Back to News Index news release: 11/14/2005
Alpha Pro Tech, Ltd. Announces 38% Increase in Revenue and a 85%
Increase in Net Income for the Third Quarter 2005
$809,000 Increase in Disposable Protective Apparel Products and $1.4 Million in Sales of Engineered
Products Contribute to Sales Growth
- Quartery revenues increase 38.3% to $8.1 million from $5.8 million
- Quarterly earnings of $0.03 vs $0.02 for Third Quarter 2004
- 15% Increase in shareholders equity from the beginning of the year to $18.1 million

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.

Alpha Pro Tech, LTD
Consolidated Condensed Statements of Income
Consolidated Statements of Operations (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
Net Sales $8,056,000 $5,827,000 $24,078,000 $18,428,000
Cost of Goods Sold (excluding depreciation & amortization)
$4,407,000 $2,910,000 $13,040,000 $9,281,000
Gross Margin $3,649,000 $2,917,000 $11,038,000 $9,147,000
Expenses:
    Selling, General & Administrative $2,421,000 $2,198,000 $7,289,000 $6,711,000
    Depreciation & Amortization $130,000 $127,000 $375,000 $393,000
Income From Operations $1,098,000 $592,000 $3,374,000 $2,043,000
Other Income (Expense)
    Gain on Sales of Assets - - - $7,000
    Interest, Net $2,000 - $24,000 ($4,000)
Income Before Provision for Income Taxes $1,100,000 $592,000 $3,398,000 $2,046,000
Provision for Income Taxes $407,000 $218,000 $1,257,000 $756,000
Net Income $693,000 $374,000 $2,141,000 $1,290,000
Basic Net Income Per Share $0.03 $0.02 $0.09 $0.06
Diluted Net Income Per Share $0.03 $0.02 $0.09 $0.05
Basic Weighted Average Shares Outstanding 23,679,933 23,270,478 23,668,386 23,155,358
Diluted Weighted Average Shares Outstanding 25,347,172 24,467,474 25,155,335 24,642,728
Balance Sheet Highlights
Sept 30 Dec 31
2005 2004
Cash $294,000 $4,875,000
Total Current Assets $16,278,000 $15,348,000
Net Property & Equipment $3,418,000 $3,256,000
Total Assets $21,215,000 $18,789,000
Total Current Liabilities $2,447,000 $2,437,000
Total Liabilities $3,099,000 $3,089,000
Shareholder's Equity $18,116,000 $15,700,000
Total Liabilities & Equity $21,215,000 $18,789,000
The Private Securities Litigation Reform Act of 1995 ("Act") provides a safe harbor for forward-looking information made on behalf of the Company. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in registration statements, annual reports and other periodic reports and filings of the Company filed with the Securities and Exchange Commission. All statements, other than statements of historical facts which address the Company's expectations of sources of capital or which express the Company's expectations for the future with respect to financial performance or operating strategies, can be identified as forward-looking statements. As a result, there can be no assurance that the Company's future results will not be materially different from those described herein as "believed," "anticipated," "estimated" or "expected," which reflect the current views of the Company with respect to future events. We caution readers that these forward-looking statements speak only as the date hereof. The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which such statement is based.
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