Alpha Pro Tech, Ltd. (NYSE American: APT) (the
“Company”), 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 month period ended
March 31, 2020 and provided an update on personal protective
equipment (“PPE”) orders resulting from the COVID-19 pandemic.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “The unprecedented surge in
demand for our personal protective equipment, otherwise known as
PPE, resulting from the outbreak of the coronavirus, COVID-19,
particularly our N-95 Particulate Respirator face mask and face
shields, drove quarterly sales and significantly higher gross
profit for the first quarter. We are incredibly proud of our
employees and their ability to adjust and respond to evolving
circumstances and to successfully navigate industry changes and
macro-economic cycles in these unprecedented times. Our initial
response to the tremendous spike in demand for our N-95 face masks,
which are 100% sourced and manufactured in the United States, was
quick and demonstrates our continued commitment to navigating an
ever-changing landscape. We are working diligently to expand
production capacity of our N-95 face mask and our face shields in
order to meet the extreme demand for these products.”
Hoffman continued, “A major focus for us during
much of the first quarter has been the continued safety and
well-being of our employees in light of COVID-19. The majority of
the products that we manufacture are deemed essential by the
various jurisdictions in which we operate. We have implemented
significant protective measures throughout our facilities,
including travel and visitor restrictions, work from home policies,
employee screenings, social distancing and use of face coverings,
as we continue to service our customers. While this remains a
fluid situation, as of today, we are pleased to report that all of
our U.S. manufacturing sites are operating, with the majority of
them at or above normal production rates. I want to say thank
you to the manufacturing employees who continue to come to work
each day with dedication to our Company and our customers.”
Hoffman added, “Our proven business model and
the solid margin profile of our products are driving strong
operating cash flows that are further strengthening our balance
sheet and enabling us to self-fund growth through additional
investment in production capabilities. Diligent management of our
balance sheet, including asset utilization and capital structure,
has been a cornerstone of our philosophy towards operating and
growing our business and affords us the ability to weather economic
cycles and deploy assets opportunistically to meet market
demands.”
“In addition to the growth of our PPE, we are
encouraged by the 16% growth for the first quarter in the Building
Supply segment, although we expect growth for the remainder of the
year to be tempered by the current health crisis and consequential
economic slowdown,” said Hoffman.
Update on Personal Protective Equipment Orders Resulting
from COVID-19 Pandemic
The Company has experienced a significant surge
in customer demand for its proprietary N-95 Particulate Respirator
face mask (the “N-95 face mask”) product, face shield products and
other PPE products as a result of COVID-19 pandemic.
As of May 1, 2020, the Company has booked
approximately $46.8 million in orders for the Company’s N-95 face
mask since January 27, 2020, which includes a recently received
order of $7.2 million for N-95 face masks and an additional $2.3
million for surgical masks. The Company fulfilled approximately
$3.7 million of the orders in the first quarter of 2020, which was
slightly below the previously estimated forecast of $4.0 million,
primarily as a result of delays at the Company’s manufacturing
facility in Utah following an earthquake in March. The Utah
facility has returned to normal operations. At this time, the
Company expects the remaining backlog of N-95 face mask orders with
request dates in 2020 to be fulfilled by the end of the year.
Approximately 8% of booked orders have request dates in 2021.
The Company is nearing completion of its phase 1
ramp up plan on N-95 face mask production and is in the process of
preparing for a phase 2 expansion that will involve building
additional proprietary N-95 Particulate Respiratory face mask
production lines to further increase capacity. The phase 2
expansion is expected to be operational by late summer 2020. The
fulfillment forecast described above does not take into account
increased production capacity from the phase 2 ramp up plan.
The Company has also seen a significant increase
in orders of its face shield products since January 27, 2020, with
orders totaling over $13.3 million as of May 1, 2020. Approximately
$1.3 million of face shield orders (net of rebates) were fulfilled
in the first quarter of 2020. At this time, the Company expects the
remaining backlog of face shield orders with request dates in 2020
to be fulfilled by the end of the year. Approximately 14% of booked
orders have request dates in 2021.
