One of the Company's subsidiaries has entered into a manufacturing agreement with Signore, Inc. a former wholly-owned subsidiary of the Company, under which Signore will furnish fabricating, assembly and shipping services. The Agreement, which expires on April 30, 2000, provides that the cost to the Company for these services will be equal to Signore's standard cost divided by 80%. Purchases from Signore under the Agreement amounted to $3,489,499, $3,470,582 and $2,793,880 for the years ended December 31, 1996, 1995 and 1994, respectively. Two Directors of the Company are stockholders and directors of Rollform of Jamestown Inc., a rollforming company. One of the Company's subsidiaries purchased $90,084, $98,571 and $5,833 of fabricated parts from Rollform of Jamestown, Inc. in 1996, 1995 and 1994, respectively, at prices that the Company believes are at arms length. 34 9. Business Segment Data The Company has operations in the United States and Canada. The geographic distribution of sales, operating income and identifiable assets for 1996, 1995 and 1994 are as follows: United States Canada Eliminations Total -------------------------------------------------- 1996 - -------------------------- Revenues from unaffiliated customers $20,830,473 $ 1,687,116 $ - $22,517,589 Transfers between geographic areas 665,165 - 665,165 - -------------------------------------------------- Total revenues $21,495,638 $ 1,687,116 $ 665,165 $22,517,589 ================================================== Operating income $ 1,698,760$ $ 37,376 - $ 1,736,136 ================================================== Identifiable assets $ 9,978,585 $ 931,258 $ 889,765 $10,020,078 ================================================== 1995 - -------------------------- Revenues from unaffiliated customers $22,112,011 $1,565,929 $ 485,377 $23,677,940 Transfers between geographic areas 485,377 - 485,377 - ================================================== Total revenues $22,597,388 $1,565,929 $ 485,377 $23,677,940 ================================================== Operating income $ 2,579,420 $ 29,862 $ - $ 2,609,282 ================================================== Identifiable assets $10,060,749 $ 934,20 $ 888,765 $10,106,185 ================================================== 1994 - ----------------------------- Revenues from unaffiliated customers $13,899,533 $ 1,866,890 $ - $15,766,423 Transfers between geographic areas 617,762 - 617,762 - ================================================== Total revenues $14,517,295 $ 1,866,890 $617,762 $15,766,423 ================================================== Operating income $ 128,037 $ 72,622 $ - $200,659 ================================================== 35 Identifiable assets $ 8,264,864$ 848,768$ 888,765 $ 8,224,867 ================================================== 36 9. Business Segment Data (continued) In 1996, 1995 and 1994, the Company had export sales of $1,123,434, $1,730,087 and $2,009,086, respectively. In 1996, 1995 and 1994, export sales represented approximately 5.0%, 7.3% and 12.7%, respectively of the Company's consolidated net sales. Sales to the U.S. Postal Service represented 61.8%, 61.2% and 45.8% of net sales in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995, the Company had secured receivables from customers under time payment arrangements totaling $306,532 and $331,087, respectively. At December 31, 1996, the Company had unsecured trade receivables from customers considered to be distributors of $312,709 (including a United Kingdom distributor of $129,932) and from governmental agencies of $1,610,504. At December 31, 1995, the Company had unsecured trade receivables from customers considered to be distributors of $351,122 (including a United Kingdom distributor of $119,249) and from governmental agencies of $1,858,497. Other concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of entities comprising the Company's customer base and their dispersion across many different industries. 