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 and six months ended
June 30, 2019.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Early in the second quarter,
we announced the expansion of our TECHNO family of spunbond based
(SB) products, which products are expected to significantly expand
our market share in the synthetic roof underlayment market. We are
pleased with the early success of our new TECHNO SB® 25 product,
which was a driving force in our 23.2% growth in sales of synthetic
roof underlayment during the second quarter.”
Hoffman continued, “Though sales in our
Disposable Protective Apparel segment were down in the quarter,
sales in that segment are still up year-to-date, and we are
encouraged by the 5.7% increase in sales of disposable protective
clothing during the first six months of 2019 compared to the same
period last year, primarily due to increased sales to our major
international supply chain partner. Year-to-date, income from
operations increased by 11.1%, primarily due to lower expenses, and
net income increased by 51.9%, primarily due to lower expenses and
a gain on marketable securities.”
Net sales
Consolidated sales for the second quarter of
2019 were $11.4 million, compared to $12.1 million for second
quarter of 2018, representing a decrease of 5.7%, reflecting
decreased sales in the Disposable Protective Apparel segment of
$832,000, partially offset by increased sales in the Building
Supply segment of $138,000.
Building Supply segment sales for the second
quarter of 2019 increased by $138,000, or 2.1%, to $6.7 million,
compared to $6.6 million for the same period of 2018. This segment
increase was primarily due to an increase in sales of the
economy TECHNO SB® family brand of synthetic roof underlayment,
partially offset by a decrease in sales of the economy REX™ Wrap
brand of housewrap and a decrease in sales of other woven material.
In the second quarter of 2019, synthetic roof underlayment sales
increased by 23.2%, partially offset by a decrease in housewrap
sales of 8.6% and a decrease in other woven material sales of 14.2%
compared to the same period of 2018. A softening in housing starts
affected our housewrap sales during the second quarter of 2019, and
our other woven material sales were down as a result of our largest
customer in this category having excess inventory and experiencing
a slowdown in orders from their customers.
Sales for the Disposable Protective Apparel
segment for the second quarter of 2019 decreased by $832,000, or
15.0%, to $4,705,000, compared to $5,537,000 for the same period of
2018. This segment decrease was primarily due to a decrease in
sales of disposable protective clothing, partially offset by an
increase in sales of masks and shields. The decrease in sales of
disposable protective clothing was primarily due to decreased sales
to our major international supply chain partner; the second quarter
of 2019 was a challenging comparative quarter in that last year’s
second quarter sales with this partner were a record high.
Consolidated sales for the six months ended June
30, 2019 increased to $23,718,000, from $23,551,000 for the six
months ended June 30, 2018, representing an increase of $167,000,
or 0.7%. This increase consisted of increased sales in the
Disposable Protective Apparel Segment of $200,000, partially offset
by slightly decreased sales in the Building Supply segment of
$33,000.
Building Supply segment sales for the six months
ended June 30, 2019 remained basically flat at $13.2 million,
decreasing by only $33,000, or 0.2%, compared to the same period of
2018. Our synthetic roof underlayment product line includes REX™,
TECHNOply™ and TECHNO SB®, and our housewrap line consists of REX™
Wrap, REX™ Wrap Plus and REX™ Wrap Fortis. This slight Building
Supply segment decrease was primarily due to a decrease in sales of
housewrap of 5.2%, a decrease in sales of other woven material of
6.3% and an increase in rebates, partially offset by an increase in
sales of synthetic roof underlayment of 8.1%, compared to the same
period of 2018. Synthetic roof underlayment sales have increased as
a result of increased sales of the TECHNO family products.
Housewrap sales in the first half of 2019 were negatively affected
by softer U.S. housing starts due in part to unusually severe
weather across many parts of the country. Other woven material
sales were down, as mentioned above, due to lower orders from a
customer that currently has excess inventory and has seen a decline
in its business.
Sales for the Disposable Protective Apparel
segment for the six months ended June 30, 2019 increased by
$200,000, or 1.9%, to $10,510,000, compared to $10,310,000 for the
same period of 2018. This segment increase was primarily due to a
5.7% increase in sales of disposable protective clothing, partially
offset by a decrease in sales of masks and to a lesser extent
shields. The increase in sales of disposable protective clothing
was primarily due to increased sales to our major international
supply chain partner. Mask sales have been affected by a less
severe flu season in 2019.
Gross profit
Gross profit decreased by $613,000, or 13.0%, to
$4,106,000 for the three months ended June 30, 2019, from
$4,719,000 for the same period of 2018. The gross profit margin was
36.0% for the three months ended June 30, 2019, compared to 39.0%
for the same period of 2018. Gross profit margin in the second
quarter of 2019 was affected by a change in product mix in the
Building Supply segment, with significant growth in the economy
line of synthetic roof underlayment, which has lower gross margin.