The Company’s disposable protective apparel
garments, which include coveralls, gowns, lab coats, shoecovers and
bouffant caps, have also seen continued increase in demand, which
primarily began in early March. The Company remains committed to
allocating the necessary resources and procuring the necessary raw
materials in an effort to meet the unprecedented demand for these
PPE products, although the Company’s joint venture in India that
manufacturers the disposable protective garment lines remains under
a country-wide, government mandated closure that started in late
March and now has been extended through May 18. The Company has
alternative manufacturers that may be pursued, but the joint
venture has historically been the primary supply source for these
products. Customer demand for disposable protective garments
remains strong, but the Company does expect at least some
short-term impact on sales as a result of the India mandated
closure, which could impact order fulfillment and revenue growth.
In addition, the COVID-19 pandemic may create other issues in the
Company’s supply chain and in its ability to deliver products to
customers, especially outside the U.S.
Net sales
Consolidated sales for the first quarter of 2020
were $18.2 million, compared to $12.3 million for the first quarter
of 2019, an increase of $5.9 million or 47.5%, reflecting increased
sales in the Disposable Protective Apparel segment of $4.8 million
and increased sales in the Building Supply segment of $1.1
million.
Sales for the Disposable Protective Apparel
segment (including disposable protective garments, face masks and
face shields) increased by $4.8 million, or 82.5%, to $10.6
million, compared to $5.8 million for the same period of 2019. This
segment increase was due to a $3.7 million, or 419.3%, increase in
sales of face masks, a $0.9 million, or 235.3%, increase in sales
of face shields and a 5.1%, increase in sales of disposable
protective garments. The increase in face mask sales, attributable
to increased sales of the Company’s N-95 face mask, and the
increase in face shield sales was due increased demand resulting
from the COVID-19 pandemic. Sales of disposable protective garments
in the first quarter of 2020 were at a record 10-year high.
Building Supply segment sales increased by $1.1
million, or 16.3%, to $7.6 million for the first quarter of 2020,
compared to $6.5 million for the same period of 2019. This segment
increase was primarily due to a 14.4% increase in sales of the
Company’s core building products, including an increase in sales of
synthetic roof underlayment of 12.1% and an increase in sales of
housewrap of 20.0%. Sales of other woven material increased by
26.4% compared to the same period of 2019.
The increase in sales of the Company’s synthetic
roof underlayment was attributable to the expansion of program
purchases, particularly the Company’s TECHNO family of spunbond
based (SB) products. Housewrap sales also experienced significant
growth as the Company expanded its distribution reach with the
additional accessory items, such as seam tape and window flashings,
which have been added to the system sell. The Company has
experienced an overall increase in market share due to its ability
to shorten lead times with the Company’s United States-based
manufacturing and due to its vertical integration as a result of
the Company’s joint venture. Sales of other woven material
increased as a result of the Company’s largest customer in this
category increasing its order volume.
The Company expects continued growth in this market segment
longer term but does anticipate a softer market as a result of the
COVID-19 pandemic.
Gross profit
Gross profit for the first quarter of 2020
increased by 78.1% to $8.6 million, or 47.1% gross profit margin,
compared to $4.8 million, or 38.0% gross profit margin, for the
same period of 2019. Gross profit margin was positively affected by
the significant change in product mix, with a surge in customer
demand in light of the COVID-19 pandemic for face masks, in
particular the N-95 Particulate Respirator face mask, and face
shields, which generally have a higher gross profit margin than the
Company’s other products. The Company expects these higher gross
profit margin products to be in high demand for at least the rest
of 2020.
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
increased by $427,000, or 11.6%, to $4.1 million for the three
months ended March 31, 2020, compared to $3.7 million in the same
period last year. As a percentage of net sales, selling, general
and administrative expenses decreased to 22.6% in the first quarter
of 2020, compared to 29.9% for the same period of 2019. The
increase in selling, general and administrative expenses was
primarily the result of increased employee compensation for both
the Building Supply and Disposable Protective Apparel segments,
increased professional fees, increased accrued bonuses and
increased payroll taxes, partially offset by decreased trade show
expenses. The Company expects to continue to experience higher
levels of operating expenses as production capacity is
expanded.
