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, reported a correction to the Company’s press
release issued on the morning of August 4, 2020 relating to the
Company’s expectations for timing of fulfillment of orders for its
N-95 face mask booked as of August 1, 2020, as described in the
second paragraph of the section of the press release titled
“Personal Protective Equipment (PPE) Orders Resulting from COVID-19
Pandemic.”
The corrected press release reads as
follows:
ALPHA PRO TECH, LTD. ANNOUNCES FINANCIAL
RESULTS FOR THE SECOND QUARTER ENDED JUNE 30,
2020
Net Sales of $25.5 Million, an Increase
of 123.4% Year-over-Year
Provides Update on Orders for Personal
Protective Equipment (PPE)
- Net sales for the second quarter of 2020 were $25.5 million,
compared to $11.4 million for the second quarter of 2019, up 123.4%
year-over-year.
- Net income for the second quarter of 2020 was $6.2 million, or
$0.46 per diluted share, compared to $1.0 million, or $0.08 per
diluted share, for the second quarter of 2019, up 475% on a per
share basis.
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 month period ended June
30, 2020.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Alpha Pro Tech delivered
another exceptional quarter with triple-digit organic revenue
growth, a 123% increase compared to the second quarter of 2019.
Gross profit margin was nearly 50%, which is above our historical
average, due to a shift in product mix towards more personal
protective equipment (PPE) and extremely strong cash flow. As a
result of the ongoing COVID-19 pandemic, demand for our N-95 face
masks and other PPE remains strong and shows no indications of
slowing as we move into the second half of 2020. Our backlog of
orders continues to increase with current delivery commitments into
the second quarter of 2021.”
Hoffman continued, “In our Building Supply
segment, we continue to attract more builders and have expanded our
distribution network to capture increased demand for our housewrap,
window flashing and seam tape. In addition to benefitting from cash
flow that has enabled us to build a strong inventory position, we
have managed to avoid many of the challenges faced by competitors
that rely heavily on third-party imported products from countries
hit hard by the pandemic by relying on our U.S.-based manufacturing
and our joint venture partner.”
“Our business continues to generate strong cash
flows from operations, which enables us to invest in production
capabilities and inventory in step with the ongoing demand for PPE
and building supplies,” added Hoffman.
Personal Protective Equipment (PPE)
Orders Resulting from COVID-19 PandemicThe Company began
ramping up production of its N-95 Particulate Respirator face mask
and face shields in response to a significant increase in customer
demand and volume of orders resulting from the initial outbreak of
COVID-19 and the declaration by the World Health Organization of
the outbreak as a “public health emergency of international
concern,” and, ultimately, a global pandemic. The Company has
continued to experience a significant surge in customer demand for
the N-95 face mask, face shields and other PPE products as a result
of the COVID-19 pandemic.
In an effort to meet the unprecedented demand,
and to aid communities around the world in responding to the
ongoing healthcare crisis, the Company began ramping up production
during the first quarter of 2020 of the Company’s N-95 face mask,
which is manufactured by the Company in the United States. As of
August 1, 2020, the Company had booked approximately $66 million in
orders for the Company’s N-95 face mask since January 27, 2020, of
which approximately 10% have request dates in 2021. The Company
fulfilled approximately $12 million of the orders through the first
six months of 2020. At this time, the Company expects approximately
$43 million of booked N-95 face mask orders with request dates in
2020 to be fulfilled by the end of the year, and approximately $23
million of the orders to be fulfilled in 2021.
During the second quarter of 2020, the Company
brought all available phase 1 N-95 production lines into service
and secured raw materials to support the fulfillment of anticipated
2020 orders. In the second quarter, one of the raw materials did
have availability constraints; however; the Company has now added
additional supply sources, which the Company expects to remove any
further bottlenecks and allow full production capacity of phase 1
in the latter part of the third quarter of 2020. Based on
increased production capacity and current order demand, the Company
expects N-95 face mask sales in the third quarter of 2020 to be
significantly higher than the second quarter. The Company continues
to expect the phase 2 expansion of additional N-95 face mask
manufacturing lines to be initially operational by the latter part
of the third quarter of 2020. Once phase 2 is operational, the
Company will further ramp up production throughout the remainder of
2020 and expects that for fiscal 2021 the production capacity for
the N-95 face mask will be over $100 million.
The Company has also seen a significant increase
in orders of the Company’s face shield products since January 27,
2020, with approximately $6 million of face shield orders fulfilled
in the first six months of 2020. At this time, the Company expects
face shield sales in the second half of 2020 to exceed the $6
million in sales through the first six months of the year.
