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 fourth quarter and year ended
December 31, 2019.
Correction: the previously released press
release omitted additional information regarding Mr. Hoffman’s
quote. The following release updates that information.
Lloyd Hoffman, President and Chief Executive
Officer of Alpha Pro Tech, commented, “Sales in the Building
Supply segment finished the year strong as a direct result of the
expansion of our TECHNO family of spunbond based (SB) synthetic
roof underlayment products earlier in the year and improved U.S.
housing starts in the second half of 2019. Sales of our TECHNO
family of products grew by 36.3% in 2019 and were a significant
driver of our 11.5% overall growth in sales of synthetic roof
underlayment for the year.”
Hoffman continued “Our gross margins were
negatively affected in 2019, primarily due to a change in product
mix in the Building Supply segment and as a result of the mid-year
termination of the Generalized System of Preferences, which had
provided tariff-free status for sales of many of our Disposable
Protective Apparel segment products and, to a lesser extent, some
of our Building Supply segment products. We expect gross profit
margin to stabilize and be in the mid-to-high thirty percent range
for 2020. However, as a result of a surge in customer demand
resulting from the outbreak of Covid-19, our overall gross margin
is expected to be higher than normal in the first quarter of 2020
and potentially for the rest of the year, as gross margin on the
N-95 face mask is significantly higher than our overall gross
margin.”
Net salesConsolidated net sales
for the fourth quarter of 2019 were $10.9 million, compared to
$11.0 million for the fourth quarter of 2018, representing a slight
decrease of 0.4%. Building Supply segment sales for the fourth
quarter ended December 31, 2019 increased by 5.8% to $6.2 million,
compared to $5.8 million for the same period of 2018. Sales for the
Disposable Protective Apparel segment for the fourth quarter ended
December 31, 2019 decreased 7.5% to $4.8 million, compared to $5.2
million for the same period of 2018.
Consolidated sales for the year ended December
31, 2019 increased to $46.7 million, up from $46.6 million for the
year ended December 31, 2018, representing an increase of 0.1%.
Revenue growth in 2019 was driven by increased sales in the
Building Supply segment of $541,000, partially offset by a decline
in sales in the Disposable Protective Apparel segment of
$500,000.
Building Supply segment sales in 2019 increased
by $541,000, or 2.1%, to $26.6 million, compared to $26.0 million
in 2018, primarily driven by an increase in sales of core building
products of 6.2%, including an increase in sales of synthetic roof
underlayment of 11.5% and an increase in sales of housewrap of
2.2%, partially offset by a decrease in sales of non-core other
woven materials of 24.3%. Sales of other woven material decreased
in 2019 compared to 2018 as a result of our largest customer in
this category having excess inventory and a slowdown in orders from
its customers. We anticipate sales to this other woven customer to
return to previous levels in 2020.
The sales mix of the Building Supply segment for
the year ended December 31, 2019 was 47% for synthetic roof
underlayment, 44% for housewrap and 9% for other woven material.
This compared to a sales mix of 44% for synthetic roof
underlayment, 44% for housewrap and 12% for other woven material
for the year ended December 31, 2018.
Sales for the Disposable Protective Apparel
segment for the year ended December 31, 2019 decreased by $500,000,
or 2.4%, to $20.1 million, compared to $20.6 million for the year
ended December 31, 2018. The decrease was due to a slight decrease
in sales of disposable protective garments and a decrease in sales
of face masks and face shields in 2019. Face mask sales were
negatively affected by a less severe flu season in 2019, and face
shield sales decreased primarily due to a large, one-time sale in
2018 that did not recur in 2019.
Gross profitGross profit for
the fourth quarter of 2019 decreased by 2.8% to $3.8 million, or
35.2% gross profit margin, compared to $4.0 million, or 36.0% gross
profit margin, for the same period of 2018.
Gross profit for the year ended December 31,
2019 decreased by $739,000, or 4.2%, to $17.0 million, compared to
$17.7 million for the year ended December 31, 2018. The gross
profit margin was 36.4% for the year ended December 31, 2019,
compared to 38.0% for the year ended December 31, 2018. Gross
profit margin was negatively affected, as certain products that
were tariff-free until June 4, 2019 are no longer tariff-free, as
well as due to the change in product mix in the Building Supply
segment discussed above and increased rebates.
Management expects gross profit margin to be in
the mid-to-high thirty percent range for 2020, which excludes any
gross margin improvement that may result from increased sale of the
N-95 face mask in connection with the Covid-19 outbreak.
Selling, General and Administrative
ExpensesSelling, general and administrative expenses
decreased by $48,000, or 1.5%, to $3.24 million for the fourth
quarter of 2019, compared to $3.29 million in the same period of
2018. As a percentage of net sales, selling, general and
administrative expenses decreased to 29.7% in the fourth quarter of
2019 compared to 30.0% for the same period of 2018.
