UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q |
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20202021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 01-15725
Alpha Pro Tech, Ltd.
(Exact Name of Registrant as Specified in Its Charter)
Delaware, U.S.A. | 63-1009183 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| 60 Centurian Drive, Suite 112 | |
| Markham, Ontario, Canada | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (905) 479-0654
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | APT | NYSE American |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☒
Emerging growth company ☐
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | Smaller reporting company ☒ | |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding November | ||
| Common Stock, $0.01 par value |
Alpha Pro Tech, Ltd.
Index
| PART I. | FINANCIAL INFORMATION | ||
| ITEM 1. | Financial Statements | page | |
| Condensed Consolidated Balance Sheets (Unaudited) | 1 | ||
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | 2 | ||
| Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) | 3 | ||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | 4 | ||
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 5 | ||
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||
| ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | ||
| ITEM 4. | Controls and Procedures | ||
| PART II. | OTHER INFORMATION | ||
| ITEM IA. | Risk Factors | ||
| ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
| ITEM 6. | Exhibits | ||
| SIGNATURES | |||
| EXHIBITS | |||
Alpha Pro Tech, Ltd.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets (Unaudited)
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 (1) | 2021 | 2020 (1) | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 24,583,000 | $ | 6,548,000 | $ | 17,636,000 | $ | 23,292,000 | ||||||||
Investments | 173,000 | 335,000 | ||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $68,000 as of September 30, 2020 and $53,000 as of December 31, 2019 | 9,137,000 | 3,568,000 | ||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $64,000 as of September 30, 2021 and $71,000 as of December 31, 2020 | 3,991,000 | 8,132,000 | ||||||||||||||
Accounts receivable, related party | 833,000 | 724,000 | 1,396,000 | 905,000 | ||||||||||||
Inventories | 13,155,000 | 11,303,000 | ||||||||||||||
Inventories, net | 23,190,000 | 16,749,000 | ||||||||||||||
Prepaid expenses | 4,859,000 | 3,587,000 | 6,562,000 | 6,225,000 | ||||||||||||
Total current assets | 52,740,000 | 26,065,000 | 52,775,000 | 55,303,000 | ||||||||||||
Property and equipment, net | 4,086,000 | 3,943,000 | 6,136,000 | 4,353,000 | ||||||||||||
Goodwill | 55,000 | 55,000 | 55,000 | 55,000 | ||||||||||||
Definite-lived intangible assets, net | 9,000 | 11,000 | 4,000 | 7,000 | ||||||||||||
Right-of-use assets | 2,501,000 | 3,178,000 | 2,872,000 | 3,535,000 | ||||||||||||
Equity investment in unconsolidated affiliate | 5,295,000 | 4,839,000 | 6,172,000 | 5,549,000 | ||||||||||||
Total assets | $ | 64,686,000 | $ | 38,091,000 | $ | 68,014,000 | $ | 68,802,000 | ||||||||
Liabilities and Shareholders' Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 992,000 | $ | 501,000 | $ | 1,029,000 | $ | 1,983,000 | ||||||||
Accrued liabilities | 2,969,000 | 920,000 | 1,120,000 | 2,793,000 | ||||||||||||
Customer advance payments of orders | 3,218,000 | - | 0 | 209,000 | ||||||||||||
Lease liabilities | 893,000 | 882,000 | 880,000 | 867,000 | ||||||||||||
Total current liabilities | 8,072,000 | 2,303,000 | 3,029,000 | 5,852,000 | ||||||||||||
Lease liabilities, net of current portion | 1,657,000 | 2,337,000 | 2,046,000 | 2,719,000 | ||||||||||||
Deferred income tax liabilities, net | 224,000 | 224,000 | 211,000 | 211,000 | ||||||||||||
Total liabilities | 9,953,000 | 4,864,000 | 5,286,000 | 8,782,000 | ||||||||||||
Commitments | ||||||||||||||||
Shareholders' equity: | ||||||||||||||||
Common stock, $.01 par value: 50,000,000 shares authorized; 13,577,847 and 12,885,273 shares outstanding as of September 30, 2020 and December 31, 2019, respectively | 136,000 | 129,000 | ||||||||||||||
Common stock, $.01 par value: 50,000,000 shares authorized; 13,162,341 and 13,419,847 shares outstanding as of September 30, 2021 and December 31, 2020, respectively | 132,000 | 135,000 | ||||||||||||||
Additional paid-in capital | 2,539,000 | 708,000 | 0 | 409,000 | ||||||||||||
Retained earnings | 52,058,000 | 32,390,000 | 62,596,000 | 59,476,000 | ||||||||||||
Total shareholders' equity | 54,733,000 | 33,227,000 | 62,728,000 | 60,020,000 | ||||||||||||
Total liabilities and shareholders' equity | $ | 64,686,000 | $ | 38,091,000 | $ | 68,014,000 | $ | 68,802,000 | ||||||||
(1) The condensed consolidated balance sheet as of December 31, 20192020 has been prepared using information from the audited consolidated balance sheet as of that date.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Alpha Pro Tech, Ltd.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | Septermber 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Net sales | $ | 30,027,000 | $ | 12,027,000 | $ | 73,681,000 | $ | 35,745,000 | $ | 14,475,000 | $ | 30,027,000 | $ | 55,442,000 | $ | 73,681,000 | ||||||||||||||||
Cost of goods sold, excluding depreciation and amortization | 14,891,000 | 7,807,000 | 37,378,000 | 22,616,000 | 9,533,000 | 14,891,000 | 35,089,000 | 37,378,000 | ||||||||||||||||||||||||
Gross profit | 15,136,000 | 4,220,000 | 36,303,000 | 13,129,000 | 4,942,000 | 15,136,000 | 20,353,000 | 36,303,000 | ||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Selling, general and administrative | 4,580,000 | 3,172,000 | 13,236,000 | 10,108,000 | 3,884,000 | 4,580,000 | 12,661,000 | 13,236,000 | ||||||||||||||||||||||||
Depreciation and amortization | 186,000 | 142,000 | 546,000 | 410,000 | 209,000 | 186,000 | 611,000 | 546,000 | ||||||||||||||||||||||||
Total operating expenses | 4,766,000 | 3,314,000 | 13,782,000 | 10,518,000 | 4,093,000 | 4,766,000 | 13,272,000 | 13,782,000 | ||||||||||||||||||||||||
Income from operations | 10,370,000 | 906,000 | 22,521,000 | 2,611,000 | 849,000 | 10,370,000 | 7,081,000 | 22,521,000 | ||||||||||||||||||||||||
Other income: | ||||||||||||||||||||||||||||||||
Equity in income of unconsolidated affiliate | 250,000 | 10,000 | 456,000 | 371,000 | 112,000 | 250,000 | 623,000 | 456,000 | ||||||||||||||||||||||||
Gain (loss) on marketable securities | (24,000 | ) | (387,000 | ) | (42,000 | ) | 223,000 | |||||||||||||||||||||||||
Gain /(Loss) on marketable securities | 0 | (24,000 | ) | 0 | (42,000 | ) | ||||||||||||||||||||||||||
Interest income, net | 1,000 | 18,000 | 17,000 | 52,000 | 1,000 | 1,000 | 2,000 | 17,000 | ||||||||||||||||||||||||
Total other income | 227,000 | (359,000 | ) | 431,000 | 646,000 | 113,000 | 227,000 | 625,000 | 431,000 | |||||||||||||||||||||||
Income before provision for income taxes | 10,597,000 | 547,000 | 22,952,000 | 3,257,000 | 962,000 | 10,597,000 | 7,706,000 | 22,952,000 | ||||||||||||||||||||||||
Provision for income taxes | 2,490,000 | 110,000 | 3,284,000 | 592,000 | 196,000 | 2,490,000 | 1,550,000 | 3,284,000 | ||||||||||||||||||||||||
Net income | $ | 8,107,000 | $ | 437,000 | $ | 19,668,000 | $ | 2,665,000 | $ | 766,000 | $ | 8,107,000 | $ | 6,156,000 | $ | 19,668,000 | ||||||||||||||||
Basic earnings per common share | $ | 0.60 | $ | 0.03 | $ | 1.46 | $ | 0.20 | $ | 0.06 | $ | 0.60 | $ | 0.46 | $ | 1.46 | ||||||||||||||||
Diluted earnings per common share | $ | 0.58 | $ | 0.03 | $ | 1.41 | $ | 0.20 | $ | 0.06 | $ | 0.58 | $ | 0.45 | $ | 1.41 | ||||||||||||||||
Basic weighted average common shares outstanding | 13,588,554 | 13,056,173 | 13,431,210 | 13,209,598 | 13,177,520 | 13,588,554 | 13,255,125 | 13,431,210 | ||||||||||||||||||||||||
Diluted weighted average common shares outstanding | 14,033,027 | 13,075,692 | 13,977,564 | 13,238,026 | 13,419,485 | 14,033,027 | 13,555,925 | 13,977,564 | ||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Alpha Pro Tech, Ltd.
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)
For the Nine Months Ended September 30, 2021 |
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2020 | 13,419,847 | $ | 135,000 | $ | 409,000 | $ | 59,476,000 | $ | 60,020,000 | |||||||||||
Net income | - | - | - | 3,719,000 | 3,719,000 | |||||||||||||||
Common stock repurchased and retired | (186,000 | ) | (2,000 | ) | (817,000 | ) | (1,547,000 | ) | (2,366,000 | ) | ||||||||||
Stock-based compensation expense | - | - | 101,000 | - | 101,000 | |||||||||||||||
Options exercised | 89,494 | 1,000 | 307,000 | - | 308,000 | |||||||||||||||
Balance as of March 31, 2021 | 13,323,341 | 134,000 | - | 61,648,000 | 61,782,000 | |||||||||||||||
Net income | - | - | - | 1,671,000 | 1,671,000 | |||||||||||||||
Common stock repurchased and retired | (150,000 | ) | (2,000 | ) | (151,000 | ) | (1,189,000 | ) | (1,342,000 | ) | ||||||||||
Stock-based compensation expense | - | - | 68,000 | - | 68,000 | |||||||||||||||
Options exercised | 35,000 | - | 83,000 | - | 83,000 | |||||||||||||||
Balance as of June 30, 2021 | 13,208,341 | $ | 132,000 | $ | - | $ | 62,130,000 | $ | 62,262,000 | |||||||||||
Net income | - | - | - | 766,000 | 766,000 | |||||||||||||||
Common stock repurchased and retired | (46,000 | ) | - | (69,000 | ) | (300,000 | ) | (369,000 | ) | |||||||||||
Stock-based compensation expense | - | - | 69,000 | - | 69,000 | |||||||||||||||
Balance as of September 30, 2021 | 13,162,341 | $ | 132,000 | $ | - | $ | 62,596,000 | $ | 62,728,000 | |||||||||||
For the Nine Months Ended September 30, 2020 |
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | �� | Total | |||||||||||||||
Balance as of December 31, 2019 | 12,885,273 | $ | 129,000 | $ | 708,000 | $ | 32,390,000 | $ | 33,227,000 | |||||||||||
Net income | - | - | - | 5,342,000 | 5,342,000 | |||||||||||||||
Common stock repurchased and retired | (35,100 | ) | - | (125,000 | ) | - | (125,000 | ) | ||||||||||||
Stock-based compensation expense | - | - | 91,000 | - | 91,000 | |||||||||||||||
Options exercised | 712,839 | 7,000 | 1,834,000 | - | 1,841,000 | |||||||||||||||
Balance as of March 31, 2020 | 13,563,012 | 136,000 | 2,508,000 | 37,732,000 | 40,376,000 | |||||||||||||||
Net income | - | - | - | 6,220,000 | 6,220,000 | |||||||||||||||
Stock-based compensation expense | - | - | 92,000 | - | 92,000 | |||||||||||||||
Options exercised | 24,835 | - | 94,000 | - | 94,000 | |||||||||||||||
Balance as of June 30, 2020 | 13,587,847 | $ | 136,000 | $ | 2,694,000 | $ | 43,951,000 | $ | 46,781,000 | |||||||||||
Net income | - | - | - | 8,107,000 | 8,107,000 | |||||||||||||||
Common stock repurchased and retired | (20,000 | ) | - | (281,000 | ) | - | (281,000 | ) | ||||||||||||
Stock-based compensation expense | - | - | 91,000 | - | 91,000 | |||||||||||||||
Options exercised | 10,000 | - | 35,000 | - | 35,000 | |||||||||||||||
Balance as of September 30, 2020 | 13,577,847 | 136,000 | 2,539,000 | 52,058,000 | 54,733,000 | |||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Condensed Consolidated Statements of Shareholders’ EquityCash Flows (Unaudited)
For the Nine Months Ended September 30, 2020 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2019 | 12,885,273 | $ | 129,000 | $ | 708,000 | $ | 32,390,000 | $ | 33,227,000 | |||||||||||
Net income | - | - | - | 5,341,000 | 5,341,000 | |||||||||||||||
Common stock repurchased and retired | (35,100 | ) | - | (125,000 | ) | - | (125,000 | ) | ||||||||||||
Stock-based compensation expense | - | - | 91,000 | - | 91,000 | |||||||||||||||
Options exercised | 712,839 | 7,000 | 1,834,000 | - | 1,841,000 | |||||||||||||||
Balance as of March 31, 2020 | 13,563,012 | $ | 136,000 | $ | 2,508,000 | $ | 37,731,000 | $ | 40,375,000 | |||||||||||
Net income | - | - | - | 6,220,000 | 6,220,000 | |||||||||||||||
Common stock repurchased and retired | - | - | - | - | - | |||||||||||||||
Stock-based compensation expense | - | - | 92,000 | - | 92,000 | |||||||||||||||
Options exercised | 24,835 | - | 94,000 | - | 94,000 | |||||||||||||||
Balance as of June 30, 2020 | 13,587,847 | $ | 136,000 | $ | 2,694,000 | $ | 43,951,000 | $ | 46,781,000 | |||||||||||
