American Locker Group Incorporated
American Locker Group Incorporated
Sales: $35 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: ALGI
NAIC: 337215 Lockers (Except Refrigerated)
Manufacturing; 337127 Institutional Furniture
Manufacturing; 42144 Other Commercial Equipment
Wholesalers; 333311 Automatic Vending Machine
Manufacturing; 334419 Other Electronic Component Manufacturing
Through its wholly owned subsidiary American Locker Security Systems, Inc., American Locker Group Incorporated ranks as one of the world’s leading supplier of secure locker storage. Fully 70 percent of its business, however, is conducted with the United States Postal Service, for which it supplies mailbox clusters for use in multi-family dwellings. The estate of former CEO Harold Ruttenberg, who died in 1998 at the age of 84, controls 21 percent of American Locker.
Origins of American Locker Group
American Locker Group traces its origins, at least in part, to the U.S. Voting Machine Company, which was founded in 1958 to exploit Thomas Edison’s pioneering invention to ensure honest election results. The company was bought by Pittsburgh-based Rockwell Manufacturing Company and then spun off to shareholders in 1964 and renamed the Automatic Voting Machine Corporation (AVM). Rockwell continued to supply the management team, including executives Lloyd A. Dixon, Sr., and Lloyd A. Dixon, Jr. AVM’s subsidiary company American Locker Group, Inc., was originally incorporated on December 15, 1958. In April 1964 shares of American Locker were distributed to AVM stockholders and American Locker became a publicly held corporation. In its heyday, AVM had 15 divisions, making everything from auto parts and furniture to air-conditioning components.
Management Problems: 1972-73
In August 1972, Lloyd Dixon, Sr., died, just after signing a $19 million contract with the Republic of Venezuela to deliver 10,000 voting machines in time for the 1973 presidential elections. This huge contract was canceled shortly after AVM had borrowed money to fill the order. In an unrelated problem, Lloyd Dixon, Jr., was indicted by a federal grand jury in Buffalo, being charged with bribing Buffalo officials in order to sell them voting machines. He resigned in disgrace on January 10, 1973. He eventually was found not guilty of the bribery charge, but was nonetheless found to have violated Securities and Exchange Commission rules.
The Ruttenberg Era: 1973
Ex-labor union economist Harold J. Ruttenberg, who as Philip Murray’s right-hand man had helped organize the United Steelworkers of America, stepped in to save the day. Ruttenberg had proposed that steelworkers’ wages be tied to increased mill productivity, becoming chief economist and director of research for the union. He later became president of Stardill-Keystone, merging four companies into one, and then helped manage Portsmouth Steel. He was appointed president and chief executive officer of AVM on April 17, 1973, replacing Alvin Dawson.
Ruttenberg began raising needed cash by suspending AVM’s dividends, and by selling off seven divisions over the next two decades, including the voting machines unit, the airport checking locker businesses, the domestic locker concessions, and the steel office furniture division, Signore Inc., which was sold to its employees in 1989 at a $1.7 million loss.
After reorganization, American Locker Group, Inc. was the sole surviving division of the original firm and the nation’s leading maker of storage lockers for business and recreation. Part of the reorganization involved the development of new markets. A key element in the company’s new direction was the successful development of high-quality molded plastic cluster box units that could be built by outside manufacturers for its lucrative U.S. Postal Service contract.
American Locker’s sales offices were centrally located throughout the United States, with general access provided via e-mail through corporate headquarters; international representatives around the world provided expert consultation on product selection, operation, and specific security needs. American Locker’s National Service Center, located in Ellicottville, New York, supplied parts to customers throughout the world. In addition to stocking and supplying parts for virtually all American Locker products, the Service Center also cut keys, repaired locks, assisted customers with problems over the telephone, and, in some areas, provided customers with on-site service.
Lockers were outfitted with rugged self-closing rubber cushioned doors, corner returns, and stainless steel double loop hinges. All modules come factory-assembled in single- to triple-wide tiers containing up to 18 compartments per module. Ease of installation meant that a great number of modules could be installed in minimum time.
Cash Flow Positive in the 1990s
Unlike many publicly traded companies, American Locker operated as a cash flow positive enterprise with shareholder value firmly in the forefront of management’s concerns. With the help of its lucrative Postal Service contract, American Locker’s net income from operations expanded from $472,535 in 1996 to $1.46 million in 1997. At around this time the company adopted a policy of repurchasing shares in order to enhance shareholder value. By the end of 1997, American Locker had repurchased nearly 25 percent of the common shares it had outstanding at the end of 1996, resulting in increased per-share earnings for the year. A four-for-one stock split took place on June 25, 1998, triggering a 50 percent advance in the company’s stock price within five days.