10. Quarterly Results of Operations (Unaudited) The following is a tabulation of the unaudited quarterly results of operations for the years ended December 31, 1996 and 1995: 1996 -------------------------------------------------- Three Months Ended March 31 June 30 September 30 December 31 --------------------------------------------------- Net sales $4,946,120 $5,961,890 $5,955,670 $5,653,909 =================================================== Gross profit $1,447,412 $1,922,588 $1,781,680 $1,573,953 =================================================== Net income $ 192,612 $ 335,955 $ 364,735 $ 251,530 =================================================== Net income per share $ .24 $ .41 $ .45 $ .31 =================================================== 37 10. Quarterly Results of Operations (Unaudited) - (continued) 1995 -------------------------------------------------- Three Months Ended March 31 June 30 September 30 December 31 --------------------------------------------------- Net sales $7,080,084 $5,273,245 $5,633,832 $5,690,779 =================================================== Gross profit $2,377,764 $1,699,121 $1,910,998 $1,482,876 =================================================== Net (loss) income $ 666,765 $ 242,766 $ 406,332 $ 474,706 =================================================== Net (loss) income per share $ .78 $ .28 $ .48 $ .58 =================================================== The Company's accounting practice for interim periods provides for possible inventory, insurance, pension and income tax adjustments. Such adjustments resulted in increasing the 1996 fourth quarter pretax income by $103,791 for inventory costs and $158,682 for income tax expense. A decrease in fourth quarter pretax income in the amount of $48,141 was due to adjustments in pension costs and receivable reserves. In 1995 fourth quarter adjustments relating to insurance, pensions costs and income tax expense increased income by $229,000 while inventory costs decreased fourth quarter pretax income by $209,000. 11. Contingencies The Company has been named as a defendant by four former employees alleging discrimination and seeking unspecified damages. The Company has denied all charges and it intends to vigorously defend this matter. It is management's opinion that the ultimate outcome of this matter will not have a material impact on the Company's financial position or operating results. Although no formal legal proceedings have been directed towards the Company, it has been alleged that the Company and/or one of its previously owned subsidiaries is a potentially responsible party at two sites suspected to have some form of environmental contamination. The Company believes that its contributions to these sites, if any, is diminimus, however, it is too early to predict the ultimate outcome of these matters. 38 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with accountants on accounting and financial disclosures during 1996 or 1995. PART III Item 9, 10, 11, and 12 will be contained in American Locker Group Incorporated's Annual proxy Statement, incorporated herein by reference, which will be filed within 120 days after year end. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-KSB (a) Exhibits - Exhibits required by Item 601 of Regulation S-B are submitted as a separate section herein immediately following the "Exhibit Index". (b) Reports on Form 8-KSB filed in the fourth quarter of 1995 - None. 39 In accordance with Section 13 or 15(d) 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 /s/ Harold J. Ruttenberg Harold J. Ruttenberg Chairman, Chief Executive Officer, Treasurer and Principal Accounting Officer March 27, 1997 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Harold J. Ruttenberg Chairman, Chief March 27, 1997 - ------------------------ Harold J. Ruttenberg Executive Officer, Treasurer, Principal Accounting Officer and Director /s/ Roy J. Glosser President, Chief March 27, 1997 - ------------------ Roy J. Glosser Operating Officer and Director /s/ Thomas Phillips Johnson Director March 27, 1997 - --------------------------- Thomas Phillips Johnson /s/ Alan H. Finegold Director March 27, 1997 - -------------------- Alan H. Finegold /s/ Thomas Lynch, IV Director March 27, 1997 - -------------------- Thomas Lynch, IV /s/ James E. Ruttenberg Director March 27, 1997 - ----------------------- James E. Ruttenberg /s/ Edward F. Ruttenberg Director March 27, 1997 - ------------------------ Edward F. Ruttenberg 40 EXHIBIT INDEX Prior Filing or Sequential Page Exhibit No. No. Herein - ----------- --------------------- 3.1 Certificate of Incorporation of Exhibits to Form 10-K American Locker Group Incorporated for Year ended December 31, 1980 3.2 Amendment to Certificate of Form 