-----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, TnY8mDsQLcaOi9363W+3kAzVvv5GonnTjLE0QmFceEwLeR9MHJbCpD5oOiWvfXZ9 bpDPxWWK/nwmD7IpBaOMxg== 0001005477-01-500354.txt : 20010808 0001005477-01-500354.hdr.sgml : 20010808 ACCESSION NUMBER: 0001005477-01-500354 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010807 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: 1700158 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 d01-34001.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 June 30, 2001 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 AUGUST 2, 2001 -------------- Common stock, $.01 par value..... 23,962,033 ALPHA PRO TECH, LTD. Table of Contents
PART I. FINANCIAL INFORMATION ITEM 1 Consolidated Financial Statements (Unaudited) Page No. a) Consolidated Balance Sheet - June 30, 2001 (unaudited) and December 31, 2000 1 b) Consolidated Statement of Operations for the three and six months ended June 30, 2001 and June 30, 2000 (unaudited) 2 c) Consolidated Statement of Shareholder's Equity for the six months ended June 30, 2001 (unaudited) 3 d) Consolidated Statement of Cash Flows for the six months ended June 30, 2001 and June 30, 2000 (unaudited) 4 e) Notes to Consolidated Financial Statements 5-7 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 8-12 Part II. OTHER INFORMATION ITEM 4 Submission of Matters to a Vote Security Holders 13 SIGNATURES 14
ALPHA PRO TECH, LTD. CONSOLIDATED BALANCE SHEETS (UNAUDITED) - --------------------------------------------------------------------------------
JUNE 30, DECEMBER 31, 2001 2000 ASSETS Current assets: Cash $ 869,000 $ 1,131,000 Accounts receivable, net of allowance for doubtful accounts of $32,000 at June 30, 2001 and December 31, 2000 3,123,000 3,359,000 Inventories, net 3,610,000 2,399,000 Prepaid expenses and other current assets 201,000 247,000 Deferred income taxes 250,000 250,000 ------------ ------------ Total current assets 8,053,000 7,386,000 Property and equipment, net 3,543,000 2,806,000 Intangible assets, net 225,000 254,000 Notes receivable and other assets 57,000 58,000 ------------ ------------ $ 11,878,000 $ 10,504,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,316,000 $ 932,000 Accrued liabilities 603,000 467,000 Notes payable, current portion 422,000 131,000 Capital leases, current portion 18,000 41,000 ------------ ------------ Total current liabilities 2,359,000 1,571,000 Notes payable, less current portion 524,000 363,000 Deferred income taxes 340,000 340,000 ------------ ------------ Total liabilities 3,223,000 2,274,000 ------------ ------------ Shareholders' Equity: Common stock, $.01 par value, 50,000,000 shares authorized, 23,857,016 and 23,942,516 shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively 239,000 239,000 Additional paid-in capital 23,888,000 24,028,000 Accumulated deficit (15,472,000) (16,037,000) ------------ ------------ Total shareholders' equity 8,655,000 8,230,000 ------------ ------------ $ 11,878,000 $ 10,504,000 ============ ============
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 FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 Sales $ 6,003,000 $ 5,131,000 $11,438,000 $10,071,000 Cost of goods sold, excluding depreciation and amortization 3,473,000 3,059,000 6,527,000 5,947,000 ----------- ----------- ----------- ----------- Gross margin 2,530,000 2,072,000 4,911,000 4,124,000 Expenses: Selling, general and administrative 1,991,000 1,609,000 3,800,000 3,159,000 Depreciation and amortization 120,000 101,000 237,000 203,000 ----------- ----------- ----------- ----------- Income from operations 419,000 362,000 874,000 762,000 Interest, net 4,000 20,000 -- 8,000 ----------- ----------- ----------- ----------- Income before provision for income taxes 415,000 342,000 874,000 754,000 Provision for income taxes 150,000 -- 309,000 -- ----------- ----------- ----------- ----------- Net income $ 265,000 $ 342,000 $ 565,000 $ 754,000 =========== =========== =========== =========== Basic income per share $ 0.01 $ 0.01 $ 0.02 $ 0.03 ----------- ----------- ----------- ----------- Diluted income per share $ 0.01 $ 0.01 $ 0.02 $ 0.03 ----------- ----------- ----------- ----------- Basic weighted average shares outstanding 23,595,697 24,043,874 23,643,783 24,064,988 ----------- ----------- ----------- ----------- Diluted weighted average shares outstanding 23,716,767 25,846,027 24,384,234 25,988,520 ----------- ----------- ----------- -----------