Net income | - | - | - | 8,107,000 | 8,107,000 | |||||||||||||||
Common stock repurchased and retired | (20,000 | ) | - | (281,000 | ) | - | (281,000 | ) | ||||||||||||
Stock-based compensation expense | - | - | 91,000 | - | 91,000 | |||||||||||||||
Options exercised | 10,000 | - | 35,000 | - | 35,000 | |||||||||||||||
Balance as of September 30, 2020 | 13,577,847 | 136,000 | 2,539,000 | 52,058,000 | 54,733,000 | |||||||||||||||
For the Nine Months Ended September 30, 2019 | ||||||||||||||||||||
Additional | ||||||||||||||||||||
Common Stock | Paid-in | Retained | ||||||||||||||||||
Shares | Amount | Capital | Earnings | Total | ||||||||||||||||
Balance as of December 31, 2018 | 13,502,684 | $ | 135,000 | $ | 2,669,000 | $ | 29,390,000 | $ | 32,194,000 | |||||||||||
Net income | - | - | - | 1,218,000 | 1,218,000 | |||||||||||||||
Common stock repurchased and retired | (255,000 | ) | (2,000 | ) | (1,006,000 | ) | - | (1,008,000 | ) | |||||||||||
Stock-based compensation expense | - | - | 122,000 | - | 122,000 | |||||||||||||||
Options exercised | 33,334 | - | 60,000 | - | 60,000 | |||||||||||||||
Balance as of March 31, 2019 | 13,281,018 | $ | 133,000 | $ | 1,845,000 | $ | 30,608,000 | $ | 32,586,000 | |||||||||||
Net income | - | - | - | 1,010,000 | 1,010,000 | |||||||||||||||
Common stock repurchased and retired | (172,000 | ) | (2,000 | ) | (626,000 | ) | - | (628,000 | ) | |||||||||||
Stock-based compensation expense | - | - | 138,000 | - | 138,000 | |||||||||||||||
Options exercised | - | - | - | - | - | |||||||||||||||
Balance as of June 30, 2019 | 13,109,018 | $ | 131,000 | $ | 1,357,000 | $ | 31,618,000 | $ | 33,106,000 | |||||||||||
Net income | - | - | - | 437,000 | 437,000 | |||||||||||||||
Common stock repurchased and retired | (121,010 | ) | (1,000 | ) | (427,000 | ) | - | (428,000 | ) | |||||||||||
Stock-based compensation expense | - | - | 93,000 | - | 93,000 | |||||||||||||||
Options exercised | 16,499 | - | 35,000 | - | 35,000 | |||||||||||||||
Balance as of September 30, 2019 | 13,004,507 | 130,000 | 1,058,000 | 32,055,000 | 33,243,000 | |||||||||||||||
For the Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 6,156,000 | $ | 19,668,000 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Stock-based compensation | 238,000 | 274,000 | ||||||
Depreciation and amortization | 611,000 | 546,000 | ||||||
Loss on marketable equity securities | 0 | 42,000 | ||||||
Equity in income of unconsolidated affiliate | (623,000 | ) | (456,000 | ) | ||||
Operating lease expense, net of accretion | 663,000 | 677,000 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable, net | 4,141,000 | (5,569,000 | ) | |||||
Accounts receivable, related party | (491,000 | ) | (109,000 | ) | ||||
Inventories | (6,441,000 | ) | (1,852,000 | ) | ||||
Prepaid expenses | (337,000 | ) | (1,272,000 | ) | ||||
Accounts payable and accrued liabilities | (2,627,000 | ) | 2,540,000 | |||||
Customer advance payments of orders | (209,000 | ) | 3,218,000 | |||||
Lease liabilities | (660,000 | ) | (669,000 | ) | ||||
Net cash provided by operating activities | 421,000 | 17,038,000 | ||||||
Cash Flows From Investing Activities: | ||||||||
Purchases of property and equipment | (2,391,000 | ) | (687,000 | ) | ||||
Proceeds from sales of marketable securities | 0 | 120,000 | ||||||
Net cash used in investing activities | (2,391,000 | ) | (567,000 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from exercise of stock options | 391,000 | 1,970,000 | ||||||
Repurchase of common stock | (4,077,000 | ) | (406,000 | ) | ||||
Net cash provided by (used in) financing activities | (3,686,000 | ) | 1,564,000 | |||||
Increase (decrease) in cash | (5,656,000 | ) | 18,035,000 | |||||
Cash, beginning of the period | 23,292,000 | 6,548,000 | ||||||
Cash, end of the period | $ | 17,636,000 | $ | 24,583,000 | ||||
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Alpha Pro Tech, Ltd.
Condensed Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, | ||||||||
2020 | 2019 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net income | $ | 19,668,000 | $ | 2,665,000 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Stock-based compensation | 274,000 | 353,000 | ||||||
Depreciation and amortization | 546,000 | 410,000 | ||||||
Loss (gain) on marketable securities | 42,000 | (223,000 | ) | |||||
Equity in income of unconsolidated affiliate | (456,000 | ) | (371,000 | ) | ||||
Operating lease expense, net of accretion | 677,000 | 532,000 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable, net | (5,569,000 | ) | (479,000 | ) | ||||
Accounts receivable, related party | (109,000 | ) | (372,000 | ) | ||||
Inventories | (1,852,000 | ) | (1,377,000 | ) | ||||
Prepaid expenses | (1,272,000 | ) | 855,000 | |||||
Accounts payable and accrued liabilities | 2,540,000 | (402,000 | ) | |||||
Customer advance payments of orders | 3,218,000 | - | ||||||
Lease liabilities | (669,000 | ) | (492,000 | ) | ||||
Net cash provided by operating activities | 17,038,000 | 1,099,000 | ||||||
Cash Flows From Investing Activities: | ||||||||
Purchase of property and equipment | (687,000 | ) | (1,164,000 | ) | ||||
Proceeds from sales of marketable securities | 120,000 | 133,000 | ||||||
Net cash used in investing activities | (567,000 | ) | (1,031,000 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Proceeds from exercise of stock options | 1,970,000 | 95,000 | ||||||
Repurchase of common stock | (406,000 | ) | (2,064,000 | ) | ||||
Net cash provided (used) in financing activities | 1,564,000 | (1,969,000 | ) | |||||
Increase (decrease) in cash | 18,035,000 | (1,901,000 | ) | |||||
Cash, beginning of the period | 6,548,000 | 7,007,000 | ||||||
Cash, end of the period | $ | 24,583,000 | $ | 5,106,000 | ||||
Supplemental disclosure of non-cash financing activities:
Upon adoption of ASC 842, Leases, on January 1, 2019, the Company recorded $3,455,000 of right-of-use assets and related operating leases liabilities.
See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. | The Company |
Alpha Pro Tech, Ltd. (“Alpha Pro Tech,” the “Company,” “we”, “us” or “our”) is in the business of protecting people, products and environments. The Company accomplishes this by developing, manufacturing and marketing a line of building supply products for the new home and re-roofing markets and a line of disposable protective apparel for the cleanroom, industrial, pharmaceutical, medical and dental markets.
The Building Supply segment consists of construction weatherization products, such as housewrap and synthetic roof underlayment, as well as other woven material.
The Disposable Protective Apparel segment consists of a complete line of disposable protective clothing (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields. Previously, face masks and face shields were included in a separate business segment called Infection Control. All of our disposable protective apparel products, including face masks and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in Food and Drug Administration (“FDA”) approved facilities, regardless of the market served. Based on these similarities, the Infection Control segment was combined with the Disposable Protective Apparel segment during the first quarter of 2019. The disclosures herein reflect this current segmentation.
The Company’s products are sold under the "Alpha Pro Tech" brand name as well as under private label, and are predominantly sold in the United States of America (“US”).
The ongoing novel coronavirus (COVID-19)(COVID-19) pandemic has adversely affected global economies, financial markets and the overall environment in which we do business. The impact of the COVID-19 pandemic continues to unfold. Overall, the increase in sales of our Disposable Protective Apparel segment products resulting from the pandemic has had a positive impact on our year-to-date results.results, but the positive impact in 2021 is less than in 2020, as the effects of COVID-19 are normalizing. The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time. Future developments include the duration, scope and severity of the pandemic and new variants, including the Delta variant, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19COVID-19 pandemic on our future operations.
2. | Basis of Presentation and Revenue Recognition |
The interim financial information included in this report is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for the fair presentation of the consolidated financial position, results of operations and cash flows for the interim periods reflected herein. These interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, omit certain information and note disclosures that would be necessary to present the statements in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The interim condensed consolidated financial statements should be read in conjunction with the Company’s current year SEC filings, as well as the Company’s consolidated financial statements for the year ended December 31, 2019, 2020, which are included in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended December 31, 2019 (the “20192020 (the “2020 Form 10-K”10-K”), filed with the SEC on March 10, 2020. 2021. The results of operations for the three and nine months ended September 30, 2020 2021 in this Quarterly Report on Form 10-Q10-Q are not necessarily indicative of the results to be expected for the full year. The condensed consolidated balance sheet as of December 31, 2019 2020 was prepared using information from the audited consolidated balance sheet contained in the 20192020 Form 10-K;10-K; however, it does not include all disclosures required by U.S. GAAP for annual consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Net sales includes revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods, and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements. We estimate product returns based on historical return rates and estimate rebates based on contractual agreements. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales. The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labelling. The Company has determined as of September 30, 2020 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of September 30, 2020, we had contract liabilities of $3,218,000 as a result of customer advance payments of orders in connection with the COVID-19 pandemic. No such contract liabilities existed as of December 31, 2019. See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
3. |
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The Company maintains a stock option plan (the “2004 Option Plan”) under which the Company may grant incentive stock options and non-qualifiedpreviously granted stock options to employees and non-employee directors.directors under a stock option plan (the “2004 Option Plan”). Stock options have been granted with exercise prices at or above the fair market value of the underlying shares of common stock on the date of grant. Options vest and expire according to terms established at the grant date.
At the Company’s 2020 Annual Meeting of Shareholders held on June 9, 2020, the Company’s shareholders approved the Alpha Pro Tech, Ltd. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, awards of restricted stock and restricted stock units, performance share awards, cash awards and other equity-based awards to employees (including officers), consultants and non-employee directors of the Company and its affiliates. A total of 1,800,000 shares of the Company’s common stock are reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan. As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan. Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan. As of September 30, 2021, 24,052 restricted stock equity awards had been granted under the 2020 Incentive Plan.
The Company records compensation expense for the fair value of stock-based awards determined as of the grant date, including employee stock options and restricted stock awards over the determined requisite service period, which is generally ratably over the vesting term.
