10-Q 1 form10q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark one) (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 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) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements. Yes X No ----- ----- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No Not Applicable ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's class of common stock equity as of the latest practicable date: August 3, 2001. Common Stock $1.00 par value - 2,049,546 Transitional Small Business Disclosure (check one) Yes No X ----- ----- 1 Part I - Financial Information Item 1 - Financial Statements American Locker Group Incorporated and Subsidiaries Consolidated Balance Sheets
JUNE 30, December 31, 2001 2000 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 3,449,651 $ 3,696,359 Accounts and notes receivable, less allowance for doubtful accounts of $248,000 in 2001 and $324,000 in 2000 4,426,843 4,633,422 Inventories 5,777,005 4,818,348 Prepaid expenses 232,098 45,209 Deferred income taxes 668,769 668,769 ----------- ----------- Total current assets 14,554,366 13,862,107 Property, plant and equipment: Land 500 500 Buildings 389,606 389,959 Machinery and equipment 10,712,576 10,378,983 ----------- ----------- 11,102,682 10,769,442 Less allowance for depreciation (9,392,481) (9,048,950) ----------- ----------- 1,710,201 1,720,492 ----------- ----------- $16,264,567 $15,582,599 =========== -----------
2 American Locker Group Incorporated and Subsidiaries Consolidated Balance Sheets
JUNE 30, December 31, 2001 2000 ---- ---- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,043,519 $ 1,513,203 Commissions, salaries, wages and taxes thereon 190,282 323,769 Other accrued expenses 860,847 659,852 Federal, state and foreign income taxes payable 259,430 458,825 Current portion of long-term debt 200,000 200,000 ----------- ----------- Total current liabilities 2,554,078 3,155,649 Long-term liabilities: Long-term debt 33,318 133,320 Pension and other benefits 429,106 470,375 Deferred income taxes 99,430 99,430 ----------- ----------- 561,854 703,125 Stockholders' equity: Common stock, $1 par value: Authorized shares - 4,000,000 Issued shares - 2,511,026 in 2001, 2,511,550 in 2000 Outstanding shares - 2,049,546 in 2001, 2,062,540 in 2000 2,511,026 2,511,550 Other capital 561,708 565,331 Retained earnings 14,090,743 12,550,001 Treasury stock at cost (461,480 shares in 2001, 449,010 in 2000) (3,816,533) (3,717,603) Accumulated other comprehensive income (198,309) (185,454) ----------- ----------- Total stockholders' equity 13,148,635 11,723,825 ----------- ----------- Total liabilities and stockholders' equity $16,264,567 $ 15,582,599 =========== ============ See accompanying notes.
3 American Locker Group Incorporated and Subsidiaries Consolidated Statements of Income
SIX MONTHS ENDED JUNE 30, 2001 2000 ---- ---- Net sales $17,942,511 $18,495,063 Cost of products sold 12,738,951 13,066,026 ------------ ----------- 5,203,560 5,429,037 Selling, administrative and general expenses 2,918,896 3,226,199 ------------ --------- 2,284,664 2,202,838 Interest income 88,126 96,021 Other (expense) income--net 185,967 124,673 Interest expense (28,837) (107,251) ------------ --------- Income before income taxes 2,529,920 2,316,281 Income taxes 989,178 909,360 ------------ --------- Net Income $1,540,742 $1,406,921 ============ ========== Earnings per share of common stock: Basic $0.75 $0.62 ============ ========== Diluted $0.74 $0.62 ============ ========== Dividends per share of common stock: $0.00 $0.00 ============ ========== See accompanying notes.