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, 2000 23,942,516 $ 239,000 $ 24,028,000 ($16,037,000) $ 8,230,000 Exercise of Options 76,000 1,000 57,000 58,000 Repurchase and cancellation of common stock (161,500) (1,000) (197,000) (198,000) Net Income 565,000 565,000 ---------- --------- ------------ ------------ ----------- Balance at June 30, 2001 23,857,016 $ 239,000 $ 23,888,000 ($15,472,000) $ 8,655,000 ========== ========= ============ ============ ===========
The accompanying notes are an integral part of these consolidated financial statements 3 ALPHA PRO TECH, LTD. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 565,000 $ 754,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 237,000 203,000 Changes in assets and liabilities: Restricted cash 11,000 Accounts receivable, net 236,000 (289,000) Inventories, net (1,211,000) (317,000) Prepaid expenses and other current assets 47,000 79,000 Accounts payable and accrued liabilities 520,000 (113,000) ----------- ----------- Net cash provided by operating activities: 394,000 328,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (933,000) (224,000) Cost of intangible assets (12,000) (14,000) ----------- ----------- Net cash used in investing activities (945,000) (238,000) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 516,000 8,895,000 Payments on notes payable (64,000) (8,692,000) Proceeds from issuance of common stock 1,000 Proceeds from exercise of options 58,000 212,000 Payments for repurchase of common stock (198,000) (177,000) Principal payments on capital leases (23,000) (59,000) ----------- ----------- Net cash provided by financing activities 289,000 180,000 ----------- ----------- Increase/(decrease) in cash during the period (262,000) 270,000 Cash, beginning of period 1,131,000 785,000 ----------- ----------- Cash, end of period $ 869,000 $ 1,055,000 ----------- ----------- Supplemental disclosure of cash flow information: Cash paid for interest $ 18,000 $ 50,000 ----------- -----------
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 woundcare products. Most of the Company's disposable apparel, mask and shield products, and woundcare products are distributed to medical, dental, industrial safety and clean room markets, predominantly in the United States. 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 applicable to interim periods. 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, 2000. There have been no significant changes since December 31, 2000 in accounting principles and practices utilized in the presentation of these financial statements. 3. INVENTORIES
JUNE 30, DECEMBER 31, 2001 2000 Raw materials $ 2,230,000 $ 1,375,000 Work in process 208,000 174,000 Finished goods 1,477,000 1,155,000 ----------- ----------- 3,915,000 2,704,000 Less reserve for obsolescence (305,000) (305,000) ----------- ----------- $ 3,610,000 $ 2,399,000 =========== ===========
4. RECLASSIFICATIONS Certain 2000 balances have been reclassified to conform with the current periods presentation. These reclassifications had no effect on net income, total assets or liabilities. 5 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 5. 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 FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 Net income (Numerator) $ 265,000 $ 342,000 $ 565,000 $ 754,000 Shares (Denominator): Basic weighted average shares outstanding 23,595,697 24,043,874 23,643,783 24,064,988 Add: Dilutive effect of stock options and warrants 121,070 1,802,153 740,451 1,923,532 ----------- ----------- ----------- ----------- Diluted weighted average shares outstanding 23,716,767 25,846,027 24,384,234 25,988,520 =========== =========== =========== =========== Net income per share: Basic $ 0.01 $ 0.01 $ 0.02 $ 0.03 Diluted $ 0.01 $ 0.01 $ 0.02 $ 0.03
6. 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 and six months ended June 30, 2001 was $150,000 and $309,000, as compared to $0 for the three and six months ended June 30, 2000. The Company had no provision for income taxes for the three and six months ended June 30, 2000 because of the utilization of net operating loss carry forwards. 6 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 7. 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 and six months ended June 30, 2001 and 2000:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 Apparel $4,335,000 $3,352,000 $ 7,768,000 $ 6,206,000 Mask and eye shield 1,238,000 1,329,000 2,640,000 2,779,000 Fleece 430,000 450,000 1,030,000 1,086,000 ---------- ---------- ----------- ----------- Consolidated total net sales $6,003,000 $5,131,000 $11,438,000 $10,071,000 ========== ========== =========== ===========
