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, 1997
[ ] 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
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(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
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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
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(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. $29,295,533.
1
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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 13, 1998: $17,110,899.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 604,695 shares common stock
($1.00 par value) as of March 13, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Stockholders'
Meeting to be held May 19, 1998, are incorporated by reference into Part III.
Transitional Small Business Disclosure Form (check one): / / Yes /X/ No
2
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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 centralized 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.
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 Company has developed a polycarbonate all-weather parcel locker for the
United States Postal Service, and has shipped over 144,000 of the units from
March 1989 through March 10, 1998. Cluster Box Units, i.e. (combination letter
box - CBU), are plastic parcel and letter units 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. Type One and Type Two CBU's are approved and included in the
current contract. As of March 10, 1998, Cluster Box Units with aggregate invoice
prices in excess of $39,000,000 have been shipped to the United States Postal
Service pursuant to the 1994 contract and subsequent contracts. Components of
these units are made by outside vendors and the units are assembled by The
Company's wholly-owned subsidiary, American Locker Security Systems, Inc.
(ALSSI). The units are sold directly by ALSSI to the United States Postal
Service.
The checking lockers are fabricated by Signore Inc. and are marketed in the
United States by ALSSI. Lockers for the Canadian market are manufactured by
Signore Inc. 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.
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Canadian Locker also owns and 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 sold by
ALSSI and Canadian Locker. 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.
Additional information with respect to business segment data, including
significant customers, is disclosed in Note 10 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 Inc. pursuant to the
Manufacturing Agreement, except for the locks which are manufactured by ALSSI.
PATENTS
The Company owns a number of patents, none of which it considers material to the
conduct of its business.
4
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EMPLOYEES
The Company actively employed 120 individuals as of December 31, 1997, in its
businesses of whom 41 are in Canada. The Company considers its relations with
its employees to be satisfactory. None of the Company's employees 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 $48,735, $44,634, and
$148,527 in 1997, 1996 and 1995, 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.
In 1994, the Company received correspondence from the owner of certain real
property which was sold by the Company in 1978 and which was allegedly
contaminated at the time of sale. The correspondence sought, among other things,
contributions for past and future remediation costs. The Company has denied
liability with respect to this matter. No developments occurred with respect to
this matter in 1997.
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. In 1997, the Company and the State of New
York entered into an agreement whereby the State released the Company from any
and all claims for any and all civil liability relating to the site. In return,
the Company contributed $90,000 to reimburse the state for a percentage of its
response costs related to the site. The Company's insurance carrier at the time
of the alleged incident agreed to pay $25,000 of the settlement sum and also
bore the legal costs of the Company's defense.
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 1997, 1996 and 1995, one customer, the United States Postal Service,
accounted for 69.2%, 61.8% and 61.2% of net sales, respectively. The loss of
this customer, or a reduction in its orders, could adversely affect the
Company's operations and financial results.
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EXECUTIVE OFFICERS OF THE COMPANY
YEAR FIRST
ASSUMED
NAME AGE OFFICE HELD WITH COMPANY POSITION
- ------------------------------------------------------------------------------
Harold J. Ruttenberg 83 Chairman of the Board, 1973
Chief Executive Officer,
and Treasurer
Roy J. Glosser 37 President and Chief 1996
Operating Officer
Mr. 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 1995 and has
been employed by the Company since 1992 in operations and product development.
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.
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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.
Jamestown, NY American Locker Security 21,300 * Assembly and
Systems, Inc. Warehouse
Pittsburgh, PA Executive Office 1,000 * Office space
Ellicottville, NY American Locker Security 12,800 Lock manufac-
Systems, Inc. - Lock Shop turing
service and
repair
Toronto, Canadian Locker Company, Ltd. 4,000 * Coin-
Ontario operated
lockers and
locks
Toronto,
Ontario Canadian Locker Company, Ltd. 3,000 * Warehouse
------
TOTAL 79,100
======
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 1998 through 2001.
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."
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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 1997.
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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
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
DIVIDEND
1997 HIGH LOW DECLARED
---- ---- ---- --------
First Quarter $14 $13 $0.00
Second Quarter 14.25 11.25 0.00
Third Quarter 24 12 0.00
Fourth Quarter 28 18.25 0.00
-----
Total $0.00
As of March 13, 1998, the Company had 1,444 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.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - 1997 COMPARED TO 1996
In 1997, consolidated sales of $29,295,533 increased 30% over 1996 sales of
$22,517,589. Income before income taxes rose 90% to $3,454,508 compared to
$1,819,184 in 1996. Sales of the Company's plastic lockers to the United States
Postal Service (USPS) increased 51% from $12,658,767 in 1996 to $19,112,209 in
1997. Revenues from the Company's other, non-plastic locker products increased
3% from $9,858,822 in 1996 to $10,183,324 in 1997.
Consolidated cost of sales as percentage of sales decreased slightly to 70.0% in
1997 from 70.1% in 1996. Gross margin gains due to higher volume efficiencies on
Cluster Box Units (CBU's) were mostly offset by price concessions to the USPS.
The Company's present contract with the USPS covers all three types of CBU's and
the Outdoor Parcel Locker (OPL). The contract was awarded March 27, 1996 for a
period of one year expiring April 14, 1997. On April 16, 1997 the USPS exercised
the first of four one-year options to extend the contract to April 14, 1998.
