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 six months ended
June 30, 2021.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Through the second quarter,
we witnessed the softening in demand for our N-95 particulate
respirator face mask and face shield sales, consistent with our
guidance provided in our first quarter earnings release. Sales for
these products declined to be more in line with pre-pandemic
quarterly levels and we currently expect similar trends going
forward. There is a potential for mask sales to increase again as a
result of the recent increased spread of Covid-19, primarily due to
the Delta variant. However, due to the inherent uncertainty of the
unprecedented and rapidly evolving situation, we are unable to
predict with any certainty the likelihood of this on our future
operations.”
“Record sales for disposable protective garments
in the second quarter of 2021 increased 36.3% compared to the
second quarter of 2020, representing two consecutive quarters of
record sales for disposable protective garments as the first
quarter of 2021 was the previous record. This was a result of
strong open orders, generated largely in 2020, primarily from our
major international channel partner. Open orders for the disposable
protective garments are now more in line with pre-pandemic levels
and sales in the coming quarters could be negatively affected as
current inventory levels in the supply chain, primarily with our
major international channel partner, are higher than historical
levels. We are working closely with all of our channel partners to
uncover new end-customer sales opportunities.
Our Building Supply segment sales remained
strong in the second quarter of 2021 with an increase of 31.5%
compared to the second quarter of 2020, bolstered by a robust
demand for new home construction. The synthetic roof underlayment
sales increase of 35.6% from the same period in 2020 was attributed
to both an increase in the growth of the brand and increased demand
caused by product shortages in the market. Our housewrap family of
products remained strong with a 29.1% increase from the same period
in 2020, driven by the new home construction market.
Our optimism for continued growth in the
Building Supply segment remains high as open orders for our
synthetic roof underlay and housewrap remain very strong. As a
result of our continued optimism, we have committed to increasing
production capacity of this segment by investing approximately $4.0
million in new equipment, part of which is expected to be
operational in the third and fourth quarter of 2021. As a result of
a delay in the relevant supply chain, the final piece of equipment
is now anticipated to arrive in the latter part of the fourth
quarter of 2021 and is expected to be operational in first quarter
of 2022,” added Hoffman.
Net Sales
Consolidated sales for the three months
ended June 30, 2021, decreased to $17.8 million, from
$25.5 million for the three months ended June 30, 2020,
representing a decrease of $7.7 million, or 30.2%. This decrease
consisted of decreased sales in the Disposable Protective Apparel
segment of $10.0 million, partially offset by increased sales in
the Building Supply segment of $2.3 million.
Sales for the Disposable Protective
Apparel segment for the three months ended June 30, 2021,
decreased by $10.0 million, or 55.6%, to $8.0 million, compared to
$18.0 million for the same period of 2020. This segment decrease
was due to a 89.4% decrease in sales of face masks and a 93.2%
decrease in face shields, partially offset by a 43.3% increase in
sales of disposable protective garments. The decreased sales of
face masks and face shields during the second quarter of 2021 were
primarily due to increased demand resulting from the COVID-19
pandemic in the second quarter of 2020. Sales for the disposable
protective garments in the second quarter of 2021 were a record
high and increased by a significant 36.3% compared to the same
period last year. This was a result of strong open orders and our
increased inventory position in the second quarter of 2021. Open
orders for the disposable protective garments are now more in line
with pre-pandemic levels. Management expects sales of face mask,
face shields and disposable protective garments to be more in-line
with pre-pandemic levels in future periods.
The sales mix of the Disposable Protective
Apparel segment for the three months ended June 30, 2021 was
approximately 85% for disposable protective garments, 11% for face
masks and 4% for face shields. This sales mix is compared to
approximately 28% for disposable apparel garments, 47% for face
masks and 25% for face shields for the three months ended June 30,
2020.
Building Supply segment sales for the
three months ended June 30, 2021, increased by $2.3
million, or 31.5%, to $9.8 million, compared to $7.5 million for
the three months ended June 30, 2020. The Building Supply segment
sales increase was primarily due to a 35.6% increase in sales of
synthetic roof underlayment, a 29.1% increase in sales of housewrap
and a 19.6% increase in sales of other woven material compared to
the same period of 2020.
The sales mix of the Building Supply segment for
the three months ended June 30, 2021, was approximately 48% for
synthetic roof underlayment, 43% for housewrap and 9% for other
woven material. This compared to approximately 46% for synthetic
roof underlayment, 44% for housewrap and 10% for other woven
material for the three months ended June 30, 2020. Our synthetic
roof underlayment product line includes REX SynFelt®, REX
TECHNOply® and TECHNO SB®, and our housewrap product line consists
of REX Wrap®, REX Wrap® Plus and REX Wrap Fortis®.
