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
March 31, 2021.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Alpha Pro Tech delivered a
record first quarter with sales of $23.2 million and its fourth
quarter in a row with sales in excess of $20 million. This was
aided by a sales increase in the Disposable Protective Apparel
segment of 40%, of which disposable protective garments were a
record and up a very strong 41%. This was a result of strong open
orders, primarily from our major international channel partner. We
continue to realize higher than historical open orders for
disposable protective garments and are working closely with all our
channel partners uncovering new end-customer sales opportunities.
We expect growth in pre-pandemic demand for our disposable
protective garments.”
Hoffman continued, “The increase in face mask
sales of 24% was primarily attributable to sales of our proprietary
N-95 Particulate Respirator face mask resulting from customer
demand associated with the COVID-19 pandemic. Although we showed
face mask revenue growth in the first quarter of 2021, sales were
materially lower than prior pandemic quarters. We are witnessing a
softening in demand due various factors such as: (i) decreased
demand from distributors and their customers in light of high
levels of stockpiled inventory, resulting from a rush to obtain
face masks in the early months of the pandemic, (ii) increased
availability of N-95 face masks from manufacturers ramping up
production capacity, (iii) increased competition as more
manufacturers entered the market as well as Emergency Use
Authorization in the U.S. that has allowed foreign manufactured,
non-NIOSH approved KN-95 face masks, and (iv) the improvement in
outlook with respect to the pandemic and the growing number of
individuals being vaccinated to protect against COVID-19. The
increase in face shield sales of 94% was also attributable to the
pandemic. We expect sales of face masks and face shields to
decrease in the coming quarters and to be more in-line with
pre-pandemic levels.”
With that said, “The impact of the COVID-19
pandemic continues to unfold. The extent of the pandemic’s effect
on our future operational and financial performance will depend in
large part on future developments, including the duration, scope
and severity of the pandemic and new variants, the actions taken to
contain or mitigate its impact, the impact on governmental programs
and budgets, the development of treatments or vaccines, the
efficacy of mass vaccinations, and the resumption of widespread
economic activity in certain sectors. Due to the inherent
uncertainty of the unprecedented and rapidly evolving situation, we
are unable to predict with any certainty the likely impact of
the COVID-19 pandemic on our future operations.”
“Our Building Supply segment had record first
quarter sales, and our core product sales were up 18%. Open orders
for our core products, consisting of synthetic roof underlayment
and housewrap, continue to be at unprecedented levels as the new
home construction and residential re-roofing markets were strong in
the first quarter of 2021, and optimism remains high going into the
second quarter. Our line of synthetic roof underlayment enjoyed
strong growth of 32% related to these two factors, and our
housewrap continued growth in the new home construction market. We
are optimistic about continued growth in the Building Supply
segment and have committed to increasing production capacity of
this segment by investing approximately $4.0 million in new
equipment, which is expected to be operational later in the year,”
added Hoffman.
Net sales
Consolidated sales increased by $5.0 million or
28%, to a first quarter record of $23.2 million, compared to $18.2
million for the same period of 2020, reflecting increased sales in
the Disposable Protective Apparel segment of $4.2 million and
increased sales in the Building Supply segment of $783,000.
Sales for the Disposable Protective Apparel
segment increased by $4.2 million, or 40%, to a record first
quarter of $14.8 million, compared to $10.6 million for the same
period of 2020. The increases for face masks, face shields and to a
lesser extent disposable protective garments were primarily due to
increased demand resulting from the COVID-19 pandemic. This segment
increase was due to a 41% increase in sales of disposable
protective garments, a 24% increase in sales of face masks and a
94% increase in face shields. The sales mix of the Disposable
Protective Apparel segment for the three months ended March 31,
2021 was approximately 45% for disposable protective garments, 38%
for face masks and 17% for face shields. This sales mix is compared
to approximately 45% for disposable protective garments, 43% for
face masks and 12% for face shields for the three months ended
March 31, 2020.
Building Supply segment sales increased by
$783,000, or 10%, to a first quarter record of $8.3 million,
compared to $7.6 million for the same period of 2020. This segment
increase was primarily due to an 18% increase in core building
products, including an increase in sales of synthetic roof
underlayment of 32% and an increase in sales of housewrap of 4%
compared to the same period of 2020. Sales of other woven material
decreased by 26% compared to the same period of 2020.