Sales Increase: 1997-98
At the end of the third quarter of 1998, net sales for the preceding nine months were $36.8 million, up over 120 percent from the same period in 1997, with a net income of $3.4 million. Plastic locker sales were up by nearly 200 percent, although sales of metal products were somewhat lower.
End of the Ruttenberg Era: 1998
On August 15, 1998, American Locker announced the death by heart failure of 84-year-old Harold J. Ruttenberg, chairman, CEO, and treasurer. At the time of his death, he owned about 30 percent of the company. On September 3, 1998, the board of directors appointed Ruttenberg’s eldest son, 52-year-old Edward F. Ruttenberg, to replace his father. With the Ruttenberg family still owning approximately 33 percent of the business, Edward Ruttenberg had much incentive to continue where his father left off.
Preparing for the Future
Since 1996 American Locker had been actively pursuing corrective Y2K actions. After assessing its information technology systems in 1997, the company decided to scrap all existing hardware and software. Implementation of the new IT system, which connected to a Novell PC network, was scheduled for early 1999, with the existing IT system running parallel to the new network until it had been fully tested. American Locker also surveyed the company’s entire vendor base during the third quarter of 1998, to verify that its major suppliers were working towards year 2000 compliance, and that reasonable contingency plans were in place to allow uninterrupted production of products to continue.
American Locker Group had maintained sufficient resources and enough capital liquidity to continue the expansion of its operations indefinitely. Indeed, its working capital steadily increased in the late 1990s, with a line of credit also available for contingencies. A “Safe Harbor” statement filed by American Locker, in accordance with the Private Securities Litigation Reform Act, included the company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, projecting that future capital needs could be met primarily through cash proceeds from its own operations.
In February 1999, American Locker was named number three by Business Wire in its list of the top ten 1998 technology stock performance winners. Thanks to the far-seeing efforts of founder Harold Ruttenberg, the company remained well run, both financially and operationally, and was consistently recommended as a “good risk” for savvy investors.
With the motto “Security is our Business/’ American Locker Security Systems, Inc., headquartered in Jamestown, NY, is the world’s premier supplier of secure locker storage. An international company with product lines ranging from classic coin-operated lockers to computer-controlled distribution systems, American Locker currently dominates a sizeable portion of the locker specialty field and is viewed as the industry standard for secure storage around the world.
While ALGI’s prospects for the future seemed bright, the rosy scenario was based almost entirely on maintenance of its lucrative United States Postal Service contracts. Should those agreements change suddenly, or should eager competitors underbid American Locker (which did not have patent protection on its cluster units), or should necessary components and materials suddenly become scarce or unavailable, the outlook would become considerably more clouded. Having laid its financial “eggs” solely in the post office’s “basket,” the company’s future was tied inexorably to USPS concerns. Fortunately for investors, these concerns seemed minimal in 1999, and the company’s current financial basis remained rock solid.
American Locker Security Systems, Inc.; Canadian Locker Company, Ltd.
- U.S. Voting Machine Company is founded.
- American Locker Group is incorporated.
- Business is spun off from Rockwell Manufacturing and renamed Automatic Voting Machine Corporation (AVM).
- Harold J. Ruttenberg becomes new president and CEO and American Locker Group becomes sole surviving corporate entity of AVM.
- Ruttenberg dies and is replaced by his eldest son, Edward F. Ruttenberg; company issues a four-for-one stock split.
“Alvin Dawson, 90, Founded Plastics Company,” Boston Globe, December 11, 1988, p. 83.
“American Locker Chairman, CEO Named,” Dow Jones News Service, September 3, 1998.
“American Locker Chairman Ruttenberg Dies at 84,” Dow Jones Online News, August 18, 1998.
“American Locker Group, Inc.,” Wall Street Journal, June 7, 1996, p. B2.
“American Locker Group Posts $1.2 Million Profit,” Buffalo News, July 25, 1998, p. B12.
“American Locker Group Sells Unit to Employees…,” Dow Jones News Service, January 5, 1990.
“American Locker Group Shares Climb Following 4-for-l Stock Split,” Dow Jones Online News, June 30, 1998.
“American Locker Rescinds Pension Plan Termination,” Dow Jones News Service, September 18, 1987.
Barrett, William P., “Indestructible,” Forbes, February 8, 1999, p. 76.
“The Best 200 Small Companies,” Forbes, November 2, 1998, p. 250.
“Harold J. Ruttenberg (obituary),” New York Times, August 18, 1998, p. B9.
“Harold J. Ruttenberg Labor Leader Turned Entrepreneur,” Pittsburgh Post-Gazette, August 16, 1998, p. B5.
Robinson, David, “American Locker Sees Profits Triple in Third Quarter,” Buffalo News, November 4, 1998, p. B4.
—Robert Reginald and Mary A. Burgess