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 nine month periods ended September 30, 2018.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Increased sales in the third
quarter were led by modest growth in our Disposable Protective
Apparel and Infection Control segments due to increased sales to
our national distributors. The drop in housing starts in September,
which we believe was influenced by Hurricane Florence, was a drag
on sales in our Building Supply segment. However, we expect growth
of our housewrap products to pick up in the coming quarters.
Year-to-date, our top-line growth of 4.6% is growing at a faster
pace than the overall economy, and our disciplined approach to cost
and inventory management has enabled us to grow our income from
operations by 18%.”
Hoffman continued, “Operating and net income
were up substantially on a modest increase in revenue in the third
quarter of 2018, primarily as a result of favorable adjustments
related to recovery efforts from the Company’s former litigation
counsel subsequent to the settlement of a litigation matter. While
we are pleased with the impact to our financial results for the
third quarter, the operating results of our business are clearer to
evaluate on a year-to-date basis, given the legal settlement
expense recorded in the first quarter and subsequent recovery
recorded in the third quarter.”
Net sales
Consolidated sales for the third quarter of 2018
were $12.1 million, compared to $12.0 million for the third quarter
of 2017. The increase was primarily due to a 6.6% increase in
Infection Control segment sales and a 2.0% increase in the
Disposable Protective Apparel segment sales, which was partially
offset by a 1.4% decrease in sales in the Building Supply
segment.
Building Supply segment sales for the three
months ended September 30, 2018 decreased by 1.4% to $7.0 million,
compared to $7.1 million for the same period of 2017. The sales mix
of the Building Supply segment for the three months ended September
30, 2018 was 44% for synthetic roof underlayment, 42% for housewrap
and 14% for other woven material. This compared to 48% for
synthetic roof underlayment, 42% for housewrap and 10% for other
woven material for the third quarter of 2017.
Sales for the Disposable Protective Apparel
segment for the three months ended September 30, 2018 increased by
$77,000, or 2.0%, to $3.9 million, compared to $3.8 million for the
same period of 2017.
Infection Control segment sales for the three
months ended September 30, 2018 increased by $75,000, or 6.6%, to
$1.2 million, compared to $1.1 million for the same period of
2017.
Consolidated sales for the nine months ended
September 30, 2018 increased 4.6% to $35.7 million, up from $34.1
million for the same period of 2017. The increase consisted of
increased sales in the Building Supply segment of 4.8%, increased
sales in the Disposable Protective Apparel segment of 5.8% and
increased sales in the Infection Control segment of 0.6%.
Building Supply segment sales for the first nine
months of 2018 increased by $922,000, or 4.8%, to $20.2 million,
compared to $19.3 million for the same period of 2017. The increase
was primarily due to an increase in sales of housewrap and an
increase in sales of other woven material, partially offset by a
decrease in sales of synthetic roof underlayment.
Sales for the Disposable Protective Apparel
segment for the nine months ended September 30, 2018 increased by
$628,000, or 5.8%, to $11.5 million, compared to $10.9 million for
the same period of 2017. The increase was primarily due to
increased sales to the Company’s major international supply chain
partner, as well as national and regional distributors.
Infection Control segment sales for the nine
months ended September 30, 2018 increased by $23,000, or 0.6%, to
$3.89 million, compared to $3.87 million for the same period of
2017.
Gross profit
Gross profit for the third quarter of 2018
decreased by 2.7% to $4.6 million, or 37.9% gross profit margin,
compared to $4.7 million, or 39.1% gross profit margin, for the
same period of 2017.
Gross profit for the nine months ended September
30, 2018 increased by 2.0% to $13.8 million, compared to $13.5
million for the same period of 2017. The gross profit margin was
38.6% for the nine months ended September 30, 2018, compared to
39.6% for the same period of 2017. Management expects gross profit
margin to be reduced for the full year of 2018 but still to be in
the high thirty percent range.
Selling, general and administrative
expenses
Selling, general and administrative expenses
decreased by $774,000, or 22.4%, to $2.7 million for the third
quarter of 2018, compared to $3.5 million for the same period of
2017. The decrease was primarily the result of recovery efforts
from the Company’s former litigation counsel subsequent to the
settlement of a litigation matter, as well as decreased overall
employee compensation expense and lower general office expenses as
compared to the same period of 2017.