For the nine months ended September 30, 2020 2021 and 2019, 0 and 370,0002020,no stock options were granted under the Company’s 2004 Option Plan respectively.or the 2020 Incentive Plan. The Company recognized $274,000$155,000 and $353,000$274,000 in stock-based compensation expense for the nine months ended September 30, 2020 2021 and 2019,2020, respectively, related to outstanding options previously granted under the 2004 Option Plan. For the nine months ended September 30, 2021 and 202015,140 and 0 restricted stock awards were granted respectively under the 2020 Incentive Plan. The Company recognized $83,000 and $0 in compensation expense associated with outstanding restricted stock awards for the nine months ended September 30, 2021 and 2020, respectively.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The Company uses the Black-Scholes option-pricing model to value the options. The Company uses historical data to estimate the expected life of the options. The risk-free interest rate for periods within the contractual life of an award is based on the US Treasury yield curve in effect at the time of grant. The estimated volatility is based on historical volatility and management’s expectations of future volatility. The Company uses an estimated dividend payout of zero, as the Company has not paid dividends in the past and, at this time, does not expect to do so in the future. The Company accounts for option forfeitures as they occur.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table summarizes stock option activity for the nine months ended September 30, 2020:2021:
Weighted Average | Weighted Average | |||||||||||||||
Exercise Price | Exercise Price | |||||||||||||||
Options | Per Option | Options | Per Option | |||||||||||||
Options outstanding, December 31, 2019 | 1,326,414 | $ | 2.86 | |||||||||||||
Options outstanding, December 31, 2020 | 568,740 | $ | 3.42 | |||||||||||||
Granted to employees and non-employee directors | - | - | - | 0 | ||||||||||||
Exercised | (747,674 | ) | 2.63 | (124,494 | ) | 3.15 | ||||||||||
Canceled/expired/forfeited | - | - | (6,666 | ) | 3.62 | |||||||||||
Options outstanding, September 30, 2020 | 578,740 | 3.43 | ||||||||||||||
Options exercisable, September 30, 2020 | 172,167 | 3.22 | ||||||||||||||
Options outstanding, September 30, 2021 | 437,580 | 3.51 | ||||||||||||||
Options exercisable, September 30, 2021 | 330,583 | 3.48 | ||||||||||||||
As of September 30, 2020, $315,0002021, $71,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 1.310.61 years.
At the Company’s 2020 Annual Meeting of Shareholders held on June 9, 2020, the Company’s shareholders approved the Alpha Pro Tech, Ltd. 2020 Omnibus Incentive Plan (the “2020 Incentive Plan”). The 2020 Incentive Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, awards of restricted stock and restricted stock units, performance share awards, cash awards and other equity-based awards to employees (including officers), consultants and non-employee directors of the Company and its affiliates. A total of 1,800,000 shares of the Company’s common stock are reserved for issuance under the 2020 Incentive Plan, plus the number of shares underlying any award granted under the 2004 Option Plan that expires, terminates or is cancelled or forfeited under the terms of the 2004 Option Plan. As a result of the approval of the 2020 Incentive Plan, no future equity awards will be made pursuant to the 2004 Option Plan. Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan. As of September 30, 2020, no equity awards had been granted under the 2020 Incentive Plan.
4. | Investments |
As of September 30, 2020 and December 31, 2019, investments totaled $173,000 and $335,000, respectively, which consisted of equity securities. 2021, we had no investments. NaN marketable securities were sold during the three or nine months ended September 30, 2021.
Certain marketable securities were sold during the three months ended September 30, 2020, and no marketable securities were sold during the three months ended September 30, 2019. The total loss on marketable securities during the three months ended September 30, 2020 was $24,000, consisting of an unrealized loss of $42,000 and a realized gain of $18,000. Certain marketable securities were sold during both the nine months ended September 30, 2020 and 2019. 2020. The total loss on marketable securities during the nine months ended September 30, 2020 was $42,000, and the total gain on marketable securities during the nine months ended September 30, 2019 was $223,000. The loss for the nine months ended September 30, 2020 was due to an unrealized loss of $77,000 and a realized gain of $35,000. The gain for the nine months ended September 30, 2019 was due to an unrealized gain of $168,000 and a realized gain of $55,000.
5. | Recent Accounting Pronouncements |
In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. Based on the effective date, we adopted this ASU beginning on January 1, 2019 and elected the transition option provided under ASU 2018-11. This standard had a material effect on our consolidated balance sheet with the recognition of new right-of-use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than one year. Upon adoption, both assets and liabilities on our consolidated balance sheet increased by approximately $3,455,000. We have elected a package of transition practical expedients, which include not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We have also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the ROU assets. See also Note 13 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for more information.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
In June 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-13Accounting Standards Update (“ASU”) 2016-13 Financial Instruments - Credit Losses (Topic 326)326): Measurement of Credit Losses on Financial Instruments. ASU 2016-132016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-132016-13 is effective for public entitiescompanies for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019. This guidance iswas applicable to the Company’s fiscal year beginning January 1, 2020. Adoption of the new standard did not have a material impact on our consolidated financial statements.
In June 2018, December 2019, the FASB issued ASU 2018-07, Compensation No.2019- Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of ASC Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. We adopted the provisions of this ASU in the first quarter of 2019. Adoption of the new standard did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12,12, Income Taxes (Topic 740)740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-122019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluatingAdoption of the new standard did not have a material impact of this standard on itsour consolidated financial statements and related disclosures.statements.
Management periodically reviews new accounting standards that are issued. Management has not identified any other new standards that it believes merit further discussion at this time.
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As of September 30, 2020 and December 31, 2019, inventories consisted of the following:
September 30, | December 31, | |||||||
2020 | 2019 | |||||||
Raw materials | $ | 7,963,000 | $ | 4,284,000 | ||||
Work in process | 1,905,000 | 2,559,000 | ||||||
Finished goods | 3,287,000 | 4,460,000 | ||||||
| $ | 13,155,000 | $ | 11,303,000 | |||||
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Inventories |
As of September 30, 2021 and December 31, 2020, inventories net of reserves consisted of the following:
September 30, | December 31, | |||||||
2021 | 2020 | |||||||
Raw materials | $ | 12,583,000 | $ | 9,729,000 | ||||
Work in process | 2,574,000 | 2,003,000 | ||||||
Finished goods | 8,033,000 | 5,017,000 | ||||||
| $ | 23,190,000 | $ | 16,749,000 | |||||
7. | Equity |
In 2005, Alpha ProTech Engineered Products, Inc. (a subsidiary of Alpha Pro Tech, Ltd.) entered into a joint venture with a manufacturer in India, Maple Industries and associates, for the production of building products. Under the terms of the joint venture agreement, a private company, Harmony Plastics Private Limited (“Harmony”), was created with ownership interests of 41.66% owned by Alpha ProTech Engineered Products, Inc. and 58.34% owned by Maple Industries and associates.
This joint venture positions Alpha ProTech Engineered Products, Inc. to respond to current and expected increased product demand for housewrap and synthetic roof underlayment and provides future capacity for sales of specialty roofing component products and custom products for industrial applications requiring high quality extrusion coated fabrics. In addition, the joint venture now supplies products for the Disposable Protective Apparel segment.
The capital from the initial funding and a bank loan, which loan is guaranteed exclusively by the individual shareholders of Maple Industries and associates and collateralized by the assets of Harmony, were utilized to purchase the original manufacturing facility in India. Harmony currently has four facilities in India (three(three owned and one rented), consisting of: (1)(1) a 113,000 square foot building for manufacturing building products; (2)(2) a 73,000 square foot building for manufacturing coated material and sewing proprietary disposable protective apparel; (3)(3) a 16,000 square foot facility for sewing proprietary disposable protective apparel; and (4)(4) a 93,000 square foot facility (rented) for manufacturing Building Supply segment products. All additions have been financed by Harmony with no guarantees from the Company.
In accordance with ASC 810, Consolidation, the Company assesses whether or not related entities are variable interest entities (“VIEs”). For those related entities that qualify as VIEs, ASC 810 requires the Company to determine whether or not the Company is the primary beneficiary of the VIE, and, if so, to consolidate the VIE. The Company has determined that Harmony is not a VIE and is, therefore, considered to be an unconsolidated affiliate.
The Company records its investment in Harmony as “equity investment in unconsolidated affiliate” in the accompanying condensed consolidated balance sheets. The Company records its equity interest in Harmony’s results of operations as “equity in income of unconsolidated affiliate” in the accompanying condensed consolidated statements of comprehensive income. The Company periodically reviews its investment in Harmony for impairment. Management has determined that no impairment was required as of September 30, 2020 2021 or December 31, 2019.2020.
For the three months ended September 30, 2020 2021 and 2019, Alpha Pro Tech2020, the Company purchased $4,156,000$6,190,000 and $4,849,000$4,156,000 of inventories, respectively, from Harmony. For the nine months ended September 30, 2020 2021 and 2019, Alpha Pro Tech2020, the Company purchased $12,636,000$19,979,000 and $15,300,000$12,636,000 of inventories, respectively, from Harmony. For the three months ended September 30, 2021 and 2020, the Company sold $399,000 and $180,000 of inventories, respectively, to Harmony. For the nine months ended September 30, 2021 and 2020, the Company sold $1,291,000 and $833,000 of inventories, respectively, to Harmony.
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the three months ended September 30, 2020 2021 and 2019,2020, the Company recorded equity in income of unconsolidated affiliate of $250,000$112,000 and $10,000,$250,000, respectively, related to Harmony. For the nine months ended September 30, 2020 2021 and 2019,2020, the Company recorded equity in income of unconsolidated affiliate of $456,000$623,000 and $371,000,$456,000, respectively, related to Harmony.
As of September 30, 2020, 2021, the Company’s investment in Harmony was $5,295,000,$6,172,000, which consisted of its original $1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $4,864,000,$5,741,000, less $942,000 in repayments of the advance and $77,000 in dividends.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Accrued |
As of September 30, 2020 2021 and December 31, 2019, 2020, accrued liabilities consisted of the following:
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Payroll expenses and taxes payable | $ | 1,085,000 | $ | 299,000 | $ | 336,000 | $ | 123,000 | ||||||||
Commissions and bonuses payable and general accrued liabilities | 1,884,000 | 621,000 | 784,000 | 2,670,000 | ||||||||||||
| $ | 2,969,000 | $ | 920,000 | |||||||||||||
Total accrued liabilities | $ | 1,120,000 | $ | 2,793,000 | ||||||||||||
| Basic and Diluted EarningsPerCommon Share |
The following table provides a reconciliation of both net income and the number of shares used in the computation of “basic” earnings per common share (“EPS”), which utilizes the weighted average number of common shares outstanding without regard to dilutive shares, and “diluted” EPS, which includes all such dilutive shares, for the three and nine months ended September 30, 2020 2021 and 2019:2020:
For the Three Months Ended | For the Nine Months Ended | For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||
September 30, | September 30, | Septermber 30, | Septermber 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Net income (numerator) | $ | 8,107,000 | $ | 437,000 | $ | 19,668,000 | $ | 2,665,000 | $ | 766,000 | $ | 8,107,000 | $ | 6,156,000 | $ | 19,668,000 | ||||||||||||||||
Shares (denominator): | ||||||||||||||||||||||||||||||||
Basic weighted average common shares outstanding | 13,588,554 | 13,056,173 | 13,431,210 | 13,209,598 | 13,177,520 | 13,588,554 | 13,255,125 | 13,431,210 | ||||||||||||||||||||||||
Add: dilutive effect of common stock options | 444,473 | 19,519 | 546,354 | 28,428 | 241,965 | 444,473 | 300,800 | 546,354 | ||||||||||||||||||||||||
Diluted weighted average common shares outstanding | 14,033,027 | 13,075,692 | 13,977,564 | 13,238,026 | 13,419,485 | 14,033,027 | 13,555,925 | 13,977,564 | ||||||||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.60 | $ | 0.03 | $ | 1.46 | $ | 0.20 | $ | 0.06 | $ | 0.60 | $ | 0.46 | $ | 1.46 | ||||||||||||||||
Diluted | $ | 0.58 | $ | 0.03 | $ | 1.41 | $ | 0.20 | $ | 0.06 | $ | 0.58 | $ | 0.45 | $ | 1.41 | ||||||||||||||||
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Activity of Business Segments |
The Company operates through two business segments:
(1) (1) Building Supply: consisting of a line of construction supply weatherization products. The construction supply weatherization products consist of housewrap and synthetic roof underlayment, as well as other woven material. The majority of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Building Supply segment.
(2) (2) Disposable Protective Apparel: consisting of a complete line of disposable protective clothing, including shoecovers (including the Aqua Trak® and spunbond shoecovers), bouffant caps, coveralls, frocks, lab coats, gowns and hoods, as well as face masks and face shields for the pharmaceutical, cleanroom, industrial, medical and dental markets. A portion of the Company’s equity in income of unconsolidated affiliate (Harmony) is included in the total segment income for the Disposable Protective Apparel segment.
Previously, face masks and face shields were included in a separate business segment called Infection Control. All of our disposable protective apparel, including face masks and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in FDA-approved facilities, regardless of the market served. Based on these similarities, we determined that it would be best to consolidate the Infection Control segment into the Disposable Protective Apparel segment beginning with the first quarter of 2019.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Segment data excludes charges allocated to the principal executive office and other unallocated corporate overhead expenses and income tax. The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales.