During 1997, the Company delivered approximately 16,000 CBU's (all three types
combined) and approximately 16,000 OPL's. We anticipate that OPL shipments will
decline as the USPS buys more CBU's, all of which have parcel compartments built
in. As previously announced, the USPS instituted procurement policy that
strictly limits purchase of NDCBU's (the steel predecessor to plastic or
aluminum CBU's) in relation to the new CBU's. Fourth quarter 1997 CBU shipments
increased dramatically due to execution of this policy and the Company's ability
to maintain its dominant market share position.
The USPS has advised the Company that it will exercise the second of four option
years extending the contract to mid-April 1999. Prices and quantities under the
contract renewal have not yet been finalized and are still subject to
negotiation. In February 1998, both aluminum CBU competitors substantially
lowered their prices to slightly below our current prices. The Company has
advised the USPS in previous negotiating meetings that the Company's policy is
to lower our selling prices based on cost reductions that we intend to share
with the USPS. While the effect of this price reduction on the Company's market
share is undetermined at present, 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.
Selling, administrative and general expenses of $5,119,905 during 1997 increased
2.6% from the $4,989,497 in 1996. The increase in selling, administrative and
general expenses relates to increased freight and selling expenses associated
with the increased shipment volume.
Interest income increased to $51,270 in 1997 compared to $43,270 in 1996 due to
improvements in daily cash management procedures and higher balances available
for overnight investment. Total other expense was $56,762 in 1997 as compared to
other income of $248,605 in 1996.
Interest expense decreased to $181,678 in 1997 from $208,827 recorded in 1996.
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RESULTS OF OPERATIONS 1996 TO 1995
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 decrease relates
to the lower volumes and increased depreciation expense resulting from the Type
One and Type Two CBU tooling.
As stated earlier, the Company's present contract with the USPS was awarded
March 27, 1996 and covers OPL's and all three types of CBU's. Under the terms of
this contract, the Company delivered approximately 6,800 CBU's and 12,400 OPL's
through December 31, 1996.
Selling, administrative and general expenses of $4,989,497 during 1996 increased
2.6% from the $4,861,477 in 1995. The 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
note receivable during 1996.
Other income of $248,605 in 1996 increased 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.
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 2.90
to 1 and 2.47 to 1 at the end of 1997 and 1996, respectively. Working capital,
or the excess of current assets over current liabilities, was $6,558,095 at
December 1997 and $5,165,135 at December 31, 1996. The increase in working
capital resulted primarily from the increased business activity with the USPS in
1996 and 1997. In 1997, the Company's operations generated $1,461,266 in cash
from operating activities. Principally, operating cash was utilized to fund the
increase in inventory $296,860, 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 1998.
In 1997, from January through August, the Company continued to make principal
payments on the term loan at the rate of $50,000 per month. In August 1997, the
outstanding balance on this
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loan was paid in full using the proceeds of a new term loan in original
principle amount of $1,000.000, payable at $16,667 per month plus interest.
Additionally, a second term loan for $2,315,000 payable at $38,583 per month
plus interest, was instituted in August 1997. Proceeds from this loan were used
for the repurchase of a large block of Company stock. At December 31, 1997 the
outstanding balances on these loans were $933,333 and $2,160,667, respectively.
Also at December 31, 1997, the Company has an outstanding balance of $850,000
under a $3,000,000 line-of-credit with its principal bank. This $850,000
borrowing was a yearend overnight borrowing to allow for a cash balance in
excess of $1,000,000. The $850,000 was repaid on the first day of business in
January 1998.
The Company's policy is to maintain modern equipment and adequate capacity.
During 1997, 1996 and 1995, the Company expended $520,000, $234,000 and
$1,232,600, respectively, for capital additions. Capital expenditures in 1997
and 1996 were financed principally from operations. In addition, 1998 capital
expenditures are also expected to be financed from operations.
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.
IMPACT OF NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement 130,
"Reporting Comprehensive Income." Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components; however,
adoption in 1998 will have no impact on the Company's net income or
shareholders' equity. Statement 130 requires the foreign currency translation
adjustment, which currently is reported in shareholders' equity, to be included
in other comprehensive income and the disclosure of total comprehensive income.
If the Company adopted Statement 130 for the year ended December 31, 1997, the
total of other comprehensive income items, reported as a component of
shareholders' equity, and comprehensive income (which includes net income) would
be $(34,493) and $2,077,982, respectively, and would be displayed separately.
In June 1997, the Financial Accounting Standards Board issued Statement 131,
"Disclosure About Segments of an Enterprise and Related Information," which is
effective for years beginning after December 15, 1997. Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
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financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company will
adopt the new requirements retroactively during 1998. Management does not expect
that the adoption of this statement will result in the Company reporting
additional segments.
ADDRESSING THE YEAR 2000 ISSUE
The Year 2000 issue relates to the fact that many computers and computer
programs 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 is actively pursuing a course of action
to address them. The Company's basic strategy is to replace its existing
computer system with one that is Year 2000 compatible. The vast majority of
hardware (personal computers and local area network devices) has already been
purchased and installed. The Company plans to select and install the new
operating system (software) prior to the end of 1998.