Selling, general and administrative expenses
decreased by $245,000, or 2.4%, to $10.0 million for the nine
months ended September 30, 2018, down from $10.3 million for the
same period of 2017. The decrease was primarily due to an overall
decrease in employee compensation expense.
Income from Operations
Income from operations increased by $654,000, or
58.7%, to $1,769,000 for the three months ended September 30, 2018,
compared to $1,115,000 for the three months ended September 30,
2017. Income from operations for the third quarter of 2018 was
positively affected by the legal recovery mentioned above.
Income from operations increased by $507,000, or
18.1%, to $3,305,000 for the nine months ended September 30, 2018,
compared to $2,798,000 for the nine months ended September 30,
2017. The increase in income from operations of 18.1% was primarily
due to an increase in gross profit and a decrease in overall
employee compensation expense.
Net income
Net income increased for the third quarter of
2018 to $1.5 million, compared to $1.1 million for the same period
of 2017, an increase of $436,000, or 39.5%. Net income as a
percentage of net sales for the third quarter of 2018 was 12.7%,
compared to 9.2% for the third quarter of 2017. Basic and diluted
earnings per common share for the third quarters of 2018 and 2017
were $0.11 and $0.07, respectively.
Net income for the nine months ended September
30, 2018 was $3.0 million, compared to $2.5 million for the same
period of 2017, an increase of 22.4%. The increase in net income
was due to an increase in income from operations of $507,000 and a
decrease in provision for income taxes of $415,000, partially
offset by a decrease in other income of $372,000, primarily due to
the gain on sale of property in the third quarter of 2017 that was
not repeated in 2018. Net income as a percentage of net sales for
the nine months ended September 30, 2018 was 8.4%, and net income
as a percentage of net sales for the same period of 2017 was 7.2%.
Basic and diluted earnings per common share for the nine months
ended September 30, 2018 and 2017 were $0.21 and $0.16,
respectively.
Balance Sheet
The consolidated balance sheet remained strong
with a cash balance of $6.8 million as of September 30, 2018,
compared to $8.8 million as of December 31, 2017. The decrease in
cash was due to cash used in financing activities of $2.6 million,
primarily from the repurchase of common stock, and cash used in
investing activities of $409,000, partially offset by cash provided
by operating activities of $1.1 million. The Company ended the
third quarter of 2018 with working capital of $24.5 million and a
current ratio of 15:1.
Inventory decreased by $897,000, or 8.8%, to
$9.4 million as of September 30, 2018, down from $10.2 million as
of December 31, 2017. The decrease was primarily due to a decrease
in inventory for the Building Supply segment of $552,000, or 12.1%,
to $4.0 million and a decrease in inventory for the Disposable
Protective Apparel segment of $418,000, or 12.1%, to $3.0 million,
partially offset by an increase in inventory for the Infection
Control segment of $73,000, or 3.3%, to $2.3 million.
Colleen McDonald, Chief Financial Officer,
commented, “At the end of the third quarter of 2018, we had $1.45
million available for additional stock purchases under our stock
repurchase program. During the nine months ended September 30,
2018, we repurchased 793,000 shares of common stock at a cost of
$2.8 million, bringing the program total to 16,997,007 shares of
common stock repurchased at a cost of $31.8 million since the
program’s inception. 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.
