<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
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Quarterly Report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 2000 Commission File No. 0-19893
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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
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(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 July 27, 2000
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Common stock, $.01 par value..... 24,235,609
<PAGE>
ALPHA PRO TECH, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements Page No.
a) Consolidated Balance Sheet -
June 30, 2000 (unaudited) and December 31, 1999 1
b) Consolidated Statement of Operations
for the three and six months ended June 30, 2000
and June 30, 1999 (unaudited) 2
c) Consolidated Statement of Shareholders' Equity
for the six months ended June 30, 2000 (unaudited) 3
d) Consolidated Statement of Cash Flows
for the six months ended June 30, 2000
and June 30, 1999 (unaudited) 4
e) Notes to Consolidated Financial Statements (unaudited) 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
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains forward looking statements that are
made pursuant to the Safe Harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward looking statements involve risks, uncertainties and
assumptions as described from time to time in registration statements, annual
reports and other periodic reports and filings of the Company filed with the
Securities and Exchange Commission. All statements, other than statements of
historical facts which address the Company's expectations of sources of capital
or which express the Company's expectations for the future with respect to
financial performance or operating strategies, can be identified as
forward-looking statements. As a result, there can be no assurance that the
Company's future results will not be materially different from those described
herein as "believed," "anticipated," "estimated" or "expected," which reflect
the current views of the Company with respect to future events. We caution
readers that these forward-looking statements speak only as the date hereof. The
Company hereby expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any such statements to reflect any change
in the Company's expectations or any change in events, conditions or
circumstances on which such statement is based.
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,055,000 $ 785,000
Restricted cash 7,000 18,000
Accounts receivable, net of allowance for doubtful
accounts of $40,000 at June 30, 2000
and December 31, 1999 3,541,000 3,252,000
Inventories 3,274,000 2,957,000
Prepaid expenses and other current assets 311,000 146,000
------------ ------------
Total current assets 8,188,000 7,158,000
Property and equipment, net 2,303,000 2,260,000
Intangible assets, net 279,000 287,000
Notes receivable and other assets 99,000 343,000
------------ ------------
$ 10,869,000 $ 10,048,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,550,000 $ 1,284,000
Accrued liabilities 231,000 610,000
Notes payable, current portion 992,000 754,000
Capital leases, current portion 109,000 135,000
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Total current liabilities 2,882,000 2,783,000
Notes payable, less current portion 132,000 167,000
Capital leases, less current portion 3,000 36,000
------------ ------------
Total liabilities 3,017,000 2,986,000
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Shareholders' Equity:
Common stock, $.01 par value, 50,000,000 shares authorized,
24,240,616 and 24,079,949 shares issued and
outstanding at June 30, 2000
and December 31, 1999, respectively 242,000 241,000
Additional paid-in capital 24,353,000 24,318,000
Accumulated deficit (16,743,000) (17,497,000)
------------ ------------
Total shareholders' equity 7,852,000 7,062,000
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$ 10,869,000 $ 10,048,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
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ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Sales $ 5,131,000 $ 5,222,000 $10,071,000 $ 9,712,000
Cost of goods sold, excluding
depreciation and amortization 3,059,000 3,164,000 5,947,000 5,759,000
----------- ----------- ----------- -----------
2,072,000 2,058,000 4,124,000 3,953,000
Expenses:
Selling, general and administrative 1,609,000 1,631,000 3,159,000 3,106,000
Depreciation and amortization 101,000 108,000 203,000 216,000
----------- ----------- ----------- -----------
Income from operations 362,000 319,000 762,000 631,000
Interest, net 20,000 39,000 8,000 80,000
----------- ----------- ----------- -----------
Income before provision
for income taxes 342,000 280,000 754,000 551,000
Provision (benefit) for income taxes -- -- -- --
----------- ----------- ----------- -----------
Net income $ 342,000 $ 280,000 $ 754,000 $ 551,000
=========== =========== =========== ===========
Basic income per share $ 0.01 $ 0.01 $ 0.03 $ 0.02
----------- ----------- ----------- -----------
Diluted income per share $ 0.01 $ 0.01 $ 0.03 $ 0.02
