Alpha Pro Tech, Ltd. (NYSE American: APT), a
leading manufacturer of products designed to protect people,
products and environments, including disposable protective apparel
and building products, today announced financial
results
for the three months ended March 31,
2019.
Lloyd Hoffman, President and Chief Executive Officer of Alpha Pro
Tech, commented, “Alpha Pro Tech delivered a 140% increase in net
income and more than doubled our earnings per share, demonstrating
the strength of our diversified business model and our ability to
overcome short-term, weather-related decreases in our Building
Supply segment. We expanded our gross margin slightly, but more
than doubled our income from operations, reflecting expense
management and the absence of legal charges during the quarter.”
Hoffman continued, “It is encouraging to note
that the weather-related decreases in our Building Supply segment
were partially offset by increases in our economy brand synthetic
roof underlayment and an increase in the sales of our premium REX™
Wrap Fortis housewrap line, demonstrating that these new products
are gaining continued market approval. This progress reinforces our
decision to expand the economy brand synthetic roof underlayment
line to include TECHNO SB® 25 and TECHNO SB® ULTRA.”
Net sales
Consolidated sales for the first quarter of 2019
were $12.3 million, compared to $11.4 million for the first quarter
of 2018, an increase of 7.5%, reflecting increased sales in the
Disposable Protective Apparel segment of $1.0 million, partially
offset by modest decreases in sales in the Building Supply
segment.
Sales for the Disposable Protective Apparel
segment (including disposable protective clothing, masks and
shields) increased by $1.0 million, or 21.6%, to $5.8 million,
compared to $4.8 million for the same period of 2018. Previously,
masks and shields were included in a separate segment called
Infection Control. Effective as of the first quarter of 2019, the
Infection Control segment has been combined with the Disposable
Protective Apparel segment. The increase in disposable protective
clothing was primarily due to strong sales growth across all of our
supply chain partners. Sales of masks were affected by a less
severe flu season this year.
Building Supply segment sales decreased by
$171,000, or 2.6%, to $6.5 million for the first quarter of 2019,
compared to $6.7 million for the same period of 2018. This segment
decrease was primarily due to a decrease in sales of premium REX™
synthetic roof underlayment and, to a lesser extent, a decrease in
sales of economy brand housewrap. Unusually severe weather during
the quarter, which impeded construction projects, was a primary
driver of decreased sales.
Gross profit
Gross profit increased by $349,000, or 7.8%, to
$4.8 million for the three months ended March 31, 2019, from $4.5
million for the same period of 2018. The gross profit margin was
39.0% for the three months ended March 31, 2019, compared to 38.9%
for the same period of 2018. Management expects gross profit margin
in 2019 to be similar to 2018.
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
decreased by $206,000, or 5.3%, to $3.7 million for the three
months ended March 31, 2019, from $3.9 million in the first quarter
last year. The decrease was primarily the result of the accrual of
expenses associated with the settlement of a litigation matter for
the three months ended March 31, 2018 that did not recur for the
same period of 2019, partially offset by increased trade show
expenses and employee compensation.
Income from Operations
Income from operations increased by $574,000, or
134.1%, to $1.0 million in the first quarter of 2019, compared to
$428,000 in the first quarter of 2018. The increase was primarily
due to higher gross profit and a decrease in selling, general and
administrative expenses. Income from operations for the three
months ended March 31, 2018 was negatively impacted by the
settlement discussed above. Income from operations as a percentage
of net sales for the three months ended March 31, 2019 was 8.1%,
compared to 3.7% for the same period of 2018.
Net Income
Net income for the first quarter of 2019 was
$1.2 million, or $0.09 per diluted share, compared to net income of
$508,000, or $0.04 per diluted share for the same period of 2018,
representing an increase of $710,000, or 140%. The increase in net
income was due to an increase in income before provision for income
taxes of $861,000, partially offset by an increase in provision for
income taxes of $151,000. Net income for the three months ended
March 31, 2018, would have been higher without the expense
associated with the settlement discussed above. Net income as a
percentage of net sales for the three months ended March 31, 2019
was 9.8%, compared to 4.4% for the same period of 2018.