A reconciliation of total segment net income to total consolidated net income for the three and six months ended June 30, 2001 and 2000 is presented below:
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS JUNE 30, ENDED JUNE 30, 2001 2000 2001 2000 Apparel $ 1,005,000 $ 621,000 $ 1,858,000 $ 1,113,000 Mask and Shield 20,000 345,000 122,000 822,000 Fleece 72,000 87,000 211,000 240,000 ----------- ----------- ----------- ----------- Total segment net income 1,097,000 1,053,000 2,191,000 2,175,000 Unallocated corporate overhead expenses (832,000) (711,000) (1,626,000) (1,421,000) ----------- ----------- ----------- ----------- Consolidated net income $ 265,000 $ 342,000 $ 565,000 $ 754,000 =========== =========== =========== ===========
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001, COMPARED TO THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported income before provision for income taxes for the three months ended June 30, 2001 of $415,000 as compared to $342,000 for the three months ended June 30, 2000, representing an improvement of $73,000 or 21.4%. The improvement is attributable primarily to an increase in gross profit of $458,000, due to higher sales and gross profit margin, a decrease in net interest expense of $16,000, partially offset by an increase in selling, general and administrative expenses of $382,000 and an increase in depreciation and amortization of $19,000. Income before provision for income taxes for the six months ended June 30, 2001 was $874,000 as compared to $754,000 for the six months ended June 30, 2000, representing an improvement of $120,000 or 15.9%. The improvement is attributable primarily to an increase in gross profit of $787,000, due to higher sales and gross profit margin, a decrease in net interest expense of $8,000, partially offset by an increase in selling, general and administrative expenses of $641,000, and an increase in depreciation and amortization of $34,000. SALES Consolidated sales for the three months ended June 30, 2001 increased to a record quarterly sales level of $6,003,000 from $5,131,000 for the three months ended June 30, 2000, representing an increase of $872,000 or 17.0%. Sales for the Apparel Division for the three months ended June 30, 2001 were $4,335,000 as compared to $3,352,000 for the same period of 2000. The Apparel Division sales increase of $983,000 or 29.3% was due primarily to increased sales to the Company's largest distributor. Management's expectation is that Apparel sales growth should continue, and as a result the Company's sales to this distributor should also remain strong. Mask and eye shield sales decreased by $91,000 or 6.9% to $1,238,000 for the second quarter of 2001 from $1,329,000 in the second quarter of 2000. This decrease is primarily the result of a decline in industrial and medical mask sales, partially offset by growth in medical shield sales. Sales from the Company's Extended Care Unreal Lambskin(R) and other related products, which includes a line of pet beds, decreased to $430,000 for the three months ended June 30, 2001 from $450,000 for the three months ended June 30, 2000. The decrease in sales of $20,000 or 4.4% is primarily the result of a decrease in consumer fleece sales, partially offset by an increase in medical fleece product sales. Pet bed sales were basically flat in the second quarter of 2001 as compared to the same period in 2000. 8 Consolidated sales were $11,438,0000 and $10,071,000 for the six months ended June 30, 2001 and 2000 respectively, representing an increase of $1,367,000 or 13.6%. Sales for the Apparel Division for the six months ended June 30, 2001 were $7,768,000 as compared to $6,206,000 for the same period of 2000, an increase of $1,562,000 or 25.2% The Company's largest distributor has had record year to date sales of the Company's products to their end-users. Mask and eye shield sales decreased by $139,000 or 5.0% to $2,640,000 for the six months ended June 30, 2001 from $2,779,000 in the same period of 2000. The decrease is primarily due to lower industrial mask sales partially offset by increased medical mask and shield sales. Sales from the Company's Extended Care Unreal Lambskin(R) and other related products decreased by $56,000 or 5.2% to $1,030,000 for the six months ended June 30, 2001 compared to $1,086,000 in the same period in 2000. The decrease in sales is the result of a decrease in medical bed pad sales and flat pet products sales. The Company's largest distributor, which supplies Apparel products for the industrial safety and clean room markets and accounts for a significant percent of the Company's revenues, has had sales increases of the Company's products to end-users of 16.9% for the six months ended June 30, 2001 as compared to the same period in 2000. The expectation is that Apparel sales growth should continue, and as a result the Company's sales to this distributor should also remain strong. The Medical market, which includes a line of face masks, eye shield and fleece bed pads, is up $114,000 or 6.0% year to date, to $2,022,000 for the six months ended June 30, 2001 as compared to $1,908,000 for the six months ended June 30, 2000. Medical face masks and eye shield sales are up year to date and fleece bed pads sales are down. With release of the new medical mask product portfolio, medical sales should improve over the next twelve months. As stated previously, medical mask sales have increased this year. Dental market sales are down by approximately $36,000 or 4.4%, to $787,000 for the six months ended June 30, 2001 as compared to $823,000 for the same period in 2000. The Company continues to work with dental distributors to increase the Company's share of the Dental market. The result of those efforts are expected to improve the Company's dental market revenue in the second half of 2001. Sales in the Pet supply market, in which the Company markets a line of pet beds are down $9,000 or 1.9%, to $459,000 for the six months ended June 30, 2001, compared to $468,000 for same period in 2000. In the Food Service market, sales for the six months ended June 30, 2001 were $86,000 compared to $83,000 in the same period of 2000. The Company continues to work with its existing customers, and has introduced new edge products to its major customer which are generating positive feedback. Furthermore, new efforts to acquire additional national chain business have been implemented, and the Company anticipates new revenues from this strategy within the year. Management is confident that increased exposure and new product launches to the Food service sector will result in added revenues over the next twelve months, and will position Alpha for revenue growth in this marketplace. Management believes that the Company is well positioned to grow revenue in its current markets of Industrial Safety, Clean Room, Medical, Dental and Pet Supply, as well as the Food Service market. 9 COST OF GOODS SOLD Cost of goods sold, excluding depreciation and amortization, increased to $3,473,000 for the three months ended June 30, 2001 from $3,059,000 for the same period in 2000. As a percentage of net sales, cost of goods sold decreased to 57.9% in 2001 from 59.6% in 2000. Gross profit margin increased to 42.2% for the three months ended June 30, 2001 from 40.4% for the same period in 2000. For the six months ended June 30, 2001 as compared to 2000, cost of goods sold increased to $6,527,000 from $5,947,000. As a percentage of net sales for the six months, cost of goods decreased to 57.1% from 59.1%. Gross profit margin increased to 43.0% from 41.0% for the six months ended June 30, 2001 and 2000, respectively. Management expects gross profit margin for fiscal 2001 to continue to be strong, due to a more global emphasis on purchasing and a continued emphasis on improving manufacturing processes and efficiency. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $382,000 or 23.7% to $1,991,000 for the three months ended June 30, 2001 from $1,609,000 for the three months ended June 30, 2000. As a percentage of net sales, selling, general and administrative expenses increased to 33.2% for second quarter 2001 from 31.4% for same quarter in 2000. The increase in selling, general and administrative expenses primarily consists of increased payroll related costs of $130,000; increased travel expenses of $44,000; increased general office expenses of $221,000; partially offset by decreased public company expenses of $24,000. Selling, general and administrative expenses increased by $641,000 or 20.3%, to $3,800,000 for the six months ended June 30, 2001 from $3,159,000 for the six months ended June 30, 2000. The increase in selling, general and administrative expenses primarily consists of increased payroll related costs of $281,000; increased