----------- ----------- ----------- -----------
Basic weighted average shares outstanding 24,043,874 24,112,449 24,064,988 24,112,449
----------- ----------- ----------- -----------
Diluted weighted average shares 25,846,027 24,405,106 25,988,520 24,392,187
outstanding ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
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ADDITIONAL ACCUMULATED
SHARES COMMON STOCK PAID-IN CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1999 24,079,949 $ 241,000 $ 24,318,000 $(17,497,000) $ 7,062,000
Stock Issued upon
Exercise of
Options/Warrants 236,667 2,000 212,000 $ 214,000
Shares
Repurchased/cancelled (76,000) (1,000) (177,000) (178,000)
Net income -- -- -- 754,000 754,000
------------ ------------ ------------ ------------ ------------
Balance at
June 30, 2000 24,240,616 $ 242,000 $ 24,353,000 $(16,743,000) $ 7,852,000
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30,
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $ 754,000 $ 551,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 203,000 216,000
Changes in assets and liabilities:
Restricted cash 11,000 (1,000)
Accounts receivable (289,000) (730,000)
Inventories (317,000) (285,000)
Prepaid expenses and other assets 79,000 (109,000)
Accounts payable and accrued liabilities (113,000) 837,000
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Net cash provided by operating activities 328,000 479,000
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Cash flows from investing activities:
Purchase of property and equipment (224,000) (168,000)
Cost of intangible assets (14,000) (10,000)
Purchase of other assets 6,000
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Net cash used in investing activities (238,000) (172,000)
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Cash flows from financing activities:
Net proceeds on loans payable 8,895,000 9,400,000
Repayments on loans payable (8,692,000) (9,227,000)
Net proceeds from issuance of common stock 1,000
Net proceeds from exercise of options 212,000
Net payments for stock repurchase (177,000)
Net payments on capital leases (59,000) (54,000)
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Net cash provided by (used in) financing activities 180,000 119,000
----------- -----------
Increase (decrease) in cash $ 270,000 $ 426,000
Cash, beginning of period $ 785,000 $ 43,000
Cash, end of period $ 1,055,000 $ 469,000
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
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ALPHA PRO TECH, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. THE COMPANY
Alpha Pro Tech, Ltd. (the Company) manufactures and distributes a variety of
disposable mask, shield, shoe cover, apparel, food service and woundcare
products. Most of the Company's disposable apparel, mask and shield
products, and woundcare products are distributed to medical, dental,
industrial, and clean room markets, predominantly in the United States.
2. BASIS OF PRESENTATION
The accompanying 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 and the results of operations and cash flows for the periods
presented in conformity with generally accepted accounting principles
applicable to interim periods. The accompanying financial statements should
be read in conjunction with the audited consolidated financial statements of
the Company for the year ended December 31, 1999.
There have been no significant changes since December 31, 1999 in accounting
principles and practices utilized in the presentation of these financial
statements.
3. INVENTORIES
JUNE 30, DECEMBER 31,
2000 1999
Raw materials $1,866,000 $1,656,000
Work in process 321,000 123,000
Finished goods 1,087,000 1,178,000
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$3,274,000 $2,957,000
========== ==========
5
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ALPHA PRO TECH, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
4. BASIC AND DILUTED NET INCOME PER SHARE
Net income per share ("EPS") has been computed pursuant to the provisions of
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings
Per Share".
The following table provides a reconciliation of both the net income and the
number of shares used in the computations 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.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income (Numerator) $ 342,000 $ 280,000 $ 754,000 $ 551,000
Shares (Denominator):
Basic weighted average shares outstanding 24,043,874 24,112,449 24,064,988 24,112,449
Add: Dilutive effect of stock options
and warrants 1,802,153 292,657 1,923,532 279,738
----------- ----------- ----------- -----------
Diluted weighted average shares
outstanding 25,846,027 24,405,106 25,988,520 24,392,187
=========== =========== =========== ===========
Net income per share:
Basic $ 0.01 $ 0.01 $ 0.03 $ 0.02
Diluted $ 0.01 $ 0.01 $ 0.03 $ 0.02
</TABLE>
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. At December 31, 1999 the Company had net
operating loss (NOL) carryforwards of approximately $3,402,000. No provision
(benefit) for income taxes has been recorded in the consolidated statements
of operations as a result of the Company's net operating loss carryforwards.