The Company is not able to project, at this time, the ultimate cost of its Year
2000 project. However, the Company does not expect that the expense to address
the Year 2000 issue will have a material effect on 1998 operations.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations, and intentions are subject to
change at any time at the discretion of the Company, (ii) the Company's plans
and results of operations will be affected by the Company's ability to manage
its growth and inventory, and (iii) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Auditors
Board of Directors and Stockholders
American Locker Group Incorporated and Subsidiaries
We have audited the accompanying consolidated balance sheets of American Locker
Group Incorporated and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/Ernst & Young, LLP
Buffalo, New York
February 18, 1998
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<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,154,045 $ 1,229,222
Accounts and notes receivable, less allowance
for doubtful accounts of $438,784 in 1997 and 4,519,710 3,363,277
$386,309 in 1996
Inventories 3,636,528 3,339,668
Prepaid expenses 89,656 97,917
Prepaid federal, state and foreign income taxes 32,515 28,986
Deferred income taxes 576,861 619,096
------- -------
Total current assets 10,009,315 8,678,166
Property, plant and equipment:
Land 500 500
Buildings 511,649 505,970
Machinery and equipment 8,004,338 7,617,871
--------- ---------
8,516,487 8,124,341
Less allowances for depreciation and
amortization (7,267,199) 6,782,429
---------- ---------
1,249,288 1,341,912
- -
Deferred income taxes 5,122 --
----- ---------
Total assets $11,263,725 $10,020,078
=========== ===========
</TABLE>
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<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
DECEMBER 31
1997 1996
-----------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand note payable $ 850,000 $ 1,125,000
Accounts payable:
Trade 737,467 660,202
Related party 434,565 381,196
------- -------
1,172,032 1,041,398
Commissions, salaries, wages and taxes
thereon 330,956 298,671
Other accrued expenses 435,232 447,962
Current portion of long-term debt 663,000 600,000
------- -------
Total current liabilities 3,451,220 3,513,031
Deferred income taxes -- 44,580
Long-term obligations:
Long-term debt 2,431,000 700,000
Pension benefits 322,521 271,690
Postretirement benefits 139,839 132,630
------- -------
2,893,360 1,104,320
Stockholders' equity:
Common stock, $1 par value:
Authorized shares -- 4,000,000
Issued and outstanding shares --
601,445 in 1997
and 800,024 in 1996 601,445 800,024
Other capital -- 1,027,527
Retained earnings 4,466,780 3,645,183
Foreign currency translation
adjustment (149,080) (114,587)
-------- --------
Total stockholders' equity 4,919,145 5,358,147
--------- ---------
Total liabilities and stockholders' equity $ 11,263,725 $ 10,020,078
============ ============
</TABLE>
See accompanying notes.
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<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
Net sales $ 29,295,533 $ 22,517,589 $ 23,677,940
Cost of products sold 20,533,950 15,791,956 16,207,181
---------- ---------- ----------
8,761,583 6,725,633 7,470,759
Selling, administrative
and general expenses 5,119,905 4,989,497 4,861,477
--------- --------- ---------
3,641,678 1,736,136 2,609,282
Interest income 51,270 43,270 59,716
Other (expense)
income - net (56,762) 248,605 244,769
Interest expense (181,678) (208,827) (166,289)
-------- -------- --------
Income before income
taxes 3,454,508 1,819,184 2,747,478
Income taxes 1,342,033 674,352 956,909
--------- ------- -------
Net income $ 2,112,475 $ 1,144,832 $ 1,790,569
=========== =========== ===========
Earnings per share of
common stock:
Basic $2.90 $1.41 $2.12
----- ----- -----
Diluted $2.82 $1.39 $2.08
----- ----- -----
Dividends per share
of common stock: $0.00 $0.00 $0.00
===== ===== =====
See accompanying notes.
</TABLE>
17
<PAGE>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
FOREIGN
CURRENCY TOTAL
COMMON OTHER RETAINED TRANSLATION STOCKHOLDERS'
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $ 858,876 $ 1,571,970 $ 709,782 $ (134,977) $ 3,005,651
Net income -- -- 1,790,569 -- 1,790,569
Foreign currency -- -- -- 21,262 21,262
translation
Common stock purchased
and retired (40,251 (40,251) (313,165) -- -- (353,416)
shares) ----------- ----------- ----------- ----------- -----------
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 -- -- -- (872) (872)
translation
Common stock purchased
and retired (18,601
shares) (18,601) (231,278) -- -- (249,879)
------- -------- -------- -------- --------
Balance at December 31, 1996 800,024 1,027,527 3,645,183 (114,587) 5,358,147
Net income -- -- 2,112,475 -- 2,112,475
Foreign currency -- -- -- (34,493) (34,493)
translation
Common stock purchased
and retired (198,579
shares) (198,579) (1,027,527) (1,290,878) -- (2,516,984)
-------- ---------- ---------- --------- ----------
Balance at December 31, 1997 $ 601,445 $ -- $4,466,780 $ (149,080) $ 4,919,145
======= ======== ============ ============ ===========
</TABLE>
See accompanying notes.
18
<PAGE>
<TABLE>
<CAPTION>
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 2,112,475 $ 1,144,832 $ 1,790,569
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 600,632 622,392 404,006
Loss (gain) on disposition of
property, plant and equipment 490 (20,224) (27,346)
Deferred income taxes (credits) (7,467) (124,245) 46,000
Retirement benefits 50,831 39,106 58,042
Postretirement benefits 7,209 7,000 9,120
Change in assets and liabilities:
Accounts and notes receivable (1,164,644) 461,028 384,683
Inventories (296,860) (564,015) (670,019)
Prepaid expenses 7,603 46,090 43,541
Accounts payable and accrued
expenses 154,526 (280,424) (138,984)
Income taxes (3,529) (859,005) 811,101
------ -------- -------
Net cash provided by operating
activities 1,461,266 472,535 2,710,713
INVESTING ACTIVITIES
Purchase of property, plant
and equipment (520,358) (234,621) (1,232,604)
Proceeds from sale of property,
plant and equipment 3,702 43,104 32,675
----- ------ ------
Net cash used in investing activities (516,656) (191,517) (1,199,929)
FINANCING ACTIVITIES
Net (repayment) borrowings under
line of credit (275,000) (275,000) 200,000
Additional borrowings 3,315,000 1,000,000 --
Debt repayments (1,521,000) (600,000) (600,000)
Common stock purchased and retired (2,516,984) (249,879) (353,416)
---------- -------- --------
Net cash used in financing activities (997,984) (124,879) (753,416)
Effect of exchange rate
changes on cash (21,803) (7,404) 7,434
------- ------ -----
Net (decrease) increase in cash (75,177) 148,735 764,802
Cash and cash equivalents at
beginning of year 1,229,222 1,080,487 315,685
--------- --------- -------
Cash and cash equivalents at
end of year $ 1,154,045 $ 1,229,222 $ 1,080,487
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 172,953 $ 208,827 $ 160,607
=========== =========== ===========
Income taxes paid $ 1,345,562 $ 1,650,823 $ 59,684
=========== =========== ===========
See accompanying notes.
