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, 2019.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Sales in our Building Supply
segment continue to increase as a result of increasing sales
volumes in our TECHNO family of spunbond-based (SB) synthetic roof
underlayment products. The expansion of this line of products
earlier this year was instrumental in the more than 60% growth of
our TECHNO products and 16.7% overall growth in synthetic roof
underlayment during the third quarter of 2019 as compared to the
same quarter of 2018. At the same time, housewrap sales were up
more than 15% as a result of improved U.S. housing starts and our
increased efforts to grow market share.”
Hoffman continued, “Year-over-year, our third
quarter profitability was impacted by lower gross profit margin due
to the expiration of duty free status for several of our products
as of June 4, 2019, a change in the mix of building products,
increased rebates and a lower introductory price on products in the
TECHNO SB® synthetic roof underlayment family. Profitability was
further impacted by a significant unrealized loss on marketable
securities in the third quarter of 2019. We also have a challenging
comparable result due to a significant cost recovery from our
former litigation counsel during the third quarter of 2018 that was
not repeated in the third quarter of 2019. We expect gross profit
margin to be in the mid to high thirty percent range next
year.”
Net sales
Consolidated net sales for the third quarter of
2019 were $12.0 million, compared to $12.1 million for third
quarter of 2018, representing a slight decrease of 0.6%, reflecting
decreased sales in the Disposable Protective Apparel segment of
$313,000, partially offset by increased sales in the Building
Supply segment of $236,000.
Building Supply segment sales for the third
quarter of 2019 increased by $236,000, or 3.4%, to $7.2 million,
compared to $7.0 million for the same period of 2018. The segment
increase was primarily due to an increase in synthetic roof
underlayment sales of 16.7% and an increase in housewrap sales of
15.4%, while other woven material sales decreased 56.1% compared to
the same period of 2018. The increases in synthetic roof
underlayment and housewrap sales were primarily due to an increase
in sales of the economy TECHNO SB® family brand of synthetic roof
underlayment, which grew by 60.6% compared to third quarter of
2018, and an increase in sales of the economy REX™ Wrap brand of
housewrap.
Sales for the Disposable Protective Apparel
segment for the third quarter of 2019 decreased by $313,000, or
6.1%, to $4.8 million, compared to $5.1 million for the same period
of 2018. This segment decrease was primarily due to a decrease in
sales of disposable protective garments and face shields, partially
offset by an increase in sales of face masks. The decrease was
primarily due to decreased sales to a large national distributor
that lost business in a bid situation to another one of the
company’s national distributors. The end user continues to use the
company’s Critical Cover® Brand, and, once the end user runs
through its current inventory, we expect the end user to continue
to purchase Alpha Pro Tech products through the distributor that
won the bid. To a lesser extent, the decrease was due to lower
sales to a major international supply chain partner. However, this
partner’s sales of our products to its end users for the three
months ended September 30, 2019 were up 8%, demonstrating demand
for our products.
Consolidated sales for the nine months ended
September 30, 2019 increased to $35.75 million, up from $35.66
million for the nine months ended September 30, 2018, representing
an increase of $90,000, or 0.3%. This increase consisted of
increased sales in the Building Supply segment of $203,000,
partially offset by decreased sales in the Disposable Protective
Apparel segment of $113,000.
Building Supply segment sales for the nine
months ended September 30, 2019 increased by $203,000, or 1.0%, to
$20.4 million, compared to $20.2 million for the same period of
2018. The Building Supply segment increase was primarily due to a
5.3% increase in sales of our core building products, broken down
to an increase in sales of synthetic roof underlayment of 11.1% and
an increase in sales of housewrap of 1.5%, compared to the same
period of 2018. Synthetic roof underlayment sales have increased as
a result of increased sales of the TECHNO family products, and
management expects continued growth from this product line.
Although 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, sales in the third
quarter of 2019 increased 15.4%, and we expect continued growth in
housewrap sales due to the current positive outlook towards housing
starts.
In addition, Building Supply segment sales for
the nine months ended September 30, 2019 were significantly
affected by non-core sales of other woven material, which decreased
by 26.8% compared to the same period of 2018. These sales were down
due to lower orders from a customer that currently has seen a
decline in its business.
Sales for the Disposable Protective Apparel
segment for the nine months ended September 30, 2019 slightly
decreased by $113,000, or 0.7%, to $15.3 million, compared to $15.4
million for the same period of 2018. This segment decrease was
primarily due to a decrease in sales of face masks and face
shields, partially offset by a 1.3% increase in disposable
protective garments.
Gross profit
Gross profit decreased by $365,000, or 8.0%, to
$4.2 million for the three months ended September 30, 2019, from
$4.6 million for the same period of 2018. The gross profit margin
was 35.1% for the three months ended September 30, 2019, compared
to 37.9% for the same period of 2018. Gross profit margin in the
third quarter of 2019 was affected as certain products that were
tariff free until June 4, 2019 under the U.S. Customs and Borders
Protection Generalized System of Preferences are no longer duty
free, as the government program was terminated. This change
primarily affected gross profit of the Disposable Protective
Apparel segment and to a much lesser extent the Building Supply
segment. In addition, both segments were negatively impacted by
increased rebates and a change in product mix in the Building
Supply segment. In addition, our TECHNO family of spunbond based
(SB) products, which includes our new TECHNO SB® 25 product, has
been marketed with a lower introductory price that negatively
impacted gross profit in the third quarter. Pricing of the TECHNO
SB® family will be increased during the latter part of the fourth
quarter this year, which should improve gross profit margin going
forward.