Gross profitGross profit for
the first quarter of 2021 increased by 7% to $9.2 million, or 40%
gross profit margin, compared to $8.6 million, or 47% gross profit
margin, for the same period of 2020. The gross profit margin on our
face masks, in particular our N-95 Particulate Respirator face
mask, and face shields, which have a higher gross profit margin
than our other products, were negatively impacted in the first
quarter of 2021 by a change in distribution channels associated
with the pandemic, including higher sales to our legacy
distribution channel partners as compared to newer COVID-19 based
customers. In addition, our portfolio of products, as well as a
spectrum of industries worldwide, have been affected by increases
in raw material costs, as well as significant increases in ocean
freight and other transportation costs.
Management expects gross profit margin will more
closely align with prior levels as a result of changes in product
mix in which the need for face masks and face shields decline from
the surge in customer demand in 2020 as a result of the COVID-19
pandemic. In addition, we expect additional increases in raw
material costs as well as continued higher prices for ocean freight
and domestic freight costs.
Selling, General and Administrative
ExpensesSelling, general and administrative expenses
increased by $476,000, or 12%, to $4.6 million for the three months
ended March 31, 2021, compared to $4.1 million in the same period
last year. As a percentage of net sales, selling, general and
administrative expenses decreased to 20% in the first quarter of
2021, compared to 23% for the same period of 2020. The increase in
selling, general and administrative expenses was primarily the
result of increased employee compensation in the Disposable
Protective Apparel segment, increased public company expenses and
increased insurance and general office expenses, partially offset
by decreased travel and trade show expenses.
Income from OperationsIncome
from operations increased by $133,000, or 3%, to $4.4 million in
the first quarter of 2021, compared to $4.3 million for the same
period last year. The increased income from operations was
primarily due to an increase in gross profit of $625,000, partially
offset by an increase in selling, general and administrative
expenses of $476,000 and an increase in depreciation and
amortization expense of $16,000. Income from operations as a
percentage of net sales for the three months ended March 31, 2021,
was 19%, compared to 24% for the same period of 2020.
Net IncomeNet income for the
first quarter of 2021 was $3.7 million, compared to $5.3 million
for the same period of 2020, representing a decrease of $1.6
million, or 30%. A tax benefit from stock options exercised
positively impacted net income by an estimated $2.0 million in the
first quarter of last year. Excluding the estimated tax benefit in
2020, net income for the three months ended March 31, 2021, would
have exceeded net income for the three months ended March 31, 2020.
Basic earnings per common share for the three months ended March
31, 2021 and 2020, were $0.28 and $0.41, respectively. Diluted
earnings per common share for the three months ended March 31, 2021
and 2020, were $0.27 and $0.39, respectively. Excluding the
estimated tax benefit in 2020, earnings per share for the three
months ended March 31, 2021, would have exceeded earnings per share
for the months ended March 31, 2020.
Balance SheetAs of March 31,
2021, the company had cash of $17.9 million, compared to $23.3
million as of December 31, 2020. The decrease in cash was due to
cash used in operating activities of $3.2 million, cash used in
investing activities of $130,000 and cash used in financing
activities of $2.1 million. Working capital totaled $51 million and
the Company’s current ratio was 14:1, compared to a current ratio
of 9:1 as of December 31, 2020.
Inventory increased by $2.0 million, or 12%, to
$18.8 million as of March 31, 2021, from $16.7 million as of
December 31, 2020. The increase was primarily due to an increase in
inventory for the Disposable Protective Apparel segment of $1.6
million, or 14%, to $13.1 million and an increase in inventory for
the Building Supply segment of $390,000, or 7%, to $5.6
million.
Colleen McDonald, Chief Financial Officer,
commented, “During the three months ended March 31, 2021, we
repurchased 186,000 shares of common stock at a cost of $2,366,000.
As of March 31, 2021, we had repurchased a total of 18,296,917
shares of common stock at a cost of $40,400,000 through our
repurchase program. We retire all stock upon repurchase. Future
repurchases are expected to be funded from cash on hand and cash
flows from operating activities. As of March 31, 2021, we had
$2,119,000 available for additional stock purchases under our stock
repurchase program.”