</TABLE>
19
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 centralized mail and parcel
distribution lockers and locks. The Company sells to customers throughout North
America as well as internationally.
CASH AND CASH EQUIVALENTS
Cash includes currency on hand and demand deposits with financial institutions.
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
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.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
SFAS 109, deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory rates applicable to future
years to differences between the financial statement carrying amounts and the
tax basis of existing assets and liabilities. The effect of a change in tax
rates is recognized in the period that includes the enactment date.
20
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. SFAS 128 did not impact
previously reported earnings per share.
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.
STOCK-BASED COMPENSATION
The Company accounts for stock options granted under its stock-based
compensation plan in accordance with the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), as allowed under
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market value of the Company's stock
at the date of grant over the amount an employee must pay to acquire the stock.
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.
21
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
---------------------------
<S> <C> <C>
Finished products $ 1,041,732 $ 982,888
Work-in-process 1,559,037 1,742,320
Raw materials 1,869,576 1,625,633
--------- ---------
4,470,345 4,350,841
Less allowance to reduce to LIFO basis (833,817) (1,011,173)
-------- ----------
Net inventories $ 3,636,528 $3,339,668
=========== ==========
</TABLE>
In 1996, inventory quantities were reduced resulting in liquidations in LIFO
inventory quantities carried at lower costs in prior years. The effect of this
liquidation was to decrease cost of products sold and increase net income by
approximately $69,000 and $43,700 ($.05 per share). No such LIFO liquidation
occurred in 1997.
3. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
---------------------------
<S> <C> <C>
Note payable to bank,
unsecured, payable through
August 31, 2002, payable at
$38,583 per month plus
interest at prime plus .25%
(8.75% at December 31, 1997) $2,160,667 $ --
Note payable to bank,
unsecured, payable through
August 31, 2002, payable at
$16,667 per month plus
interest at prime plus .15%
(8.65% at December 31, 1997) 933,333 --
Note payable to bank,
unsecured, payable $50,000 per
month plus interest at prime
plus .25% -- 1,300,000
--------- ---------
Total long-term debt 3,094,000 1,300,000
Less current portion 663,000 600,000
------- -------
Long-term portion $2,431,000 $ 700,000
========== ==========
</TABLE>
The credit agreement underlying the notes 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 credit agreement has restrictions on the payment of dividends. The
Company was in compliance with these covenants at yearend.
22
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DEBT (CONTINUED)
Required principal payments on long-term obligations in each of the years
through final maturity are as follows:
1998 $ 663,000
1999 663,000
2000 663,000
2001 663,000
2002 442,000
At December 31, 1997, the Company had outstanding $850,000 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 8.5%, 8.3%, and 8.8% in 1997, 1996
and 1995, respectively.
4. OPERATING LEASES
The Company leases several operating facilities and vehicles under noncancelable
operating leases. Future minimum lease payments consist of the following at
December 31, 1996:
1998 $ 262,652
1999 184,398
2000 187,621
2001 188,935
-------
$ 823,606
===========
Rent expense amounted to $360,352, $351,222, and $410,763 in 1997, 1996 and
1995, respectively.
23
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. 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. Significant
components of the Company's deferred tax assets and liabilities at December 31
are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Deferred tax liabilities:
Property, plant and equipment $ 161,203 $ 178,461
Prepaid expenses 28,899 17,209
------ ------
Total deferred tax liabilities 190,102 195,670
Deferred tax assets:
Postretirement benefits 62,336 60,252
Pension costs 129,009 108,676
Allowance for doubtful accounts 173,278 152,190
Accrued expenses 71,094 52,658
Other employee benefits 47,205 39,951
Inventory costs 274,303 341,599
Other 14,860 14,860
------ ------
Total deferred tax assets 772,085 770,186
------- -------
Net deferred tax assets $ 581,983 $ 574,516
========== ==========
Current deferred tax asset $ 576,861 $ 619,096
Long-term deferred tax asset (liability) 5,122 (44,580)
----- -------
$ 581,983 $ 574,516
========== ==========
</TABLE>
For financial reporting purposes, income before income taxes includes the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
United States $ 3,475,062 $ 1,802,858 $ 2,714,028
Foreign (loss) income (20,554) 16,326 33,450
------- ------ ------
$ 3,454,508 $ 1,819,184 $ 2,747,478
=========== ============ ============
</TABLE>
24
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INCOME TAXES (CONTINUED)
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 1,162,327 $ 670,960 $ 834,400
State 199,227 118,437 117,900
Foreign (12,054) 9,200 33,700
Prior year taxes -- -- (75,091)
--------- ------- -------
Total current 1,349,500 798,597 910,909
Deferred:
Federal (6,347) (105,608) 55,900
State (1,120) (18,637) (9,900)
------ ------- ------
(7,467) (124,245) 46,000
------ -------- ------
$ 1,342,033 $ 674,352 $ 956,909
=========== =========== ===========
</TABLE>
The differences between the federal statutory rate and the effective tax rate as
a percentage of income before taxes are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 34% 34% 34%
State and foreign income taxes 3 4 1
Other permanent differences 2 (1) -
-- -- --
39% 37% 35%
-- -- --
</TABLE>
6. PENSION PLAN
The Company and its subsidiaries have a defined benefit pension plan covering
substantially all employees. Benefits for the salaried employees are based on
specified percentages of the employees annual compensation. The benefits for
hourly employees are based on stated amounts for each year of service. The
plan's 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.