Condensed Consolidated Balance Sheets
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
|
|
|
|
|
2018 |
|
2017 (1) |
Assets |
|
|
|
Current
assets: |
|
|
|
|
Cash |
$ |
6,823,000 |
|
$ |
8,763,000 |
|
|
Investments |
|
289,000 |
|
|
343,000 |
|
|
Accounts
receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
$70,000 and
$83,000 as of September 30, 2018 and December 31, 2017 |
|
5,763,000 |
|
|
4,597,000 |
|
|
Accounts
receivable, related party |
|
495,000 |
|
|
361,000 |
|
|
Inventories |
|
9,352,000 |
|
|
10,249,000 |
|
|
Prepaid
expenses |
|
3,499,000 |
|
|
2,665,000 |
|
|
|
|
Total
current assets |
|
26,221,000 |
|
|
26,978,000 |
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net |
|
3,158,000 |
|
|
3,158,000 |
|
Goodwill |
|
55,000 |
|
|
55,000 |
|
Definite-lived intangible assets, net |
|
17,000 |
|
|
21,000 |
|
Deferred
income tax assets |
|
19,000 |
|
|
19,000 |
|
Equity
investment in unconsolidated affiliate |
|
4,286,000 |
|
|
3,893,000 |
|
|
|
|
Total
assets |
$ |
33,756,000 |
|
$ |
34,124,000 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
646,000 |
|
$ |
1,236,000 |
|
|
Accrued
liabilities |
|
1,072,000 |
|
|
1,565,000 |
|
|
|
|
Total
current liabilities |
|
1,718,000 |
|
|
2,801,000 |
|
|
|
|
|
|
|
|
|
|
|
Commitments |
|
|
|
Shareholders' equity: |
|
|
|
|
Common
stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
|
|
13,629,583
and 14,290,749 shares outstanding as of |
|
|
|
|
|
September
30, 2018 and December 31, 2017, respectively |
|
136,000 |
|
|
143,000 |
|
|
Additional
paid-in capital |
|
3,130,000 |
|
|
5,415,000 |
|
|
Accumulated
other comprehensive loss |
|
- |
|
|
(458,000 |
) |
|
Retained
earnings |
|
28,772,000 |
|
|
26,223,000 |
|
|
|
|
Total
shareholders' equity |
|
32,038,000 |
|
|
31,323,000 |
|
|
|
|
Total
liabilities and shareholders' equity |
$ |
33,756,000 |
|
$ |
34,124,000 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The
condensed consolidated balance sheet as of December 31, 2017 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 Nine Months
Ended |
|
|
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
|
2018 |
|
2017 |
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
12,104,000 |
|
$ |
12,049,000 |
|
$ |
35,655,000 |
|
|
$ |
34,082,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
goods sold, excluding depreciation |
|
|
|
|
|
|
|
|
and
amortization |
|
7,519,000 |
|
|
7,337,000 |
|
|
21,896,000 |
|
|
|
20,589,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
4,585,000 |
|
|
4,712,000 |
|
|
13,759,000 |
|
|
|
13,493,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative |
|
2,676,000 |
|
|
3,450,000 |
|
|
10,024,000 |
|
|
|
10,269,000 |
|
Depreciation and amortization |
|
140,000 |
|
|
147,000 |
|
|
430,000 |
|
|
|
426,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
expenses |
|
2,816,000 |
|
|
3,597,000 |
|
|
10,454,000 |
|
|
|
10,695,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
1,769,000 |
|
|
1,115,000 |
|
|
3,305,000 |
|
|
|
2,798,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income: |
|
|
|
|
|
|
|
|
Equity in
income of unconsolidated affiliate |
|
103,000 |
|
|
105,000 |
|
|
393,000 |
|
|
|
339,000 |
|
Gain on
sale of property |
|
- |
|
|
385,000 |
|
|
- |
|
|
|
385,000 |
|
Realized
gain on sales of marketable securities |
|
3,000 |
|
|
- |
|
|
3,000 |
|
|
|
- |
|
Unrealized
gain (loss) on marketable securities |
|
22,000 |
|
|
- |
|
|
(43,000 |
) |
|
|
- |
|
Interest
income, net |
|
1,000 |
|
|
1,000 |
|
|
2,000 |
|
|
|
3,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income |
|
129,000 |
|
|
491,000 |
|
|
355,000 |
|
|
|
727,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision
for income taxes |
|
1,898,000 |
|
|
1,606,000 |
|
|
3,660,000 |
|
|
|
3,525,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
359,000 |
|
|
503,000 |
|
|
653,000 |
|
|
|
1,068,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
$ |
1,539,000 |
|
$ |
1,103,000 |
|
$ |
3,007,000 |
|
|
$ |
2,457,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share |
$ |
0.11 |
|
$ |
0.07 |
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share |
$ |
0.11 |
|
$ |
0.07 |
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding |
|
13,795,007 |
|
|
14,732,173 |
|
|
14,031,518 |
|
|
|
14,962,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding |
|
13,853,619 |
|
|
14,933,426 |
|
|
14,076,033 |
|
|
|
15,075,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Company Contact: |
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|
Investor Relations
Contact: |
Alpha Pro Tech,
Ltd. |
|
|
|
|
|
|
|
|
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|
|
|
|
Hayden IR |
Donna Millar |
|
|
|
|
|
|
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|
|
|
|
Cameron Donahue |
905-479-0654 |
|
|
|
|
|
|
|
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|
|
|
|
|
651-653-1854 |
e-mail:
ir@alphaprotech.com |
|
|
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|
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|
|
|
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|
|
e-mail:
cameron@haydenir.com |
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