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Letter To Shareholders 

To Our Shareholders

As 2017 drew to a close, we were pleased to do so on continued solid ground. This was a year in which we made strides in building for the future with organic new product launches and development of others, but also a year in which we said goodbye to one of our founders with the loss of our former President and Chairman, Al Millar.

Operationally, we delivered 8.2% growth in sales of our housewrap, a 38.7% increase in sales of other woven material and top line growth in our Infection Control and Disposable Protective Apparel segment, despite a $2.2 million decline in total sales. The overall decrease was driven primarily by lower sales of our synthetic roof underlayment.

Our 2017 profitability was bolstered by a nearly three-percentage point increase in gross profit margin, despite the overall reduction in sales, as we remain focused on strategies to manage our cost platform to maximize profit potential. Going forward, products in our Disposable Apparel segment, which were duty free in 2017 under the U.S. Customs and Borders Protection Generalized System of Preferences (GSP), will no longer be duty free in 2018, as the government program was not renewed. We expect this change will have an impact on our gross profit margin in 2018, but we believe we will still achieve margins in the high thirty percent range. We believe there may be an opportunity for this program to be reinstated in the future, but even if it is not, we expect increased revenue and operating leverage will drive higher net profit and earnings per share in 2018.

Net income of $2.6 million for 2017 was negatively impacted by expenses related to the death benefit provided to the beneficiaries of our former President and Chairman. Excluding these expenses, net income would have been down by only a modest amount compared to 2016, and earnings per share would actually have been up at $0.21 per diluted share, compared to $0.19 for 2016.

Our balance sheet remains healthy, and the generation of cash from operating activities, which was more than $4 million for 2017, continues to support our active share repurchase program, which directly returns value to our shareholders, and enables investment in new product development.

Our initiative to expand our product offerings to support future growth led to accomplishments in both the Building Supply and Disposable Apparel segments during 2017. In our Building Supply segment, we announced a new, innovative and exciting product line in our housewrap family, REX™ Wrap Fortis with JX ALTA 360°Drainage Technology™ at the end of the third quarter of 2017. With its one-of-a-kind construction, this product uniquely enables the drainage of water in every direction to protect buildings from the elements exponentially better than a traditional housewrap, while decreasing job site material waste, simplifying installation to reduce labor and allowing fewer products to be carried onto the job site. This new product offering competes in a segment of the housewrap market that has historically been untapped for us, and we anticipate that it will provide us with growth opportunities going forward. We are currently working on the development of additional Building Supply segment products, which we hope to launch during 2018. Research and development efforts in our Disposable Protective Apparel segment have culminated in a new product launch branded “NuTech™”, which is expected to contribute to revenue in 2018. This line of product focuses on the industrial safety market, as compared to our current clean room market and we are able to monetize our existing distribution network.

We are excited to grow these new opportunities into material contributions for the future growth of our Company. We look forward to a successful 2018 as we build on the AlphaProTech brand and continue to develop, manufacture and market innovative, high-value products for the protection of people, products and the environment. We thank you for your continued support.




 Lloyd Hoffman
 President and Chief Executive Officer