25
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. PENSION PLAN (CONTINUED)
The summary of the components of net periodic pension expense follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during the
period $ 155,750 $ 161,276 $ 193,514
Interest cost on projected benefit
obligation 129,881 120,169 113,188
Return on plan assets (131,333) (127,945) (155,711)
Net amortization and deferral (103,467) (114,394) (92,949)
-------- -------- -------
Net pension expense $ 50,831 $ 39,106 $ 58,042
========== ======== ========
</TABLE>
The following table sets forth the funded status and amounts recognized in the
statements of consolidated financial position at December 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
------------------------
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 1,840,739 $ 1,544,146
Non-vested benefit obligation 31,139 28,541
----------- -----------
Accumulated benefit obligation $ 1,871,878 $ 1,572,687
=========== ===========
Projected benefit obligation for service
rendered to date $ 2,089,481 $ 1,764,414
Plan assets at fair value 1,911,849 1,876,393
----------- -----------
Excess of projected benefit obligations over plan (177,632) 111,979
assets
Unrecognized net loss 381,049 250,095
Unrecognized prior service cost 3,118 1,330
Unrecognized net transition asset (529,056) (635,094)
----------- -----------
Net liability recognized in the statement of
consolidated financial position $ (322,521) $ (271,690)
=========== ===========
</TABLE>
The average discount rate used in determining the actuarial value of the
projected benefit obligations was 7% in 1997 and 7.25% in 1996. The rates of
future years' compensation levels was 5% in 1997 and 5.25% in 1996. The expected
long-term rate of return on plan assets was 7.25% in 1997 and 1996.
Effective January 1, 1998, the Company implemented a Supplemental Executive
Retirement Plan Based upon actuarial calculations, the projected benefit
obligation of the plan is approximately $200,000 and the annual expense will be
approximately $64,000.
26
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the Company's defined benefit plan, 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:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (63,199) $ (59,941)
Fully eligible active plan participants (52,059) (49,375)
Other active plan participants (18,044) (17,114)
------- -------
Accumulated postretirement benefit obligation (133,302) (126,430)
Unrecognized net gain (6,537) (6,200)
------ ------
Accrued postretirement benefit cost $ (139,839) $ (132,630)
========== ==========
</TABLE>
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Service cost $ 1,517 $ 1,474 $ 1,882
Interest cost 7,180 6,971 8,238
Net gain (1,488) (1,445) --
====== ====== =======
Net periodic postretirement benefit cost $ 7,209 $ 7,000 $10,120
======= ======= =======
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligations was 7.25% at December 31, 1997 and 1996.
8. 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
27
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK AND STOCK OPTIONS (CONTINUED)
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, 1997, 1996 and 1995,
there were no stock appreciation rights outstanding under this plan. The Company
has elected to follow Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) and related Interpretations in
accounting for its employee stock options. Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS
123. The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions: risk-free interest rates of 6.0%; dividend yields of 0.0;
volatility factors of the expected market price of the Company's common stock of
.37; and a weighted-average expected life of the option of 5 years. If the fair
value based method accounting provisions of SFAS 123 had been adopted, net
income for 1997 would have been $2,069,635 and basic and diluted earnings per
share would have been $2.85 and $2.76, respectively. The per share fair value of
the options granted in 1997 using these assumptions was $4.76. The 1996 and 1995
net income and earnings per share would not have been impacted.
A summary of the activity in the Company's Employee Option Plan and related
information for the years ended December 31 follows:
28
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL STOCK AND STOCK OPTIONS (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
--------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding -
beginning of year 25,500 $ 3.23 25,500 $ 3.23 25,500 $ 3.23
Granted 15,000 $11.25 -- -- -- --
------ ------ ------ ------ ------ -------
Outstanding -
end of year 40,500 $ 6.20 25,500 $ 3.23 25,500 $ 3.23
------ ------- ------ ------- ------ -------
</TABLE>
The exercise prices for options outstanding as of December 31, 1997 were as
follows: $2.875 - 19,000 shares, $4.25 - 6,500 shares, and $11.25 - 15,000
shares. The weighted-average remaining contractual life of those options is 4.53
years.
9. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share for the years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Numerator:
Net income $2,112,475 $1,144,832 $1,790,569
Denominator:
Denominator for basic earnings per
share - weighted average shares 727,447 808,102 845,350
outstanding
Effect of dilutive securities:
Employee stock options 22,585 18,867 15,232
---------- ---------- ----------
Denominator for diluted earnings
per share - weighted average
shares out- standing and assumed 750,032 826,969 860,582
========== ========== ==========
conversions
Basic earnings per share $ 2.90 $ 1.41 $ 2.12
========== ========== ==========
Diluted earnings per share $ 2.82 $ 1.39 $ 2.08
========== ========== ==========
</TABLE>
29
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BUSINESS SEGMENT DATA
The Company has operations in the United States and Canada. The geographic
distribution of sales, operating income and identifiable assets for 1997, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
UNITED STATES CANADA ELIMINATIONS TOTAL
----------------------------------------------------
1997
- -------
<S> <C> <C> <C> <C>
Revenues from
unaffiliated
customers $27,995,453 $ 1,300,080 $ -- $29,295,533
Transfers between
geographic areas 397,052 -- 397,052 --
----------- ----------- ----------- -----------
Total revenues $28,392,505 $ 1,300,080 $ 397,052 $29,295,533
=========== =========== =========== ===========
Operating income 3,635,05 $ 6,626 $ -- $ 3,641,678
=========== =========== =========== ===========
Identifiable assets $11,209,415 $ 944,075 $ 889,765 $11,263,725
=========== =========== =========== ===========
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 $ -- $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 $ 934,201 $ 888,765 $10,106,185
=========== =========== =========== ===========
</TABLE>
In 1997, 1996 and 1995, the Company had export sales of $1,824,837, $1,123,434,
and
30
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. BUSINESS SEGMENT DATA (CONTINUED)
$1,730,087, respectively. In 1997, 1996 and 1995, export sales represented
approximately 6.2%, 5.0% and 7.3%, respectively of the Company's consolidated
net sales.
Sales to the U.S. Postal Service represented 69.2%, 61.8% and 61.2% of net sales
in 1997, 1996 and 1995, respectively.
At December 31, 1997 and 1996, the Company had secured receivables from
customers under time payment arrangements totaling $181,445 and $306,532,
respectively. At December 31, 1997, the Company had unsecured trade receivables
from customers considered to be distributors of $310,758 (including a United
Kingdom distributor of $188,424) and from governmental agencies of $2,381,643.
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.
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.
31
<PAGE>
<TABLE>
<CAPTION>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a tabulation of the unaudited quarterly results of operations
for the years ended December 31, 1997 and 1996:
1997
---------------------------------------------------------
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 5,283,597 $ 7,722,976 $ 6,906,402 $9,382,558
============ ============= ============= ==========
Gross profit $ 1,617,925 $ 2,333,741 $ 2,044,312 $2,765,545
============ ============= ============= ==========
Net income $ 223,806 $ 553,973 $ 423,887 $ 910,809
============ ============= ============= ==========
Earnings per share - Basic $ .28 $ .70 $ .59 $ 1.33
============ ============= ============= ==========
Earnings per share - Diluted $ .27 $ .68 $ .57 $ 1.30
============ ============= ============= ==========
1996
----------------------------------------------------------
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------------------------------------------------------
<S> <C> <C> <C> <C>
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
============ ============ ============ =============
Earnings per share - Basic $ .24 $ .41 $ .45 $ .31
============ ============ ============ =============
Earnings per share - Diluted $ .23 $ .41 $ .44 $ .31
============ ============ ============ =============
</TABLE>
32
<PAGE>
AMERICAN LOCKER GROUP INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) - (CONTINUED)
The Company's accounting practice for interim periods provides for possible
inventory, insurance, pension and income tax adjustments. Such adjustments
resulted in increasing 1997 fourth quarter pretax income by $177,356 for
inventory costs and increasing net income by $57,586 for income tax expense. A
decrease in fourth quarter pretax income of $58,040 was due to adjustments for
pension costs. In 1996 such adjustments resulted in increasing fourth quarter
pretax income by $103,791 for inventory costs and increasing net income by
$158,682 for income tax expense. A decrease in fourth quarter pretax income in
the amount of $48,141 was due to adjustments for pension costs and receivable
reserves. In 1995, adjustments resulted in increasing fourth quarter pretax
income by $51,000 for insurance and pension costs and increasing net income by
$178,000 for income tax expense. A decrease in 1995 fourth quarter pretax income
of $209,000 was due to adjustments for inventory costs.
12. RELATED PARTIES
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 $3,632,254, $3,489,499 and $3,470,582
for the years ended December 31, 1997, 1996 and 1995, 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 $114,004, $90,084 and $98,571 of fabricated parts from Rollform of
Jamestown, Inc. in 1997, 1996 and 1995, respectively, at prices that the Company
believes are at arms length.
13. 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 a site suspected to have some
form of environmental contamination. The Company believes that it bears no
liability for this site.
33
<PAGE>
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 1997 or 1996.
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 1997 -
None.
34
<PAGE>
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
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 17, 1998
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 17, 1998
- ------------------------
Harold J. Ruttenberg Executive Officer,
Treasurer, Principal
Accounting Officer
and Director
/S/ ROY J. GLOSSER President, Chief March 17, 1998
- ------------------------
Roy J. Glosser Operating Officer
and Director
Director March __, 1998
- ------------------------
Thomas Phillips Johnson
/S/ ALAN H. FINEGOLD Director March 17, 1998
- ------------------------
Alan H. Finegold
/S/ THOMAS LYNCH, IV Director March 17, 1998
- ------------------------
Thomas Lynch, IV
/S/ JAMES E. RUTTENBERG Director March 17, 1998
- ------------------------
James E. Ruttenberg
/S/ EDWARD F. RUTTENBERG Director March 17, 1998
- ------------------------
Edward F. Ruttenberg
35
<PAGE>
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]
<PAGE>
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.