The following table presents consolidated net sales for each segment for the three and nine months ended September 30, 2020 2021 and 2019:2020:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Building Supply | $ | 7,668,000 | $ | 7,215,000 | $ | 22,677,000 | $ | 20,423,000 | ||||||||
Disposable Protective Apparel | 22,359,000 | 4,812,000 | 51,004,000 | 15,322,000 | ||||||||||||
Consolidated net sales | $ | 30,027,000 | $ | 12,027,000 | $ | 73,681,000 | $ | 35,745,000 | ||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Building Supply | $ | 10,072,000 | $ | 7,668,000 | $ | 28,210,000 | $ | 22,677,000 | ||||||||
Disposable Protective Apparel | 4,403,000 | 22,359,000 | 27,232,000 | 51,004,000 | ||||||||||||
Consolidated net sales | $ | 14,475,000 | $ | 30,027,000 | $ | 55,442,000 | $ | 73,681,000 | ||||||||
The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and nine months ended September 30, 2020 2021 and 2019:2020:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Building Supply | $ | 1,901,000 | $ | 1,307,000 | $ | 5,629,000 | $ | 4,023,000 | ||||||||
Disposable Protective Apparel | 234,000 | 10,880,000 | 6,351,000 | 23,733,000 | ||||||||||||
Total segment income | 2,135,000 | 12,187,000 | 11,980,000 | 27,756,000 | ||||||||||||
Unallocated corporate overhead expenses | 1,173,000 | 1,590,000 | 4,274,000 | 4,804,000 | ||||||||||||
Provision for income taxes | 196,000 | 2,490,000 | 1,550,000 | 3,284,000 | ||||||||||||
Consolidated net income | $ | 766,000 | $ | 8,107,000 | $ | 6,156,000 | $ | 19,668,000 | ||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Building Supply | $ | 1,307,000 | $ | 1,010,000 | $ | 4,023,000 | $ | 2,819,000 | ||||||||
Disposable Protective Apparel | 10,880,000 | 839,000 | 23,733,000 | 3,140,000 | ||||||||||||
Total segment income | 12,187,000 | 1,849,000 | 27,756,000 | 5,959,000 | ||||||||||||
Unallocated corporate overhead expenses | 1,590,000 | 1,302,000 | 4,804,000 | 2,702,000 | ||||||||||||
Provision for income taxes | 2,490,000 | 110,000 | 3,284,000 | 592,000 | ||||||||||||
Consolidated net income | $ | 8,107,000 | $ | 437,000 | $ | 19,668,000 | $ | 2,665,000 | ||||||||
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of September 30, 2020 2021 and December 31, 2019:2020:
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Building Supply | $ | 1,913,000 | $ | 1,867,000 | $ | 3,649,000 | $ | 1,806,000 | ||||||||
Disposable Protective Apparel | 1,193,000 | 1,087,000 | 1,429,000 | 1,432,000 | ||||||||||||
Total segment assets | 3,106,000 | 2,954,000 | 5,078,000 | 3,238,000 | ||||||||||||
Unallocated corporate assets | 1,044,000 | 1,055,000 | 1,117,000 | 1,177,000 | ||||||||||||
Total consolidated assets | $ | 4,150,000 | $ | 4,009,000 | $ | 6,195,000 | $ | 4,415,000 | ||||||||
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Financial Information about Geographic Areas |
The following table summarizes the Company’s net sales by geographic region for the three and nine months ended September 30, 2020 2021 and 2019:2020:
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net sales by geographic region | ||||||||||||||||
United States | $ | 24,295,000 | $ | 11,806,000 | $ | 62,461,000 | $ | 35,004,000 | ||||||||
International | 5,732,000 | 221,000 | 11,220,000 | 741,000 | ||||||||||||
Consolidated net sales | $ | 30,027,000 | $ | 12,027,000 | $ | 73,681,000 | $ | 35,745,000 | ||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net sales by geographic region | ||||||||||||||||
United States | $ | 14,244,000 | $ | 24,295,000 | $ | 52,836,000 | $ | 62,461,000 | ||||||||
International | 231,000 | 5,732,000 | 2,606,000 | 11,220,000 | ||||||||||||
Consolidated net sales | $ | 14,475,000 | $ | 30,027,000 | $ | 55,442,000 | $ | 73,681,000 | ||||||||
Net sales by geographic region are based on the countries in which our customers are located. For the three and nine months ended September 30, 2020, the Company generated approximately $4,514,000 2021 and $6,567,000, respectively, in sales from Australia. No other single country other than the United States was significant to consolidated net sales. During the three and nine months ended September 30, 2019,2020, the Company did not generate sales from any single country, other than the United States, that were significant to the Company’s consolidated net sales.
The following table summarizes the locations of the Company’s long-lived assets by geographic region as of September 30, 2020 2021 and December 31, 2019:2020:
September 30, | December 31, | September 30, | December 31, | |||||||||||||
2020 | 2019 | 2021 | 2020 | |||||||||||||
Long-lived assets by geographic region | ||||||||||||||||
United States | $ | 2,642,000 | $ | 2,450,000 | $ | 4,668,000 | $ | 2,787,000 | ||||||||
International | 1,444,000 | 1,493,000 | 1,468,000 | 1,566,000 | ||||||||||||
Consolidated total long-lived assets | $ | 4,086,000 | $ | 3,943,000 | $ | 6,136,000 | $ | 4,353,000 | ||||||||
| Related Party Transactions |
As of September 30, 2020, 2021, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony. See Note 7 of these Notes to Condensed Consolidated Financial Statements (Unaudited).
Notes to Condensed Consolidated Financial Statements (Unaudited)
| Leases |
The Company has operating leases for the Company’s corporate office and manufacturing facilities, which expire at various dates through 2024.2025. The Company’s primary operating lease commitments at September 30, 2020 2021 related to the Company’s manufacturing facilities in Valdosta, Georgia; Nogales, Arizona; and Salt Lake City, Utah, as well as the Company’s corporate headquarters in Markham, Ontario, Canada.
As of September 30, 2020, 2021, the Company had operating lease right-of-use assets of $2,501,000$2,872,000 and operating lease liabilities of $2,550,000.$2,926,000. As of September 30, 2020, 2021, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $201,000$265,000 and $603,000$769,000, respectively during the three and nine months ended September 30, 2020, respectively.2021.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
The aggregate future minimum lease payments and reconciliation to lease liabilities as of September 30, 2020 2021 were as follows:
September 30, | ||||
2020 | ||||
Remaining three months of 2020 | $ | 273,000 | ||
2021 | 1,000,000 | |||
2022 | 670,000 | |||
2023 | 676,000 | |||
Thereafter | 126,000 | |||
Total future minimum lease payments | 2,745,000 | |||
Less imputed interest | (195,000 | ) | ||
Total Lease liabilities | $ | 2,550,000 | ||
September 30, | ||||
2021 | ||||
Remaining three months of 2021 | $ | 263,000 | ||
2022 | 1,010,000 | |||
2023 | 1,017,000 | |||
2024 | 484,000 | |||
2025 | 365,000 | |||
Total future minimum lease payments | 3,139,000 | |||
Less imputed interest | (213,000 | ) | ||
Total Lease liabilities | $ | 2,926,000 | ||
As of September 30, 2020, 2021, the weighted average remaining lease term of the Company’s operating leases was 3.973.27 years. During the nine months ended September 30, 2020, 2021, the weighted average discount rate with respect to these leases was 4.28%4.07%.
| Income taxes |
The Company accounts for income taxes using the asset and liability method. A valuation allowance is recorded to reduce the carrying amounts of deferred income tax assets unless it is more likely than not that such assets will be realized. The Company’s policy is to record any interest and penalties assessed by the Internal Revenue Service as a component of the provision for income taxes. The Company provides allowances for uncertain income tax positions when it is more likely than not that the position will not be sustained upon examination by the tax authority.
Alpha Pro Tech, Ltd. and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions.
An employer generally does not claim a corporate income tax deduction (which would be in an amount equal to the amount of income recognized by the employee) upon the exercise of its employee's Incentive Stock Optionsincentive stock options (“ISOs”) unless the employee does not meet the holding period requirements and sells early, making a disqualifying disposition, or if the options otherwise do not qualify as ISOs under applicable tax laws. With Non-Qualified Stock Optionsnon-qualified stock options (“NQSOs”), on the other hand, the employer is typically eligible to claim a deduction upon its employee's exercise of the NQSO.NQSOs.
The company had an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified ISOs and the exercise of NQSOs, partially offset by tax expense of an estimated $1.0 million.Notes to Condensed Consolidated Financial Statements (Unaudited)
On March 27, 2020, President Trump signed into U.S. federal law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which is aimed at providing emergency assistance and health care for individuals, families and businesses affected by the COVID-19COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. In particular, under the CARES Act, (i) for taxable years beginning before 2021, net operating loss carryforwards and carrybacks may offset 100% of taxable income, (ii) NOLs arising in the 2018, 2019 and 2020 taxable years may be carried back to each of the preceding five years to generate a refund and (iii) for taxable years beginning in 2019 and 2020, the base for interest deductibility is increased from 30% to 50% of EBITDA. The CARES Act currently has minimal impact on the Company.
Alpha Pro Tech, Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
15. | Subsequent Events |
The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of September 30, 2020 2021 through the filing date of this Quarterly Report on Form 10-Q10-Q that would require accounting or disclosure and has concluded that there are no such subsequent events.
Alpha Pro Tech, Ltd.
ITEM 22..MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with our unaudited condensed consolidated financial statements and the notes to our unaudited condensed consolidated financial statements, which appear elsewhere in this report, as well as our Annual Report on Form 10-K for the year ended December 31, 2019,2020, filed with the Securities and Exchange Commission (the “SEC”) on March 10, 20202021 (the “2019“2020 Form 10-K”).
Special Note Regarding Forward-Looking Statements
Certain information set forth in this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of federal securities laws. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, production levels and sales in 20202021 and 2021,2022, and other information that is not historical information. When used in this report, the words “estimates,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. We may make additional forward-looking statements from time to time. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. All forward-looking statements, whether written or oral and whether made by us or on our behalf, are expressly qualified by this special note.
The following are some of the risks that could affect our financial performance or that could cause actual results to differ materially from those expressed or implied in our forward-looking statements:
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● | The effects of the COVID-19 pandemic, including effects on the business and operations of those within our supply chain and on global economic conditions generally, have had, and could continue to have, a material adverse effect on our business, financial results and results of operations. |
● | The loss of any large customer or a reduction in orders from any large customer could reduce our net sales and harm our operating results. |
● | We rely on suppliers and contractors, and our business could be seriously harmed if these suppliers and contractors are not able to meet our requirements. |
● | Risks associated with international manufacturing could have a |
● | Our joint venture may present risks that are only present when third parties are involved. |
● | Our success depends in part on protection of our intellectual property, and |
● | Our industry is highly competitive, which may negatively affect our ability to grow our customer base and generate sales. |
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● | Security breaches and other disruptions to the Company’s information technology infrastructure could interfere with the Company’s operations, compromise information belonging to the Company and our customers and suppliers and expose the Company to liability, which could adversely impact the Company’s business and reputation. |
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Alpha Pro Tech, Ltd.
The foregoing list of risks is not exclusive. For a more detailed discussion of the risk factors associated with our business, see the risks described in Part I, Item IA, “Risk Factors,” in the 20192020 Form 10-K and in Part II, Item IA, “Risk Factors,” in this Quarterly Report on Form 10-Q.10-K. These and many other factors could affect the Company’s future operating results and financial condition and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by the Company or on its behalf.
Special Note Regarding Smaller Reporting Company Status
We are filing this report as a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended). As a result of being a smaller reporting company, we are allowed and have elected to omit certain information from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate.
Where to find more information about us. We make available, free of charge, on our website (http:(http://www.alphaprotech.com)www.alphaprotech.com) our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q, any Current Reports on Form 8-K furnished or filed since our most recent Annual Report on Form 10-K, and any amendments to such reports, as soon as reasonably practicable following the electronic filing of such reports with the SEC. In addition, in accordance with SEC rules, we provide paper copies of our filings free of charge upon request.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the periods reported. We base estimates on past experience and on various other assumptions that are believed to be reasonable under the circumstances. Our estimates are subject to uncertainties associated with the ongoing COVID-19 pandemic. The application of these accounting policies on a consistent basis enables us to provide timely and reliable financial information. Our significant accounting policies and estimates are more fully described in Note 2, – “Summary of Significant Accounting Policies” in the notes to our condensed consolidated financial statements in Part I, Item 8 of the 20192020 Form 10-K. Our critical accounting policies and estimates include the following:
Accounts Receivable:Receivable: Accounts receivable are recorded at the invoice amount and do not bear interest. The general terms for receivables is net 30 days. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future. The Company determines the allowance based upon historical write-off experience and known conditions about customers’ current ability to pay. Account balances are charged against the allowance when the potential for recovery is considered remote. For new customers with no order history with the Company we may require advance payments to reduce our credit risk.
Inventories: Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost or net realizable value. Allowances are recorded for slow-moving, obsolete or unusable inventory. We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated net realizable value based upon assumptions about future sales and supply on-hand, if necessary. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.
Leases: We determine if an arrangement is a lease at inception. Operating leases are included as right-of-use (“ROU”) assets and lease liabilities on our condensed consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Our leases do not provide an implicit rate, and, therefore, we estimate our incrementalcollateralized borrowing rate under similar terms based on the information available at the commencement date in determining the present value of future minimum lease payments. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. We do not record leases on our condensed consolidated balance sheet with a term of one year or less. We elected a package of transition practical expedients, which included not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets.