4 American Locker Group Incorporated and Subsidiaries Consolidated Statements of Income
THREE MONTHS ENDED JUNE 30, 2001 2000 ---- ---- Net sales $9,825,943 $10,635,913 Cost of products sold 7,034,726 7,522,484 ---------- ----------- 2,791,217 3,113,429 Selling, administrative and general expenses 1,470,928 1,711,290 ---------- ----------- 1,320,289 1,402,139 Interest income 32,117 50,766 Other (expense) income--net 107,564 65,562 Interest expense (13,332) (56,464) ---------- ----------- Income before income taxes 1,446,638 1,462,003 Income taxes 562,733 577,973 ---------- ----------- Net Income $ 883,905 $884,030 ========== =========== Earnings per share of common stock: Basic $0.43 $0.39 ========== =========== Diluted $0.42 $0.39 ========== =========== Dividends per share of common stock: $0.00 $0.00 ========== =========== See accompanying notes.
5 American Locker Group Incorporated and Subsidiaries Consolidated Statements of Cash Flows
SIX MONTHS ENDED JUNE 30, 2001 2000 ---- ---- OPERATING ACTIVITIES Net income $1,540,742 $1,406,921 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 358,905 377,575 Change in assets and liabilities: Accounts and notes receivable 206,579 (1,079,077) Inventories (727,038) (68,349) Prepaid expenses (186,889) 66,217 Accounts payable and accrued expenses (402,176) 70,196 Pension and other benefits (41,269) 272,710 Income taxes (199,395) 254,379 ---------- ---------- Net cash provided by operating activities 549,459 1,300,572 INVESTING ACTIVITIES (580,233) (135,493) ---------- ---------- Purchase of property, plant and equipment (580,233) (135,493) Net cash used in investing activities FINANCING ACTIVITIES Debt repayment (100,002) (100,002) Common stock purchased for treasury (98,930) (304,237) Common stock purchased and retired (4,147) (1,218) Proceeds from common stock issued - 13,812 ---------- ---------- New cash used in financing activities (203,079) (391,645) Effect of exchange rate changes on cash (12,855) (13,915) ---------- ---------- Net increase (decrease) in cash (246,708) 759,519 Cash and cash equivalents at beginning of period 3,696,359 3,285,983 ---------- ---------- Cash and cash equivalents at end of period $3,449,651 $4,045,502 ========== ========== Supplemental cash flow information: Cash paid during the period for: Interest $28,837 $107,251 ========== ======== Income Taxes $1,137,000 $624,250 ========== ======== See accompanying notes.
6 Notes to Consolidated Financial Statements American Locker Group Incorporated and Subsidiaries 1. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, the condensed financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the Company's management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of such condensed financial statements have been included. Operating results for the six month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. For further information, refer to the Company's consolidated financial statements and the footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2000. 2. Provision for income taxes is based upon the estimated annual effective tax rate. 3. Net income per common share is computed by dividing net income by the weighted average number of shares outstanding, plus, when dilutive, the common stock equivalents which would arise from the exercise of stock options, during the periods. Basic and diluted weighted average shares outstanding were 2,058,977 (2,269,624 in 2000) and 2,081,272 (2,288,695 in 2000) respectively for the six month period ending June 30, 2001. During the quarter ended June 30, 2001, the Company paid $98,930 to purchase 12,470 shares of common stock. These shares are recorded as treasury stock at June 30, 2001. Additionally, the Company purchased and retired 424 shares of common stock for $3,560 during the second quarter of 2001. 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. JUNE 30, December 31, 2001 2000 -------- ------------ Raw materials $2,900,131 $2,888,897 Work-in-process 1,464,863 1,541,110 Finished goods 2,010,039 986,369 ---------- ---------- $6,375,033 $5,416,376 Less allowance to reduce carrying value to LIFO basis (598,028) (598,028) --------- ---------- $5,777,005 $4,818,348 ========== ========== 5. Total comprehensive income consisting of net income and foreign currency translation adjustment was $1,527,887 and $1,420,836 for the six months ended June 30, 2001 and June 30, 2000 respectively. 