Consolidated sales for the six months
ended June 30, 2021, decreased to $41.0 million from $43.7
million for the six months ended June 30, 2020, representing a
decrease of $2.7 million, or 6.2%. This decrease consisted of
decreased sales in the Disposable Protective Apparel segment of
$5.8 million which were partially offset by increased sales in the
Building Supply segment of $3.1 million.
Sales for the Disposable Protective
Apparel segment for the six months ended June 30, 2021,
decreased by $5.8 million, or 20.3%, to $22.8 million, compared to
$28.6 million for the same period of 2020. This segment decrease
was due to a 50.0% decrease in sales of face masks and a 52.3%
decrease in sales of face shields which decreases were partially
offset by a 38.4% increase in sales of disposable protective
garments, all primarily due to changing customer demand associated
with the pandemic.
The sales mix of the Disposable Protective
Apparel segment for the six months ended June 30, 2021 was 59% for
disposable protective garments, 29% for masks and 12% for shields.
This sales mix is compared to 34% for disposable protective
garments, 46% for masks and 20% for shields for the six months
ended June 30, 2020.
Building Supply segment sales for the
six months ended June 30, 2021, increased by $3.1 million,
or 20.9%, to $18.1 million, compared to $15.0 million for the same
period of 2020. The Building Supply segment increase was primarily
due to an increase in sales of synthetic roof underlayment of 33.6%
and an increase in sales of housewrap of 16.5%, partially offset by
a decrease in sales of other woven material of 3.8% compared to the
same period of 2020. Synthetic roof underlayment sales increased as
a result of increased sales of the Company’s TECHNO family of
products. Synthetic roof underlayment and housewrap sales were
positively affected during the six months ended June 30, 2021 by
improved U.S. housing starts.
The sales mix of the Building Supply segment for
the six months ended June 30, 2021 was 50% for synthetic roof
underlayment, 42% for housewrap and 8% for other woven material.
This compared to 45% for synthetic roof underlayment, 45% for
housewrap and 10% for other woven material for the six months ended
June 30, 2020.
Gross Profit
Gross profit decreased by $6.4 million, or
50.6%, to $6.2 million for the three months ended June 30, 2021,
from $12.6 million for the three months ended June 30, 2020. The
gross profit margin was 35.0% for the three months ended June 30,
2021, compared to 49.5% for the three months ended June 30,
2020.
Gross profit decreased by $5.8 million, or
27.2%, to $15.4 million for the six months ended June 30, 2021,
from $21.2 million for the same period of 2020. The gross profit
margin was 37.6% for the six months ended June 30, 2021, compared
to 48.5% for the same period of 2020.
Management believes that gross profit margin has
been and will continue to be negatively affected in 2021 as a
result of changes in product mix as the need for face masks and
face shields, which have a higher gross profit margin than our
other products, declines from the surge in customer demand in 2020
as a result of the COVID-19 pandemic. 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. In the
current environment, cost increases may rise more rapidly than our
sales prices, which could decrease gross profit.
Selling, General and Administrative
Expenses
Selling, general and administrative expenses
decreased by $354,000, or 7.8%, to $4.2 million for the three
months ended June 30, 2021, from $4.6 million for the three months
ended June 30, 2020. However, as a percentage of net sales,
selling, general and administrative expenses increased to 23.6% for
the three months ended June 30, 2021, up from 17.9% for the same
period of 2020, primarily as a result of lower net sales.
Selling, general and administrative expenses
increased by $121,000, or 1.4%, to $8.8 million for the six months
ended June 30, 2021, from $8.7 million for the six months ended
June 30, 2020. As a percentage of net sales, selling, general and
administrative expenses increased to 21.4% for the six months ended
June 30, 2021, up from 19.8% for the same period of 2020, primarily
as a result of lower net sales.
Income from Operations
Income from operations decreased by $6.1
million, or 76.8%, to $1.8 million for the three months ended June
30, 2021, compared to $7.9 million for the three months ended June
30, 2020. The decreased income from operations was primarily due to
a decrease in gross profit of $5.8 million and an increase in
depreciation and amortization expense of $25,000, partially offset
by a decrease in selling, general and administrative expenses of
$354,000. Income from operations as a percentage of net sales for
the three months ended June 30, 2021 was 10.3%, compared to 30.9%
for the same period of 2020.
