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NOGALES, ARIZONA - November 11, 2005 -- Alpha Pro Tech
(AMEX: APT; CHX:APT), a leading manufacturer of disposable
protective apparel, consumer and building products announced its financial
results for the third quarter and nine-month period ended September 30, 2005.
Revenues for the three months ended September 30, 2005 increased 38.3% to $8.1
million compared to $5.8 million in the third quarter of 2004. The Engineered
Products segment’s building wrap and roof underlayment, which commenced sales
in the first quarter of 2005, totaled $1.4 million and showed a 27% sequential
increase over the prior quarter. Sales for the Disposable Protective Apparel
segment for the quarter was $5.1 million, an increase of 18.8% compared to the
$4.3 million reported for the same period of 2004, primarily due to increased
sales of $400,000 to the Company’s largest distributor, and approximately a
$400,000 increase due to other distributors who focus on the industrial safety
and cleanroom industries. Infection Control segment sales for the third quarter
increased by 8.3% to $1.2 million compared to $1.1 million for the same period
of 2004 aided by an increase in medical, dental and industry mask sales. Sales
of the Company’s Extended Care Unreal Lambskin and other related products
decreased by 14.8% to $356,000 for the third quarter from $418,000 for the
quarter ended September 30, 2004 due to decreased demand for the Company’s
Extended Care Unreal Lambskin products.
Gross profit increased by 25.1% to $3.6 million, or 45.3% of sales, for the
third quarter from $2.9 million, or 50.1% of sales, for the same period in
2004. The decrease in overall gross margins is primarily due to the lower
margins related to sales from the Engineered Products segment. Excluding
Engineered Products, gross profit margin was 48.9% for the third quarter, down
marginally from gross profit margin of 49.5% for fiscal 2004. Gross profit on
the Engineered Products segment improved to 28.2% for the third quarter from
25.2% for the second quarter of 2005 and from 20.6% for the first quarter of
2005. Gross profit on this product line is expected to increase to the mid 30
percent range by the second quarter of 2006 as the Company’s production
facility in India becomes fully operational and additional capacity is
utilized. Management expects some pressure on consolidated gross profit margins
over the next twelve months primarily due to increasing sales on the lower
gross margin Engineered Products segment.
Selling, general and administrative expenses increased by 10.1% to $2.4 million,
or 30.1% of sales, for the quarter from $2.2 million, or 37.7% of sales for the
quarter ended September 30, 2004. The increase in selling, general and
administrative expenses primarily consists of increased payroll costs,
increased expense for the executive bonus program, increased rent and utilities
expense, and increased insurance expense. Selling, general and administrative
expenses for the quarter for the Engineered Products segment was $314,000 as
compared to $155,000 for the same period of 2004. Management continues to
believe the infrastructure required to substantially grow the Engineered
Products is now in place, and accordingly, expenses are not expected to change
substantially from current year to date levels for at least the next 12 months
if sales increase as expected.
Income from operations increased by 85.5% to $1.1 million for the quarter as
compared to income from operations of $592,000 for the same quarter last year.
The increase in income from operations is due to an increase in gross profit of
$732,000, partially offset by an increase in selling, general and
administrative expenses of $223,000 and an increase in depreciation and
amortization of $3,000.
Net income for the third quarter increased by 85.3% to $693,000, or $0.03 per
basic and fully diluted share, compared to net income of $374,000. or $0.02 per
basic and fully diluted share for the quarter ended September 30, 2004.
Al Millar, President of Alpha Pro Tech commented, “Our growth in the engineered
products and disposable protective apparel sales continue to drive solid top
line growth, and our ability to continue managing expenses coupled with our
operating leverage has enabled ongoing improvements in profitability. Results
from our Engineered Products division has validated our expectation that these
new products will collectively be solid contributors to both our revenue and
net income growth going forward with margin improvements materializing as we
drive higher volume production. Despite lower margin contributions from our
Engineered Products segment, we increased our gross profit by more than 25
percent and our income from operations by more than 85 percent.”