Selling, general and administrative expenses
increased slightly by $36,000, or 0.3%, to $13.35 million for the
year ended December 31, 2019, from $13.31 million for the year
ended December 31, 2018. As a percentage of net sales, selling,
general and administrative expenses were flat at 28.6% for the
years ended December 31, 2019 and 2018.
Income from OperationsIncome
from operations decreased by $158,000, or 27.8%, to $411,000 in the
fourth quarter of 2019, compared to $569,000 for the same period
last year. The decreased income from operations was primarily due
to a decrease in gross profit of $109,000 and an increase in
depreciation and amortization of $97,000, partially offset by a
decrease in selling, general and administrative expenses of
$48,000.
Income from operations decreased by $852,000, or
22.0%, to $3.0 million for the year ended December 31, 2019,
compared to $3.9 million for the year ended December 31, 2018. The
decreased income from operations was primarily due to a decrease in
gross profit of $739,000, an increase in selling, general and
administrative expenses of $36,000 and an increase in depreciation
and amortization expense of $77,000.
Net IncomeNet income for the
fourth quarter of 2019 was $335,000, compared to $618,000 for the
same period of 2018, a decrease of $283,000, or 45.8%. Net income
as a percentage of net sales for the fourth quarter of 2019 was
3.1%, compared to 5.6% for the fourth quarter of 2018. Basic and
diluted earnings per common share for the fourth quarters of 2019
and 2018 were $0.03 and $0.05, respectively.
Net income for the year ended December 31, 2019
was $3.0 million, compared to $3.6 million for the year ended
December 31, 2018, a decrease of $625,000, or 17.2%. The decrease
in net income was due to a decrease in income before provision for
income taxes of $734,000, partially offset by a decrease in
provision for income taxes of $109,000. Net income as a percentage
of net sales for the year ended December 31, 2019 was 6.4%,
compared to 7.8% for the year ended December 31, 2018. Basic and
diluted earnings per common share for the years ended December 31,
2019 and 2018 were $0.23 and $0.26, respectively.
Balance SheetAs of December 31,
2019, the company had cash of $6.5 million, compared to $7.0
million as of December 31, 2018. The decrease in cash was due to
cash used in financing activities of $2.4 million, primarily for
the repurchase of common stock, and cash used in investing
activities of $1.1 million, partially offset by cash provided by
operating activities of $3.1 million. The Company ended 2019 with
working capital of $24.6 million and a current ratio of 12:1.
Inventory increased by $1.4 million, or 14.4%,
to $11.3 million as of December 31, 2019, up from $9.9 million as
of December 31, 2018. The increase was due to an increase in
inventory for the Building Supply segment of $1.4 million, or
32.4%, and an increase in inventory for the Disposable Protective
Apparel segment of $23,000, or 0.4%.
Colleen McDonald, Chief Financial Officer,
commented, “On December 11, 2019, the Board of Directors authorized
a $2.0 million expansion of our existing stock repurchase program,
and, as of year-end, the amount available for additional
repurchases under our stock repurchase program was $2.2 million.
During the year ended December 31, 2019, we repurchased 683,910
shares of common stock at a cost of $2.5 million, bringing the
program total to 17,887,817 shares of common stock repurchased at a
cost of $35.3 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. 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 product demand, inventory levels, production
plans and capacity, 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.