The Company’s other disposable protective
garment product line, which include coveralls, gowns, lab coats,
shoecovers and bouffant caps, has also seen a significant increase
in demand, which primarily began in early March and continued
throughout the second quarter. For the remainder of 2020, the
Company expects increased demand for these products to continue.
During the second quarter of 2020, the Company’s India joint
venture ceased production due to a government-mandated COVID-19
shutdown, which impacted inventory levels. With the reopening of
the joint venture in June, subsequent to the end of the shutdown,
shipping of inventory has recommenced, but the temporary shutdown
will impact production and sales of disposable protective garments
in the third quarter, and production and sales could be further
impacted by subsequent shutdowns. Even with these actual and
potential delays, however, the Company expects disposable
protective garment sales for the second half of 2020 to show
continued top line growth.
Net salesConsolidated sales for
the second quarter of 2020 were $25.5 million, compared to $11.4
million for the second quarter of 2019, an increase of 123.4%,
reflecting increased sales in the Disposable Protective Apparel
segment of $13.3 million and increased sales in the Building Supply
segment of $742,000.
Sales for the Disposable Protective Apparel
segment (including disposable protective garments, masks and
shields) increased by $13.3 million, or 283.6%, to $18.0 million,
compared to $4.7 million for the same period of 2019. This segment
increase was due to a 991.3% increase in sales of face masks, a
973.2% increase in face shields and a 42.3% increase in sales of
disposable protective garments. The increase in face mask sales was
primarily attributable to increased sales of the Company’s N-95
face mask due to the COVID-19 pandemic. Although face mask sales
increased very significantly during the quarter, sales could have
been even higher without a supply chain issue that the Company
experienced. Management anticipates that this issue will be
resolved in the third quarter of 2020 and that resolving this issue
should bolster sales and inventory levels in the coming quarters.
The increase in face shield sales was also due to the pandemic and
having a strong inventory position.
Building Supply segment sales increased by
$742,000, or 11.1%, to $7.5 million for the second quarter of 2020,
compared to $6.7 million for the same period of 2019. This segment
increase was primarily due to an 11.7% increase in sales of the
Company’s core building products, including an increase in sales of
housewrap of 13.1% and an increase in sales of synthetic roof
underlayment of 9.9%.
Consolidated sales for the six months ended June
30, 2020 increased to $43.7 million, up from $23.7 million for the
six months ended June 30, 2019, representing an increase of $19.9
million, or 84.1%. This increase consisted of increased sales in
the Disposable Protective Apparel segment of $18.1 million and
increased sales in the Building Supply segment of $1.8 million.
Building Supply segment sales for the six months
ended June 30, 2020 increased by $1.8 million, or 13.6%, to $15.0
million, compared to $13.2 million for the same period of 2019. The
Building Supply segment increase was primarily due to an increase
in sales of housewrap of 16.5%, an increase in sales of synthetic
roof underlayment of 11.0% and an increase in sales of other woven
material of 17.0% compared to the same period of 2019.
Synthetic roof underlayment sales have increased as a result of
increased sales of the TECHNO family products. Housewrap sales in
the first half of 2020 were positively affected by increased system
warranty sales and improved U.S. housing starts.
Gross profitGross profit for
the second quarter of 2020 increased by 207.2% to $12.6 million, or
49.5% gross profit margin, compared to $4.1 million, or 36.0% 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 Company’s N-95 face mask) and face
shields, which generally have a higher gross profit margin than the
Company’s other products.
Gross profit increased by $12.3 million, or
137.6%, to $21.2 million for the six months ended June 30, 2020, up
from $8.9 million for the same period of 2019. The gross profit
margin was 48.5% for the six months ended June 30, 2020, compared
to 37.6% for the same period of 2019.
Selling, General and Administrative
ExpensesSelling, general and administrative expenses
increased by $1.3 million, or 39.6%, to $4.6 million for the three
months ended June 30, 2020, compared to $3.3 million in the same
period last year. However, as a percentage of net sales, selling,
general and administrative expenses decreased to 17.9% in the
second quarter of 2020, compared to 28.6% for the same period of
2019, primarily as a result of the growth in net sales. The
increase in selling, general and administrative expenses was
primarily the result of increased employee compensation, increased
sales commission, increased accrued bonuses, increased insurance
costs and increased factory-related expenses largely due to the
COVID-19 pandemic.
Selling, general and administrative expenses
increased by $1.7 million, or 24.8%, to $8.7 million for the six
months ended June 30, 2020, from $6.9 million for the six months
ended June 30, 2019. However, as a percentage of net sales,
selling, general and administrative expenses decreased to 19.8% for
the six months ended June 30, 2020, down from 29.2% for the same
period of 2019, primarily as a result of the growth in net sales.