The Company currently has no outstanding debt
and believes that the current cash balance 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 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)
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
|
|
|
2021 |
|
2020 (1) |
Assets |
|
|
|
|
|
Current
assets: |
|
|
|
|
Cash and cash
equivalents |
$ |
17,884,000 |
|
|
$ |
23,292,000 |
|
|
Accounts
receivable, net of allowance for doubtful accounts of |
|
|
|
|
|
|
|
|
|
$76,000 as of
March 31, 2021 and $71,000 as of December 31, 2020 |
|
6,748,000 |
|
|
|
8,132,000 |
|
|
Accounts
receivable, related party |
|
1,275,000 |
|
|
|
905,000 |
|
|
Inventories,
net |
|
18,778,000 |
|
|
|
16,749,000 |
|
|
Prepaid
expenses |
|
10,235,000 |
|
|
|
6,225,000 |
|
|
|
|
Total current
assets |
|
54,920,000 |
|
|
|
55,303,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net |
|
4,287,000 |
|
|
|
4,353,000 |
|
Goodwill |
|
|
55,000 |
|
|
|
55,000 |
|
Definite-lived
intangible assets, net |
|
6,000 |
|
|
|
7,000 |
|
Right-of-use
assets |
|
3,315,000 |
|
|
|
3,535,000 |
|
Equity investment
in unconsolidated affiliate |
|
5,871,000 |
|
|
|
5,549,000 |
|
|
|
|
Total assets |
$ |
68,454,000 |
|
|
$ |
68,802,000 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
Current
liabilities: |
|
|
|
|
Accounts
payable |
$ |
1,219,000 |
|
|
$ |
1,983,000 |
|
|
Accrued
liabilities |
|
1,762,000 |
|
|
|
2,793,000 |
|
|
Customer advance
payments of orders |
|
113,000 |
|
|
|
209,000 |
|
|
Lease
liabilities |
|
871,000 |
|
|
|
867,000 |
|
|
|
|
Total current
liabilities |
|
3,965,000 |
|
|
|
5,852,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities,
net of current portion |
|
2,496,000 |
|
|
|
2,719,000 |
|
Deferred income
tax liabilities, net |
|
211,000 |
|
|
|
211,000 |
|
|
|
|
Total
liabilities |
|
6,672,000 |
|
|
|
8,782,000 |
|
Commitments |
|
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
|
|
|
|
Common stock, $.01
par value: 50,000,000 shares authorized; |
|
|
|
|
|
|
|
|
|
13,323,341 and
13,419,847 shares outstanding as of |
|
|
|
|
|
|
|
|
|
March 31, 2021 and
December 31, 2020, respectively |
|
134,000 |
|
|
|
135,000 |
|
|
Additional paid-in
capital |
|
- |
|
|
|
409,000 |
|
|
Retained
earnings |
|
61,648,000 |
|
|
|
59,476,000 |
|
|
|
|
Total
shareholders' equity |
|
61,782,000 |
|
|
|
60,020,000 |
|
|
|
|
Total liabilities
and shareholders' equity |
$ |
68,454,000 |
|
|
$ |
68,802,000 |
|
1) The condensed consolidated balance sheet as
of December 31, 2020 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 |
|
|
|
|
|
|
|
|
March 31, |
|
|
|
|
|
|
|
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
23,161,000 |
|
|
$ |
18,154,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods
sold, excluding depreciation |
|
|
|
|
|
|
and
amortization |
|
|
13,982,000 |
|
|
|
9,600,000 |
|
|
|
|
|
|
Gross profit |
|
|
9,179,000 |
|
|
|
8,554,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Selling, general
and administrative |
|
|
4,578,000 |
|
|
|
4,102,000 |
|
|
Depreciation and
amortization |
|
|
198,000 |
|
|
|
182,000 |
|
|
|
|
|
|
Total operating expenses |
|
|
4,776,000 |
|
|
|
4,284,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
4,403,000 |
|
|
|
4,270,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
|
Equity in income
of unconsolidated affiliate |
|
|
322,000 |
|
|
|
87,000 |
|
|
Loss on marketable
securities |
|
|
- |
|
|
|
(59,000 |
) |
|
Interest income,
net |
|
|
1,000 |
|
|
|
16,000 |
|
|
|
|
|
|
Total other income |
|
|
323,000 |
|
|
|
44,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for
income taxes |
|
|
4,726,000 |
|
|
|
4,314,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
(benefit) for income taxes |
|
|
1,007,000 |
|
|
|
(1,028,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
3,719,000 |
|
|
$ |
5,342,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share |
|
$ |
0.28 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per common share |
|
$ |
0.27 |
|
|
$ |
0.39 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted
average common shares outstanding |
|
|
13,342,398 |
|
|
|
13,121,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
|
13,717,404 |
|
|
|
13,664,710 |
|
|
|
Company
Contact: |
Investor Relations Contact: |
Alpha Pro Tech, Ltd. |
HIR Holdings |
Donna Millar |
Cameron Donahue |
905-479-0654 |
651-707-3532 |
e-mail: ir@alphaprotech.com |
e-mail: cameron@hirholdings.com |
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