-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Onuk5Nwxybgz56WnIujVqk0MNb9Dbnd6Bb2mUxeTM7mC3408oBklrAq8YPMQTb5S ET3/ftpbwtS5ECsyDb6j8g== 0000912057-02-019216.txt : 20020509 0000912057-02-019216.hdr.sgml : 20020509 ACCESSION NUMBER: 0000912057-02-019216 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHA PRO TECH LTD CENTRAL INDEX KEY: 0000884269 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 631030494 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15725 FILM NUMBER: 02638950 BUSINESS ADDRESS: STREET 1: 60 CENTURIAN DR STREET 2: SUITE 112 CITY: MARKHAM ONTARIO CANA STATE: A6 BUSINESS PHONE: 9054790654 MAIL ADDRESS: STREET 1: 60 CENTURION DR STREET 2: STE 112 CITY: MARKHAM ON STATE: A6 FORMER COMPANY: FORMER CONFORMED NAME: BFD INDUSTRIES INC DATE OF NAME CHANGE: 19930328 10-Q 1 a2078973z10-q.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-Q ------------------ Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 2002 Commission File No. 0-19893 --------------------------- ALPHA PRO TECH, LTD. -------------------- (exact name of registrant as specified in its charter) DELAWARE, U.S.A. 63-1009183 - ---------------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation) Suite 112, 60 Centurian Drive Markham, Ontario, Canada L3R 9R2 - ------------------------ ------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (905) 479-0654 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 3 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 /X/ No / / Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of April 22, 2002 Common stock, $.01 par value..... 23,546,809 ALPHA PRO TECH, LTD. Table of Contents PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements (Unaudited) Page No. a) Consolidated Balance Sheets - March 31, 2002 (unaudited) and December 31, 2001 1 b) Consolidated Statements of Operations for the three months ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited) 2 c) Consolidated Statement of Shareholder's Equity for the three months ended March 31, 2002 (unaudited) 3 d) Consolidated Statements of Cash Flows for the three months ended March 31, 2002 (unaudited) and March 31, 2001 (unaudited) 4 e) Notes to Consolidated Financial Statements 5-7 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-11 SIGNATURES 12
ALPHA PRO TECH, LTD.
CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, 2002 2001 (UNAUDITED) ASSETS Current assets: Cash $ 1,705,000 $ 1,372,000 Accounts receivable, net of allowance for doubtful accounts of $34,000 at March 31, 2002 and December 31, 2001 2,685,000 2,455,000 Inventories, net 3,599,000 3,581,000 Prepaid expenses and other current assets 296,000 249,000 Deferred income taxes 467,000 467,000 ------------ ------------ Total current assets 8,752,000 8,124,000 Property and equipment, net 3,504,000 3,535,000 Intangible assets, net 186,000 189,000 Notes receivable and other assets 57,000 56,000 ------------ ------------ $ 12,499,000 $ 11,904,000 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,084,000 $ 882,000 Accrued liabilities 973,000 603,000 Notes payable, current portion 186,000 185,000 Capital leases, current portion 5,000 9,000 ------------ ------------ Total current liabilities 2,248,000 1,679,000 Notes payable, less current portion 375,000 770,000 Deferred income taxes 551,000 551,000 ------------ ------------ Total liabilities 3,174,000 3,000,000 ------------ ------------ Shareholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 23,546,809 shares issued and outstanding at March 31, 2002 and December 31, 2001 235,000 235,000 Additional paid-in capital 23,920,000 23,920,000 Accumulated deficit (14,830,000) (15,251,000) ------------ ------------ Total shareholders' equity 9,325,000 8,904,000 ------------ ------------ $ 12,499,000 $ 11,904,000 ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. 1 ALPHA PRO TECH, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 Sales $ 5,203,000 $ 5,435,000 Cost of goods sold, excluding depreciation and amortization 2,778,000 3,054,000 ------------ ------------ Gross margin 2,425,000 2,381,000 Expenses: Selling, general and administrative 1,658,000 1,809,000 Depreciation and amortization 108,000 117,000 ------------ ------------ Income from operations 659,000 455,000 Interest, net 10,000 (4,000) ------------ ------------ Income before provision for income taxes 649,000 459,000 Provision for income taxes 228,000 159,000 ------------ ------------ Net income $ 421,000 $ 300,000 ============ ============ Basic income per share $ 0.02 $ 0.01 ------------ ------------ Diluted income per share $ 0.02 $ 0.01 ------------ ------------ Basic weighted average shares outstanding 23,547,216 23,691,868 ------------ ------------ Diluted weighted average shares outstanding 24,179,918 25,051,701 ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements. 