Income from operations decreased by $5.9
million, or 48.7%, to $6.2 million for the six months ended June
30, 2021, compared to $12.2 million for the six months ended June
30, 2020. The decreased income from operations was primarily due to
a decrease in gross profit of $5.8 million, an increase in selling,
general and administrative expenses of $121,000 and an increase in
depreciation and amortization expense of $41,000. Income from
operations as a percentage of net sales for the six months ended
June 30, 2021 was 15.2%, compared to 27.8% for the same period of
2020.
Net Income
Net income for the three months ended June 30,
2021 was $1.8 million, compared to net income of $6.2 million for
the three months ended June 30, 2020, representing a decrease of
$4.6 million, or 73.1%. Net income as a percentage of net sales for
the three months ended June 30, 2021 was 9.4%, and net income as a
percentage of net sales for the same period of 2020 was 24.4%.
Basic earnings per common share for the three months ended June 30,
2021, and 2020 were $0.13 and $0.47, respectively. Diluted earnings
per common share for the three months ended June 30, 2021 and 2020
were $0.12 and $0.46, respectively.
Net income for the six months ended June 30,
2021 was $5.4 million, compared to net income of $11.6 million for
the same period of 2020, representing a decrease of $6.2 million,
or 53.4%. The net income decrease comparing the 2021 and 2020
periods was due to a decrease in income before provision for income
taxes of $5.6 million, and an increase in provision for income
taxes of $712,000. A tax benefit from stock options exercised
positively impacted net income for the six months ended June 30,
2020 by an estimated $2.0 million. Net income as a percentage of
net sales for the six months ended June 30, 2021 was 13.5%, and net
income as a percentage of net sales for the same period of 2020 was
26.5%. Basic earnings per common share for the six months ended
June 30, 2021 and 2020 were $0.41 and $0.87, respectively. Diluted
earnings per common share for the six months ended June 30, 2021
and 2020 were $0.40 and $0.84, respectively.
Balance Sheet
As of June 30, 2021, the Company had cash of
$15.5 million compared to $23.3 million as of December 31, 2020.
The decrease in cash from December 31, 2020 was due to cash used in
operating activities of $3.0 million, cash used in investing
activities of $1.5 million and cash used in financing activities of
$3.3 million. Working capital totaled $50.1 million and the
Company’s current ratio was 19:1, compared to a current ratio of
9:1 as of December 31, 2020.
Inventory increased by $5.2 million, or 31.3%,
to $22.0 million as of June 30, 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 $3.8
million, or 32.9%, to $15.3 million and an increase in inventory
for the Building Supply segment of $1.5 million, or 28.0%, to $6.7
million.
Colleen McDonald, Chief Financial Officer,
commented, “During the three months ended June 30, 2021, we
repurchased 150,000 shares of common stock at a cost of $1.3
million. As of June 30, 2021, we had repurchased a total of
18,446,917 shares of common stock at a cost of approximately $41.7
million 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 June 30,
2021, we had $777,000 available for additional stock repurchases
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. The Company has made
approximately $4.0 million in commitments for capital investments
to increase our production capacity in our Building Supply segment,
of which $2.5 million has been paid as of June 30, 2021.