For the nine-month period ended September 30, 2005, sales increased 30.7% to
$24.1 million from $18.4 million for the same period last year. The increase is
primarily attributed to $2.6 million in increased sales of disposable
protective apparel, as well as new sales of construction supply weatherization
products of $3.5 million, partially offset by decreased infection control
segment sales of $361,000. Sales for the Disposable Protective Apparel segment
for the nine months were $15.8 million compared to $13.1 million for the same
period of 2004, an increase of 20.1%. Infection Control segment sales decreased
by 9.2% to $3.6 million from $3.9 million in the same period of 2004, due to a
large $600,000 international sale for N-95 respirator masks in the second
quarter of 2004. Excluding this international sale, the infection control
segment was up 7.1% for nine-month period. Engineered Products sales for the
nine months were $3.5 million as compared to $0 for the same period of 2004.
Sales of the Company's Extended Care Unreal Lambskin and other related products
decreased by 9.2% to $1.2 million from $1.4 for the mine months ended September
30, 2004.
Gross profit margin decreased to 45.8% for the nine months ended September 30,
2005 from 49.6% for the same period in 2004. Excluding the 25.1% gross profit
margin on Engineered Products, the gross profit margin for the nine-months was
49.4%.
Selling, general and administrative expenses increased by 8.6% to $7.3 million,
or 30.3% of sales, for the nine month ended September 30, 2005 from $6.7
million, or 36.4% of sales, for the nine months ended September 30, 2004.
Excluding the year to date Engineered Products segment expenses of $870,000,
selling, general and administrative expenses for the nine months ended
September 30, 2005 decreased by 1.7% to $6.4 million as compared to $6.5
million for the same period of 2004.
Income from operations increased by 65.1% to $3.4 million for the nine months
ended September 30, 2005 as compared to income from operations of $2.0 million
for the nine months ended September 30, 2004.
Net income for the nine months ended September 30, 2005 increased by 66.0% to
$2.1 million, or $0.09 per basic and fully diluted share, compared to net
income of $1.3 million, or $0.06 per basic and $0.05 per fully diluted share
for the same period of 2004.
The balance sheet continues to remain strong with a current ratio of 6.7 to 1 on
September 30, 2005. The Company continues to carry no long-term debt, although
has short term debt of $177,000 and shareholders’ equity improved to $18.1
million as of September 30, 2005 from $15.7 million as of December 31, 2004. As
of September 30, 2005, the Company had cash and cash equivalents of $294,000
and working capital of $13.8 million. Cash continued to be utilized during the
quarter for further investment in the India joint venture, for the purchase of
capital equipment and inventory for the continued launch of the Engineered
Products segment. Our investment in the India joint venture is now complete and
our purchase of capital equipment for Engineered Products will not be
significant. As well, cash will increase in the coming quarters as we convert
inventory on hand. The Company has a $3.5 million dollar line of credit of
which $3.26 million is accessible and combined with current working capital
management believes is sufficient to fund operations.
“We are excited about our joint venture in India, a project which will increase
our gross profit and increase our manufacturing capacity for our Engineered
Products line,” Mr. Millar continued. “Also we have recently received Notice of
Acceptance from Miami-Dade County Building Code Compliance for our
AlphaProTector™-SUL Synthetic Roof Underlayment product. The Miami-Dade Notice
of Acceptance essentially serves as certification nationwide, as it is among
the most rigorous standards in the country. This validates the quality of our
roof underlayment and will allow our exclusive distributor, Perma “R” a greater
platform to sell our products. Additionally, as seen in the growth of our
Disposable Protective Apparel segment we are successfully further penetrating
existing and new distributors. We believe that there are continued
opportunities globally driven by the potential spread of the Avian bird-flu
pandemic to drive further growth above current levels.”
About Alpha Pro Tech
Alpha Pro Tech, Ltd. develops, manufactures and markets innovative disposable
and limited-use protective apparel products for the industrial, clean room,
medical and dental markets. In addition, Alpha ProTech Engineered Products,
Inc. manufactures and markets a line of construction weatherization products,
including building wrap, roof underlayment and mold resistant framing sealant.
The Company has manufacturing facilities in Salt Lake City, Utah; Nogales,
Arizona; Janesville, Wisconsin; and Valdosta, Georgia.
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