Taxable income for the period ended June 30, 2000 was offset by the
utilization of such NOL's. The Company will continue to assess the valuation
allowance on a quarterly basis.
6
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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 principally of disposable medical clothing such as
coveralls, frocks, lab coats, hoods, bouffant caps, and shoe covers
(including the Aqua Track and spunbond 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.
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 and
gross margin.
The following table shows net sales for each segment for the three and six
months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Apparel $ 3,352,000 $ 3,497,000 $ 6,206,000 $ 6,200,000
Mask and shield 1,329,000 1,267,000 2,779,000 2,395,000
Fleece 450,000 458,000 1,086,000 1,117,000
----------- ----------- ----------- -----------
Consolidated total net sales $ 5,131,000 $ 5,222,000 $10,071,000 $ 9,712,000
=========== =========== =========== ===========
</TABLE>
A reconciliation of total segment net income to total consolidated net
income for the three and six months ended June 30, 2000 and 1999 is
presented below:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Apparel $ 621,000 $ 687,000 $ 1,113,000 $ 1,195,000
Mask and Shield 345,000 128,000 822,000 280,000
Fleece 8700 105,000 240,000 265,000
----------- ----------- ----------- -----------
Total segment net income 1,053,000 920,000 2,175,000 1,740,000
Unallocated corporate overhead expenses (711,000) (640,000) (1,421,000) (1,189,000)
----------- ----------- ----------- -----------
Consolidated net income $ 342,000 $ 280,000 $ 754,000 $ 551,000
=========== =========== =========== ===========
</TABLE>
7
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000, COMPARED TO THE THREE MONTHS
AND SIX MONTHS ENDED JUNE 30, 1999
Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported net income for the
three months ended June 30, 2000 of $342,000 as compared to net income of
$280,000 for the three months ended June 30, 1999, representing an improvement
of $62,000 or 22.1%. The net income increase of $62,000 is attributable
primarily to an increase in gross profit of $14,000, due to higher gross profit
margin, a decrease in selling, general and administrative expenses of $22,000, a
decrease in depreciation and amortization of $7,000, and a decrease in net
interest expense of $19,000. The year to date net income increase of $203,000 is
attributable primarily to an increase in gross profit of $171,000, a decrease in
depreciation and amortization of $13,000, and a decrease in net interest expense
of $72,000, partially offset by an increase in selling, general and
administrative expenses of $53,000. Management expects record sales and net
income in 2000.
SALES Consolidated net sales for the three months ended June 30, 2000 decreased
to $5,131,000 from $5,222,000 for the three months ended June 30, 1999,
representing a decrease of $91,000 or 1.7%.
Net sales for the Apparel Division for the three months ended June 30, 2000 were
$3,352,000 as compared to $3,497,000 for the same period of 1999. The Apparel
Division sales decrease of $145,000 or 4.1% was due to decreased sales to the
Company's largest distributor. Sales to this distributor were weak in April
2000, however, the quarter finished with its strongest month ever. This
distributor has reported record second quarter 2000 sales to its customers of
the Company's products and has also reported sales increases of the Company's
products for eight consecutive quarters. Management's expectation is that growth
should continue, and as a result the Company's sales to this distributor should
also remain strong.
Mask and eye shield sales increased by $62,000 or 4.9% to $1,329,000 for the
second quarter of 2000 from $1,267,000 in the second quarter of 1999. This
increase is primarily the result of growth in dental mask sales, and to a lesser
extent medical mask sales, partially offset by a decline in industrial mask
sales. Medical mask sales for the month of June were the strongest in the past
twelve months.
Sales from the Company's Extended Care Unreal Lambskin(R) and other related
products, which includes a line of pet beds, decreased slightly by $8,000 or
1.7% to $450,000 in the second quarter of 2000 compared to $458,000 in the same
period in 1999. The slight decrease in sales of $8,000 is primarily the result
of decreased medical fleece sales partially offset by increased pet bed sales.