10.15 Modification #MO3 to USPS Exhibits to Form 10QSB
Contract #072368-96-B-0741 dated for the quarter ended
April 16, 1997 March 31, 1997
10.16 First Amendment dated May 20, Exhibits to Form 10QSB
1997 to Agreement dated as of for the quarter ended
May 21, 1996 between American June 30, 1997
Locker Group Incorporated and
Edward F. Ruttenberg
10.17 Fourth Amendment to Manufacturing Exhibits to Form 10QSB
Agreement dated as of May 20, for the quarter ended
1997 between American Locker June 30, 1997
Security Systems, Inc. and
Signore, Inc.
<PAGE>
10.18 Amendment dated August 22, 1997 Exhibit to Form 10QSB
to Corporate Term Loan Agreement for the quarter ended
dated August 30, 1991 between September 30, 1997
American Locker Group
Incorporated and Manufacturers
and Traders Trust Company
10.19 Modification M05 to USPS Contract Exhibit to Form 10QSB
#072368-96-B-0741, dated for the quarter ended
October 9, 1997, which replaces September 30, 1997
steel pedestals with aluminum
pedestals for American Locker
Outdoor Parcel Lockers
10.20 Modification M06 to USPS Contract Exhibit to Form 10QSB
#072368-96-B-0741, dated for the quarter ended
October 23, 1997 regarding prices September 30, 1997
and minimum quantities through
April 14, 1998
10.21 Form of American Locker Group Page ________
Incorporated Supplemental
Executive Retirement Benefit
Plan
22.1 List of Subsidiaries Page ________
27.1 Financial Data Schedule Page ________
<PAGE>
38
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
JURISDICTION OF VOTING SECURITIES
NAME 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)
Ltd.
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.
39
Exhibit 10.21
AMERICAN LOCKER GROUP INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I. PURPOSE OF THE PLAN
The purposes of the American Locker Group Incorporated Supplemental
Executive Retirement Plan are to recognize the substantial contributions to the
success and profitability of American Locker Group Incorporated (the "Company")
made by certain executive level employees who have served the Company for many
years and, thereby, to promote and maintain the profitability of the Company by
attracting and retaining executives of outstanding competence.
ARTICLE II. DEFINITIONS
In this Plan, the following words and phrases shall have the
following meanings:
2.01 "ACTUAL RETIREMENT" shall mean the date upon which the Eligible
Executive ceases (for reasons other than death) all active employment with the
Company.
2.02 "BOARD" shall mean the Board of Directors of the Company.
2.03 "CHANGE OF CONTROL" shall mean a change in ownership or
control of the Company such that:
(i) any "person" as such term is used in Sections 13(d) and
14(d) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, or any Company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act
whether or not the Company is then subject to the Exchange Act), directly
or indirectly, of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company's then
outstanding securities; or
(ii) during any period of two (2) consecutive years (not
including any period prior to the execution of this Trust Agreement) there
shall cease to be a majority of
<PAGE>
the Board comprised as follows: individuals who at the beginning of such
period constituted the Board and any new director(s) whose election by the
Board or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved; or
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, the
stockholders of the Company approve a plan of complete liquidation of the
Company, or the Company enters into an agreement for the sale or other
disposition of all or substantially all of the Company's assets, in a
single transaction or a series of related transactions, or the Company
otherwise disposes of such assets.
2.04 "COMMITTEE" shall mean a committee of no less than three
persons appointed by the Board to administer this Plan; provided, however, in
the event the Board, in its discretion, has not or does not appoint a Committee,
or in the event that the members of such Committee have resigned or are unable
to serve for any reason, "Committee" shall mean the Board of Directors; and
provided further, no person who has been designated as an Eligible Executive
shall be permitted to take part in the deliberations of the Committee with
regard to a determination of his or her participation in or benefits under this
Plan.
2.05 "COMPANY" shall mean American Locker Group Incorporated, a
Delaware corporation, with its principal place of business in Jamestown, New
York.
2.06 "ELIGIBLE EXECUTIVE" shall mean an officer or key employee of
the Company (or of a corporation the majority of the stock of which is owned by
the Company) who is designated as an Eligible Executive by the Board and who
acknowledges and agrees in writing to be bound by the terms and conditions of
the Plan. No director who is not or was not also an employee may become an
Eligible Executive.
2.07 "HEALTH BENEFIT" shall mean an insurance arrangement which
supplements Medicare, if such arrangement is then offered by an insurance
company licensed to do business in any state in the United States.
2.08 "PLAN" shall mean this American Locker Group Incorporated
Supplemental Executive Retirement Plan.
<PAGE>
2.09 "SPOUSE" shall mean the person to whom the Eligible Employee is
married at the time of his or her death.
2.10 "SPOUSE BENEFIT" is a monthly amount equal to 50% of the amount
of an Eligible Employee's Supplemental Benefit payable to the Eligible
Employee's Spouse for the Spouse's life commencing with the first day of the
month next following the Eligible Employee's death and continuing until the
first day of the month immediately preceding the death of the Spouse.
2.11 "SUPPLEMENTAL BENEFIT" shall mean a benefit payable in a
monthly amount determined by the Board of Directors at the time an Eligible
Employee is designated as eligible to participate in this Plan for the life of
the Eligible Executive on the first day of each month commencing with the month
in which the earlier of the events described in Section 4.1 occurs and ending
with the month in which the Eligible Executive's death occurs.