Income from Operations
Income from operations increased by $3.3
million, or 326.1%, to $4.3 million in the first quarter of 2020,
compared to $1.0 million for the same period last year. The
increased income from operations was primarily due to an increase
in gross profit of $3.8 million, partially offset by an increase in
selling, general and administrative expenses of $427,000 and an
increase in depreciation and amortization expense of $55,000.
Income from operations as a percentage of net sales for the three
months ended March 31, 2020 was 23.5%, compared to 8.1% for the
same period of 2019.
Provision for Income TaxesThe
provision for income taxes for the three months ended March 31,
2020 was a tax benefit of $1.0 million, compared to a tax provision
of $243,000 for the same period of 2019. The provision for income
taxes consisted of an estimated nonrecurring tax benefit of $2.0
million in the first quarter of 2020 as a result of the exercise of
certain stock options, partially offset by tax expense of an
estimated $1.0 million.
Net Income
Net income for the first quarter of 2020 was a
quarterly record of $5.3 million, compared to $1.2 million for the
same period of 2019, an increase of $4.1 million, or 338.6%. As
mentioned above, a tax benefit from stock options exercised
positively impacted net income in the first quarter of 2020. Net
income as a percentage of net sales for the first quarter of 2020
was 29.4%, compared to 9.9% for the first quarter of 2019.
Basic earnings per common share for the first
quarters of 2020 and 2019 were $0.41 and $0.09, respectively.
Diluted earnings per common share for the first quarters of 2020
and 2019 were $0.39 and $0.09, respectively.
Balance Sheet
As of March 31, 2020, the Company had cash of
$17.4 million, compared to $6.5 million as of December 31, 2019.
The increase in cash was from cash provided by operating activities
of $9.3 million, primarily prepayments on future PPE sales, and
cash provided by financing activities of $1.7 million, primarily
proceeds from the exercise of stock options by Company employees,
which were partially offset by cash used in investing activities of
$241,000 for the purchase of property and equipment, primarily in
the Building Supply segment. The Company ended the first quarter of
2020 with working capital of $31.6 million and a current ratio
(current assets/current liabilities) of 4:1.
Inventory decreased by $155,000, or 1.4%, to
$11.1 million as of March 31, 2020, down from $11.3 million as of
December 31, 2019. The decrease was due to a decrease in inventory
for the Disposable Protective Apparel segment of $269,000, or 4.8%,
partially offset by an increase in inventory for the Building
Supply segment of $114,000, or 2.0%, to $5.8 million.
Colleen McDonald, Chief Financial Officer,
commented, “During the three months ended March 31, 2020, we
repurchased 35,100 shares of common stock at a cost of $125,000,
bringing the program total to 17,922,917 shares of common stock
repurchased at a cost of $35.5 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, which is due
to be renewed in May 2020. 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, expectations
regarding timing of fulfillment of orders, production capacity and
our plans to ramp up production and expand capacity, product
demand, 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. Specifically, these
factors include, but are not limited to, changes in global economic
conditions; the effects of the COVID-19 pandemic on our business
and operations, the business and operations of those within our
supply chain and global economic conditions generally; changes in
order volume by our customers; the inability of our suppliers and
contractors to meet our requirements; potential challenges related
to international manufacturing; our partnership with a joint
venture partner; the inability to protect our intellectual
property; competition in our industry; customer preferences; the
timing and market acceptance of new product offerings; security
breaches or disruptions to the information technology
infrastructure; the impact of legal and regulatory proceedings or
