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NOGALES, ARIZONA - May 11, 2005 -- Alpha Pro Tech (AMEX:
APT; CHX:APT),a leading manufacturer of products designed to protect
people and environments, including disposable protective apparel and
construction supply weatherization products, announced its financial results
for the first quarter ended March 31, 2005.
Revenues for the three months ended March 31, 2005 increased 19.3% to $7.0
million, up from $5.9 million for the comparable prior year period. The new
Engineered Products segment, which consists of construction supply
weatherization products including building wrap and roof underlayment,
contributed $1.0 million of the sales. Sales for the Disposable Protective
Apparel Division for the quarter increased 3.7% to $4.2 million as compared to
sales of $4.1 million for the same period of 2004 due to increased sales to
distributors that concentrate on the industrial safety market. Sales of
infection control products, including the Company’s mask and eye shield line of
products, remained flat compared to the $1.2 million sold last year.
Gross profit margin for the quarter decreased to 45.3% from 51.1 % in the first
quarter last year. The decrease is due to the initial launch of the Company’s
Engineered Products segment, in which the Company validated its proprietary
manufacturing processes and encountered normal startup costs. During the first
quarter, gross profit on the segment’s products was 20.6%. Management expects
margins on this segment to increase sequentially each quarter, stabilizing in
the 35% range by the second quarter of 2006. As revenues from this segment
expand and startup costs dissipate the Company’s distribution strategy will
enable greater operating leverage which should favorably impact net margins due
to lower marketing costs compared to the other product lines. Excluding
revenues from the Engineered Products segment, gross profit margin was 49.3%
for the quarter, in line with the 49.5% gross profit margin reported for fiscal
2004.
Selling, general and administrative expenses were $2.4 million, an increase of
11.2% from the $2.1 million reported for the first quarter last year. The
increase was primarily attributed to the startup of the Engineered Products
Division and initiatives to ensure Sarbanes-Oxley corporate compliance.
SG&A expenses for the quarter were specifically impacted by $317,000 in
expenses related to the Engineered Products segment, expenses which were not
present last year. Management believes the infrastructure the Company has built
in the last six months is sufficient to significantly grow revenues in this
segment, and accordingly, expenses are not expected to materially increase over
the next 12 months.
Income from operations decreased by 7.7% to $686,000 from $743,000 for the first
quarter of last year. The decrease is attributed to an increase in SG&A
expenses, partially offset by an increase in gross profit. Net income for the
quarter ended March 31, 2005 was $444,000, or $0.02 per share, compared to net
income of $467,000, or $0.02 per share, in the first quarter last year. Net
income for the quarter was impacted by a pre-tax loss of $115,000 in connection
with the Engineered Products segment. Management anticipates this segment to
reach profitability in the quarter ending June 30, 2005. Excluding this
segment, net income for the first quarter would have increased 9.0% to $509,000
compared to the first quarter last year.
The balance sheet continues to remain strong with a current ratio of 8.4:1 on
March 31, 2005. The Company continues to carry no long-term debt, and
shareholders’ equity improved to $16.4 million as of March 31, 2005 from $15.7
million as of December 31, 2004.
Al Millar, President of Alpha Pro Tech commented, “We successfully launched our
Engineered Products segment and successfully worked through the typical startup
issues which were anticipated as part of this launch. During the first quarter,
we introduced two new key products, secured a national distributor, and
generated $1.0 million in revenue. The initial sales, of which 77% emanated
from building wrap and the balance from roof underlayment, is the result of
Perma “R” Products, Inc. ramping up its marketing initiatives to its
diversified customer base. The combination of manufacturing efficiencies and
leveraging an experienced sales and marketing partner gives us confidence that
we can improve our net margins on a going forward basis. Even though our
Disposable Protective Apparel segment only increased by 3.7%, orders from our
largest distributor in the first quarter of 2005 exceeded orders for the same
period in 2004 by approximately $1,000,000 or 25%. Due to a short-term issue
with one of our raw materials, which has been resolved and the Chinese New
Year, which resulted in two weeks of down-time with one of our Chinese
sub-contractor factories, we received fewer containers from China than ordered
and therefore could not fulfill these orders within the first quarter. We
expect to fulfill these in the second quarter. In summary, we finished the
quarter with the strongest, most diversified and most comprehensive product
portfolio in our Company’s history, and we believe we are well positioned for
measurable financial improvements in 2005.”
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