-----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, ONMKQClObpECpbW6lq6RI5LcbZNX9+IE6PWKBKgC+X2QDyea/8+pSGLo8B9kW6eC 89W1hCLuJWyLh4eTcISmDA== 0000898431-99-000174.txt : 19991102 0000898431-99-000174.hdr.sgml : 19991102 ACCESSION NUMBER: 0000898431-99-000174 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991101 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-00439 FILM NUMBER: 99738756 BUSINESS ADDRESS: STREET 1: 608 ALLEN STREET CITY: JAMESTOWN STATE: NY ZIP: 14701 BUSINESS PHONE: 7166649600 MAIL ADDRESS: STREET 1: 608 ALLEN STREET CITY: JAMESTOWN STATE: NY ZIP: 14701 FORMER COMPANY: FORMER CONFORMED NAME: AVM CORP DATE OF NAME CHANGE: 19850520 10-Q 1 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 SEPTEMBER 30, 1999 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: October 26, 1999 Common Stock $1.00 par value - 2,277,118 Transitional Small Business Disclosure (check one) Yes No X ---- ---- Part I - Financial Information Item 1 - Financial Statements
American Locker Group Incorporated and Subsidiaries Consolidated Balance Sheets SEPTEMBER 30, December 31, 1999 1998 --------------- ------------- ASSETS Current assets: Cash and cash equivalents $2,303,113 $1,188,007 Accounts and notes receivable, less allowance for doubtful accounts (1999 $220,799; and 1998 $216,062) 3,084,584 4,062,802 Inventories 6,075,948 6,312,131 Prepaid expenses 180,144 150,808 Prepaid federal, state and foreign 195,866 0 income taxes Deferred income taxes 501,477 501,477 -------------------------------- Total current assets 12,341,132 12,215,225 Property, plant and equipment: Land 500 500 Buildings 390,715 388,795 Machinery and equipment 9,299,983 8,408,983 -------------------------------- 9,691,198 8,798,278 Less allowances for depreciation and amortization 8,079,198 7,681,632 --------------------------------- 1,611,759 1,116,646 Deferred income taxes 137,645 137,645 --------------------------------- Total assets $14,090,536 $13,469,516 =================================
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Consolidated Balance Sheets SEPTEMBER 30, December 31, 1999 1998 -------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $823,501 $1,574,809 Commissions, salaries, wages and taxes thereon 120,802 639,822 Other accrued expenses 984,265 600,582 Federal, state and foreign income taxes payable 0 82,941 Current portion of long-term debt 200,004 200,000 ------------------------------ Total current liabilities 2,128,572 3,098,154 Long-term obligations: Long-term debt 1,883,321 533,333 Pension benefits 595,021 573,973 ------------------------------ 2,478,342 1,107,306 Stockholders' equity: Common stock, $1 par value: Authorized shares --- 4,000,000 Issued shares - 2,498,768 (2,277,118 outstanding) in 1999 and 2,422,772 (2,422,772) outstanding) in 1998 2,498,768 2,422,772 Other capital 538,455 74,867 Retained earnings 8,982,499 6,976,987 Treasury stock at cost (221,650 shares) (2,367,966) 0 Accumulated other comprehensive loss (168,134) (210,570) --------------------------------- Total stockholders' equity 9,483,622 9,264,056 --------------------------------- Total liabilities and stockholders' equity $14,090,536 $13,469,516 ================================= See accompanying notes.
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American Locker Group Incorporated and Subsidiaries Consolidated Statements of Income NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 --------------------------------- Net sales $25,648,174 $36,817,468 Cost of products sold 18,106,204 26,019,296 --------------------------------- 7,541,970 10,798,172 Selling, administrative and general expenses 4,273,570 5,284,536 --------------------------------- 3,268,400 5,513,636 Interest income 57,290 60,798 Other income--net 195,374 236,483 Interest expense (89,590) (192,739) --------------------------------- Income before income taxes 3,431,474 5,618,178 Income taxes 1,425,962 2,208,367 ================================= Net Income $2,005,512 $3,409,811 ================================= Earnings per share of common stock: Basic $0.84 $1.41 ================================= Diluted $0.82 $1.34 ================================= Dividends per share of common stock: $0.00 $0.00 ================================= See accompanying notes.
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American Locker Group Incorporated and Subsidiaries Consolidated Statements of Income THREE MONTHS ENDED SEPTEMBER 30, 1999 1998 --------------------------------- Net sales $7,761,363 $15,422,935 Cost of products sold 5,433,654 11,317,491 --------------------------------- 2,327,709 4,105,444 Selling, administrative and general expenses 1,447,833 2,113,731 --------------------------------- 879,876 1,991,713 Interest income 27,949 24,667 Other income--net 66,917 104,600 Interest expense (52,958) (62,016) --------------------------------- Income before income taxes 921,784 2,058,964 Income taxes 419,625 825,457 ================================= Net Income $502,159 $1,233,507 ================================= Earnings per share of common stock: Basic $0.22 $0.51 ================================= Diluted $0.22 $0.48 ================================= Dividends per share of common stock: $0.00 $0.00 ================================= See accompanying notes.