Alpha Pro Tech, Ltd.
Revenue Recognition: Net sales includes revenue from products and shipping and handling charges, net of estimates for product returns and any related sales incentives. Our customer contracts have a single performance obligation: transfer control of products to customers. Revenue is measured as the amount of consideration that we expect to receive in exchange for transferring control of products. All revenue is recognized when we satisfy our performance obligations under the applicable contract. We recognize revenue in connection with transferring control of the promised products to the customer, with revenue being recognized at the point in time when the customer obtains control of the products, which is generally when title passes to the customer upon delivery to a third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements, at which time a receivable is created for the invoice sent to the customer. Shipping and handling activities are performed prior to the customer obtaining control of the goods, and are accounted for as fulfillment activities and are not a promised good or service. Shipping and handling charges billed to customers are included in revenue. Shipping and handling costs, associated with the distribution of the Company’s product to the customers, are recorded in cost of goods sold and are recognized when control of the product is transferred to the customer, which is at the time products are delivered to the third party carrier for FOB shipping point arrangements and to the customer for FOB destination arrangements. We estimate product returns based on historical return rates and estimate rebates based on contractual agreements. Using probability assessments, we estimate sales incentives expected to be paid over the term of the contract. Sales taxes and value added taxes in foreign and domestic jurisdictions that are collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded from net sales. The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labelling. The Company has determined that, as of September 30, 2020,2021, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. As of September 30, 2020, the Company had contract liabilities of $3,218,000 as a result of customer advance payments of orders connected to the COVID-19 pandemic (see “Impact of the Novel Coronavirus (COVID-19)” below). No such contract liabilities existed as of December 31, 2019.
Sales Returns, Rebates and Allowances: Sales are reduced for any anticipated sales returns, rebates and allowances based on historical experience. Since our return policy is only 90 days and our products are not generally susceptible to external factors such as technological obsolescence or significant changes in demand, we are able to make a reasonable estimate for returns. We offer end-user product-specificproduct specific and sales volume rebates to select distributors. Our rebates are based on actual sales and are accrued monthly.
Stock-Based Compensation: The Company accounts for stock-based awards in accordance with ASCusing Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 718, Stock Compensation. ASC 718 requires companies to estimaterecord compensation expense for the fair value of equity-based awards on the date of grant with the related compensation expense recognized ratably over the requisite service period, which generally matches the vesting term.all outstanding and unvested share-based payments, including employee stock options and similar awards.
The fair values of stock option grants are determined using the Black-Scholes option-pricing model and are based on the following assumptions: expected stock price volatility based on historical data and management’s expectations of future volatility, risk-free interest rates from published sources, expected term based on historical data, and no dividend yield, as the Board of Directors currently has no plans to pay dividends in the foreseeable future. The Company accounts for option forfeitures as they occur. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and that are fully transferable. In addition, the option-pricing model requires the input of highly subjective assumptions, including expected stock price volatility. Our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value of such options.
Alpha Pro Tech, Ltd.
OVERVIEW
Alpha Pro Tech is in the business of protecting people, products and environments. We accomplish this by developing, manufacturing and marketing a line of high-value, disposable protective apparel products for the cleanroom, industrial, pharmaceutical, medical and dental markets. We also manufacture a line of building supply construction weatherization products. Our products are sold under the "Alpha Pro Tech" brand name, as well as under private label.
Our products are grouped into two business segments: the Building Supply segment, consisting of construction weatherization products, such as housewrap and synthetic roof underlayment as well as other woven material; and the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields. All financial information presented in this report reflects the current segmentation.
Previously, face masks and face shields were included in a separate business segment called Infection Control. All of our disposable protective apparel, including face masks (including the Company’s proprietary N-95 Particulate Respiratory face mask) and face shields, are sold through similar distribution channels, are single-use and disposable, have the purpose of protecting people, products and environments, and have to be produced in FDA-approved facilities, regardless of the market served. Based on these similarities, we determined that it would be best to consolidate the Infection Control segment into the Disposable Protective Apparel segment beginning with the first quarter of 2019.
Our target markets include pharmaceutical manufacturing, bio-pharmaceutical manufacturing, medical device manufacturing, lab animal research, high technology electronics manufacturing (which includes the semi-conductor market), medical and dental distributors, and construction, building supply and roofing distributors.
Our products are used primarily in cleanrooms, industrial safety manufacturing environments, health care facilities, such as hospitals, laboratories and dental offices, and building and re-roofing sites. Our products are distributed principally in the United States through a network consisting of purchasing groups, national distributors, local distributors, independent sales representatives and our own sales and marketing force.
Impact of the Novel Coronavirus (COVID-19)
In MarchAfter the start of the COVID-19 pandemic in early 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the U.S. and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. COVID-19 has had, and we expect the virus to continue to have, a number of effects, both positive and negative, on our business operations and financial condition.
We have experienced a significant surge in customer demand for our proprietary N-95 Particulate Respirator face mask product and other personal protective equipment (“PPE”) products as a result of COVID-19. We experienced a dramatic increase in revenue from sales of PPE products during the first nine months of the year and expect additional increases for the remainder ofthroughout 2020, and even beyond, especially with respect to face masks, face shields and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps. We have seen significant increases not only in near-term demand, but also in longer-term ongoing purchase orders that have request dates that extend into 2021. Although orders of the Company’s face shield products are expected to remain above historic levels through the fourth quarter of 2020, management now believes that, due to increased competition resulting from relatively low barriers to entry in the face shield market and a surplus of face shields now available to consumers, face shield sales during the fourth quarter will be down from the unprecedented levels experienced in the second and third quarters of 2020, and face shield sales for the second half of the year will be less than the approximately $6.0 million previously expected.
Alpha Pro Tech, Ltd.
In an effort to meet the unprecedented demand, and to aid communities around the world in responding to the ongoing healthcare crisis, the Company began rampingramped up production during the first quarter of 2020 of our PPE products, in particular our N-95 face mask, which is manufactured by the Company in the United States. We have addressed the growing customer demand for PPE products by increasing and improving the human, mechanical, and supply chain components behind production. Even with these increases and improvements, customer demand for PPE products, face masks in particular, continues to exceed industry supply in many instances, and we believe that this may continue for some time. Due to this customer demand and the current state of the industry, we expect continued face mask sales growth during the fourth quarter and into 2021, but much of our production will be presold. Industry-wide reports also appear to indicate that, even with the significant increase in supply, demand will continue to outpace capacity for immediate utilization, with longer-term stockpiling not realistic until late 2021 and into 2022.
We haveDuring 2020, we encountered over the last several months a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays. Although we continue to workworked to alleviate these supply chain issues (which have improved since the second quarter) by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted. Further, we expect that prices of raw materials have increased and we expect they may continue to rise more rapidly in the current environment than our sales prices, which could decrease our profits.
We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees. We have enacted enhanced operating protocols to assure the safety and well-being of our employees, placed restrictions on non-essential travel, and otherwise adjusted work schedules to maximize our capacity while adhering to recommended precautions such as social distancing. We believe that we may have to take further actions that we determine are in the best interests of our employees or as required by federal, state, or local authorities. Although we will continue to adhere to restrictions imposed by local governments in the jurisdictions in which we operate, government regulations have impacted workforce availability and expense in certain of the Company’s manufacturing facilities, and we expect this to continue for some time. While this remains a fluid situation, all of our U.S. manufacturing sites are currently operating at or above normal production rates.
COVID-19 has resulted in
As detailed below under “Results of Operations,” we witnessed a downturnsoftening in the global financial marketsdemand for face masks, and a slowdown inface shields during the global economy. This economic environment may impact somefirst nine months of our customers’ ability to pay or lead them to request extended payment terms,2021 and we have experienced cost increases from some of our suppliers. And, despite the tremendous surgeexpect sales will continue to decline to be more in-line with pre-pandemic levels in future periods. We expect growth in pre-pandemic demand for our PPE productsdisposable protective garments and continued growth in recent months, we expect that demand for our Building Supply segment products although the Building Supply segment could be negatively impacted by decreasedif there is a decrease in housing starts and increased uncertainty in the housing market and the economy in general, althoughgeneral. Additionally, as supply chain issues for certain housing components not supplied by the Company, which could lead to date we have not experienced any material negative impacta slowdown in our Building Supply segment.new home construction.
The impact of the COVID-19 pandemic continues to unfold. Overall, the increase in sales of our PPE products resulting from the pandemic has had a positive impact on our year-to-date results. The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.developments. Future developments include the duration, scope and severity of the pandemic and new variants, including the Delta variant, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors. Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID-19 pandemic on our future operations.
Management will continue to carefully monitor the current dynamic market conditions and work to respond to them swiftly and effectively.
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a percentage of net sales for the periods indicated:
For the Three Months | For the Nine Months | For the Three Months Ended Septermber 30, | For the Nine Months Ended Septermber 30, | |||||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
Gross profit | 50.4 | % | 35.1 | % | 49.3 | % | 36.7 | % | 34.1 | % | 50.4 | % | 36.7 | % | 49.3 | % | ||||||||||||||||
Selling, general and administrative expenses | 15.3 | % | 26.4 | % | 18.0 | % | 28.3 | % | 26.8 | % | 15.3 | % | 22.8 | % | 18.0 | % | ||||||||||||||||
Income from operations | 34.5 | % | 7.5 | % | 30.6 | % | 7.3 | % | 5.9 | % | 34.5 | % | 12.8 | % | 30.6 | % | ||||||||||||||||
Income before provision for income taxes | 35.3 | % | 4.5 | % | 31.2 | % | 9.1 | % | 6.6 | % | 35.3 | % | 13.9 | % | 31.2 | % | ||||||||||||||||
Net income | 27.0 | % | 3.6 | % | 26.7 | % | 7.5 | % | 5.3 | % | 27.0 | % | 11.1 | % | 26.7 | % | ||||||||||||||||
Three months ended September 30, 2020,2021 compared to three months ended September 30, 20192020
Sales.Consolidated sales for the three months ended September 30, 2020 increased2021 decreased to $30,027,000,$14,475,000, from $12,027,000$30,027,000 for the three months ended September 30, 2019,2020, representing an increasea decrease of $18,000,000,$15,552,000, or 149.7%51.8%. This increasedecrease consisted of increaseddecreased sales in the Disposable Protective Apparel segment of $17,547,000 and$17,956,000, partially offset by increased sales in the Building Supply segment of $453,000.$2,404,000.
Disposable Protective Apparel Segment
Sales for the Disposable Protective Apparel segment for the three months ended September 30, 2021 decreased by $17,956,000, or 80.3%, to $4,403,000, compared to $22,359,000 for the same period of 2020. This segment decrease was due to a 92.3% decrease in sales of face masks, a 91.9% decrease in face shields and a 33.1% decrease in sales of disposable protective garments. The decreases for face masks, face shields and disposable protective garments were primarily due to increased demand resulting from the COVID-19 pandemic in the third quarter of 2020. Future sales of face mask and face shields are expected to be in line with pre-pandemic levels. Sales for the disposable protective garments in the third quarter of 2021 were down as inventory levels in the supply chain, primarily with our major international channel partner, were higher than historical levels, as a result of record sales in the first and second quarter of 2021. This partner’s sales to its end users for the three and nine months ended September 30, 2021 were significantly higher than pre-pandemic levels due to strong open orders, generated largely in 2020. Open orders for the disposable protective garments are now more in line with pre-pandemic levels and sales in the coming quarters could be negatively affected as current inventory levels are higher than historical levels. We are working closely with all of our channel partners to uncover new end-customer sales opportunities.
Alpha Pro Tech, Ltd.
The sales mix of the Disposable Protective Apparel segment for the three months ended September 30, 2021 was approximately 69% for disposable protective garments, 23% for face masks and 8% for face shields. This sales mix is compared to approximately 20% for disposable protective garments, 60% for face masks and 20% for face shields for the three months ended September 30, 2020.
Building Supply Segment
Building Supply segment sales for the three months ended September 30, 20202021 increased by $453,000,$2,404,000, or 6.3%31.4%, to $7,668,000,a quarterly record of $10,072,000, compared to $7,215,000$7,668,000 for the three months ended September 30, 2019.2020. We have had back to back quarterly record sales as the second quarter of 2021 was the previous highest quarter on record. Also, the first quarter of 2021 was a record first quarter in the Building Segment. In addition, sales increased by over 30% in each of the second and third quarters of 2021 compared to the prior year comparative quarter. The Building Supply segment increase during the three months ended September 30, 2021 was primarily due to ana 35.9% increase in sales of synthetic roof underlayment, of 6.7%, ana 25.7% increase in sales of housewrap of 2.1% and ana 26.7% increase in sales of other woven material of 27.8% compared to the same period of 2019.2020.