The increase in selling, general and administrative expenses was a
result of increased expenses in all selling, general and
administrative expense categories to support significant sales
growth during 2020.
Income from OperationsIncome
from operations increased by $7.2 million, or 1,019.6%, to $7.9
million in the second quarter of 2020, compared to $704,000 for the
same period last year. The increased income from operations was
primarily due to an increase in gross profit of $8.5 million,
partially offset by an increase in selling, general and
administrative expenses of $1.3 million and an increase in
depreciation and amortization expense of $38,000. Income from
operations as a percentage of net sales for the three months ended
June 30, 2020 was 30.9%, compared to 6.2% for the same period of
2019.
Income from operations increased by $10.4
million, or 612.7%, to $12.2 million for the six months ended June
30, 2020, compared to $1.7 million for the six months ended June
30, 2019. The increased income from operations was primarily due to
an increase in gross profit of $12.3 million, partially offset by
an increase in selling, general and administrative expenses of $1.7
million and an increase in depreciation and amortization expense of
$93,000. Income from operations as a percentage of net sales for
the six months ended June 30, 2020 was 27.8%, compared to 7.2% for
the same period of 2019.
Net IncomeNet income for the
second quarter of 2020 was $6.2 million, compared to $1.0 million
for the same period of 2019, an increase of $5.2 million, or
515.8%. Net income as a percentage of net sales for the second
quarter of 2020 was 24.4%, compared to 8.8% for the second quarter
of 2019. Diluted earnings per common share for the second quarters
of 2020 and 2019 were $0.46 and $0.08, respectively. Sequential
quarterly growth in net income increased by 82% to $6.2 million in
net income for the second quarter of 2020, compared to $3.4 million
in net income for the first quarter of 2020, excluding a
nonrecurring tax benefit of $2.0 million in the first quarter of
2020.
Net income for the six months ended June 30,
2020 was $11.6 million, compared to $2.2 million for the same
period of 2019, representing an increase of $9.3 million, or
418.9%. This six month period significantly exceeds even the
highest annual net income that the Company has previously
experienced – annual net income of $9.0 million in 2009 resulting
from the H1N1 pandemic. The net income increase was due to an
increase in income before provision for income taxes of $9.6
million, partially offset by an increase in provision for income
taxes of $313,000. Net income as a percentage of net sales for the
six months ended June 30, 2020 was 26.5%, and net income as a
percentage of net sales for the same period of 2019 was 9.4%.
Diluted earnings per common share for the six months ended June 30,
2020 and 2019 were $0.84 and $0.17, respectively.
Balance SheetAs of June 30,
2020, the Company had cash of $24.7 million, compared to $6.5
million as of December 31, 2019. The increase in cash was from cash
provided by operating activities of $16.8 million for the first six
months of 2020, primarily from prepayments on future PPE sales, and
cash provided by financing activities of $1.8 million, primarily
proceeds from the exercise of stock options by Company employees.
This increase was partially offset by cash used in investing
activities of $372,000 for the purchase of property and equipment.
The Company ended the second quarter of 2020 with working capital
of $37.0 million and a current ratio of 4:1.
Inventory increased by $677,000, or 6.0%, to
$12.0 million as of June 30, 2020, up from $11.3 million as of
December 31, 2019. The increase was due to an increase in inventory
for the Disposable Protective Apparel segment of $1.4 million, or
24.7%, partially offset by a decrease in inventory for the Building
Supply segment of $708,000, or 12.4%, to $5.0 million.
The Company did not renew its $3,500,000 credit
facility, which expired in May 2020. The credit line had not been
used in several years, and the cost to maintain it had increased
significantly. Management believes that, given the Company’s
current cash position, zero debt and strong cash flow generation,
the Company is sufficiently capitalized to satisfy projected
working capital needs and planned capital expenditures for the
foreseeable future without maintaining a credit facility.
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 order volume, timing of
fulfillment of orders, production capacity and our plans to
ramp up production and expand capacity, product
demand, availability of raw materials and supply chain access,
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 and Quarterly Report on
Form 10-Q. 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.