Balance Sheet
The consolidated balance sheet remained strong
with a cash balance of $4.5 million as of March 31, 2019, compared
to $7.0 million as of December 31, 2018. The decrease in cash was
due to cash used in operating activities of $1.4 million, cash used
in financing activities of $948,000 and cash used in investing
activities of $142,000. Historically, cash on hand is the lowest at
the end of the first quarter of each year, due to the Company’s
Building Supply segment winter buy extended terms program, as well
as prior year accruals that are paid in the first quarter. As such,
management expects cash to increase next quarter. The Company ended
the quarter with working capital of $24.6 million and a current
ratio of 13:1.
Inventory increased by $529,000, or 5.4%, to
$10.4 million as of March 31, 2019, from $9.9 million as of
December 31, 2018. The increase was primarily due to an increase in
inventory for the Building Supply segment, partially offset by a
decrease in inventory for the Disposable Protective Apparel
segment.
Colleen McDonald, Chief Financial Officer,
commented, “During the first quarter of 2019, we repurchased
255,000 shares of common stock at a cost of $1.0 million. We have
$1.7 million remaining for additional stock repurchases based on
the $2 million increase authorized by our Board of Directors on
December 20, 2018. All stock is retired upon repurchase, and future
repurchases are expected to be funded from cash on hand and cash
flows from operating activities.”
The Company currently has no outstanding debt and maintains an
unused $3.5 million credit facility. The Company believes that
current cash balances and the borrowings available under its credit
facility will be sufficient to satisfy projected working capital
needs and planned capital expenditures for the foreseeable
future.
About Alpha Pro Tech, Ltd.
Alpha Pro Tech, Ltd. is the parent company of
Alpha Pro Tech, Inc. and Alpha ProTech Engineered Products, Inc.
Alpha Pro Tech, Inc. develops, manufactures and markets innovative
disposable and limited-use protective apparel products for the
industrial, clean room, medical and dental markets. Alpha ProTech
Engineered Products, Inc. manufactures and markets a line of
construction weatherization products, including building wrap and
roof underlayment. The Company has manufacturing facilities in Salt
Lake City, Utah; Nogales, Arizona; Valdosta, Georgia; and a joint
venture in India. For more information and copies of all news
releases and financials, visit Alpha Pro Tech’s website at
http://www.alphaprotech.com.
Certain statements made in this press release
constitute “forward-looking statements” within the meaning of the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements include any statement that
may predict, forecast, indicate or imply future results,
performance or achievements instead of historical facts and may be
identified generally by the use of forward-looking terminology and
words such as “expects,” “anticipates,” “estimates,” “believes,”
“predicts,” “intends,” “plans,” “potentially,” “may,” “continue,”
“should,” “will” and words of similar meaning. Without limiting the
generality of the preceding statement, all statements in this press
release relating to estimated and projected earnings, cash
balances, margins, costs, expenditures, cash flows, sources of
capital, growth rates, new or expanded products or product lines
and the success of such products or product lines, and future
financial and operating results are forward-looking statements. We
caution investors that any such forward-looking statements are only
estimates based on current information and involve risks and
uncertainties that may cause actual results to differ materially
from the results contained in the forward-looking statements. We
cannot give assurances that any such statements will prove to be
correct. Factors that could cause actual results to differ
materially from those estimated by us include the risks,
uncertainties and assumptions described from time to time in our
public releases and reports filed with the Securities and Exchange
Commission, including, but not limited to, our most recent Annual
Report on Form 10-K. We also caution investors that the
forward-looking information described herein represents our outlook
only as of this date, and we undertake no obligation to update or
revise any forward-looking statements to reflect events or
developments after the date of this press release. Given these
uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual
results.