-- Tables follow --
Condensed Consolidated Balance
Sheets
|
December 31, |
|
2019 |
|
2018(1) |
Assets |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
6,548,000 |
|
$ |
7,007,000 |
Investments |
|
335,000 |
|
|
258,000 |
Accounts receivable, net of allowance for doubtful accounts of |
|
|
|
$53,000 and $64,000 as of December 31, 2019 and 2018,
respectively |
|
3,568,000 |
|
|
4,935,000 |
Accounts receivable, related party |
|
724,000 |
|
|
383,000 |
Inventories |
|
11,303,000 |
|
|
9,878,000 |
Right-of-use assets |
|
898,000 |
|
|
- |
Prepaid expenses |
|
3,565,000 |
|
|
3,999,000 |
Total current assets |
|
26,941,000 |
|
|
26,460,000 |
|
|
|
|
Property and
equipment, net |
|
3,943,000 |
|
|
3,244,000 |
Goodwill |
|
55,000 |
|
|
55,000 |
Definite-lived intangible assets, net |
|
11,000 |
|
|
16,000 |
Right-of-use
assets, net of current portion |
|
2,280,000 |
|
|
- |
Equity
investments in unconsolidated affiliate |
|
4,839,000 |
|
|
4,480,000 |
Total assets |
$ |
38,069,000 |
|
$ |
34,255,000 |
|
|
|
|
Liabilities and Shareholders' Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
501,000 |
|
$ |
578,000 |
Accrued liabilities |
|
920,000 |
|
|
1,342,000 |
Lease liabilities |
|
883,000 |
|
|
- |
Total current liabilities |
|
2,304,000 |
|
|
1,920,000 |
|
|
|
|
Lease
liabilities, net of current portion |
|
2,337,000 |
|
|
- |
Deferred
income tax liabilities, net |
|
252,000 |
|
|
141,000 |
Total liabilities |
|
4,893,000 |
|
|
2,061,000 |
|
|
|
|
Commitments |
|
|
|
|
|
|
|
Shareholders' equity: |
|
|
|
Common stock, $.01 par value: 50,000,000 shares authorized; |
|
|
|
12,885,273 and 13,502,684 shares outstanding as of |
|
|
|
December 31, 2019 and 2018, respectively |
|
129,000 |
|
|
135,000 |
Additional paid-in capital |
|
657,000 |
|
|
2,669,000 |
Retained earnings |
|
32,390,000 |
|
|
29,390,000 |
Total shareholders' equity |
|
33,176,000 |
|
|
32,194,000 |
Total liabilities and shareholders' equity |
$ |
38,069,000 |
|
$ |
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
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
December 31, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net sales |
$ |
10,920,000 |
|
|
$ |
10,969,000 |
|
|
$ |
46,665,000 |
|
$ |
46,624,000 |
|
|
|
|
|
|
|
|
|
Cost of
goods sold, excluding depreciation |
|
|
|
|
|
|
|
and amortization |
|
7,077,000 |
|
|
|
7,017,000 |
|
|
|
29,693,000 |
|
|
28,913,000 |
|
Gross profit |
|
3,843,000 |
|
|
|
3,952,000 |
|
|
|
16,972,000 |
|
|
17,711,000 |
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling, general and administrative |
|
3,240,000 |
|
|
|
3,288,000 |
|
|
|
13,348,000 |
|
|
13,312,000 |
|
Depreciation and amortization |
|
192,000 |
|
|
|
95,000 |
|
|
|
602,000 |
|
|
525,000 |
|
Total operating expenses |
|
3,432,000 |
|
|
|
3,383,000 |
|
|
|
13,950,000 |
|
|
13,837,000 |
|
|
|
|
|
|
|
|
|
Income from operations |
|
411,000 |
|
|
|
569,000 |
|
|
|
3,022,000 |
|
|
3,874,000 |
|
|
|
|
|
|
|
|
|
Other income
(expenses): |
|
|
|
|
|
|
|
Equity in income of unconsolidated affiliate |
|
(12,000 |
) |
|
|
194,000 |
|
|
|
359,000 |
|
|
587,000 |
|
Gain (loss) from marketable securities |
|
8,000 |
|
|
|
(10,000 |
) |
|
|
231,000 |
|
|
(50,000 |
) |
Interest income, net |
|
16,000 |
|
|
|
1,000 |
|
|
|
68,000 |
|
|
3,000 |
|
Total other income, net |
|
12,000 |
|
|
|
185,000 |
|
|
|
658,000 |
|
|
540,000 |
|
Income
before provision |
|
|
|
|
|
|
|
for income taxes |
|
423,000 |
|
|
|
754,000 |
|
|
|
3,680,000 |
|
|
4,414,000 |
|
|
|
|
|
|
|
|
|
Provision
for income taxes |
|
88,000 |
|
|
|
136,000 |
|
|
|
680,000 |
|
|
789,000 |
|
|
|
|
|
|
|
|
|
Net
income |
$ |
335,000 |
|
|
$ |
618,000 |
|
|
$ |
3,000,000 |
|
$ |
3,625,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share |
$ |
0.03 |
|
|
$ |
0.05 |
|
|
$ |
0.23 |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share |
$ |
0.03 |
|
|
$ |
0.05 |
|
|
$ |
0.23 |
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding |
|
12,944,867 |
|
|
|
13,548,170 |
|
|
|
13,142,872 |
|
|
13,909,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
weighted average common shares outstanding |
|
12,985,847 |
|
|
|
13,623,714 |
|
|
|
13,168,725 |
|
|
13,962,819 |
|
|
|
Company
Contact: |
Investor Relations Contact: |
Alpha Pro Tech, Ltd. |
Hayden IR |
Donna Millar |
Cameron Donahue |
905-479-0654 ext. #4231 |
651-653-1854 |
e-mail: ir@alphaprotech.com |
e-mail: cameron@haydenir.com |
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