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NOGALES, ARIZONA - March 22, 2006 -- Alpha Pro Tech
(AMEX: APT; CHX:APT),a leading manufacturer of disposable protective
apparel and building products announced its financial results for the fourth
quarter and full-year period ended December 31, 2005.
Revenues for the three months ended December 31, 2005 increased 9.4 % to $7.0
million compared to $6.4 million in the fourth quarter of 2004. New sales of
construction supply weatherization products, including the Engineered Products
segment's building wrap and roof underlayment totaled $1.2 million for the
quarter. Sales for the Disposable Protective Apparel segment for the quarter
were $3.7 million, a 21.1% decrease compared to the $4.7 million reported for
the same period of 2004 as the Company experienced decreased orders primarily
from its largest distributor due to a slowdown in orders from them to reduce
their inventory levels. Although shipments to them declined in the fourth
quarter of 2005, sales to the distributor's end users remained fairly
consistent with prior quarters. Infection Control segment sales for the fourth
quarter increased by 33.4% to $1.6 million compared to the fourth quarter of
last year, which benefited from increased awareness surrounding Avian Flu. Mask
sales in the fourth quarter were up 36% as compared to the average for the
first three quarters of 2005. Extended care products were relatively unchanged
at $573,000 for the fourth quarter as the Company experienced similar levels of
demand for the Company's Extended Care Unreal Lambskin products.
Gross profit decreased by 1.0 % to $3.1 million, and represented 44.3 % of sales
for the fourth quarter of 2005 as compared to a gross profit of $3.1 million,
which represented 48.9 % of sales, for the same period in 2004. The decrease in
overall gross margins was directly related to the contribution of Engineered
Products revenue, which carries lower overall margins than the Company's other
segments and initial manufacturing startup costs in this segment. Excluding
Engineered Products, gross profit margin was 51.7% for the fourth quarter of
2005, up from gross profit margin of 48.9 % for fiscal 2004. Gross profit in
the Engineered Products segment was 25.1% for the fourth quarter, as compared
to 28.2 % for the third quarter and 25.2 % for the second quarter of 2005.
Gross profit on this product line is expected to increase to the low to mid 30%
range by the second half of 2006 as the Company generates increased sales in
this segment and the joint venture in India becomes fully operational.
Selling, general and administrative expenses increased by 13.2 % to $2.5
million, or 35.7 % of sales, for the quarter from $2.2 million, or 34.5 % of
sales for the quarter ended December 31, 2004. This was primarily the result of
increased Engineered Products expenses, increased rent and utilities expense,
increased travel expenses and increased factory indirect expenses. Management
believes it has the necessary infrastructure required to substantially grow
revenue and accordingly expects operating expenses to remain fairly stable for
the coming twelve months, despite planned revenue growth.
Income from operations decreased by 40.3% to $478,000 for the quarter compared
to income from operations of $801,000 for the fourth quarter last year. The
decrease was due to a shift in product mix, which included a higher
contribution from our lower-margin engineered products and a reduction in sales
in our core apparel business. Net income for the fourth quarter was $309,000,
or $0.01 per fully diluted share, compared to net income of $556,000, or $0.02
per fully diluted share for the quarter ended December 31, 2004.
In 2006 the Company will introduce two new apparel product lines targeted to the
industrial and clean room marketplace. Comfortech™, the first product, has been
under development for two years and is a new technically superior and lower
cost line of non-breathable material used in coveralls, gowns, lab coats and
other apparel products for the pharmaceutical, medical device and lab animal
research markets. The second is the Comfortech Certified™ product line which is
targeted for manufacturing facilities and other applications where reducing
bio-contamination is a priority. The Company has received beta orders for the
Comfortech™ product during the first quarter of 2006 and expects to receive
initial orders during the second quarter of 2006. Based on initial customer
indications, management expects both of these products to begin to contribute
more meaningfully to revenue during the second half of 2006.
Al Millar, President of Alpha Pro Tech commented, "We continued to grow our top
line while maintaining the appropriate operating expense controls to deliver
profitable results. During the fourth quarter we witnessed a decline in orders
from our largest apparel distributor, however, sales to their end users
remained fairly consistent with prior quarters. Based on initial indications,
we anticipate this distributor will return to more normalized ordering patterns
in the latter part of the first quarter of 2006."
For the year ended December 31, 2005, sales increased 25.2 % or $6.3 million to
$31.1 million from $24.8 million reported for 2004. The increase was due
primarily to $4.7 million in incremental sales from Engineered Products,
specifically construction supply weatherization products which was a new
segment in 2005 and a $1.7 million or 9.3% increase in sales of Disposable
Protective Apparel. Infection Control segment sales for the year were flat
year-over-year at $5.1 million. Discounting the $600,000 one-time sale of N-95
masks during the second quarter of 2004, sales in this segment would have
increased approximately 14% on a comparable basis. Extended Care products
decreased by 6.7% or $0.1 million to $1.8 million as the Company experienced
softness in the sale of medical bed pads. This segment is not expected to be a
growth area for the Company.
Gross profit margin decreased to 45.5 % for the year from 49.5 % for the same
period in 2004. Excluding Engineered Products, gross profit margin was 49.1 %
for the year ended December 31, 2005 compared to 49.5 % for the same period of
2004, in line with the Company's gross profit margin for 2004.
Selling, general and administrative expenses increased by 9.8 % to $9.8 million
for the year, representing 31.5 % of sales, compared to $8.9 million, or 35.9 %
of sales, for the year ended December 31, 2004. The increase in absolute
dollars was primarily related to increased expenses of $802,000 for the
Engineered Products segment.
Depreciation and amortization expense decreased by 3.5 % to $499,000 for the
year ended December 31, 2005 from $517,000 for the same period in 2004.
Income from operations increased by 35.4 % to $3.9 million for the year from
$2.8 million last year due primarily to an increase in gross profit of $1.9
million partially offset by an increase in selling, general and administrative
expenses of $0.9 million. Net income for the year ended December 31, 2005 was
up 32.6% to $2.5 million, or $0.10 per fully diluted share (based on 25.2
million fully diluted shares) compared to net income of $1.8 million, or $0.08
per fully diluted shares (based on 24.6 million fully diluted shares) for
fiscal 2004.
The balance sheet continues to remain strong with a current ratio of 6.51 to 1
as of December 31, 2005. Additionally at year end, the company reported no
long-term debt, and shareholders' equity improved to $18.6 million from $15.7
million on December 31, 2004. As of December 31, 2005, the Company had cash and
cash equivalents of $1.2 million and working capital of $14.2 million. The
Company's cash position increased by $0.9 million from the third quarter,
primarily related to a reduction in accounts receivable. The Company has a $3.5
million dollar line of credit of which almost all is still available.
"We see significant growth opportunities for both our core Disposable Protective
Apparel business in addition to our Engineered Products Division as we further
penetrate each market respectively with new and innovative products," Mr.
Millar continued. "Our Miami Dade Certification received in October 2005
validates the integrity of our Engineered Products offering and helps to clear
the way for Perma R to increase sales in the geographic areas where their
customers are located. Additionally, the Comfortech™ line of products should
bolster our Disposable Protective Apparel sales in 2006 as we look to capture
incremental market share."
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