Gross profit decreased by $630,000, or 4.6%, to
$13.1 million for the nine months ended September 30, 2019, down
from $13.8 million for the same period of 2018. The gross profit
margin was 36.7% for the nine months ended September 30, 2019,
compared to 38.6% for the same period of 2018.
Management expects gross profit margin to be in
the mid to high thirty percent range next year.
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
increased by $496,000, or 18.5%, to $3.2 million for the three
months ended September 30, 2019, up from $2.7 million in the same
period last year. As a percentage of net sales, selling, general
and administrative expenses increased to 26.4% in the third quarter
of 2019, compared to 22.1% for the same period of 2018. The
increase in selling, general and administrative expenses was
primarily the result of a cost recovery in the third quarter of
2018 that did not recur in the third quarter of 2019. The recovery
in 2018 was due to a cost recovery from our former litigation
counsel.
Selling, general and administrative expenses
increased slightly by $84,000, or 0.8%, to $10.1 million for the
nine months ended September 30, 2019, from $10.0 million for the
nine months ended September 30, 2018. As a percentage of net sales,
selling, general and administrative expenses increased to 28.3% for
the nine months ended September 30, 2019, up from 28.1% for the
same period of 2018. The increase was primarily as a result of
increased Building Supply segment trade show expenses.
Income from Operations
Income from operations decreased by $863,000, or
48.8%, to $906,000 in the third quarter of 2019, compared to $1.8
million for the same period last year. The decreased income from
operations was primarily due to a decrease in gross profit of
$365,000 and an increase in selling, general and administrative
expense of $496,000. Income from operations for the third quarter
of 2018 was positively impacted by the cost recovery from our
former litigation counsel, as mentioned above, and is the primary
reason for the increase in selling, general and administrative
expenses in the third quarter of 2019. Income from operations as a
percentage of net sales for the three months ended September 30,
2019 was 7.5%, compared to 14.6% for the same period of 2018.
Income from operations decreased by $694,000, or
21.0%, to $2.6 million for the nine months ended September 30,
2019, compared to $3.3 million for the nine months ended September
30, 2018. The decreased income from operations was primarily due to
a decrease in gross profit of $630,000 and an increase in selling,
general and administrative expenses of $84,000, partially offset by
a decrease in depreciation and amortization expense of $20,000.
Income from operations as a percentage of net sales for the nine
months ended September 30, 2019 was 7.3%, compared to 9.3% for the
same period of 2018.
Net Income
Net income for the third quarter of 2019 was
$437,000, or $0.03 per diluted share, compared to $1.5 million, or
$0.11 per diluted share, for the same period of 2018, representing
a decrease of $1.1 million, or 71.6%. The net income decrease was
due to a decrease in income before provision for income taxes of
$1.4 million and a decrease in provision for income taxes of
$249,000. Net income in the third quarter of 2019, on a comparable
basis to the prior year period, was negatively impacted by two
large factors: the cost recovery from our former litigation counsel
in the third quarter of 2018 that did not recur in third quarter of
2019, and an unrealized loss on marketable securities of $387,000
in the third quarter of 2019. Net income as a percentage of net
sales for the third quarter of 2019 was 3.6%, and net income as a
percentage of net sales for the same period of 2018 was
12.7%.
Net income for the nine months ended September
30, 2019 was $2.7 million, compared to $3.0 million for the same
period of 2018, representing a decrease of $342,000, or 11.4%. The
net income decrease was due to a decrease in income before
provision for income taxes of $403,000 and a decrease in provision
for income taxes of $61,000. Net income as a percentage of net
sales for the nine months ended September 30, 2019 was 7.5%, and
net income as a percentage of net sales for the same period of 2018
was 8.4%. Basic and diluted earnings per common share for the nine
months ended September 30, 2019 and 2018 were $0.20 and $0.21,
respectively.
Balance Sheet
As of September 30, 2019, the company had cash
of $5.1 million, compared to $7.0 million as of December 31, 2018.
The decrease in cash was due to cash used in financing activities
of $2.0 million, primarily for the repurchase of common stock, and
cash used in investing activities of $1.0 million, partially offset
by cash provided by operating activities of $1.1 million. Working
capital decreased to $24,516,000, representing a decrease of
$24,000 from $24,540,000 as of December 31, 2018. As of September
30, 2019, the Company’s current ratio (current assets/current
liabilities) was 12:1, compared to a 14:1 current ratio as of
December 31, 2018.