ARTICLE III. ELIGIBILITY TO PARTICIPATE
An executive employee of the Company shall be entitled to
participate in this Plan only if he or she (i) is designated as an Eligible
Executive under this Plan by the Board of Directors in a resolution duly
adopted, (ii) the resolution of the Board of Directors designating the Eligible
Employee sets forth the amount of the Supplemental Benefit payable to the
Eligible Employee or a formula or other method of determining the Supplemental
Benefit payable to the Eligible Employee, (iii) is notified in writing of the
Board's resolution and of the terms and conditions of the Plan and (iv) agrees
in writing, in a form acceptable to the Committee, to be bound by the terms and
conditions of this Plan. The Committee shall cause each person whose
recommendation is accepted to be notified in writing of his or her eligibility
to participate in the Plan and to be supplied with a written copy of this Plan
as then in effect. Except with respect to employees designated as Eligible
Executives in accordance with this Article III, no employee and no person
claiming through an employee shall have any right to any benefits under this
Plan.
ARTICLE IV. BENEFITS UNDER THE PLAN
4.01 BENEFIT PAYABLE TO THE ELIGIBLE EXECUTIVE.
Commencing with the earlier of a Change in Control or the Eligible
Executive's Actual Retirement, the Company shall pay or cause to be paid to the
Eligible Executive the Supplemental Benefit and shall cause the Eligible
Executive and the Eligible Executive's dependents, if any, to be covered under
the Health Benefit for the life of the Eligible Employee. 4.02 BENEFIT PAYABLE
TO SPOUSE. If the Spouse survives the Eligible Executive, the Company shall pay
to the Spouse the Spouse Benefit and shall cause the Spouse and the Spouse's
dependents, if any, to be covered under the Health Benefit for the life of the
Spouse. 4.03 CESSATION OF COMPANY OBLIGATION. Upon the death of the later to die
of the Eligible Executive and the Spouse, the Company's obligation with respect
to an Eligible Executive shall cease and no amount shall be payable under this
Plan to any other person.
ARTICLE V. MISCELLANEOUS
5.01 ADMINISTRATION.
This Plan shall be administered by the Committee which shall have
all powers and authority necessary to interpret the Plan and take any action the
Committee, in its collective discretion, deems necessary or appropriate. The
determinations and action of the Committee shall be final and binding upon the
Company and each Eligible Executive.
5.02 WITHHOLDING.
To the extent amounts payable hereunder are determined by the
Company in good faith to be subject to federal, state or local income or other
tax, the Company may withhold from each such payment an amount necessary to meet
the payor's obligation under the applicable federal, state or local law.
5.03 NO SEPARATE FUND.
The amounts payable under this Plan are payable from the general
assets of the Company and no special fund or arrangement is intended to be
established hereby nor shall the Company be required to earmark, place in trust
or otherwise segregate assets with respect to this Plan or any benefits
hereunder. In the event any amount becomes payable under this Plan, the payee or
potential payee of such amount shall have rights no greater than the rights of a
general creditor of the Company.
5.04 GOVERNING LAW.
This Plan shall be construed under the laws of the Commonwealth of
Pennsylvania, without regard to its principles of conflict of laws.
<PAGE>
5.05 FUTURE EMPLOYMENT.
Eligibility to participate in this Plan shall not be construed as
providing to any Eligible Executive the right to be retained in the employment
of the Company.
5.06 NO PLEDGE OR ATTACHMENT.
No benefit which is or may become payable under this Plan shall be
subject to any anticipation, alienation, sale, transfer, pledge, encumbrance or
hypothecation or subject to any attachment, levy or similar process and any
attempt to effect any such action shall be null and void.
5.07 AMENDMENT AND TERMINATION; EFFECT ON BENEFITS.
This Plan may not be terminated until all benefits payable to or
with respect to each Eligible Employee have been paid in full. No amendment or
purported amendment to this Plan shall have the effect of reducing or
eliminating an benefit accrued hereunder as of the date of such amendment or
causing any Eligible Employee (or his Spouse) to cease to be eligible to receive
benefits hereunder. This Plan may not be amended or terminated (except to
increase benefits hereunder) after the earliest to occur of the following:
(a) the Actual Retirement of the Executive;
(b) the death of the Eligible Executive; or
(c) a Change in Control of the Company.
<PAGE>
ARTICLE VI. EXECUTION
To record the due adoption of this Plan, the Company has caused its
duly authorized officer to execute the Plan, for and on behalf of the Company,
as of the 1st day of January, 1998.
AMERICAN LOCKER GROUP INCORPORATED
By: /S/ROY J. GLOSSER
---------------------
Roy J. Glosser
Title: President and Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
AMERICAN LOCKER GROUP INCORPORATED
FINANCIAL DATA SCHEDULE
DECEMBER 31, 1997
This schedule contains summary financial information extracted from SEC Form
10-KSB and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000008855
<NAME> AMERICAN LOCKER GROUP INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-START> JUN-30-1997
<PERIOD-END> DEC-30-1997
<EXCHANGE-RATE> 1
<CASH> 1,154,045
<SECURITIES> 0
<RECEIVABLES> 4,519,710
<ALLOWANCES> 438,784
<INVENTORY> 3,636,528
<CURRENT-ASSETS> 10,009,315
<PP&E> 8,516,487
<DEPRECIATION> 7,267,199
<TOTAL-ASSETS> 11,263,725
<CURRENT-LIABILITIES> 3,451,220
<BONDS> 2,431,000
0
0
<COMMON> 601,445
<OTHER-SE> 4,317,700
<TOTAL-LIABILITY-AND-EQUITY> 11,263,725
<SALES> 29,295,533
<TOTAL-REVENUES> 29,290,041
<CGS> 20,533,950
<TOTAL-COSTS> 20,533,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,678
<INCOME-PRETAX> 3,454,508
<INCOME-TAX> 1,342,033
<INCOME-CONTINUING> 2,112,475
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,112,475
<EPS-PRIMARY> 2.90
<EPS-DILUTED> 2.82
</TABLE>