In 2000, the Company implemented a pet products telemarketing campaign and feels
that sales should strengthen in 2000 as a result.
8
<PAGE>
Consolidated sales were $10,071,000 and $9,712,000 for the six months ended June
30, 2000 and 1999 respectively, representing an increase of $359,000 or 3.7%.
Consolidated sales for the six months ended June 30, 2000 were adversely
affected by two factors. Firstly, in 2000, the Company's largest distributor
implemented a corporate wide inventory reduction that has led to a reduction of
inventory of the Company's products. This inventory reduction program appears to
have leveled off, as inventory levels have stayed fairly constant for the past
two months. Secondly, strong orders in the latter part of the second quarter
have led to an increase in open orders as compared to Dec 31,1999. Without these
two factors, consolidated sales for the six months ended June 30, 2000 would
have been up by 13.0% as opposed to 3.7%.
Net sales for the Apparel Division for the six months ended June 30, 2000 were
$6,206,000 as compared to $6,200,000 for the same period of 1999, a small
increase of $6,000. Even though the Company's sales for the Apparel Division are
flat to the prior year, the Company's largest distributor has had sales
increases to their end-users for eight consecutive quarters as well as a record
June and a record year to date. Allowing for the two factors as stated above,
net sales for the Apparel Division for the six months ended June 30, 2000 would
have been up significantly as opposed to the small increase of $6,000.
Mask and eye shield sales increased by $384,000 or 16.0% to $2,779,000 for the
six months ended June 30, 2000 from $2,395,000 in the same period of 1999. The
increase is primarily the result of an improvement in industrial mask sales and
dental mask sales.
Sales from the Company's Extended Care Unreal Lambskin(R) and other related
products decreased by $31,000 or 2.9% to $1,086,000 for the six months ended
June 30, 2000 compared to $1,117,000 in the same period in 1999. The decrease in
sales is the result of decreases in medical bed pad sales, partially offset by
increases in pet bed sales.
Management believes that the Company is well positioned to continue to grow
revenue in its current markets of Industrial Cleanroom, Medical, Dental and Pet
Supply, as well as the new Food Service market.
The Company's largest distributor, which supplies the industrial cleanroom
market, accounts for a significant percent of Company's revenues, has had sales
increases of the Company's products to their end-users for eight consecutive
quarters as well as a record June and record year to date. The expectation is
that growth should continue, and as a result the Company's sales to this
distributor should also remain strong.
The Medical market is down by $257,000 or 14.0% year to date but, with the
recent addition of independent sales representatives and the anticipated release
of a new product portfolio in third quarter, which should result in increased
sales over the next 12 months. Medical mask sales for the month of June were the
strongest month in the past year.
The Dental market is up by approximately $135,000 or 20% year to date. The
Company is in the process of initiating a telemarketing campaign to dentists and
is working with dental distributors to increase the Company's share of the
dental market.
The Pet supply market in which the Company markets a line of pet beds is up
$128,000 or 33.3% year to date. Since late last year, the Company has dedicated
a sales representative to this market and sales should continue to be strong.
9
<PAGE>
In the Food Service market, the Company has signed a Vendor Supply Agreement
with McDonald's Corporation to market its line of proprietary Food Service
Safety Products to the McDonald's system, which includes more than 25,000
restaurants in 119 countries worldwide. Recently, McDonald's has rewarded both
the Company's marketing efforts and in-store performance by issuing an internal
mail correspondence, highlighting the Alpha Pro Tech Safety Program to over
3,000 owner groups and corporate centers, representing over 15,000 stores.
Additionally, Alpha has initiated a widespread telemarketing and sampling
campaign. In addition, the Company has undertaken a strategy to participate in
local and regional meetings throughout the US along with McDonald's Security,
Human Resources, and Field Service directors. The Company expects Food Service
sales to gain momentum and grow significantly over the next twelve months.
COST OF GOODS SOLD Cost of goods sold decreased to $3,059,000 for the three
months ended June 30,2000 from $3,164,000 for the same period in 1999. As a
percentage of net sales for the second quarter, cost of goods sold decreased to
59.6% in 2000 from 60.6% in 1999. Gross profit margin increased to 40.4% for the
three months ended June 30, 2000 from 39.4% for the same period in 1999.