travel expenses of $67,000 and increased general office expenses of $320,000; partially offset by decreased public company expenses of $27,000. As a percentage of net sales, selling, general and administrative expenses increased to 33.2% in the six months ended June 30, 2001 from 31.4% in the same period of 2000. DEPRECIATION & AMORTIZATION Depreciation and amortization expense increased by $19,000 to $120,000 for the three months ended June 30, 2001 from $101,000 for the same period in 2000 and increased by $34,000 to $237,000 from $203,000 for the six months ended June 30, 2001 compared to the same period in 2000. The increase is primarily attributable to the introduction of a new Extrusion Coating Machine and new mask machines. INCOME FROM OPERATIONS Income from operations increased by $57,000 or 15.8%, to $419,000 for the three months ended June 30, 2001 as compared to income from operations of $362,000 for the three months ended June 30, 2000. The increase in income from operations is due to an increase in gross profit of $458,000, partially offset by an increase in selling, general and administrative expenses of $382,000, and a increase in depreciation and amortization of $19,000. Income from operations increased by $112,000 or 14.7% to $874,000 for the six months ended June 30, 2001 as compared to income from operations of $762,000 for the six months ended June 30, 2000. The increase in income from operations is due to an increase in gross profit of $787,000, partially offset by an increase in selling, general and administrative expenses of $641,000 and a increase in depreciation and amortization expense of $34,000. 10 NET INTEREST Net interest expense decreased by $16,000 or 80.0% to $4,000 for the three months ended June 30, 2001 from $20,000 for the three months ended June 30, 2000. Net interest expense decreased by $8,000 or 100.0% to $0 for the six months ended June 30, 2001 from $8,000 for the six months ended June 30, 2000. The decrease in net interest expense is due to lower borrowings, lower interest rates, and a decreased number of outstanding capital leases, partially offset by decreased interest income. INCOME BEFORE PROVISION FOR INCOME TAXES Net income before provision for income taxes for the three months ended June 30, 2001 was $415,000 as compared to $342,000 for the three months ended June 30, 2000, representing an improvement of $73,000 or 21.4%. The net income before provision for income taxes improvement of $73,000 for the three months ended June 30, 2001 compared to the same period in 2000 is attributable primarily to an increase in gross profit of $458,000 due to higher sales and gross profit margin, and a decrease in net interest expense of $16,000, partially offset by an increase in selling, general and administrative expenses of $382,000, and an increase in depreciation and amortization of $19,000. Net income before provision for income taxes for the six months ended June 30, 2001 was $874,000 as compared to $754,000 for the six months ended June 30, 2000, representing an improvement of $120,000 or 15.9%. The net income before provision for income taxes improvement of $120,000 for the three months ended June 30, 2001 compared to the same period in 2000 is attributable primarily to an increase in gross profit of $787,000 due to higher sales and gross profit margin, and a decrease in net interest expenses of $8,000, partially offset by an increase in selling, general and administrative expenses of $641,000, and an increase in depreciation and amortization of $34,000. PROVISION FOR INCOME TAX The provision for income taxes for the three and six months ended June 30, 2001 was $150,000 and $309,000, as compared to $0 for the three and six months ended June 30, 2000. The Company had no provision for income taxes for the three and six months ended June 30, 2000 because of the utilization of net operating loss carry forwards. The estimated tax rate is 34.0% in 2001, as compared with 0.0% in 2000. NET INCOME Net income for the three months ended June 30, 2001 was $265,000 compared to net income of $342,000 for the three months ended June 30, 2000, a decrease of $77,000 or 22.5%. The net income decrease of $77,000 is comprised of an increase in income taxes of $150,000, partially offset by an increase in income from operations of $57,000, and a decrease in interest expense of $16,000. Net income for the six months ended June 30, 2001 was $565,000 compared to net income of $754,000 for the six months ended June 30, 2000, a decrease of $189,000 or 25.1%. The net income decrease of $189,000 is comprised of an increase in incomes taxes of $309,000, partially offset by an increase in income from operations of $112,000 and a decrease in interest expense of $8,000. 