The sales mix of the Building Supply segment for the three months ended September 30, 20202021 was approximately 50% for synthetic roof underlayment, 43% for housewrap and 7% for other woven material. This compared to approximately 49% for synthetic roof underlayment, 44% for housewrap and 7% for other woven material. This compared to approximately 48% for synthetic roof underlayment, 46% for housewrap and 6% for other woven material for the three months ended September 30, 2019.2020. Our synthetic roof underlayment product line includes REX SynFelt®, REX TECHNOply® and TECHNO SB®, and our housewrap product line consists of REX Wrap®, REX Wrap® Plus and REX Wrap Fortis®.
The increase in our synthetic underlayment sales was a result of damage stemming from multiple storms in the southeast as well as demand associated with re-roofing and remodeling growth that has been on the rise this year. We have also expanded our distribution network with new dealers for our line of synthetic roof underlayment. The third quarter of 2020 was a record quarter for housewrap sales, and, even though sales in the third quarter were only slightly higher than in the comparative quarter of 2019,Building Supply segment sales in the third quarter of 2019 were a record up2021 showed continued significant growth due to that point. The housewrap sales increase was aided by a strong inventory position in the Company’s manufacturing facility in the United States. Sales ofdemand for both our synthetic roof underlayment and housewrap have benefitted from anproducts. Synthetic roof underlayment sales increased by 35.9% compared to the third quarter of 2020 due to the increase in inventory requirements at the dealer level, as well as the expansion of new home construction during 2020 and management’s determinationconstruction. The housewrap family of products continued grow with a 25.7% year-over-year increase due to expand the Company’s distribution reach to cover thegrowth in new market share as well as high demand for new home growth.construction. Our system of selling housewrap with associated accessories is becoming increasingly accepted in the market.
AtManagement is optimistic about continued growth for the endfuture as the demand for Building Supply products looks to remain strong. Management has committed to increasing production capacity for this segment by investing approximately $4.0 million in new equipment, a part of which became operational in the latter part of the third quarter of 2020, our backlog of open orders for both2021, which contributed to the synthetic roof underlayment and housewrap product lines was at higher than historical levels.record sales quarter. As a result of a delay in the backlog, we anticipate continued growth forsupply chain, the most expensive piece of equipment is now anticipated to arrive in the latter part of the fourth quarter of 2021 and is expected to be operational in the first quarter of 2022.
Nine months ended September 30, 2021 compared to nine months ended September 30, 2020
Consolidated sales for the nine months ended September 30, 2021 asdecreased to $55,442,000 from $73,681,000 for the industry is forecasting growthnine months ended September 30, 2020, representing a decrease of new home construction, along with demand for re-roofing$18,239,000, or 24.8%. This decrease consisted of decreased sales in 2021. Although we expect continued long-term growththe Disposable Protective Apparel Segment of $23,772,000 and increased sales in this marketthe Building Supply segment given the uncertainty of the economy as a result of the COVID-19 pandemic, short-term growth could be affected.$5,533,000.
Disposable Protective Apparel Segment
Sales for the Disposable Protective Apparel segment for the threenine months ended September 30, 2020 increased2021 decreased by $17,547,000,$23,772,000, or 364.7%46.6%, to $22,359,000,$27,232,000, compared to $4,812,000$51,004,000 for the same period of 2019.2020. This segment increasedecrease was due to a 1,627.9% increase71.4% decrease in sales of face masks, a 1,024.1% increase69.6% decrease in sales of face shields and a 23.8%15.9% increase in sales of disposable protective garments.
The increase in face mask sales wasgarments, all primarily attributabledue to increased sales of our proprietary N-95 Particulate Respirator face mask resulting from increased customer demand associated with the COVID-19 pandemic. Face mask sales have grown during each quarter of 2020. Third quarter 2020 face mask sales were $13.4 million, compared to $8.5 million in the second quarter of 2020 and $4.5 million in the first quarter of 2020. Management anticipates significant continued quarterly growth of face masks in the fourth quarter of 2020 and into 2021.
The increase in face shield sales was also attributable to the pandemic and further benefited from the Company’s strong inventory position. Due to the surplus of face shields in the market discussed above, the Company expects sales of face shields to decrease significantly in the coming quarters but still to remain above historical levels as the pandemic persists.
Disposable protective garment sales experienced a 23.8% increase in the quarter, largely as a result of the pandemic. The Company’s joint venture in India, which is the primary supply source for these products, was under a government-mandated closure that ended in late May 2020, and the manufacturing facilities did not immediately resume full operation, as many employees did not return after the mandate was lifted and new employees had to be trained. This supply chain disruption negatively affected availability and, therefore, sales of the Company’s disposable protective garments in the third quarter of 2020. Conditions at the current time have improved, so similar constraints are not expected to have a material impact on sales in the fourth quarter of 2020.
The sales mix of the Disposable Protective Apparel segment for the three months ended September 30, 2020 was approximately 20% for disposable protective garments, 60% for face masks and 20% for face shields. This compared to approximately 76% for disposable protective garments, 16% for face masks and 8% for face shields for the three months ended September 30, 2019.
Alpha Pro Tech, Ltd.
Nine months ended September 30, 2020 Compared to nine months ended September 30, 2019
Consolidated2021 was 61% for disposable protective garments, 28% for masks and 11% for shields. This sales mix is compared to 28% for disposable protective garments, 52% for masks and 20% for shields for the nine months ended September 30, 2020 increased to $73,681,000 from $35,745,000 for the nine months ended September 30, 2019, representing an increase of $37,936,000, or 106.1%. This increase consisted of increased sales in the Disposable Protective Apparel Segment of $35,682,000 and increased sales in the Building Supply segment of $2,254,000.2020.
Building Supply Segment
Building Supply segment sales for the nine months ended September 30, 20202021 increased by $2,254,000,$5,533,000, or 11.0%24.4%, to $22,677,000,$28,210,000, compared to $20,423,000$22,677,000 for the same period of 2019.2020. The Building Supply segment increase was primarily due to an increase in sales of housewrapsynthetic roof underlayment of 11.2%34.4%, an increase in sales of synthetic roof underlaymenthousewrap of 9.4%19.6%, and an increase in sales of other woven material of 19.6%4.3% compared to the same period of 2019.2020. Synthetic roof underlayment sales increased as a result of increased sales of the Company’s TECHNO family of products. Synthetic roof underlayment and housewrap sales were positively affected during the nine months ended September 30, 2021 by improved U.S. housing starts. Other woven material sales were up asAs a result of supply chain issues for certain housing components not supplied by the Company, there could be a slowdown in new home construction, which could negatively affect our largest customer in this category increasing its order volume. sales.
The sales mix of the Building Supply segment for the nine months ended September 30, 20202021 was 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material. This compared to 46% for synthetic roof underlayment, 45% for housewrap and 9% for other woven material. This compared to 47% for synthetic roof underlayment, 45% for housewrap and 8% for other woven material for the nine months ended September 30, 2019. As the impact of the COVID-19 pandemic continues to unfold, there could be a negative impact in our Building Supply segment, as there could be increased uncertainty with the economy in general. However, to date, we have not experienced any material negative impact in our Building Supply segment.
Disposable Protective Apparel Segment
Sales for the Disposable Protective Apparel segment for the nine months ended September 30, 2020 increased by $35,682,000, or 232.9%, to $51,004,000, compared to $15,322,000 for the same period of 2019. This segment increase was due to a 989.6% increase in sales of face masks, a 755.6% increase in face shields and a 22.1% increase in sales of disposable protective garments, all primarily due to increased customer demand associated with the pandemic. Open purchase orders for face masks and disposable protective garments remain very strong. The sales mix of the Disposable Protective Apparel segment for the nine months ended September 30, 2020 was 28% for disposable protective garments, 52% for masks and 20% for shields. This sales mix is compared to 76% for disposable protective garments, 16% for masks and 8% for shields for the nine months ended September 30, 2019.2020.
Gross Profit. Gross profit increaseddecreased by $10,916,000,$10,194,000, or 258.7%67.3%, to $4,942,000 for the three months ended September 30, 2021, from $15,136,000 for the three months ended September 30, 2020, from $4,220,000 for the same period of 2019.2020. The gross profit margin was 34.1% for the three months ended September 30, 2021, compared to 50.4% for the three months ended September 30, 2020, compared2020.
Gross profit decreased by $15,950,000, or 43.9%, to 35.1%$20,353,000 for the threenine months ended September 30, 2019.2021, from $36,303,000 for the same period of 2020. The gross profit margin was positively36.7% for the nine months ended September 30, 2021, compared to 49.3% for the same period of 2020.
Management believes that gross profit margin will continue to be negatively affected by the significant change in product mix, which was altered due to a surge in customer demand2021 as a result of changes in product mix as the COVID-19 pandemicneed for face masks in particular our N-95 Particulate Respirator face mask, and face shields, which generally have a higher gross profit margin than our other products.
Gross profit increased by $23,174,000, or 176.5%, to $36,303,000 forproducts, declines from the nine months ended September 30, 2020, from $13,129,000 for the same period of 2019. The gross profit margin was 49.3% for the nine months ended September 30, 2020, compared to 36.7% for the same period of 2019.
Alpha Pro Tech, Ltd.
The gross profit margin could be slightly affectedsurge in the fourth quarter ofcustomer demand in 2020 as a result of the COVID-19 pandemic. In addition, gross profit is being negatively affected by significant increases in ocean freight and other transportation costs. Additionally, our portfolio of products has been affected by much higher than normal raw material costs. In the current environment, cost increases may rise more rapidly than our sales prices, of some raw materials. However, management expects continued higherwhich could decrease gross profit margin for the rest of 2020 and into 2021 due to sales associated with the pandemic.profit.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increaseddecreased by $1,408,000,$696,000, or 44.4%15.2%, to $3,884,000 for the three months ended September 30, 2021, from $4,580,000 for the three months ended September 30, 2020, from $3,172,000 for the three months ended September 30, 2019.2020. However, as a percentage of net sales, selling, general and administrative expenses decreasedincreased to 15.3%26.8% for the three months ended September 30, 2020,2021, up from 26.4%15.3% for the same period of 2019,2020, primarily as a result of the growth inlower net sales. The increase in selling, general and administrative expenses was primarily the result of increased employee compensation, increased sales commissions, increased accrued bonuses, increased insurance costs, increased general office expenses and increased factory-related expenses, largely associated with the pandemic.
The change in expenses by segment comparingfor the three months ended September 30, 2020 to the three months ended September 30, 20192021 was as follows: Disposable Protective Apparel increased by $665,000,was down $484,000, or 65.6%28.8%; Building Supply was up $187,000, or 13.8%; and corporate unallocated expenses increased by $625,000,were down $399,000, or 67.9%; and Building Supply increased by $118,000, or 9.6%25.8%. The increasedecrease in the Disposable Protective Apparel segment expenses was primarily related to increaseddecreased employee compensation, increased insurance costs, increasedcommission and general factory expenses, increased general office expenses and increased commissions as a result of increased sales. The increase in corporate unallocated expenses was a result of increased accrued bonuses as well as increased public company expenses, general office expenses and professional fees primarily due to the pandemic.expenses. The increase in the Building Supply segment expenses was primarily related to increased employee compensation, marketing, commission and increasedtravel expenses, partially offset by decreased insurance costs. The decrease in corporate unallocated expenses was primarily due to lower accrued bonuses.
Selling, general and administrative expenses increaseddecreased by $3,128,000,$575,000, or 30.9%4.3%, to $12,661,000 for the nine months ended September 30, 2021, from $13,236,000 for the nine months ended September 30, 2020, from $10,108,000 for the nine months ended September 30, 2019. However, as2020. As a percentage of net sales, selling, general and administrative expenses decreasedincreased to 18.0%22.8% for the nine months ended September 30, 2020, down2021, up from 28.3%18.0% for the same period of 2019,2020, primarily as a result of the growth inlower net sales.
The change in expenses by segment for the nine months ended September 30, 20202021 was as follows: Disposable Protective Apparel was up $1,285,000,down $248,000, or 40.1%5.5%; Building Supply was up $65,000,$201,000, or 1.6%5.0%; and corporate unallocated expenses were up $1,778,000,down $528,000, or 60.5%11.2%. The increasedecrease in the Disposable Protective Apparel segment expenses was primarily related to decreased commission and general factory expenses, partially offset by increased employee compensation, increased factory expenses and increased commissions as a result of increased sales.compensation. The increase in the Building Supply segment expenses was related to increased employee compensation and increased insurance costs.compensation. The increasedecrease in corporate unallocated expenses was primarily due to increaseddecreased accrued bonuses and professional fees, partially offset by increased public company expenses, insurance expenses and increased professional fees.general office expenses.