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American Locker Group Incorporated and Subsidiaries Consolidated Statements of Cash Flows NINE MONTHS ENDED SEPTEMBER 30, 1999 1998 --------------------------------- OPERATING ACTIVITIES Net Income $2,005,512 $3,409,811 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 426,065 518,785 Deferred income taxes (credits) 0 (140,000) Change in assets and liabilities: Accounts and notes receivable 978,218 (1,811,298) Inventories 236,183 422,194 Prepaid expenses (29,336) (130,764) Pension benefits 21,048 337,500 Accounts payable and accrued expenses (886,645) 1,387,956 Prepaid income taxes 206,193 32,515 ------------------------------ Net cash provided by operating activities 2,957,238 4,026,699 INVESTING ACTIVITIES Purchase of property, plant and equipment (921,178) (367,896) ------------------------------ Net cash used in investing activities (921,178) (367,896) FINANCING ACTIVITIES Net repayment under line of credit 0 (497,250) Additional long term borrowings 1,500,000 0 Debt repayment (150,008) (850,000) Common stock purchased and retired (41) (98) Common stock purchased for treasury (2,367,966) 0 Proceeds from exercise of stock options 54,625 101,609 ------------------------------ Net cash used in financing activities 963,390) (1,245,739) Effect of exchange rate changes on cash 42,436 (53,083) ------------------------------ Net increase (decrease) in cash 1,115,106 2,359,981 Cash and cash equivalents at beginning of period 1,188,007 1,154,045 ============================== Cash and cash equivalents at end of period $2,303,113 $3,514,026 ============================== Supplemental cash flow information: Cash paid during the period for: Interest $89,590 $192,739 ============================== Income Taxes $1,195,233 $2,068,604 ============================== 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 generally accepted accounting principles 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 nine month period ended September 30, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. 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 2,393,062 (2,419,098 in 1998) and 2,437,573 (2,549,251 in 1998) respectively for the nine month period ending September 30, 1999. During the third quarter ended September 30, 1999 the Company paid $79,435 to purchase 10,350 shares of common stock. During the first nine months ended September 30, 1999, the Company paid $2,367,966 to purchase 221,650 shares of common stock. These shares are recorded as treasury stock at September 30, 1999. 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, 1999 1998 Raw materials $2,049,446 $1,763,210 Work-in-process 1,641,580 2,023,542 Finished goods 2,845,431 2,985,888 ---------- ---------- $6,536,457 $6,772,640 Less allowance to reduce value to LIFO basis (460,509) (460,509) ---------- ---------- $6,075,948 $6,312,131 ========== ========== 5. Total comprehensive income consisting of net income and foreign currency translation adjustment was $2,047,948 and $3,356,728 for the nine months ended September 30, 1999 and September 30, 1998 respectively. The Company entered into a new term loan during June 1999, which provides for borrowings up to $3,000,000 at an interest rate at the bank's prevailing prime rate. Interest only payments are due monthly through July 2000, principal is payable over a five year term beginning in August 2000. The outstanding balance on this term loan is $1,500,000 at September 30, 1999. 6. The Company entered into a new term loan during June 1999, which provides for borrowings up to $3,000,000 at an interest rate at the bank's prevailing prime rate. Interest only payments are due monthly through July 2000, principal is payable over a five year term beginning in August 2000. The outstanding balance on this term loan is $1,500,000 at September 30, 1999. 7 Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations American Locker Group Incorporated and Subsidiaries FIRST NINE MONTHS 1999 VS FIRST NINE MONTHS 1998 Sales for the first nine months of 1999 of $25,648,174 were down $11,169,294 or 30.3% compared to sales of $36,817,468 during the same period in 1998. Plastic locker sales to the United States Postal Service (USPS) totaled $18,358,941 compared to $28,063,445 during the first nine months of 1998. Cluster Box Units (CBUs) sales were $17,426,827 compared to $26,499,711 during the first nine months of 1998. The decline in sales of CBUs relates to fewer units in total purchased by the USPS compared to last year's first nine months and also to lower selling prices per unit. The Company has maintained its dominant market share position. However, USPS accumulation of CBU inventories in the third quarter of 1998 and USPS operating losses associated with deferring a postal rate increase for six months resulted in lower CBU purchases in the fourth quarter of 1998 and first nine months of 1999. Based on current information available to the Company, the Company believes that the long term outlook for CBU volumes remains favorable in light of continued USPS commitment to the CBU and its operating cost reduction benefits. Also effective September 15, 1999, the USPS had announced that it discontinued the purchase of NDCBUs. The CBU is a modernization of the NDCBU (which the USPS has purchased for 20 years) and is an integral part of the USPS delivery cost reduction program identified as Centralized Delivery. Therefore, long term CBU volumes are expected to be positively effected by replacement of older NDCBU installations. As previously reported, the USPS has extended the Company's national contract through April 14, 2000. Terms of the extension were finalized on April 14, 1999 and set prices and minimum quantities for the period through April 14, 2000. The Company lowered prices on CBUs by approximately one-third of one percent (0.33%). The contract minimum quantity is one and is solely a legal minimum, not indicative of USPS requirements. 