Inventory increased by $1.4 million, or 13.9%,
to $11.3 million as of September 30, 2019, up 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 nine months ended September 30, 2019, we
repurchased 548,000 shares of common stock at a cost of $2.1
million. We have approximately $635,000 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 |
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
|
|
September
30, |
December
31, |
|
|
|
|
|
2019 |
|
2018 (1) |
Assets |
|
|
|
Current assets: |
|
|
|
|
Cash |
$ |
5,106,000 |
|
$ |
7,007,000 |
|
Investments |
|
348,000 |
|
|
258,000 |
|
Accounts receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
$58,000 and $64,000 as of September 30, 2019 and December 31,
2018 |
|
5,414,000 |
|
|
4,935,000 |
|
Accounts receivable, related party |
|
755,000 |
|
|
383,000 |
|
Inventories |
|
11,255,000 |
|
|
9,878,000 |
|
Right-of-use assets |
|
682,000 |
|
|
- |
|
Prepaid expenses |
|
3,144,000 |
|
|
3,999,000 |
|
|
|
Total
current assets |
|
26,704,000 |
|
|
26,460,000 |
|
|
|
|
|
|
|
Property and equipment, net |
|
4,002,000 |
|
|
3,244,000 |
Goodwill |
|
55,000 |
|
|
55,000 |
Definite-lived intangible assets, net |
|
13,000 |
|
|
16,000 |
Right-of-use assets, net of current portion |
|
2,239,000 |
|
|
- |
Equity investment in unconsolidated affiliate |
|
4,851,000 |
|
|
4,480,000 |
|
|
|
Total
assets |
$ |
37,864,000 |
|
$ |
34,255,000 |
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
$ |
674,000 |
|
$ |
578,000 |
|
Accrued liabilities |
|
844,000 |
|
|
1,342,000 |
|
Lease liabilities |
|
670,000 |
|
|
- |
|
|
|
Total
current liabilities |
|
2,188,000 |
|
|
1,920,000 |
|
|
|
|
|
|
|
Lease liabilities, net of current portion |
|
2,292,000 |
|
|
- |
Deferred income tax liabilities, net |
|
141,000 |
|
|
141,000 |
|
|
|
Total
liabilities |
|
4,621,000 |
|
|
2,061,000 |
Commitments |
|
|
|
Shareholders' equity: |
|
|
|
|
Common stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
|
|
13,004,507 and 13,502,684 shares outstanding as of |
|
|
|
|
|
September 30, 2019 and December 31, 2018, respectively |
|
130,000 |
|
|
135,000 |
|
Additional paid-in capital |
|
1,058,000 |
|
|
2,669,000 |
|
Retained earnings |
|
32,055,000 |
|
|
29,390,000 |
|
|
|
Total
shareholders' equity |
|
33,243,000 |
|
|
32,194,000 |
|
|
|
Total
liabilities and shareholders' equity |
$ |
37,864,000 |
|
$ |
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 Nine
Months Ended |
|
|
|
|
September 30, |
|
September
30, |
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
12,027,000 |
|
|
$ |
12,104,000 |
|
$ |
35,745,000 |
|
$ |
35,655,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold, excluding depreciation |
|
|
|
|
|
|
|
|
|
and amortization |
|
|
7,807,000 |
|
|
|
7,519,000 |
|
|
22,616,000 |
|
|
21,896,000 |
|
|
|
Gross profit |
|
|
4,220,000 |
|
|
|
4,585,000 |
|
|
13,129,000 |
|
|
13,759,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
3,172,000 |
|
|
|
2,676,000 |
|
|
10,108,000 |
|
|
10,024,000 |
|
|
Depreciation and amortization |
|
|
142,000 |
|
|
|
140,000 |
|
|
410,000 |
|
|
430,000 |
|
|
|
Total operating expenses |
|
|
3,314,000 |
|
|
|
2,816,000 |
|
|
10,518,000 |
|
|
10,454,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
906,000 |
|
|
|
1,769,000 |
|
|
2,611,000 |
|
|
3,305,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
Equity in income of unconsolidated affiliate |
|
|
10,000 |
|
|
|
103,000 |
|
|
371,000 |
|
|
393,000 |
|
|
Gain (loss) on marketable securities |
|
|
(387,000 |
) |
|
|
25,000 |
|
|
223,000 |
|
|
(40,000 |
) |
|
Interest income, net |
|
|
18,000 |
|
|
|
1,000 |
|
|
52,000 |
|
|
2,000 |
|
|
|
Total other income (loss) |
|
|
(359,000 |
) |
|
|
129,000 |
|
|
646,000 |
|
|
355,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
547,000 |
|
|
|
1,898,000 |
|
|
3,257,000 |
|
|
3,660,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
110,000 |
|
|
|
359,000 |
|
|
592,000 |
|
|
653,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
437,000 |
|
$ |
$ |
1,539,000 |
|
$ |
2,665,000 |
|
$ |
3,007,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.03 |
|
|
$ |
0.11 |
|
$ |
0.20 |
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
|
$ |
0.03 |
|
|
$ |
0.11 |
|
$ |
0.20 |
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
13,056,173 |
|
|
|
13,795,007 |
|
|
13,209,598 |
|
|
14,031,518 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
13,075,692 |
|
|
|
13,853,619 |
|
|
13,238,026 |
|
|
14,076,033 |
|
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