In accordance with the terms of his employment agreement, the Company’s current President and Chief Executive Officer is entitled to an annual bonus equal to 5% of the pre-tax profits of the Company, excluding bonus expense, up to a maximum of $1.0 million. A bonus amount of $350,000$51,000 was accrued for the three months ended September 30, 2020,2021, compared to $36,000$350,000 for the three months ended September 30, 2019.2020. A bonus amount of $1,000,000$406,000 was accrued for the nine months ended September 30, 2020,2021, as compared to $171,000$1,000,000 for the same period of 2019.2020.
Depreciation and Amortization.Amortization. Depreciation and amortization expense increased by $44,000,$23,000, or 31.0%12.4%, to $209,000 for the three months ended September 30, 2021, from $186,000 for the three months ended September 30, 2020, from $142,000 for the three months ended September 30, 2019.2020. Depreciation and amortization expense increased by $136,000,$65,000, or 33.2%11.9%, to $546,000$611,000 for the nine months ended September 30, 2020,2021, from $410,000$546,000 for the same period of 2019.2020. The increase for the quarter and nine month period was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment and increased corporate depreciation related to computer technology.
Income from Operations. Income from operations increaseddecreased by $9,464,000,$9,521,000, or 1044.6%91.8%, to $849,000 for the three months ended September 30, 2021, compared to $10,370,000 for the three months ended September 30, 2020, compared to $906,000 for the same period of 2019.2020. The increaseddecreased income from operations was primarily due to an increasea decrease in gross profit of $10,916,000, partially offset by an increase in selling, general and administrative expenses of $1,408,000$10,194,000 and an increase in depreciation and amortization expense of $44,000.$23,000, partially offset by a decrease in selling, general and administrative expenses of $696,000. Income from operations as a percentage of net sales for the three months ended September 30, 20202021 was 34.5%5.9%, compared to 7.5%34.5% for the same period of 2019.2020.
Alpha Pro Tech, Ltd.
Income from operations increaseddecreased by $19,910,000,$15,440,000, or 762.5%68.6%, to $7,081,000 for the nine months ended September 30, 2021, compared to $22,521,000 for the nine months ended September 30, 2020, compared to $2,611,000 for the nine months ended September 30, 2019.2020. The increaseddecreased income from operations was primarily due to an increasea decrease in gross profit of $23,174,000, partially offset by an increase in selling, general and administrative expenses of $3,128,000$15,950,000, and an increase in depreciation and amortization expense of $136,000.$65,000, partially offset by a decrease in selling, general and administrative expenses of $575,000. Income from operations as a percentage of net sales for the nine months ended September 30, 20202021 was 30.6%12.8%, compared to 7.3%30.6% for the same period of 2019.2020.
Other Income. Other income increaseddecreased by $586,000$114,000, or 50.2%, to $113,000 for the three months ended September 30, 2021, from $227,000 for the three months ended September 30, 2020,2020. The decrease was primarily due to a decrease in equity in income of unconsolidated affiliate of $138,000, partially offset by an increase of $24,000 on loss on marketable securities.
Other income increased by $194,000 to $625,000 for the nine months ended September 30, 2021, from a loss of $359,000$431,000 for the same period of 2019.2020. The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $240,000$167,000 and a net increase of $363,000 on a loss on marketable securities resulting in a gain of $24,000 for the three months ended September 30, 2020 compared to a loss on marketable securities of $387,000 and a decrease in interest income of $17,000 during the same period of 2019.
Other income consisted of equity in income of unconsolidated affiliate of $250,000 and interest income of $1,000, partially offset by a loss on marketable securities of $24,000 for the three months ended September 30, 2020. Other income consisted of equity in income of unconsolidated affiliate of $10,000, a loss on marketable securities of $387,000 and interest income of $18,000 for the three months ended September 30, 2019.
Other income decreased by $215,000 to $431,000 for the nine months ended September 30, 2020, from $646,000 for the same period of 2019. The decrease was primarily due to a loss on marketable securities in 2020 compared to ano gain or loss on marketable securities during the same period of 2019,2021, for a net decreaseincrease of $265,000, and$42,000, partially offset by a decrease in interest income of $35,000, partially offset by an increase in equity in income of unconsolidated affiliate of $85,000.$15,000.
Other income consisted primarily of equity in income of unconsolidated affiliate of $456,000, a loss on marketable securities of $42,000 and interest income of $17,000 for the nine months ended September 30, 2020. Other income consisted of equity in income of unconsolidated affiliate of $371,000, a gain on marketable securities of $223,000 and interest income of $52,000 for the nine months ended September 30, 2019.
Income before Provision for Income Taxes. Income before provision for income taxes for the three months ended September 30, 20202021 was $10,597,000,$962,000, compared to income before provision for income taxes of $547,000$10,597,000 for the same period of 2019,2020, representing an increasea decrease of $10,050,000,$9,635,000, or 1,837.3%90.9%. This increasedecrease in income before provision for income taxes was primarily due to an increasea decrease in income from operations of $9,464,000$9,521,000 and an increasea decrease in other income of $586,000.$114,000.
Income before provision for income taxes for the nine months ended September 30, 20202021 was $22,952,000,$7,706,000, compared to income before provision for income taxes of $3,257,000$22,952,000 for the nine months ended September 30, 2019,2020, representing an increasea decrease of $19,695,000,$15,246,000, or 604.7%66.4%. This increasedecrease in income before provision for income taxes was due to an increasea decrease in income from operations of $19,910,000,$15,440,000, partially offset by a decreasean increase in other income of $215,000.$194,000.
Provision for Income Taxes. The provision for income taxes for the three months ended September 30, 20202021 was $2,490,000,$196,000, compared to $110,000$2,490,000 for the same period of 2019.2020. The estimated effective tax rate was 20.4% for the three months ended September 30, 2021, compared to 23.5% for the three months ended September 30, 2020, compared to 20.1% for the same period of 2019.2020. The Company does not record a tax provision on equity in income of unconsolidated affiliate.affiliate, which reduces the effective tax rate.
The provision for income taxes for the nine months ended September 30, 20202021 was $3,284,000,$1,550,000, compared to $592,000$3,284,000 for the same period of 2019.2020. The provision for income taxes consisted of an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified Incentive Stock Optionsincentive stock options and the exercise of Non-Qualified Stock Options.non-qualified stock options. The estimated effective tax rate was 20.1% for the nine months ended September 30, 2021, compared to 14.3% for the nine months ended September 30, 2020, compared to 18.2% for the nine months ended September 30, 2019.2020. Excluding the estimated nonrecurring tax benefit of $2.0 million, the estimated effective tax rate was 23.0% for the nine months ended September 30, 2020. The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.
Alpha Pro Tech, Ltd.
Net Income. Net income for the three months ended September 30, 20202021 was $8,107,000,$766,000, compared to net income of $437,000$8,107,000 for the same periodthree months ended September 30, 2020, representing a decrease of 2019, representing an increase of $7,670,000,$7,341,000, or 1,755.1%90.6%. The net income increase was due to an increase in income before provison for income taxes of $10,050,000, partially offset by an increase in provision for income taxes of $2,380,000. Net income as a percentage of net sales for the three months ended September 30, 20202021 was 27.0%5.3%, and net income as a percentage of net sales for the three months ended September 30, 2019same period of 2020 was 3.6%27.0%. Basic earnings per common share for the three months ended September 30, 2021, and 2020 were $0.06 and 2019 were $0.60, and $0.03, respectively. Diluted earnings per common share for the three months ended September 30, 2021 and 2020 were $0.06 and 2019 were $0.58, and $0.03, respectively.
Net income for the nine months ended September 30, 20202021 was $19,668,000,$6,156,000, compared to net income of $2,665,000$19,668,000 for the same period of 2019,2020, representing an increasea decrease of $17,003,000,$13,512,000, or 638.0%68.7%. Net income for the nine-month period significantly exceeded the Company’s previous net income record for a full annual period – $9.0 million for the year ended December 31, 2009, which resulted primarily from increased sales due to the H1N1 pandemic. The net income increasedecrease comparing the 20202021 and 20192020 periods was due to an increasea decrease in income before provision for income taxes of $19,695,000,$15,246,000, partially offset by an increasea decrease in provision for income taxes of $2,692,000.$1,734,000. As mentioned above, a tax benefit from stock options exercised positively impacted net income in the first quarter of 2020.2020 by an estimated $2.0 million. Net income as a percentage of net sales for the nine months ended September 30, 20202021 was 26.7%11.1%, and net income as a percentage of net sales for the same period of 20192020 was 7.5%26.7%. Basic earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.46 and 2019 were $1.46, and $0.20, respectively. Diluted earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.45 and 2019 were $1.41, and $0.20, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2020,2021, the Company had cash of $24,583,000$17,636,000 and working capital of $44,668,000, representing an increase in working capital of $20,906,000 from $23,762,000 as of December 31, 2019.$49,746,000. As of September 30, 2020,2021, the Company’s current ratio (current assets/current liabilities) was 7:17:1, compared to a current ratio of 11:9:1 as of December 31, 2019. The change in current ratio was primarily a result of customer advance payments for future dated PPE orders, which totaled $3.2 million at the end of the third quarter of 2020. Cash increaseddecreased by 275.4%24.3%, or $18,035,000,$5,656,000, to $24,583,000$17,636,000 as of September 30, 2020,2021, compared to $6,548,000$23,292,000 as of December 31, 2019. Approximately $3.2 million2020, and working capital increased by $295,000 from $49,451,000 as of the increase in cash was attributable to customer advance payments for future dated PPE orders.December 31, 2020. The increasedecrease in cash from December 31, 20192020 was due to cash used in investing activities of $2,391,000 and cash used in financing activities of $3,686,000 partially offset by cash provided by operating activities of $17,038,000 and cash provided by financing activities of $1,564,000, partially offset by cash used in investing activities of $567,000.$421,000.
We previously had a $3,500,000 credit facility with Wells Fargo Bank, consisting of a line of credit with interest at prime plus 0.5%. This credit line expired in May 2020, and the Company decided not to renew. The Company has continued its relationship with Wells Fargo, with the exception of the line of credit. The Company determined that the credit line is not necessary at this time, as it had not been used in several years, and the Company currently has sufficient funding from operations.
Net cash provided by operating activities of $17,038,000$421,000 for the ninethree months ended September 30, 20202021 was due to net income of $19,668,000,$6,156,000, impacted primarily by the following: stock-based compensation expense of $274,000,$238,000, depreciation and amortization expense of $546,000, loss on marketable securities of $42,000,$611,000, equity in income of unconsolidated affiliate of $456,000,$623,000, operating lease expense net of accretion of $677,000, an increase$663,000, a decrease in accounts receivable of $5,678,000,$3,650,000, an increase in prepaid expenses of $1,272,000,$337,000, an increase in inventory of $1,852,000, an increase$6,441,000, a decrease in accounts payable and accrued liabilities of $5,758,000$2,627,000, a decrease in customer advance payments of $209,000 and a decrease in lease liabilities of $669,000.$660,000.
Accounts receivable increaseddecreased by $5,678,000,$3,650,000, or 132.3%40.4%, to $9,970,000$5,387,000 as of September 30, 2020,2021, from $4,292,000$9,037,000 as of December 31, 2019.2020. The increasedecrease in accounts receivable was related to increased sales.decreased sales as compared to the fourth quarter of 2020. The number of days that sales remained outstanding as of September 30, 2020,2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 3540 days, compared to 34 days as of December 31, 2019.2020.
Alpha Pro Tech, Ltd.
Inventory increased by $1,852,000,$6,441,000, or 16.4%38.5%, to $13,155,000$23,190,000 as of September 30, 2020,2021, from $11,303,000$16,749,000 as of December 31, 2019.2020. The increase was primarily due to an increase in inventory for the Disposable Protective Apparel segment of $2,964,000,$4,852,000, or 52.9%42.2%, to $8,572,000, partially offset by a decrease$16,350,000 and an increase in inventory for the Building Supply segment of $1,112,000,$1,589,000 or 19.5%30.3%, to $4,583,000.$6,840,000.
Prepaid expenses increased by $1,272,000,$337,000, or 35.5%5.4%, to $4,859,000$6,562,000 as of September 30, 2020,2021, from $3,587,000$6,225,000 as of December 31, 2019.2020. The increase was primarily due to prepayments for machinerytax payments and equipment, as well as inventory.insurance.
Right-of-use assets as of September 30, 20202021 decreased by $677,000$663,000 to $2,501,000$2,872,000 from $3,178,000$3,535,000 as of December 31, 20192020 as a result of amortization of the balance.
Lease liabilities as of September 30, 20202021 decreased by $669,000$660,000 to $2,550,000$2,926,000 from $3,219,000$3,586,000 as of December 31, 2019.2020. The recording of the lease liabilities was the result of adopting ASC 842, Leases. The decrease in the lease liabilities was the result of lease payments made during the year.