10-C filed May 6, Incorporation changing name of 1985 company 3.3 Amendment to Certificate of Exhibit to Form 10-K for Incorporation limiting liability year ended December 31, of Directors and Officers 1987 3.4 By-laws of American Locker Group Exhibit to Form 10-K for Incorporated as amended and year ended December 31, restated 1985 3.5 Amendment to By-laws of American Exhibit to Form 10-K for Locker Group Incorporated dated year ended December 31, January 15, 1992 1991 10.1 American Locker Group Exhibit to Form 10-K for Incorporated 1988 Stock Incentive year ended December 31, Plan 1988 10.2 First Amendment dated March 28, Exhibit to Form 10-K for 1990 to American Locker Group year ended December 31, Incorporated 1988 Stock 1989 Incentive Plan 10.3 Form of Indemnification Agreement Exhibit to Form 10-K for between American Locker Group year ended December 31, Incorporated and its directors 1987 and officers 10.4 Corporate Term Loan Agreement Exhibit to Form 10-K for between American Locker Group year ended December 31, Incorporated and Manufacturers 1991 and Traders Trust Company covering $2,400,000 loan 10.5 Approved Line of Credit from Exhibit to Form 10-K for Manufacturers and Traders Trust year ended December 31, Company to American Locker Group 1990 Incorporated in the amount of $1,000,000 10.6 Amendment Agreement dated May 1, Exhibit to Form 10-KSB 1994 between Manufacturing and for year ended Traders Trust Company and December 31, 1994 American Locker Group Incorporated [Increase in Term Loan to $1,850,000] 10.7 Amendment Agreement dated Exhibit to Form 10-KSB March 12, 1996 between for year ended Manufacturing and Traders Trust December 31, 1995 Company and American Locker Group Incorporated [Increase in Term Loan to $1,800,000] 10.8 Employment Agreement between Exhibit to Form 10-GSB American Locker Group for quarter ended June Incorporated and Roy J. Glosser 30, 1996 10.9 Manufacturing Agreement dated as Exhibit to Form 8-K of December 29, 1989 between dated January 11, 1990 American Locker Security Systems Inc. and Signore, Inc. 10.10 First Amendment dated May 3, 1995 Exhibit to Form 10-KSB to Manufacturing Agreement dated for year ended December as of December 29, 1989 between 31, 1995 American Locker Security Systems Inc. and Signore Inc. 10.11 Second Amendment dated March 15, Exhibit to Form 10-KSB 1996 to Manufacturing Agreement for the year ended dated as of December 29, 1989 December 31, 1995 between American Locker Security Systems Inc. and Signore Inc. 10.12 Third Amendment dated May 21, Exhibit to Form 10-QSB 1996 to Manufacturing Agreement for the quarter ended dated as of December 29, 1989 June 30, 1996 between American Locker Security Systems Inc. and Signore Inc. 10.13 Agreement dated as of May 21, Exhibit to Form 10-QSB 1996 between American Locker for the quarter ended Group Incorporated and Edward F. June 30, 1996 Ruttenberg 10.14 Contract dated March 27, 1996 Exhibit to Form 10-QSB between the U.S. Postal Service for the quarter ended and American Locker Security March 31, 1996 Systems, Inc. 22.1 List of Subsidiaries Page ________ 27.1 Financial Data Schedule Page ________ Exhibit 22.1 List of Subsidiaries The following companies are subsidiaries of the Company and are included in the consolidated financial statements of the Company: Percentage of NAME Jurisdiction of Voting Securities Organization Owned American Locker Security Systems, Delaware 100% Inc. American Locker Company, Inc. Delaware 100% American Locker Company of Canada, Dominion of Canada 100% (1) 0Ltd. Canadian Locker Company, Ltd. Dominion of Canada 100% (2) American Locker Security Systems Virgin Islands 100% (1) International (1) Owned by American Locker Security Systems, Inc. (2) Owned by American Locker Company of Canada, Ltd. EX-27 2 FDS --
5 This schedule contains summary financial information extracted from SEC Form 10-KSB and is qualified in its entirety by reference to such financial statements. 0000008855 AMERICAN LOCKER GROUP INC. 1 U.S. DOLLARS YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 1.000 $1,229,222 0 3,363,277 386,309 3,339,668 8,678,166 8,124,341 6,782,429 10,020,078 3,513,031 700,000 0 0 800,024 4,558,123 10,020,078 22,517,589 22,809,464 15,791,956 15,791,956 0 0 208,827 1,819,184 674,352 1,144,832 0 0 0 1,144,832 1.41 1.41
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