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: Postal budgets, policies, financial performance, domestic new housing starts, and the weather as these units are installed outdoors. The two CBU competitors, each with an aluminum CBU, also received one-year contract extensions. The Company has maintained its dominant market share position and believes our CBU prices are competitive. The Company believes its CBU product line continues to represent the best value when all factors, including price, quality of design and construction, long term durability and service are considered. All other sales, metal and electronic were $7,289,233 for the first nine months of 1999 compared to $8,754,023 for the first nine months of 1998. This decrease of $1,464,790 or 16.7% relates to a general decrease in demand across all markets served by the Company. Cost of products sold as a percentage of sales was 70.6% during the first nine months of 1999 compared to 70.7% in the first nine months of 1998. Selling, general and administrative costs for the first nine months of 1999 decreased $1,010,966 over the same period in 1998. Selling, general and administrative expense as a percent of sales was 16.7% 8 compared to 14.4% during the first nine months of 1998. The increase as a percentage of sales relates primarily to decreased sales volume. Interest expense in the first nine months of 1999 was $89,590 compared to $192,739 in the same period in 1998. This decrease is due to lower average outstanding debt during 1999 versus 1998. THIRD QUARTER 1999 VS THIRD QUARTER 1998 Third quarter sales of $7,761,363 were down $7,661,572 or 49.7% from the same period in 1998. Plastic locker sales of $5,688,378 were down 56.2% or $7,302,404 over 1998's third quarter. Sales of other products, metal and electronic lockers, were $2,072,985 during the third quarter of 1999, 14.8% lower than 1998. Cost of products sold as a percentage of sales was 70.0% during the third quarter of 1999 down from 73.4% during the third quarter of 1998. Selling, administrative and general expenses as a percent of net sales was 18.7% during the third quarter of 1999 compared to 13.7% in the third quarter of 1998. Interest expense in the third quarter of $52,958 decreased from $62,016 in the third quarter of 1998 due to lower average outstanding debt during 1999 versus 1998. LIQUIDITY AND SOURCES OF CAPITAL The Company continues to have adequate resources and liquidity to maintain and expand its operations. Working capital at September 30, 1999 was $10,212,560, up $504,887 from working capital of $9,707,673 at June 30, 1999. The ratio of current assets to current liabilities was 5.79 to 1 at September 30, 1999, as compared to a ratio of 3.94 to 1 at December 31. 1998. Cash provided by operations was $2,957,238 during the first nine months of 1999, compared to $4,026,699 provided by operating activities for the same period in 1998. 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 will be provided principally from cash generated from future operations. The Company also has availability under its $3,000,000 term loan facility. As previously announced, the Company repurchased approximately 211,000 shares of Company common stock in private and open market transactions during the quarter ended June 30, 1999. The Company repurchased approximately 10,350 shares of Company common stock in private and open market transactions during the third quarter ended September, 30, 1999. The purchase of the shares was funded by working capital and a new $3,000,000 term loan facility with the Company's primary bank lender. At present, $1,500,000 of the $3,000,000 facility has been drawn. YEAR 2000 PROJECT UPDATE The Year 2000 (Y2K) issue relates to the fact that many computers, computer programs, and embedded microchips support only two digits to specify a year in the date field. Therefore, if not corrected, these systems may fail or create erroneous results in dealing with matters which refer to dates after December 31, 1999. The Company is aware of the issues and has actively pursued corrective action since late 9 1996. Following is a project status update as of September 30, 1999. A. Assessment Assessment of the Company's Information Technology (IT) systems was completed in 1997. Based on results of the assessment, the Company determined that complete replacement of its IT system was the best course of action. Assessment of the Company's non-IT systems with embedded microchips (security systems, telephones, etc.) began in the first quarter of 1998 and is now complete. No systems required renovation and none are critical to the Company's production process. B. Renovation Renovation by replacement of the Company's IT system is proceeding on schedule. New IT software that is certified Y2K compliant has been purchased, installed, and is operational on a Novell network of personal computers. Novell has now advised its customers that the version in use by the Company is Y2K compliant. Total project expenditures through September 30, 1999 were $230,000 for hardware, software, and implementation consulting fees. This represents over 90% of the total projected project cost. C. Validation Validation and final testing of the new IT system commenced with full-scale Company data starting January 1, 1999 