2 ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) - --------------------------------------------------------------------------------------------------------- Shares Common Additional Accumulated Total Stock Paid-in Capital Deficit Balance at December 31, 2001 23,546,809 $ 235,000 $ 23,920,000 ($15,251,000) $ 8,904,000 Exercise of options Net Income -- -- -- 421,000 421,000 ------------ ------------ ------------ ------------ ------------ Balance at March 31, 2002 23,546,809 $ 235,000 $ 23,920,000 ($14,830,000) $ 9,325,000 ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements 3 ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ----------------------------------------------------------------------------------------- FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 421,000 $ 300,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 108,000 117,000 Changes in assets and liabilities: Accounts receivable, net (230,000) 492,000 Inventories, net (18,000) (1,047,000) Prepaid expenses and other assets (48,000) (77,000) Accounts payable and accrued liabilities 572,000 920,000 ----------- ----------- Net cash provided by operating activities: 805,000 705,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (72,000) (527,000) Purchase of intangible assets (2,000) (7,000) ----------- ----------- Net cash used in investing activities (74,000) (534,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on notes payable (394,000) (37,000) Principal payments on capital leases (4,000) Proceeds from issuance of common stock 12,000 Proceeds from exercise of options (45,000) Payments for repurchase of common stock (13,000) ----------- ----------- Net cash used in financing activities (398,000) (83,000) ----------- ----------- Increase in cash during the period 333,000 88,000 Cash, beginning of period 1,372,000 $ 1,131,000 ----------- ----------- Cash, end of period 1,705,000 $ 1,219,000 ----------- -----------
The accompanying notes are an integral part of these consolidated financial statements 4 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 1. THE COMPANY Alpha Pro Tech, Ltd. (the Company) manufactures and distributes a variety of disposable mask, shield, shoe cover, apparel products and wound care products. Most of the Company's disposable apparel, mask and shield products, and wound care products are distributed to medical, dental, industrial safety and clean room markets, predominantly in the United States of America. 2. BASIS OF PRESENTATION The accompanying consolidated financial statements are unaudited but, in the opinion of management, contain all the adjustments (consisting of those of a normal recurring nature) considered necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2001. There have been no significant changes since December 31, 2001 in accounting principles and practices utilized in the presentation of these financial statements. 3. INVENTORIES
MARCH 31, DECEMBER 31, 2002 2001 Raw materials $ 2,179,000 $ 2,165,000 Work in process 133,000 100,000 Finished goods 1,599,000 1,628,000 ----------- ----------- 3,911,000 3,893,000 Less reserve for obsolescence (312,000) (312,000) $ 3,599,000 $ 3,581,000 =========== ===========
5 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 4. BASIC AND DILUTED NET INCOME PER SHARE The following table provides a reconciliation of both the net income and the number of shares used in the computation of "basic" EPS, which utilizes the weighted average number of shares outstanding without regard to potential shares, and "diluted" EPS, which includes all such shares.
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 Net income (Numerator) $ 421,000 $ 300,000 Shares (Denominator): Basic weighted average shares outstanding 23,547,216 23,691,868 Add: Dilutive effect of stock options and warrants 632,702 1,359,833 ----------- ----------- Diluted weighted average shares outstanding 24,179,918 25,051,701 =========== =========== Net income per share: Basic $ 0.02 $ 0.01 Diluted $ 0.02 $ 0.01
5. PROVISION FOR INCOME TAX The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes". This statement requires an asset and liability approach for accounting for income taxes. The provision for income taxes for the three months ended March 31, 2002 was $228,000 as compared to $159,000 for the three months ended March 31, 2001. 6 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 6. ACTIVITY OF BUSINESS SEGMENTS The Company classifies its businesses into three fundamental segments: Apparel, consisting of a complete line of disposable clothing such as coveralls, frocks, lab coats, hoods, bouffant caps and shoe covers; Mask and eye shields, consisting principally of medical, dental and industrial masks and eye shields; and Extended Care Unreal Lambskin(R), consisting principally of fleece and other related products which includes a line of pet beds. The accounting policies of the segments are the same as those described previously under "Summary of Significant Accounting Policies." Segment data excludes charges allocated to head office and corporate sales/marketing departments. The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales. The following table shows net sales for each segment for the three months ended March 31, 2002 and 2001:
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 Apparel $3,385,000 $3,433,000 Mask and eye shield 1,222,000 1,402,000 Fleece 596,000 600,000 ---------- ---------- Consolidated total net sales $5,203,000 $5,435,000 ========== ==========
A reconciliation of total segment net income to total consolidated net income for the three months ended March 31, 2002 and 2001 is presented below:
FOR THE THREE MONTHS ENDED MARCH 31, 2002 2001 Apparel $ 974,000 $ 853,000 Mask and Shield 364,000 102,000 Fleece 149,000 139,000 ----------- ----------- Total segment net income 1,487,000 1,094,000 Unallocated corporate overhead expenses (1,066,000) (794,000) ----------- ----------- Consolidated net income $ 421,000 $ 300,000 =========== ===========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2002, COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2001 Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported record quarterly net income for the quarter ended March 31, 2002 of $421,000 as compared to $300,000 for the quarter ended March 31, 2001, representing an increase of $121,000 or 40.3%. The increase is attributable to an increase in income before provision for income taxes of $190,000 discussed above, partially offset by an increase in income taxes of $69,000. SALES Consolidated sales for the quarter ended March 31, 2002 decreased to $5,203,000 from $5,435,000 for the quarter ended March 31, 2001, representing a decrease of $232,000 or 4.3%. The company attributes the lower sales to the continued economic downturn. Management expects sales growth during the balance of 2002, as we regain the momentum lost during the second half of 2001. Sales for the Apparel Division for the quarter ended March 31, 2002 were $3,385,000 as compared to $3,476,000 for the same period of 2001. The Apparel Division sales decrease of $91,000 or 2.6% was due primarily to decreased sales to the Company's largest Industrial Safety/Clean-Room distributor, partially offset by improved sales to other Industrial Safety distributors. Sales are down due to the continued weakness in the Semiconductor and Industrial Safety markets. The Company expects a slow recovery throughout the year in both of those market segments. The Company has begun to service the Pharmaceutical industry, and as a result Management expects significant growth in this market segment. Mask and eye shield sales decreased by $137,000 or 10.1% to $1,222,000 in 2002 from $1,359,000 in 2001. The decrease is primarily the result of a decline in industrial mask sales, and to a lesser extent declines in medical and dental mask sales partially offset by increased medical shield sales. Sales from the Company's Extended Care and other related products, which includes a line of pet beds, decreased by $4,000 or 0.7% to $596,000 for the quarter ended March 31, 2002 from $600,000 for the quarter ended March 31, 2001. The decrease in sales of $4,000 is primarily the result of a decrease in medical fleece product sales. The Medical market, which includes a line of face masks, eye shield and fleece bed pads, decreased by $59,000, or 6.4% to $862,000 for the quarter ended March 31, 2002 as compared to $921,000 for the quarter ended March 31, 2001. Medical face masks and medical fleece bed pads sales decreased which was partially offset by an increase in Medical shield sales. Medical mask and eye shield sales should improve over the next twelve months. The Medical market, which comprises approximately 15% of the Company's revenue, is not considered a high growth area for the Company. 8 Dental market sales decreased by approximately $81,000 or 17.0%, to $395,000 for the quarter ended March 31, 2002 as compared to $476,000 for the same period in 2001. The decline is due to the change in timing of purchases by a few distributors and we believe that revenue in this market will strengthen in the 2nd quarter of 2002. Sales in the Pet Supply market, in which the Company markets a line of pet beds increased $29,000 or 11.0%, to $292,000 for the quarter ended March 31, 2002, compared to $263,000 for same period in 2001, due in part to increased sales to the Company's largest pet customer. In the Food Service market, sales for the quarter ended March 31, 2002 were $49,000 compared to $70,000 in the same period of 2001. In January 2002, the Company announced a new distribution agreement with a food service distributor to sell and distribute Alpha Pro Tech's line of personal safety products starting in February 2002. The Company has introduced new products that continue to generate positive interest. The Company expects modest growth in this market starting in the latter part of 2002 and significant growth over the long term. COST OF GOODS SOLD Cost of goods sold, excluding depreciation and amortization, decreased to $2,778,000 for the quarter ended March 31, 2002 from $3,054,000 for the same period in 2001 Gross profit margin increased to 46.6% for the quarter ended March 31, 2002 from 43.8% for the same period in 2001, due to an increase in the amount of products being manufactured in China. We expect this to continue during fiscal 2002 and therefore gross profit margin should continue to be strong for the balance of the year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses decreased by $151,000 or 8.3% to $1,658,000 for the quarter ended March 31, 2002 from $1,809,000 for the quarter ended March 31, 2001. As a percentage of net sales, selling, general and administrative expenses decreased to 31.9% in the quarter ended March 31, 2002 from 33.3% for the same period in 2001. The decrease in selling, general and administrative expenses primarily consists of decreased payroll related costs of $103,000; decreased travel, marketing and commission expenses of $30,000, and decreased general office expenses of $45,000, partially offset by increased rent and utilities of $30,000. Management expects selling, general and administrative expenses as a percentage of net sales to improve in 2002 as compared to 2001. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense decreased by $9,000 to $108,000 for the quarter ended March 31, 2002 from $117,000 for the same period in 2001. The decrease is primarily attributable to the introduction of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which eliminates the need to amortize goodwill. 9 INCOME FROM OPERATIONS Income from operations increased by $204,000 or 44.8%, to $659,000 for the quarter ended March 31, 2002 as compared to income from operations of $455,000 for the quarter ended March 31, 2001. The increase in income from operations is due to an increase in gross profit of $44,000, a decrease in selling, general and administrative expenses of $151,000, and a decrease in depreciation and amortization of $9,000. NET INTEREST Net interest expense increased by $14,000 to $10,000 for the quarter ended March 31, 2002 from net interest income of $4,000 for the quarter ended March 31, 2001. The increase in net interest expense is due to decreased interest income. Interest income decreased by $14,000, to $4,000 for the quarter ended March 31, 2002 from $18,000 in the same period of 2001 due to an overall decrease in interest rates. INCOME BEFORE PROVISION FOR INCOME TAXES Income before provision for income taxes for the quarter ended March 31, 2002 was a record $649,000 as compared to $459,000 for the quarter ended March 31, 2001, representing an increase of $190,000 or 41.4%. This increase is attributable primarily, to an increase in gross profit of $44,000, to a decrease in selling, general and administrative expenses of $151,000 and a decrease in depreciation and amortization of $9,000, partially offset by an increase in net interest of $14,000. PROVISION FOR INCOME TAXES The provision for income taxes for the quarter ended March 31, 2002 was $228,000, as compared to $159,000 for the quarter ended March 31, 2001. The increase in income taxes is due to higher income before provision for income taxes in 2002. The estimated tax rate is approximately 34% in 2002. NET INCOME Net income for the quarter ended March 31, 2002 was a record $421,000 compared to net income of $300,000 for the quarter ended March 31, 2001, an increase of $121,000 or 40.3%. The net income increase of $121,000 is comprised of an increase in income from operations of $204,000, partially offset by an increase in net interest expense of $14,000 and an increase in income taxes of $69,000. 10 LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2002, the Company had cash of $1,705,000 and working capital of $6,504,000. During the quarter ended March 31, 2002, cash increased by $333,000 and accounts payable and accrued liabilities increased by $572,000. The increase in the Company's cash is primarily due to income from operations and managing cash flow, partially offset by net payments of notes payable. The Company has a $4,301,000 credit facility with a bank, consisting of a line of credit of up to $3,500,000, a term note of $225,000 and equipment loans of $576,000, with interest at prime plus 0.5% on the credit line, prime plus 1.0% on the term loan and an 8.5% fixed rate on the equipment loans. At March 31, 2002, the prime interest rate was 4.75%. The line of credit expires in May 2003, the term note expires in April 2003 and the equipment loans expire between December 2005 and September 2006. At March 31, 2002, the Company's unused portion of the line of credit is $2,525,000. Net cash provided from operations was $805,000 for the quarter ended March 31, 2002 compared to $705,000 for the same period of 2001. The Company's generation of cash from operations of $805,000 for the quarter ended March 31, 2002 is up primarily due to an increase in net income, an increase in accounts payable and accrued liabilities, partially offset by an increase in inventory and an increase in prepaid expenses and other assets. The Company's investing activities have consisted primarily of expenditures for property and equipment of $72,000, for a total of $74,000 for the quarter ended March 31, 2002 compared to $534,000 for the quarter ended March 31, 2001. The Company expects to purchase $250,000 of additional equipment in 2002. The Company leases equipment whenever possible. In April 2002, the Company announced that its Board of Directors had approved the buy-back of up to an additional $500,000 of the Company's outstanding common stock. During the quarter ended March 31, 2002, the Company's cash used in financing activities resulted primarily from payments on the Company's notes payable of $394,000 and payments on capital leases of $4,000. The Company believes that cash generated from operations, its current cash balance, and the funds available under its credit facility, will be sufficient to satisfy the Company's projected working capital and planned capital expenditures for the foreseeable future. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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. Alpha Pro Tech, Ltd. DATE: May 3, 2002 BY: /s/ SHELDON HOFFMAN ------------------------- ----------------------------------- SHELDON HOFFMAN CHIEF EXECUTIVE OFFICER PRINCIPAL FINANCIAL OFFICE 12 -----END PRIVACY-ENHANCED MESSAGE-----