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NOGALES, ARIZONA - May 8, 2006 -- Alpha Pro Tech (AMEX:
APT; CHX:APT),a leading manufacturer of disposable protective
apparel and consumer products announced its financial results for the first
quarter ended March 31, 2006.
Revenues for the first quarter were $8.0 million, an increase of 14.2% from $7.0
million for the comparable prior year period. Sales of construction supply
weatherization products, including the Engineered Products segment's building
wrap and roof underlayment, totaled $1.8 million compared to $1.0 million for
the first quarter last year, representing an increase of 80.0%. Engineered
Product sales improved as a result of improved sales & marketing efforts
within this segment. Sales of Disposable Protective Apparel products were $4.1
million for the quarter and were down 4.1% from last year. Sales continued to
be impacted by a slowdown in orders related to the Company's largest
distributor reducing overall internal inventory levels. During the second half
of March, sales to this distributor returned to more normalized historical
levels with order momentum increasing into April. Sales of Infection Control
products, including the Company's mask and eye shields, were $1.7 million
compared to $1.2 million for the first quarter last year, representing an
increase of 38.4%. Specifically, sales of the Company's N-95 Respirator mask
increased significantly in part due to heightened concerns regarding the Avian
Flu.
Al Millar, President of Alpha Pro Tech commented, "We made further progress
during this quarter which enabled us to achieved a double digit increase in
revenue driven by sales growth in both our Engineered Products and Infection
control segments. During the quarter we began to take on a more proactive role
with PermaR, our exclusive distributor for our Engineered Products line, and as
a result of our combined efforts we experienced an 80% increase in sales. We
believe our Engineered Product revenues will continue to improve and expect to
at least achieve the $8.0 million minimum in place for the year. Additionally,
we are also encouraged to see improving orders from our largest apparel
distributor late in the quarter. This improvement, in conjunction with strong
demand for our Engineered Products and with increased demand for our Infection
control products, has provided a solid foundation for continued growth in 2006.
Gross profit for the quarter increased to $3.6 million, or 45.7% of sales,
compared to $3.2 million, or 45.3% of sales for the comparable period last
year. Gross margins benefited from a larger percentage of total revenue
contribution from mask and eye shield sales which are among the highest margin
products for the Company. Gross profit within the Engineered Products segment
was 29.5% for the quarter compared to 20.6% for the same period of 2005. The
Company expects that gross margins within this segment will increase towards
the low to mid 30% range by the second half of this year as production
continues to increase at the Company's India manufacturing facility. Excluding
Engineered Products, gross profit margin was 50.3% for the quarter ended March
31, 2006 compared to 49.3% for the same period of 2005.
Selling, general and administrative expenses were $2.5 million, an increase of
6.1% from the $2.4 million for the first quarter last year. Expenses increased
to support overall revenue growth particularly within Engineered Products.
Despite the increase in overall expense dollars, expenses decreased as a
percentage of revenue to 31.3% compared to 33.7% last year.
Income from operations increased by 50.7%, to $1,034,000 for the quarter as
compared to income from operations of $686,000 for the quarter ended March 31,
2005. Income from operations increased to 13.0% of revenue from 9.8% last year,
indicating increased leverage in the business. The provision for income taxes
for the quarter was $381,000 compared to $258,000 for the quarter ended March
31, 2005, resulting in an effective tax rate of 37.0% which was relatively
unchanged versus last year.
Net income for the quarter increased to 46.2% to $649,000, or $0.03 per fully
diluted share, compared to net income of $444,000, or $0.02 per fully diluted
share, for the quarter ended March 31, 2005.
The balance sheet continued to remain strong with a current ratio of 7.3:1 on
March 31, 2006. The Company completed the quarter with cash and cash
equivalents of $882,000 and working capital of $15.2 million. Inventories
during the quarter totaled $10.8 million and were up 3.0% versus the comparable
quarter last year. The Company has continued to experience an elevated
inventory level associated with the expected increase in Engineered Product
sales. Management believes that inventories will return towards more normalized
levels in the second half of the year as sales of these products continue to
increase. The Company currently has no outstanding debt and maintains an unused
$3.5 million credit facility.
Mr. Millar concluded, "We continue to remain focused on not only growing
revenues but also improving our overall profitability as evidenced by our
increase in operating margins this past quarter. As our revenues continue to
grow, we believe we have the opportunity to improve our margin structure due to
higher utilization of our facilities and improved economies of scale. Despite a
difficult comparison versus the second quarter of 2005, which was
uncharacteristically strong, we remain optimistic on our prospects for both
revenue and earnings growth for the full year."
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