Form 8-K ALPHA PRO TECH LTD For: May 06

May 6, 2021 1:56 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): May 6, 2021

 

Alpha Pro Tech, Ltd.

(Exact name of registrant as specified in its charter)

 

Delaware, U.S.A.

01-15725

63-1009183

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

     

60 Centurian Drive, Suite 112

Markham, Ontario, Canada 

  L3R 9R2
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (905) 479-0654

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

APT

NYSE American

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

 

Item 2.02.       Results of Operations and Financial Condition.

 

On May 6, 2021, Alpha Pro Tech, Ltd. (the “Company”) issued a press release announcing financial results for the first quarter ended March 31, 2021. The press release is attached as Exhibit 99.1 to this Form 8-K and is furnished to, but not filed with, the Securities and Exchange Commission.

 

Item 9.01.       Financial Statements and Exhibits.

 

(d)       Exhibits

 

Exhibit Number

Exhibit

   

99.1

Press Release dated May 6, 2021, announcing financial results for the first quarter ended March 31, 2021

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

    ALPHA PRO TECH, LTD.  
       
Date: May 6, 2021   By:  /s/ Colleen McDonald    
   

Colleen McDonald

Chief Financial Officer

 

 

 

 

Exhibit 99.1

logo.jpg

 

ALPHA PRO TECH, LTD. ANNOUNCES FIRST QUARTER 2021

FINANCIAL RESULTS

 

Sales Increased 28%, or $5.0 Million, to $23.2 Million

 

 

FOR IMMEDIATE RELEASE

 

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

 

 

Net sales for the first quarter of 2021 were $23.2 million, up 28%, compared to $18.2 million for the first quarter of 2020.

 

o

Disposable Protective Apparel segment sales increased $4.2 million, or 40%.

 

o

Building Supply segment sales increased $783,000, or 10%, and our core building products increased by 18%.

 

Net income for the first quarter of 2021 was $3.7 million, or $0.27 per diluted share, compared to $5.3 million, or $0.39 per diluted share, for the first quarter of 2020.

 

o

Net income and diluted earnings per share for the first quarter of 2021 would have exceeded 2020 for the same period excluding the estimated $2 million tax benefit recorded in 2020.

 

Nogales, Arizona May 6, 2021 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 profit

Gross 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 Expenses

Selling, 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 Operations

Income 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 Income

Net 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 Sheet

As 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,

2021

   

December 31,

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  

 

 


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