and is completed. D. Implementation Final implementation of the new IT system is completed. E. Third Party Assessment The Company surveyed its entire vendor base during the third quarter of 1998. Final results were compiled during the fourth quarter 1998. The Company has verified that its major vendors are working towards Y2K compliance and that reasonable contingency plans are in place to allow the Company's production of its products to continue. Also, the Company as normal policy, maintains adequate inventory of all but the most expensive components (those supplied by vendors noted above) to safeguard against short term interruptions. The Company has also built and will maintain a large inventory of completed CBUs in order to ensure on-time deliveries to the USPS in spite of any Y2K related interruptions in production. No single customer's failure to address the Y2K issue, other than the United States Postal Service (USPS), would have a material effect on the Company. Worst Case Risks and Contingency Plans In the first nine months of 1999, the Company's contract with the United States Postal Service (USPS) accounted for over 70% of the Company's revenues. Any interruption or slowing of USPS orders or payments as a result of Y2K related issues would have a material adverse effect on the Company's results of operations, liquidity, and/or financial condition. However, through communication with the 10 USPS and assessment of USPS representations related to their Y2K project status, the Company does not anticipate Y2K related interruptions in USPS orders or payments. In the event that a Y2K related slowdown or stoppage in USPS orders does occur, the Company has a contingency plan whereby CBU inventory levels would be reduced and orders for incoming materials would be delayed or cancelled in order to free working cash. The Company's $3,000,000 line of credit, as well as other financial instruments, may be utilized if necessary. The forward looking statements contained in the Year 2000 Project Update should be read in conjunction with the Company's disclosures under the heading "Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995." 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 Item 1. Legal Matters In September 1998 and subsequent months, the Company was named as an additional defendant in over 50 cases pending in state court in Massachusetts. The plaintiffs in each such case assert that the Company manufactured and furnished to various shipyards components containing asbestos during the period from 1948 to 1972 and that injuries resulted from exposure to such products. The assets of this division were sold by the Company in 1973. Based upon investigations conducted by the Company to date, the Company has discovered no evidence that the former division manufactured or supplied any products containing asbestos. Therefore, barring the discovery of contrary evidence, the Company does not anticipate that these actions will have any substantial impact on the Company's operations or financial condition. Defense of these cases has been assumed by the Company's insurance carrier, subject to a customary reservation of rights. In December 1998, the Company was 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 property located in Gowanda, New York which was sold by the Company to Gowanda Electronics Corp. prior to 1980. The plaintiffs, current or former property owners in Gowanda, New York, assert that defendants each operated machine shops at the site during their respective periods of ownership and that as a result of such operation soil and groundwater contamination occurred which has adversely affected the plaintiffs and the value of plaintiffs' properties. The plaintiffs assert a number of causes of action and seek compensatory damages 11 of $5,000,000 related to alleged diminution of property values, $3,000,000 for economic losses and "disruption to plaintiffs' lives," $10,000,000 for "nuisance, inconveniences and disruption to plaintiffs' lives," $25,000,000 in punitive damages, and $15,000,000 to establish a "trust account" for monitoring indoor air quality and other remedies." The Company believes that its potential liability with respect to this site, if any, is de minimis. 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. Defense of this case has been assumed by the Company's insurance carrier, subject to a customary reservation of rights. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27.1 Financial Data Schedule dated September 30, 1999. (b) The Company did not file any reports on Form 8-K during the three months ended September 30, 1999. 12 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: November 1, 1999 --------------------------- 13 EXHIBIT INDEX . Prior Filing or Sequential EXHIBIT NO. EXHIBIT INDEX Page No. Herein ----------- ------------- --------------- 27.1 Financial Data Schedule dated September 30, 1999 14 EX-27 2 FDS AMERICAN LOCKER GROUP INCORPORATED 09/30/99
5 EXHIBIT 27.1 AMERICAN LOCKER GROUP INCORPORATED FINANCIAL DATA SCHEDULE SEPTEMBER 30, 1999 This schedule contains summary financial information extracted from SEC Form 10-Q and is qualified in its entirety by reference to such financial statements. 0000008855 AMERICAN LOCKER GROUP INCORPORATED 1 U.S. DOLLARS 9-MOS DEC-31-1999 DEC-31-1998 SEP-30-1999 1.0000 2,303,113 0 3,084,584 220,799 6,075,948 12,341,132 9,691,198 8,079,439 14,090,536 2,128,572 1,883,321 0 0 2,498,768 6,984,854 14,090,536 25,648,174 25,900,838 18,106,204 18,106,204 0 0 89,590 3,431,474 1,425,962 2,005,512 0 0 0 2,005,512 .84 .82
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