Company Contact: |
Investor Relations Contact: |
Alpha Pro Tech, Ltd. |
Hayden IR |
Donna Millar |
Cameron Donahue |
905-479-0654 |
651-653-1854 |
e-mail: ir@alphaprotech.com |
e-mail: cameron@haydenir.com |
-- Tables follow --
Condensed Consolidated Balance Sheets
(Unaudited)
|
March 31, |
|
December 31, |
|
|
2019 |
|
2018 (1) |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash |
$ |
4,488,000 |
|
$ |
7,007,000 |
|
Investments |
|
417,000 |
|
|
258,000 |
|
Accounts
receivable, net of allowance for doubtful accounts of $64,000 and
$64,000 as of March 31, 2019 and December 31, 2018 |
|
7,202,000 |
|
|
4,935,000 |
|
Accounts
receivable, related party |
|
837,000 |
|
|
383,000 |
|
Inventories |
|
10,407,000 |
|
|
9,878,000 |
|
Right-of-use assets |
|
668,000 |
|
|
- |
|
Prepaid
expenses |
|
2,697,000 |
|
|
3,999,000 |
|
Total
current assets |
|
26,716,000 |
|
|
26,460,000 |
|
|
|
|
|
|
Property and equipment,
net |
|
3,271,000 |
|
|
3,244,000 |
|
Goodwill |
|
55,000 |
|
|
55,000 |
|
Definite-lived
intangible assets, net |
|
15,000 |
|
|
16,000 |
|
Right-of-use assets,
net of current portion |
|
2,583,000 |
|
|
- |
|
Equity investment in
unconsolidated affiliate |
|
4,757,000 |
|
|
4,480,000 |
|
Total
assets |
$ |
37,397,000 |
|
$ |
34,255,000 |
|
|
|
|
|
|
Liabilities and
Shareholders' Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
743,000 |
|
$ |
578,000 |
|
Accrued
liabilities |
|
632,000 |
|
|
1,342,000 |
|
Lease
liabilities |
|
663,000 |
|
|
- |
|
Total
current liabilities |
|
2,038,000 |
|
|
1,920,000 |
|
|
|
|
|
|
Lease liabilities, net
of current portion |
|
2,632,000 |
|
|
- |
|
Deferred income tax
liabilities, net |
|
141,000 |
|
|
141,000 |
|
Total
liabilities |
|
4,811,000 |
|
|
2,061,000 |
|
Commitments |
|
|
|
|
Shareholders'
equity: |
|
|
|
|
Common
stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
|
|
|
13,281,018 and 13,502,684 shares outstanding as of |
|
|
|
|
|
|
March 31,
2019 and December 31, 2018, respectively |
|
133,000 |
|
|
135,000 |
|
Additional paid-in capital |
|
1,845,000 |
|
|
2,669,000 |
|
Retained
earnings |
|
30,608,000 |
|
|
29,390,000 |
|
Total
shareholders' equity |
|
32,586,000 |
|
|
32,194,000 |
|
Total
liabilities and shareholders' equity |
$ |
37,397,000 |
|
$ |
34,255,000 |
|
|
|
|
|
|
(1) The condensed consolidated balance sheet as of December 31,
2018 has been prepared using information from the audited
consolidated balance sheet as of that date.
Condensed Consolidated Statements of Income
(Unaudited)
|
|
For the Three Months
Ended |
|
|
|
March 31, |
|
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
Net sales |
|
$ |
12,304,000 |
|
$ |
11,442,000 |
|
|
|
|
|
|
|
Cost of goods sold,
excluding depreciation and amortization |
|
|
7,500,000 |
|
|
6,987,000 |
|
Gross
profit |
|
|
4,804,000 |
|
|
4,455,000 |
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
Selling,
general and administrative |
|
|
3,675,000 |
|
|
3,881,000 |
|
Depreciation and amortization |
|
|
127,000 |
|
|
146,000 |
|
Total
operating expenses |
|
|
3,802,000 |
|
|
4,027,000 |
|
|
|
|
|
|
|
Income
from operations |
|
|
1,002,000 |
|
|
428,000 |
|
|
|
|
|
|
|
Other
income: |
|
|
|
|
|
Equity in
income of unconsolidated affiliate |
|
|
277,000 |
|
|
139,000 |
|
Gain on
marketable securities |
|
|
170,000 |
|
|
32,000 |
|
Interest
income, net |
|
|
12,000 |
|
|
1,000 |
|
Total
other income |
|
|
459,000 |
|
|
172,000 |
|
|
|
|
|
|
|
Income
before provision for income taxes |
|
|
1,461,000 |
|
|
600,000 |
|
|
|
|
|
|
|
Provision for income
taxes |
|
|
243,000 |
|
|
92,000 |
|
|
|
|
|
|
|
Net income |
|
$ |
1,218,000 |
|
$ |
508,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share |
|
$ |
0.09 |
|
$ |
0.04 |
|
|
|
|
|
|
|
Diluted earnings per
common share |
|
$ |
0.09 |
|
$ |
0.04 |
|
|
|
|
|
|
|
Basic weighted average
common shares outstanding |
|
|
13,391,992 |
|
|
14,217,919 |
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
|
13,469,497 |
|
|
14,383,005 |
|
|
|
|
|
|
|
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