compliance challenges; and volatility in our common stock price and
our investments. 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 |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
|
December 31, |
|
|
|
|
2020 |
|
|
2019 (1) |
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
17,365,000 |
|
|
$ |
6,548,000 |
|
Investments |
|
228,000 |
|
|
|
335,000 |
|
Accounts receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
|
|
|
$53,000 as of March 31, 2020 and December 31, 2019 |
|
7,362,000 |
|
|
|
3,568,000 |
|
Accounts receivable, related party |
|
916,000 |
|
|
|
724,000 |
|
Inventories |
|
11,148,000 |
|
|
|
11,303,000 |
|
Right-of-use assets |
|
906,000 |
|
|
|
898,000 |
|
Prepaid expenses |
|
4,237,000 |
|
|
|
3,587,000 |
|
|
|
Total current assets |
|
42,162,000 |
|
|
|
26,963,000 |
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
4,050,000 |
|
|
|
3,943,000 |
Goodwill |
|
55,000 |
|
|
|
55,000 |
Definite-lived intangible assets, net |
|
10,000 |
|
|
|
11,000 |
Right-of-use assets, net of current portion |
|
2,048,000 |
|
|
|
2,280,000 |
Equity investment in unconsolidated affiliate |
|
4,926,000 |
|
|
|
4,839,000 |
|
|
|
Total assets |
$ |
53,251,000 |
|
|
$ |
38,091,000 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
1,727,000 |
|
|
$ |
501,000 |
|
Accrued liabilities |
|
764,000 |
|
|
|
920,000 |
|
Customer advance payments of orders |
|
7,161,000 |
|
|
|
- |
|
Lease liabilities |
|
886,000 |
|
|
|
882,000 |
|
|
|
Total current liabilities |
|
10,538,000 |
|
- |
|
2,303,000 |
|
|
|
|
|
|
|
|
|
|
Lease liabilities, net of current portion |
|
2,113,000 |
|
|
|
2,337,000 |
Deferred income tax liabilities, net |
|
224,000 |
|
|
|
224,000 |
|
|
|
Total liabilities |
|
12,875,000 |
|
|
|
4,864,000 |
Commitments |
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
Common stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
|
|
|
|
|
13,563,012 and 13,502,684 shares outstanding as of |
|
|
|
|
|
|
|
|
March 31, 2020 and December 31, 2019, respectively |
|
136,000 |
|
|
|
129,000 |
|
Additional paid-in capital |
|
2,508,000 |
|
|
|
708,000 |
|
Retained earnings |
|
37,732,000 |
|
|
|
32,390,000 |
|
|
|
Total shareholders' equity |
|
40,376,000 |
|
|
|
33,227,000 |
|
|
|
Total liabilities and shareholders' equity |
$ |
53,251,000 |
|
|
$ |
38,091,000 |
|
|
|
|
|
|
|
|
|
|
1)
The condensed consolidated balance sheet as of December 31, 2019
has been prepared using information from the audited consolidated
balance sheet as of that date. |
|
|
Condensed Consolidated Statements of
Income |
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
18,154,000 |
|
|
$ |
12,304,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, excluding depreciation |
|
|
|
|
|
|
|
|
and amortization |
|
|
9,600,000 |
|
|
|
7,500,000 |
Gross profit |
|
|
8,554,000 |
|
|
|
4,804,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
4,102,000 |
|
|
|
3,675,000 |
|
Depreciation and amortization |
|
|
182,000 |
|
|
|
127,000 |
|
|
|
|
|
Total operating expenses |
|
|
4,284,000 |
|
|
|
3,802,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
4,270,000 |
|
|
|
1,002,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss): |
|
|
|
|
|
|
|
|
Equity in income of unconsolidated affiliate |
|
|
87,000 |
|
|
|
277,000 |
|
Gain (loss) on marketable securities |
|
|
(59,000 |
) |
|
|
170,000 |
|
Interest income, net |
|
|
16,000 |
|
|
|
12,000 |
|
|
|
|
|
Total other income |
|
|
44,000 |
|
|
|
459,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision (benefit) for income taxes |
|
|
4,314,000 |
|
|
|
1,461,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision (benefit) for income taxes |
|
|
(1,028,000 |
) |
|
|
243,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
5,342,000 |
|
|
$ |
1,218,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.41 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
|
$ |
0.39 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
13,121,867 |
|
|
|
13,391,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
13,664,710 |
|
|
|
13,469,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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