-- Tables follow --
Condensed Consolidated Balance Sheets
(Unaudited)
|
June 30, |
|
December 31, |
|
2020 |
|
2019 (1) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
24,735,000 |
|
$ |
6,548,000 |
Investments |
|
270,000 |
|
|
335,000 |
Accounts receivable, net of allowance for doubtful accounts of
$62,000 as of June 30, 2020 and $53,000 as of December 31,
2019 |
|
6,661,000 |
|
|
3,568,000 |
Accounts receivable, related party |
|
952,000 |
|
|
724,000 |
Inventories |
|
11,980,000 |
|
|
11,303,000 |
Prepaid expenses |
|
4,110,000 |
|
|
3,587,000 |
Total current assets |
|
48,708,000 |
|
|
26,065,000 |
|
|
|
|
Property and equipment, net |
|
4,004,000 |
|
|
3,943,000 |
Goodwill |
|
55,000 |
|
|
55,000 |
Definite-lived intangible assets, net |
|
9,000 |
|
|
11,000 |
Right-of-use assets |
|
2,728,000 |
|
|
3,178,000 |
Equity investment in unconsolidated affiliate |
|
5,045,000 |
|
|
4,839,000 |
Total assets |
$ |
60,549,000 |
|
$ |
38,091,000 |
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
2,575,000 |
|
$ |
501,000 |
Accrued liabilities |
|
1,718,000 |
|
|
920,000 |
Customer advance payments of orders |
|
6,475,000 |
|
|
- |
Lease liabilities |
|
889,000 |
|
|
882,000 |
Total current liabilities |
|
11,657,000 |
|
|
2,303,000 |
|
|
|
|
Lease liabilities, net of current portion |
|
1,887,000 |
|
|
2,337,000 |
Deferred income tax liabilities, net |
|
224,000 |
|
|
224,000 |
Total liabilities |
|
13,768,000 |
|
|
4,864,000 |
Commitments |
|
|
|
Shareholders' equity: |
|
|
|
Common stock, $.01 par value: 50,000,000 shares authorized;
13,563,012 and 12,885,273 shares outstanding as of June 30, 2020
and December 31, 2019, respectively |
|
136,000 |
|
|
129,000 |
Additional paid-in capital |
|
2,694,000 |
|
|
708,000 |
Retained earnings |
|
43,951,000 |
|
|
32,390,000 |
Total shareholders' equity |
|
46,781,000 |
|
|
33,227,000 |
Total liabilities and shareholders' equity |
$ |
60,549,000 |
|
$ |
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 |
|
For the Six Months Ended |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Net sales |
$ |
25,500,000 |
|
$ |
11,415,000 |
|
$ |
43,654,000 |
|
|
$ |
23,718,000 |
|
|
|
|
|
|
|
|
Cost of goods sold, excluding depreciation and amortization |
|
12,887,000 |
|
|
7,309,000 |
|
|
22,487,000 |
|
|
|
14,809,000 |
Gross profit |
|
12,613,000 |
|
|
4,106,000 |
|
|
21,167,000 |
|
|
|
8,909,000 |
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
4,553,000 |
|
|
3,262,000 |
|
|
8,656,000 |
|
|
|
6,937,000 |
Depreciation and amortization |
|
178,000 |
|
|
140,000 |
|
|
360,000 |
|
|
|
267,000 |
Total operating expenses |
|
4,731,000 |
|
|
3,402,000 |
|
|
9,016,000 |
|
|
|
7,204,000 |
|
|
|
|
|
|
|
|
Income from operations |
|
7,882,000 |
|
|
704,000 |
|
|
12,151,000 |
|
|
|
1,705,000 |
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
Equity in income of unconsolidated affiliate |
|
119,000 |
|
|
84,000 |
|
|
206,000 |
|
|
|
361,000 |
Gain (loss) on marketable securities |
|
41,000 |
|
|
439,000 |
|
|
(18,000 |
) |
|
|
609,000 |
Interest income, net |
|
- |
|
|
21,000 |
|
|
16,000 |
|
|
|
34,000 |
Total other income |
|
160,000 |
|
|
544,000 |
|
|
204,000 |
|
|
|
1,004,000 |
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
8,042,000 |
|
|
1,248,000 |
|
|
12,355,000 |
|
|
|
2,709,000 |
|
|
|
|
|
|
|
|
Provision for income taxes |
|
1,822,000 |
|
|
238,000 |
|
|
794,000 |
|
|
|
481,000 |
|
|
|
|
|
|
|
|
Net income |
$ |
6,220,000 |
|
$ |
1,010,000 |
|
$ |
11,561,000 |
|
|
$ |
2,228,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share |
$ |
0.47 |
|
$ |
0.08 |
|
$ |
0.87 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Diluted earnings per common share |
$ |
0.46 |
|
$ |
0.08 |
|
$ |
0.84 |
|
|
$ |
0.17 |
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
13,351,675 |
|
|
13,184,321 |
|
|
13,351,674 |
|
|
|
13,287,583 |
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding |
|
13,651,995 |
|
|
13,208,138 |
|
|
13,813,094 |
|
|
|
13,346,146 |
|
|
|
|
|
|
|
|
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 |
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