For the six months ended June 30, 2000 as compared to 1999, cost of goods sold
increased to $5,947,000 from $5,759,000. As a percentage of net sales for the
six months, cost of goods decreased to 59.1% from 59.3%. Gross profit margin
increased to 40.9% from 40.7% for the six months ended June 30, 2000 and 1999,
respectively.
Management expects gross profit margin for fiscal 2000 to continue to be
stronger than fiscal 1999, due to a continuing focus on improving manufacturing
processes and efficiency.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative
expenses decreased by $22,000 to $1,609,000 for the three months ended June 30,
2000 from $1,631,000 for the three months ended June 30, 1999. As a percentage
of net sales, selling, general and administrative expenses increased slightly to
31.4% for second quarter 2000 from 31.2% for same quarter in 1999. The decrease
in selling, general and administrative expenses primarily consists of decreased
rent of $16,000 and decreased office, factory, insurance and general expenses of
$199,000. This is partially offset by increased payroll related costs of
$120,000; increased marketing and commissions of $24,000; increased travel
expenses of $19,000; and increased public company expenses of $34,000, including
investor relations, stock exchange listing fees, options/warrants issued for
services, annual report and annual meeting costs, stock transfer costs, and
costs associated with SEC reporting requirements.
Selling, general and administrative expenses increased by a $53,000 or 1.7%, to
$3,159,000 for the six months ended June 30, 2000 from $3,106,000 for the six
months ended June 30, 1999. The increase in selling, general and administrative
expenses primarily consists of increased payroll related costs of $245,000;
increased public company expenses of $45,000, including investor relations,
stock exchange listing fees, options/warrants issued for services, annual report
and annual meeting costs, stock transfer costs, and costs associated with SEC
reporting requirements; and increased marketing, commissions and travel expenses
of $49,000. This is partially offset by decreased office, factory, insurance and
general expenses of $262,000 and decreased rent of $24,000. As a percentage of
net sales, selling, general and administrative expenses decreased to 31.4% in
the six months ended June 30, 2000 from 32.0% in the same period of 1999.
10
<PAGE>
DEPRECIATION & AMORTIZATION Depreciation and amortization expense decreased by
$7,000 to $101,000 for the three months ended June 30, 2000 from $108,000 for
the same period in 1999 and decreased by $13,000 to $203,000 from $216,000 for
the six months ended June 30, 2000 compared to 1999. The decrease is primarily
attributable to assets in the mask division being fully depreciated and
decreased depreciation on a shield die-cut machine partially offset by increased
depreciation on automated shoecover machines.
INCOME FROM OPERATIONS Income from operations increased by $43,000 or 13.5%, to
$362,000 for the three months ended June 30, 2000 as compared to income from
operations of $319,000 for the three months ended June 30, 2000. The increase in
income from operations is due to an increase in gross profit of $14,000, a
decrease in selling, general and administrative expenses of $22,000.and a
decrease in depreciation and amortization of $7,000,
Income from operations increased by $131,000 or 20.8% to $762,000 for the six
months ended June 30, 2000 as compared to income from operations of $631,000 for
the six months ended June 30, 1999. The increase in income from operations is
due to an increase in gross profit of $171,000, an increase in selling, general
and administrative expenses of $53,000, partially offset by a decrease in
depreciation and amortization expense of $13,000.
NET INTEREST Net interest expense decreased by $19,000 or 48.7% to $20,000 for
the three months ended June 30, 2000 from $39,000 for the three months ended
June 30, 1999. Net interest expense decreased by $72,000 or 90.0% to $8,000 for
the six months ended June 30, 2000 from $80,000 for the six months ended June
30, 1999. The decrease in net interest expense is due to lower borrowings, lower
interest rate, decreased interest on capital leases and increased interest
income. Interest income increased by $25,000, to $42,000 for the six months
ended June 30, 2000 from $17,000 in the same period of 1999.