In addition, both segments were negatively impacted by increased
rebates.
Gross profit decreased by $265,000, or 2.9%, to
$8,909,000 for the six months ended June 30, 2019, from $9,174,000
for the same period of 2018. The gross profit margin was 37.6% for
the six months ended June 30, 2019, compared to 39.0% for the same
period of 2018.
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
decreased by $206,000, or 5.9%, to $3,262,000 for the three months
ended June 30, 2019, from $3,468,000 in the same period last year.
As a percentage of net sales, selling, general and administrative
expenses remained flat at 28.6% in the second quarter of 2019
compared to the same period of 2018. The decrease in selling,
general and administrative expenses for the three-month period was
primarily the result of lower employee compensation and lower
commission on sales of Disposable Protective Apparel segment
products, partially offset by increased foreign exchange
expense.
Selling, general and administrative expenses
decreased by $412,000, or 5.6%, to $6,937,000 for the six months
ended June 30, 2019, from $7,349,000 for the six months ended June
30, 2018. As a percentage of net sales, selling, general and
administrative expenses decreased to 29.2% for the six months ended
June 30, 2019, from 31.2% for the same period of 2018. The decrease
in selling, general and administrative expenses for the six- month
period was primarily the result of the accrual of expenses
associated with a mediated settlement of a litigation matter during
the first quarter of 2018 that did not recur for the same period of
2019.
Income from Operations
Income from operations decreased by $403,000, or
36.4%, to $704,000 in the second quarter of 2019, compared to
$1,107,000 for the same period last year. The decreased income from
operations was primarily due to a decrease in gross profit of
$613,000, partially offset by a decrease in selling, general and
administrative expenses of $206,000 and a decrease in depreciation
and amortization expense of $4,000.
Income from operations increased by $170,000, or
11.1%, to $1,705,000 for the six months ended June 30, 2019,
compared to $1,535,000 for the six months ended June 30, 2018. The
increased income from operations was primarily due to a decrease in
selling, general and administrative expenses of $412,000 and a
decrease in depreciation and amortization expense of $23,000,
partially offset by a decrease in gross profit of $265,000.
Net Income
Net income for the second quarter of 2019 was
$1.0 million, or $0.08 per diluted share, compared to net income of
$959,000, or $0.07 per diluted share, for the same period of 2018,
representing an increase of $51,000, or 5.3%. The net income
increase was due to an increase in income before provision for
income taxes of $86,000, partially offset by an increase in
provision for income taxes of $35,000. Net income as a percentage
of net sales for the second quarter of 2019 was 8.8%, and net
income as a percentage of net sales for the same period of 2018 was
7.9%.
Net income for the six months ended June 30,
2019 was $2.2 million, compared to net income of $1.5 million for
the same period of 2018, representing an increase of $761,000, or
51.9%. The net income increase was due to an increase in income
before provision for income taxes of $948,000, partially offset by
an increase in provision for income taxes of $187,000. Net income
as a percentage of net sales for the six months ended June 30, 2019
was 9.4%, and net income as a percentage of net sales for the same
period of 2018 was 6.2%. Basic and diluted earnings per common
share for the six months ended June 30, 2019 and 2018 were $0.17
and $0.10, respectively.
Balance Sheet
The consolidated balance sheet remained strong
with a cash balance of $5.5 million as of June 30, 2019, compared
to $7.0 million as of December 31, 2018. The decrease in cash was
due to cash used in financing activities of $1,577,000 and cash
used in investing activities of $121,000, partially offset by cash
provided by operating activities of $193,000. Working capital
improved to $25,152,000, representing an increase in working
capital of $612,000 from $24,540,000 as of December 31, 2018. As of
June 30, 2019, the Company’s current ratio (current assets/current
liabilities) was 13:1, compared to a 14:1 current ratio as of
December 31, 2018.