7 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations American Locker Group Incorporated and Subsidiaries FIRST SIX MONTHS 2001 VS FIRST SIX MONTHS 2000 Sales for the first six months of 2001 of $17,943,000 decreased $552,000 or 3% compared to sales of $18,495,000 during the same period in 2000. Plastic locker sales to the United States Postal Service (USPS) totaled $11,940,000 in 2001 compared to $12,963,000 during the first half of 2000. Cluster Box Units (CBUs) sales were $11,263,000 in 2001 compared to $12,286,000 during the first half of 2000. The decrease in sales of CBUs relates to fewer units in total purchased by the USPS compared to the first six months of 2000. Sales of Outdoor Parcel Lockers (OPLs) were $677,000 in both the first six months of 2001 and 2000. Sales of metal, mechanical and electronic lockers, which includes the Company's luggage cart business, were $6,003,000 for the first six months of 2001 compared to $5,532,000 for the first six months of 2000. This increase of $471,000 or 8% relates to price increases, new product introductions, and a general increase in demand across all markets served. On April 15, 2001 the Company was awarded a two-year contract for indefinite quantities of CBUs and OPLs. The contract minimum is one unit, which is solely a legal minimum and not indicative of USPS requirements. The new contract also provides four two-year options to extend the contract at the discretion of the USPS. In the new contract, the Company lowered its CBU prices by 3 to 5%. The Company has received approval from the USPS for a fourth model CBU, The new model, designated the Type I, contains eight mail compartments, two parcel compartments, and one outgoing mail compartment. The Company began shipping the new Type I CBU in June 2001. The USPS also awarded indefinite quantity contracts to two competitors, both of whom produce aluminum CBUs. As noted below, on July 6, 2001, the Company purchased all of the outstanding stock of B.L.L Corporation, one of the entities, which was awarded a contract for aluminum CBUs. The Company believes that the long-term outlook for CBU volume remains favorable in light of the continued USPS commitment to the CBU program and its resulting operating cost reduction benefits. The USPS decision to discontinue the purchase of Neighborhood Delivery and Collection Box Units (NDCBUs) in 1999 has also had a positive impact on the CBU market. The CBU is the modernization of the NDCBU and is an integral part of the USPS delivery cost reduction program identified as Centralized Delivery. As previously disclosed, total CBU demand is influenced by a number of factors over which the Company has no control, including but not limited to: USPS budgets, policies and financial performance, domestic new housing starts, postal rate increases, and the weather as these units are installed outdoors. The Company believes its CBU product line, including the acquired line of aluminum CBUs made by the Company's new subsidiary, B.L.L Corporation, continues to represent the best value when all factors including price, quality of design and construction, long-term durability and service are considered. Cost of products sold as a percentage of sales was 71.0% during the first six months of 2001 compared to 70.6% in the first six months of 2000. Selling, general and administrative costs for the first six months of 2001 decreased $307,000 over 8 the same period in 2000. The decrease primarily relates to decreased selling expenses resulting from the sales decrease and a decrease in advertising expenses. Selling, general and administrative expense as a percent of sales was 16.3% in 2001 compared to 17.4% in 2000. Interest expense in the first half of 2001 was $29,000 compared to $107,000 in the same period in 2000. SECOND QUARTER 2000 VS SECOND QUARTER 1990 Second quarter sales were $9,826,000 down $810,000 or 8% from the same period in 2000. Plastic locker sales of $6,324,000 decreased $1,062,000 or 14% from 2000's second quarter. Sales of metal, mechanical and electronic lockers were $3,502,000 during the second quarter of 2001, $252,000 or 8% higher than 2000. Cost of products sold as a percentage of sales was 71.6% during the second quarter of 2001, up from 70.7% during the second quarter of 2000. Selling, administrative and general expenses were 15.0% of net sales during the second quarter of 2001 compared to 16.1% in the second quarter of 2000. Interest expense in the second quarter of $13,000 decreased from $56,000 in the second quarter of 2000 due to lower average outstanding debt and lower interest rates in 2001 versus 2000. 