11 LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2001, the Company had cash of $869,000 and working capital of $5,694,000. During the six months ended June 30, 2001, cash decreased by $262,000 and accounts payable and accrued liabilities increased by $520,000. The decrease in the Company's cash is primarily due to a significant increase in inventories, the purchase of property and equipment and the repurchase of common stock offset by income from operations, an increase in accounts payable and accrued liabilities and net proceeds from notes payable. The Company has a $4,301,000 credit facility with the 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 1.0% on the credit line, prime plus 1.0% on the term loan and an 8.5% fixed rate on the equipment loans. At June 30, 2001, the prime interest rate 6.75%. The line of credit expires in May 2002, the term note expires in April 2003 and the equipment loans expire between December 2005, and June 2006. At June 30, 2001, the Company's unused line of credit is $2,175,000. Net cash provided from operations was $394,000 for the six months ended June 30, 2001 compared to $328,000 for the same period of 2000. The Company's generation of cash from operations of $394,000 for the six months ended June 30, 2001 is due primarily to net income, a decrease in accounts receivable, a decrease in prepaid expenses and other assets and an increase in accounts payable and accrued liabilities, partially offset by an increase in inventory. The Company's investing activities have consisted primarily of expenditures for property and equipment of $933,000 and increases in intangible assets of $12,000 for a total of $945,000 for the six months ended June 30, 2001 compared to $238,000 for the six months ended June 30, 2000. The Company anticipates that its mask manufacturing capabilities are to be further improved in 2001 at an estimated cost of $100,000. The Company also anticipates that its automated shoecover manufacturing capabilities are to be further improved in 2001 at an estimated cost of $150,000. The Company intends to lease equipment whenever possible. During the six months ended June 30, 2001, the Company's cash provided by financing activities resulted primarily from net increases in the Company's loans payable of $452,000, the exercise of options to purchase 76,000 shares of the Company's common stock for which the Company received $58,000 offset by payments on capital leases of $23,000 and the buy-back of 161,500 of Company's common shares at a cost of $198,000. The Company announced in December 1999 that the Board of Directors approved the buy-back of up to $500,000 of its own shares. In January 2001, the Company announced that its Board of Directors had approved the buy-back of an additional $500,000 of the Company's outstanding common stock. As of June 30, 2001, the Company has bought back 568,100 common shares at a cost of $729,000. The Company believes that cash generated from operations, its current cash balance, and the funds available under its commercial loan borrowings, will be sufficient to satisfy the Company's projected working capital and planned capital expenditures for at foreseeable future. 12 ALPHA PRO TECH, LTD. PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 4. Submission of Matters to a Vote of Security Holders (a) Registrant held its Annual Meeting of Shareholders June 8, 2001. (b) The following persons were elected Directors pursuant to the votes indicated:
NAME FOR AGAINST Sheldon Hoffman 21,307,561 99,475 Alexander Millar 21,307,561 99,475 Donald Bennett, Jr 21,310,561 96,475 Robert Isaly 21,310,561 96,475 John Ritota 21,310,561 96,475 Russell Manock 21,310,561 96,475
(c) The only other matter to be voted upon was the ratification of the appointment of Pricewaterhouse Coopers LLP as the Registrant's independent accountants as follows:
FOR AGAINST ABSTAIN 21,318,567 47,893 40,576
13 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: AUGUST 2, 2001 BY: /S/ SHELDON HOFFMAN ------------------- ------------------------------------ SHELDON HOFFMAN CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER PRINCIPAL FINANCIAL OFFICER 14 -----END PRIVACY-ENHANCED MESSAGE-----