NET INCOME Net income for the three months ended June 30, 2000 was $342,000
compared to net income of $280,000 for the three months ended June 30, 1999, an
improvement of $62,000 or 22.1%. The net income increase of $62,000 is comprised
of an increase in income from operations of $43,000 and a decrease in interest
expense of $19,000.
Net income for the six months ended June 30, 2000 was $754,000 compared to net
income of $551,000 for the six months ended June 30, 1999, an improvement of
$203,000 or 36.8%. The net income increase of $203,000 is comprised of an
increase in income from operations of $131,000 and a decrease in interest
expense of $72,000
The Company in 1999 initiated a 401 (k) Retirement Savings Plan. Employees who
have attained age 21 and completed at least one year of service with the Company
are eligible to make contributions to the 401 (k) Plan of up to 12% of the
employees compensation. The employee's fully vested benefit under the plan may
be distributed to the employee upon retirement, death, disability or termination
of employment or upon reaching age 59 1/2. Under the 401 (k) Plan the Company is
contributing 1/2 of 1% for employees contributing 1% of their compensation and
1% for employees contributing 2% or more of their compensation. For the six
months ended June 30, 2000 the Company has accrued $7,300 compared to $7,700 for
the six months ended June 1999.
The chief executive officer and president are entitled to a combined bonus equal
to 10% of the pre-tax profits of the company. A bonus of $85,000 has been
accrued in 2000 as compared to $60,000 in 1999.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, the Company had cash of $1,055,000 and working capital of
$5,306,000. During the six months ended June 30, 2000, cash increased by
$270,000 and accounts payable and accrued liabilities decreased by $113,000. The
increase in the Company's cash is primarily due to net income, the exercise of
options and an increase in borrowings from its commercial lender, partially
offset by increases in accounts receivable and inventory. The Company currently
has a commercial loan line of credit of up to $3,500,000 and a term note of
$212,000 that expires in April 2003. At June 30, 2000, the unused line of credit
from its commercial lender was $1,251,000.
Net cash provided from operations was $328,000 for the six months ended June 30,
2000 compared to net cash provided from operations of $479,000 for the same
period of 1999. The Company's cash provided from operations of $328,000 for the
six months ended June 30, 2000 is due primarily to the increase in net income
and a decrease in prepaid expenses and other assets, partially offset by an
increase in accounts receivable, inventory, and a decrease accounts payable and
accrued liabilities.
The Company's investing activities have consisted primarily of expenditures for
fixed assets of $224,000 and increases in intangible assets of $14,000 for a
total of $238,000 for the six months ended June 30, 2000.
The Company anticipates that its mask manufacturing capabilities are to be
further improved in 2000 at an estimated cost of $200,000. Based on strong
continuing demand for shoecovers and laminated material, the Company is in the
process of spending approximately $300,000 to build an extrusion coating
machine. Within the next twelve months, the Company also expects to spend
approximately $200,000 on additional automated shoecover equipment. The Company
leases equipment whenever possible.
During the six months ended June 30, 2000, the Company's cash provided by
financing resulted primarily from net increases in the commercial loan of
$203,000 and proceeds of $212,000 from the exercise of options to purchase
236,667 shares of the Company's common shares, partially offset by a buy-back of
76,000 of the Company's common shares at a cost of $177,000 and a decrease in
capital leases of $59,000. The Company announced in December 2000 that it was
authorized to buy-back up to $500,000 of its own shares. As of June 30, 2000,
the Company has bought back 108,500 common shares at a cost of $201,000.
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 least 12 months.
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ALPHA PRO TECH, LTD.
PART II - OTHER INFORMATION
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ITEM 4. Submission of Matters to a Vote Security Holders
(a) Registrant held its Annual Meeting of Shareholders June 9, 2000.
(b) The following persons were elected Directors pursuant to the votes
indicated:
NAME FOR AGAINST
Sheldon Hoffman 20,555,083 41,956
Al Millar 20,555,083 41,956
Robert Isaly 20,555,083 41,956
John Ritota 20,555,083 41,956
Donald E. Bennett, Jr. 20,555,083 41,956
(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
20,569,653 13,200 14,186
13
<PAGE>
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: JULY 31, 2000 BY: /s/ Sheldon Hoffman
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SHELDON HOFFMAN
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
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