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 5.70 to 1 at June 30, 2001 and 4.39 to 1 at December 31, 2000, respectively. Working capital, the excess of current assets over current liabilities, was $12,000,000 at June 30, 2001, an increase of $1,294,000 over $10,706,000 at December 31, 2000. Cash provided by operating activities was $549,000 during the first six months of 2001, compared to $1,301,000 provided by operating activities for the same period in 2000. The Company's $3,000,000 line of credit is available to assist in satisfying future working capital needs, if required. The Company anticipates that its requirements for funds for operations and capital expenditures, exclusive of the acquisition described below, will be provided principally from cash generated from future operations. However, if necessary, the Company has a $3,000,000 revolving bank line-of-credit available to assist in satisfying future operating cash needs. As noted below in Part II. Item 5. Other Information, on July 6, 2001 the Company incurred approximately $11,000,000 in additional term indebtedness in connection with the acquisition of the stock of B.L.L. Corporation and related real estate assets. 9 EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" in July 2001. SFAS No. 141, which is effective for all companies as of June 30, 2001, requires the use of the purchase method of accounting for all business combinations initiated after June 30, 2001. SFAS No. 142 requires that existing goodwill and certain intangible assets no longer be amortized, but tested for impairment. SFAS No. 142 will be effective for the Company's 2002 year, except that goodwill established in connection with the acquisition described above, will not be amortized during the remainder of 2001. SFAS No. 142 has no effect on the Company at June 30, 2001, since it does not have any goodwill recorded as of that date. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Forward-looking statements in this report, including without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) the Company's plans, strategies, objectives, expectations, and intentions are subject to change at any time at the discretion of the Company, (ii) the Company's plans and results of operations will be affected by the Company's ability to manage its growth and inventory, and (iii) other risks and uncertainties indicated from time to time in the Company's filings with the Securities and Exchange Commission. PART II. OTHER INFORMATION Item 1. Legal Proceedings On July 30, 2001, the Company received a letter from the New York State Department of Environmental Conservation (the "DEC") advising the Company that it is a potentially responsible party with respect to environmental contamination at a site located in Gowanda, New York, which was sold by the Company to Gowanda Electronics Corp. prior to 1980. As previously reported, the Company was in December 1998 named as a defendant in a lawsuit titled "ROBERTA RAIPORT, ET AL. V. GOWANDA ELECTRONICS CORP. AND AMERICAN LOCKER GROUP, INC." pending in the State of New York Supreme Court, County of Cattaragus. The suit involves the same property. The letter from the DEC states that a Remedial Investigation and Feasibility Study has been conducted at the site and a remediation plan selected. The Company believes that its potential liability with respect to this site, if any, is diminimus. Therefore, based on the information currently available, management does not believe the outcome of this suit will have a substantial impact on the Company's operations or financial condition. 10 Item 5. Other Information On July 6, 2001, the Company entered into and consummated a Stock and Real Estate Purchase Agreement pursuant to which the Company purchased 100% of the outstanding capital stock of B.L.L. Corporation, a privately held Texas corporation, for $9,100,000. $8,140,000 of this amount was paid at closing and $960,000 is payable over three years. The Company also purchased related real estate from the owners of B.L.L. Corporation for cash consideration of $3,500,000. The purchase price was funded with cash on hand and the proceeds of additional term loan borrowings of approximately $11,000,000. See the Report on Form 8-K dated July 12, 2001 filed by the Company for more information on this acquisition. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. None (b) Reports on Form 8-K. The Company filed a Report on Form 8-K dated July 12, 2001 disclosing the acquisition of all of the outstanding capital stock of B.L.L. Corporation and the acquisition of certain related real estate from the owners of B.L.L. Corporation. 11 S I G N A T U R E ----------------- In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN LOCKER GROUP INCORPORATED (Registrant) /s/Edward F. Ruttenberg ----------------------------------------- Edward F. Ruttenberg Chairman and Chief Executive Officer Date: August 8, 2001 -------------- 12