Accounts payable and accrued liabilities as of September 30, 2020 increased2021 decreased by $2,540,000,$2,627,000, or 178.8%55.0%, to $3,961,000,$2,149,000, from $1,421,000$4,776,000 as of December 31, 2019.2020. The increasedecrease was primarily due to an increase in accounts payable as a result of increased raw material purchases, an increased in accrued liabilities, an increasedecrease in accrued bonuses and an increasea decrease in accrued taxes.trade accounts payable.
Customer advance payment of orders as of September 30, 20202021 was $3,218,000,$0, which was the result of no customer deposits for future dated PPE orders in response to the COVID-19 pandemic. There were no advance payments of this naturepandemic, compared to $209,000 as of December 31, 2019.2020.
Net cash used in investing activities was $567,000$2,391,000 for the nine months ended September 30, 2020,2021, compared to net cash used in investing activities of $1,031,000$567,000 for the same period of 2019.2020. Investing activities for the nine months ended September 30, 2021 consisted of the purchase of property and equipment of $2,391,000. Investing activities for the nine months ended September 30, 2020 consisted of the purchase of property and equipment of $687,000 for both the Building Supply segment and the Disposable Protective Apparel segment and proceeds from the sale of marketable securities of $120,000. Investing
Net cash used in financing activities was $3,686,000 for the nine months ended September 30, 2021, compared to net cash provided by financing activities of $1,564,000 for the same period of 2020. Net cash used in financing activities for the nine months ended September 30, 2019 consisted of the purchase of property and equipment of $1,164,000 for both the Building Supply segment and the Disposable Protective Apparel segment and proceeds2021 resulted from the salepayment of marketable securities of $133,000.
Net cash provided by financing activities was $1,564,000$4,077,000 for the nine months ended September 30, 2020, compared to net cash used in financing activitiesrepurchase of $1,969,000 forcommon stock, partially offset by proceeds of $391,000 from the same periodexercise of 2019.stock options. Net cash provided by financing activities for the nine months ended September 30, 2020 resulted from proceeds of $1,970,000 from the exercise of stock options, partially offset by the payment of $406,000 for the repurchase of common stock. Net cash used in financing activities for the nine months ended September 30, 2019 resulted from the payment of $2,064,000 for the repurchase of common stock, partially offset by proceeds of $95,000 from the exercise of stock options.
As of September 30, 2020,2021, we had $6,745,000$409,000 available for additional stock purchases under our stock repurchase program. ForDuring the ninethree months ended September 30, 2020,2021, we repurchased 55,10046,000 shares of common stock at a cost of $406,000.$369,000. As of September 30, 2020,2021, we had repurchased a total of 17,942,91718,492,917 shares of common stock at a cost of $35,774,000approximately $42,111,000 through our repurchase program. We retire all stock upon repurchase. Future repurchases are expected to be funded from cash on hand and cash flows from operating activities.
We believe that our current cash balance will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.
Alpha Pro Tech, Ltd.
Recent Accounting Pronouncements We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $2,450,000 has been paid as of September 30, 2021.
In February 2016, the FASB issued ASU 2016-02, Leases, which introduces the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous guidance. The update is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those reporting periods, with early adoption permitted. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued ASU 2018-11, Targeted Improvements to ASC 842, which includes an option to not restate comparative periods in transition and elect to use the effective date of ASC 842, Leases, as the date of initial application of transition. Based on the effective date, we adopted this ASU beginning on January 1, 2019 and elected the transition option provided under ASU 2018-11. This standard had a material effect on our consolidated balance sheet with the recognition of new right-of-use assets and lease liabilities for all operating leases, as these leases typically have a non-cancelable lease term of greater than one year. Upon adoption, both assets and liabilities on our consolidated balance sheet increased by approximately $3,455,000. We have elected a package of transition practical expedients, which include not reassessing whether any expired or existing contracts are or contain leases, not reassessing the lease classification of expired or existing leases, and not reassessing initial direct costs for existing leases. We have also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining the lease terms or assessing impairment of the ROU assets. See also Note 13 of the Notes to Condensed Consolidated Financial Statements (Unaudited), which appear elsewhere in this report, for more information.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 is effective for public entities for the annual periods, including interim periods within those annual periods, beginning after December 15, 2019. This guidance is applicable to the Company’s fiscal year beginning January 1, 2020. Adoption of the new standard did not have a material impact on our consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. ASU 2018-07 is effective for annual periods beginning after December 15, 2018 and interim periods within those annual periods, with early adoption permitted but no earlier than an entity’s adoption date of ASC Topic 606. The new guidance is required to be applied retrospectively with the cumulative effect recognized at the date of initial application. We adopted the provisions of this ASU in the first quarter of 2019. Adoption of the new standard did not have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
Management periodically reviews new accounting standards that are issued. Management has not identified any other new standards that it believes merit further discussion at this time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information otherwise required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our President and Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial officer), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2020,2021, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Exchange Act. Disclosure controls and procedures are the controls and other procedures that we have designed to ensure that we record, process, summarize and report in a timely manner the information that we must disclose in reports that we file with or submit to the SEC under the Exchange Act, and such controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure.
Alpha Pro Tech, Ltd.
In designing and evaluating our disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and that we are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on the evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report.
Changes in Internal Control Over Financial Reporting
During the quarter to which this report relates, there was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. II. OTHER INFORMATION
ITEM 1A. RISK FACTORS
A list of factors that could materially affect our business, financial condition or operating results is described in Part I, Item 1A, “Risk Factors” in the 20192020 Form 10-K. There have been no material changes to our risk factors from those disclosed in Part I, Item 1A, “Risk Factors” in the 20192020 Form 10-K, other than as described in the risk factor below.10-K.
The effects of the COVID-19 pandemic could have a material adverse effect on our business, financial results and results of operations.
In December 2019, COVID-19 surfaced in Wuhan, China, and over the course of the first quarter of 2020, the World Health Organization escalated its assessment of the COVID-19 threat, finally characterizing it as a pandemic on March 11, 2020. The situation relating to the COVID-19 pandemic is complex and still evolving, with a broad number of governmental and commercial efforts to contain the spread of the virus globally. The duration and extent of the impact of the COVID-19 pandemic on our business, operations and financial results depends on factors that cannot be accurately predicted at this time, such as the severity and transmission rate of the virus, the extent and effectiveness of containment actions, and the impact of these and other factors on our employees, customers, industry partners, suppliers and third-party dealers and distributors.
Federal, state and local governments, as well as foreign governments, have imposed numerous protocols and regulations in an effort to limit the spread of the COVID-19. We have implemented a number of measures in an effort to protect our employees’ health and well-being, including having certain office workers work remotely and suspending employee travel. The potential negative effects to our operations, including reductions in production levels, research and development activities and increased costs resulting from our efforts to mitigate the impact of COVID-19, may adversely affect our ability to provide our products. Conversely, the implications of unsuccessfully implementing health and well-being measures, which could, for example, result in workers at our manufacturing facilities testing positive for COVID-19, would also adversely affect our business, including resulting in a product recall. Although we will continue to adhere to restrictions imposed by local governments in the jurisdictions in which we operate, government regulations have impacted workforce availability and expense in certain of the Company’s manufacturing facilities, and we expect this to continue for some time.
Alpha Pro Tech, Ltd.
Although we have experienced increased sales and significantly increased demand for our PPE products, the global COVID-19 pandemic has and may continue to have an adverse impact on our manufacturing and distribution capabilities. Disruptions relating to the COVID-19 pandemic, including shelter-in-place orders in the U.S., Mexico, India and other countries, have prevented and could continue to prevent employees, suppliers, distributors and others from accessing manufacturing facilities and from transporting our products or the components required to manufacture our products. For example, the government-mandated closure in India, which started in late March and ended in May 2020, impacted our order fulfillment and revenue growth related to our disposable protective garments. Any government regulation may also impact our ability to supply and ship our products to certain customers, which could lead to cancellation of some orders. Further, worldwide supply chain disruption relating to the COVID-19 pandemic has resulted in product shortages that have impacted and may continue to impact our ability to manufacture our products. We currently utilize third parties to, among other things, manufacture certain components and materials for our products, and to provide services such as sterilization services, and we purchase these materials and services from numerous suppliers worldwide. If either we or any third parties in the supply chain for materials used in the production of our products are adversely impacted by the COVID-19 pandemic, including the restrictions resulting from the COVID-19 pandemic, our supply chain may continue to be disrupted, limiting our ability to manufacture our products. These disruptions may, among other things, continue to impact our ability to produce and supply products in quantities necessary to meet market demand.
Further, in connection with the COVID-19 pandemic and in an effort to increase the wider availability of needed medical and other supplies and products, we may elect to, or governments may require us to, allocate our products (for example, pursuant to the U.S. Defense Production Act (the “DPA”)) in a way that adversely affects our regular operations and financial results, results in differential treatment of customers and/or adversely affects our reputation and customer relationships. Likewise, suppliers of our raw materials who are subject to requests under the DPA may be unable to fulfill our orders for those raw materials, or such fulfillment could be delayed. In addition, unpredictable increases in demand for certain of our products could, or in some cases may continue to, exceed our capacity to meet such demand, which could adversely affect our financial results and customer relationships and result in negative publicity.
As a result of the COVID-19 pandemic, we have experienced a significant increase in orders of our PPE products from both legacy and new customers. Because of the uncertainty associated with the pandemic, we may experience a decrease in sales from certain of these customers at the point at which conditions related to the virus change or improve and demand for these products subsides, which could impact our expectations of future orders and sales.
COVID-19 has resulted in a downturn in the global financial markets and a slowdown in the global economy, which has, in turn, negatively impacted interest rates and foreign currency exchange rates. This economic environment may impact some of our customers’ ability to pay or lead them to request extended payment terms, and we have experienced and may continue to experience cost increases from some of our suppliers. Additionally, decreased housing starts and increased uncertainty in the housing market could negatively impact demand for our Building Supply segment products.
Moreover, the impacts of the COVID-19 pandemic may exacerbate other pre-existing risks, such as political, regulatory, social, financial, operational and cybersecurity risks, and those associated with global economic conditions, any of which could have a material adverse effect on our business.
Alpha Pro Tech, Ltd.
ITEM2. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
The following table sets forth purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) of the Exchange Act:
Issuer Purchases of Equity Securities | ||||||||||||||||
Period | Total Number of | Weighted Average | Total Number of | Approximate Dollar Value | ||||||||||||
July 1 - 31, 2020 | - | - | - | $ | 2,027,000 | |||||||||||
August 1 - 31, 2020 | - | - | - | 2,027,000 | ||||||||||||
September 1 - 30, 2020 | 20,000 | $ | 13.96 | 20,000 | 6,745,000 | |||||||||||
| 20,000 | 20,000 | |||||||||||||||
Issuer Purchases of Equity Securities | ||||||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program (1) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) | ||||||||||||
July 1 - 31, 2021 | 36,000 | $ | 8.17 | 36,000 | $ | 481,000 | ||||||||||
August 1 - 31, 2021 | - | - | - | 481,000 | ||||||||||||
September 1 - 30, 2021 | 10,000 | 7.15 | 10,000 | 409,000 | ||||||||||||
| 46,000 | $ | 7.95 | 46,000 | |||||||||||||
(1) Pursuant to the Company’s share repurchase program, on September 22, 2020, the Company announced that the Board of Directors had authorized a $5,000,000 expansion of the Company’s existing share repurchase program. All of the shares included in this table were purchased pursuant to this program.
SECURITIES SOLD
We did not sell unregistered equity securities during the period covered by this report.
Alpha Pro Tech, Ltd.
ITEM 6. EXHIBITS6. EXHIBITS
3.1.1(P) | Certificate of Incorporation of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(f) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893). |
3.1.2(P) | Certificate of Amendment of Certificate of Incorporation of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(j) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893). |
3.1.3(P) | Certificate of Ownership and Merger (BFD Industries, Inc. into Alpha Pro Tech, Ltd.), incorporated by reference to Exhibit 3(l) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893). |
3.2(P) | Bylaws of Alpha Pro Tech, Ltd., incorporated by reference to Exhibit 3(g) to Form 10-K for the year ended December 31, 1994, filed on March 31, 1995 (File No. 000-19893). |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
101 | Interactive Data Files for Alpha Pro Tech, Ltd’s Form 10-Q for the period ended September 30, |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| (P) Indicates a paper filing with the SEC. |
(P) Indicates a paper filing with the SEC.
SIGNATURES
Alpha Pro Tech, Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ALPHA PRO TECH, LTD. | |||||||||
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| DATE: | November | BY: | |||||||
| Lloyd Hoffman | |||||||||
| President and Chief Executive Officer | |||||||||
| DATE: | November 5, 2021 | BY: | /s/Colleen McDonald | ||||||
| Colleen McDonald | |||||||||
| Chief Financial Officer | |||||||||