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, |
| |
2021 |
|
2020 (1) |
| Assets |
|
|
|
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
15,538,000 |
|
$ |
23,292,000 |
|
Accounts receivable, net of allowance for doubtful accounts of |
|
|
|
|
$79,000 as of June 30, 2021 and $71,000 as of December 31,
2020 |
|
6,079,000 |
|
|
8,132,000 |
| Accounts receivable, related
party |
|
997,000 |
|
|
905,000 |
| Inventories, net |
|
21,997,000 |
|
|
16,749,000 |
| Prepaid expenses |
|
8,360,000 |
|
|
6,225,000 |
|
Total current assets |
|
52,971,000 |
|
|
55,303,000 |
| |
|
|
|
| Property and equipment,
net |
|
5,422,000 |
|
|
4,353,000 |
| Goodwill |
|
55,000 |
|
|
55,000 |
| Definite-lived intangible
assets, net |
|
5,000 |
|
|
7,000 |
| Right-of-use assets |
|
3,094,000 |
|
|
3,535,000 |
| Equity investment in
unconsolidated affiliate |
|
6,059,000 |
|
|
5,549,000 |
|
Total assets |
$ |
67,606,000 |
|
$ |
68,802,000 |
| |
|
|
|
| Liabilities and
Shareholders' Equity |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
642,000 |
|
$ |
1,983,000 |
|
Accrued liabilities |
|
1,240,000 |
|
|
2,793,000 |
|
Customer advance payments of orders |
|
103,000 |
|
|
209,000 |
|
Lease liabilities |
|
876,000 |
|
|
867,000 |
|
Total current liabilities |
|
2,861,000 |
|
|
5,852,000 |
| |
|
|
|
| Lease liabilities, net of
current portion |
|
2,272,000 |
|
|
2,719,000 |
| Deferred income tax
liabilities, net |
|
211,000 |
|
|
211,000 |
|
Total liabilities |
|
5,344,000 |
|
|
8,782,000 |
| Commitments |
|
|
|
| Shareholders' equity: |
|
|
|
|
Common stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
|
13,208,341 and 13,419,847 shares outstanding as of |
|
|
|
|
June 30, 2021 and December 31, 2020, respectively |
|
132,000 |
|
|
135,000 |
| Additional paid-in
capital |
|
- |
|
|
409,000 |
| Retained earnings |
|
62,130,000 |
|
|
59,476,000 |
|
Total shareholders' equity |
|
62,262,000 |
|
|
60,020,000 |
|
Total liabilities and shareholders' equity |
$ |
67,606,000 |
|
$ |
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 |
|
For the Six Months Ended |
| |
June 30, |
|
June 30, |
| |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
| |
|
|
|
|
|
|
|
| Net sales |
$ |
17,806,000 |
|
$ |
25,500,000 |
|
$ |
40,967,000 |
|
$ |
43,654,000 |
|
| |
|
|
|
|
|
|
|
| Cost of goods sold, excluding
depreciation |
|
|
|
|
|
|
|
|
and amortization |
|
11,574,000 |
|
|
12,887,000 |
|
|
25,556,000 |
|
|
22,487,000 |
|
|
Gross profit |
|
6,232,000 |
|
|
12,613,000 |
|
|
15,411,000 |
|
|
21,167,000 |
|
| |
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
4,199,000 |
|
|
4,553,000 |
|
|
8,777,000 |
|
|
8,656,000 |
|
|
Depreciation and amortization |
|
203,000 |
|
|
178,000 |
|
|
401,000 |
|
|
360,000 |
|
|
Total operating expenses |
|
4,402,000 |
|
|
4,731,000 |
|
|
9,178,000 |
|
|
9,016,000 |
|
| |
|
|
|
|
|
|
|
|
Income from operations |
|
1,830,000 |
|
|
7,882,000 |
|
|
6,233,000 |
|
|
12,151,000 |
|
| |
|
|
|
|
|
|
|
| Other income: |
|
|
|
|
|
|
|
|
Equity in income of unconsolidated affiliate |
|
188,000 |
|
|
119,000 |
|
|
510,000 |
|
|
206,000 |
|
|
Gain /(Loss) on marketable securities |
|
- |
|
|
41,000 |
|
|
- |
|
|
(18,000 |
) |
|
Interest income, net |
|
- |
|
|
- |
|
|
1,000 |
|
|
16,000 |
|
|
Total other income |
|
188,000 |
|
|
160,000 |
|
|
511,000 |
|
|
204,000 |
|
| |
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
2,018,000 |
|
|
8,042,000 |
|
|
6,744,000 |
|
|
12,355,000 |
|
| |
|
|
|
|
|
|
|
| Provision for income
taxes |
|
347,000 |
|
|
1,822,000 |
|
|
1,354,000 |
|
|
794,000 |
|
| |
|
|
|
|
|
|
|
| Net income |
$ |
1,671,000 |
|
$ |
6,220,000 |
|
$ |
5,390,000 |
|
$ |
11,561,000 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Basic earnings per common
share |
$ |
0.13 |
|
$ |
0.47 |
|
$ |
0.41 |
|
$ |
0.87 |
|
| |
|
|
|
|
|
|
|
| Diluted earnings per common
share |
$ |
0.12 |
|
$ |
0.46 |
|
$ |
0.40 |
|
$ |
0.84 |
|
| |
|
|
|
|
|
|
|
| Basic weighted average common
shares outstanding |
|
13,246,676 |
|
|
13,351,675 |
|
|
13,294,571 |
|
|
13,351,674 |
|
| |
|
|
|
|
|
|
|
| Diluted weighted average
common shares outstanding |
|
13,511,497 |
|
|
13,651,995 |
|
|
13,621,101 |
|
|
13,813,094 |
|
| |
|
|
|
|
|
|
|
| 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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