Inventory increased by $991,000, or 10.0%, to
$10.9 million as of June 30, 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 six months ended June 30, 2019, we
repurchased 427,000 shares of common stock at a cost of $1.6
million. We have approximately $1.1 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, margins,
costs, expenditures, cash flows, sources of capital, growth rates
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) |
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
2019 |
|
2018 (1) |
Assets |
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash |
$ |
5,502,000 |
|
$ |
7,007,000 |
|
Investments |
|
735,000 |
|
|
258,000 |
|
Accounts
receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
|
|
$58,000 and
$64,000 as of June 30, 2019 and December 31, 2018 |
|
5,185,000 |
|
|
4,935,000 |
|
Accounts
receivable, related party |
|
837,000 |
|
|
383,000 |
|
Inventories |
|
10,869,000 |
|
|
9,878,000 |
|
Right-of-use
assets |
|
675,000 |
|
|
- |
|
Prepaid
expenses |
|
3,410,000 |
|
|
3,999,000 |
|
|
|
Total current assets |
|
27,213,000 |
|
|
26,460,000 |
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net |
|
3,232,000 |
|
|
3,244,000 |
|
Goodwill |
|
55,000 |
|
|
55,000 |
|
Definite-lived
intangible assets, net |
|
14,000 |
|
|
16,000 |
|
Right-of-use
assets, net of current portion |
|
2,414,000 |
|
|
- |
|
Equity investment
in unconsolidated affiliate |
|
4,841,000 |
|
|
4,480,000 |
|
|
|
Total assets |
$ |
37,769,000 |
|
$ |
34,255,000 |
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
$ |
696,000 |
|
$ |
578,000 |
|
Accrued
liabilities |
|
699,000 |
|
|
1,342,000 |
|
Lease
liabilities |
|
666,000 |
|
|
- |
|
|
|
Total current liabilities |
|
2,061,000 |
|
|
1,920,000 |
|
|
|
|
|
|
|
|
|
Lease liabilities,
net of current portion |
|
2,462,000 |
|
|
- |
Deferred income
tax liabilities, net |
|
141,000 |
|
|
141,000 |
|
|
|
Total liabilities |
|
4,664,000 |
|
|
2,061,000 |
Commitments |
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
|
Common stock, $.01
par value: 50,000,000 shares authorized; |
|
|
|
|
|
|
|
13,109,018 and
13,502,684 shares outstanding as of |
|
|
|
|
|
|
|
June 30, 2019 and
December 31, 2018, respectively |
|
131,000 |
|
|
135,000 |
|
Additional paid-in
capital |
|
1,356,000 |
|
|
2,669,000 |
|
Retained
earnings |
|
31,618,000 |
|
|
29,390,000 |
|
|
|
Total shareholders'
equity |
|
33,105,000 |
|
|
32,194,000 |
|
|
|
Total liabilities and
shareholders' equity |
$ |
37,769,000 |
|
$ |
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 |
|
For the Six Months Ended |
|
|
|
|
|
|
|
June 30, |
|
June 30, |
|
|
|
|
|
|
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
|
$ |
11,415,000 |
|
$ |
12,109,000 |
|
|
$ |
23,718,000 |
|
$ |
23,551,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold, excluding depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
amortization |
|
|
7,309,000 |
|
|
7,390,000 |
|
|
|
14,809,000 |
|
|
14,377,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
4,106,000 |
|
|
4,719,000 |
|
|
|
8,909,000 |
|
|
9,174,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and administrative |
|
|
3,262,000 |
|
|
3,468,000 |
|
|
|
6,937,000 |
|
|
7,349,000 |
|
|
Depreciation and
amortization |
|
|
140,000 |
|
|
144,000 |
|
|
|
267,000 |
|
|
290,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
3,402,000 |
|
|
3,612,000 |
|
|
|
7,204,000 |
|
|
7,639,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
704,000 |
|
|
1,107,000 |
|
|
|
1,705,000 |
|
|
1,535,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income
of unconsolidated affiliate |
|
|
84,000 |
|
|
151,000 |
|
|
|
361,000 |
|
|
290,000 |
|
|
Gain (loss) on
marketable securities |
|
|
439,000 |
|
|
(97,000 |
) |
|
|
609,000 |
|
|
(65,000 |
) |
|
Interest income,
net |
|
|
21,000 |
|
|
1,000 |
|
|
|
34,000 |
|
|
1,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
|
544,000 |
|
|
55,000 |
|
|
|
1,004,000 |
|
|
226,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
|
1,248,000 |
|
|
1,162,000 |
|
|
|
2,709,000 |
|
|
1,761,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
income taxes |
|
|
238,000 |
|
|
203,000 |
|
|
|
481,000 |
|
|
294,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
1,010,000 |
|
$ |
959,000 |
|
|
$ |
2,228,000 |
|
$ |
1,467,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share |
|
$ |
0.08 |
|
$ |
0.07 |
|
|
$ |
0.17 |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per common share |
|
$ |
0.08 |
|
$ |
0.07 |
|
|
$ |
0.17 |
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding |
|
|
13,184,321 |
|
|
14,086,277 |
|
|
|
13,287,583 |
|
|
14,151,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
|
13,208,138 |
|
|
14,127,934 |
|
|
|
13,346,146 |
|
|
14,219,063 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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