Alpha Pro Tech, Ltd., a leading manufacturer of products designed to protect people, products and environments, including disposable protective apparel and building products, announced financial results for the fourth quarter and year ended December 31, 2016.

Lloyd Hoffman, Chief Executive Officer of Alpha Pro Tech, commented, „We significantly increased overall profitability on higher sales in our Building Supply and Infection Control segments in 2016, while navigating periods of increased competition in the roofing market and softness in the market for our Disposable Protective Apparel segment products. We are optimistic about opportunities in 2017 given recent forecasts for steady economic growth and a rise in homebuilder confidence in 2016.”

"In 2016, we further improved efficiencies in our operations to reduce inventory levels by more than 30% and reduced days of sales outstanding, which allowed us to optimize our capital deployment strategy to serve our shareholders,” said Hoffman. „As a result, and as authorized by the board, we executed open market trades to repurchase and retire approximately 2.5 million shares of our common stock during the year.” 

Net sales

Consolidated sales for the fourth quarter of 2016 were $9.8 million, compared to $10.0 million in the fourth quarter of 2015. Building Supply segment sales for the three months ended December 31, 2016 increased by 3.0% to $5.6 million, compared to $5.5 million for the same period of 2015. Sales for the Disposable Protective Apparel segment for the three months ended December 31, 2016 decreased 11.9% to $3.1 million, compared to $3.5 million for the same period of 2015. Infection Control segment sales for the three months ended December 31, 2016 increased by $64,000, or 6.0%, to $1.127 million, compared to $1.064 million for the same period of 2015.

Consolidated sales for the year ended December 31, 2016 increased 2.7% to $46.2 million, up from $45.0 million for 2015. The increase consisted of increased sales in the Building Supply segment of $1.5 million and increased sales in the Infection Control segment of $120,000, partially offset by decreased sales in the Disposable Protective Apparel segment of $442,000.

Building Supply segment sales in 2016 increased by $1.5 million, or 6.0%, to $27.3 million, compared to $25.8 million for 2015. The increase was primarily due to a 10.8% increase in sales of housewrap, a 0.4% increase in sales of synthetic roof underlayment and a 27.0% increase in sales of other woven material. Building Supply segment sales by rolls increased by a larger percentage than by dollars due to a competitive marketplace. Sales by rolls for the year ended December 31, 2016 increased by 10.4%, with a 15.0% increase in sales of housewrap and 6.3% increase in sales of synthetic roof underlayment. The sales mix of the Building Supply segment for the year ended December 31, 2016 was 60% for synthetic roof underlayment, 35% for housewrap and 5% for other woven material. This compared to 62% for synthetic roof underlayment, 33% for housewrap and 5% for other woven material for the year ended December 31, 2015.

Sales for the Disposable Protective Apparel segment for the year ended December 31, 2016 decreased by $442,000, or 3.0%, to $14.2 million, compared to $14.7 million for 2015. The decrease was primarily due to a decrease in sales to our national and regional distributors and to a lesser extent decreased sales to our major international supply chain partner. 

Infection Control segment sales for the year ended December 31, 2016 increased by $120,000, or 2.7%, to $4.6 million, compared to $4.5 million for 2015. Shield sales were up by 14.2%, or $175,000, to $1.4 million, and mask sales were down by 1.7%, or $55,000, to $3.2 million.

Gross profit

Gross profit for the fourth quarter of 2016 increased by 7.5% to $3.7 million, or 37.4% gross profit margin, compared to $3.4 million, or 34.2% gross profit margin, for the same period of 2015.

Gross profit for the year ended December 31, 2016 increased by 6.3% to $17.0 million, compared to $16.0 million for 2015. The gross profit margin was 36.8% for the year ended December 31, 2016, compared to 35.5% for 2015. Management expects gross profit margin to be in a similar range in 2017.

Selling, general and administrative expenses

Selling, general and administrative expenses of $2.8 million for the fourth quarter of 2016 were essentially unchanged from the same period of 2015. As a percentage of net sales, selling, general and administrative expenses increased to 28.6% for the fourth quarter ended December 31, 2016, up from 28.1% for the same period of 2015.

Selling, general and administrative expenses decreased by $1.0 million, or 7.4%, to $12.8 million for the year ended December 31, 2016, from $13.8 million for the year ended December 31, 2015. As a percentage of net sales, selling, general and administrative expenses decreased to 27.7% for the year ended December 31, 2016, from 30.7% for 2015.

Net income

Net income increased for the fourth quarter of 2016 to $845,000, compared to $300,000 for the same period of 2015, an increase of $545,000, or 181.7%. Net income as a percentage of net sales for the fourth quarter of 2016 and 2015 was 8.6% and 3.0%, respectively. Basic and diluted earnings per common share for the fourth quarters of 2016 and 2015 were $0.05 and $0.02, respectively.

Net income for the year ended December 31, 2016 more than tripled to $3.2 million, compared to $1.0 million for 2015, an increase of 204.3%. The increase in net income was primarily due to an increase in gross profit, a decrease in selling, general and administrative expenses and a decrease in depreciation and amortization expense. Net income as a percentage of net sales for the year ended December 31, 2016 was 6.9%, and net income as a percentage of net sales for 2015 was 2.3%. Basic and diluted earnings per common share for the years ended December 31, 2016 and 2015 were $0.19 and $0.06, respectively.

Balance Sheet

The consolidated balance sheet remained strong with a cash balance of $9.5 million as of December 31, 2016, a decrease of $225,000 from $9.7 million as of December 31, 2015. The change in cash position was due to cash provided by operating activities of $6.8 million, offset by cash used in financing activities, primarily the repurchase of common stock, of $6.8 million, and cash used in investing activities of $308,000. The Company ended 2016 with working capital of $27.1 million and a current ratio of 12:1, compared to a 15:1 current ratio as of December 31, 2015.

Inventory decreased by $5.4 million, or 33.0%, to $11.0 million as of December 31, 2016 from $16.4 million as of December 31, 2015. The decrease was primarily due to a decrease in inventory for the Disposable Protective Apparel segment of $2.0 million, or 35.2%, to $3.7 million, a decrease in inventory for the Building Supply segment of $2.9 million, or 37.3%, to $4.9 million, and a decrease in inventory for the Infection Control segment of $455,000, or 16.2%, to $2.3 million. Inventory decreased across all segments as a result of a strategic decision to carry less days of inventory.

Colleen McDonald, Chief Financial Officer, commented, „At the end of the year, we had $2.5 million available for additional stock purchases under our stock repurchase program. During 2016, we repurchased 2,453,900 shares of common stock at a cost of $6.8 million, bringing the program total to 14,971,531 shares of common stock at a cost of $25.0 million since the program’s inception. All stock is retired upon repurchase, and future repurchases are expected to be funded from cash on hand and cash flows from operating activities.”

The Company currently has no outstanding debt and maintains an unused $3.5 million credit facility. The Company believes current cash balances and the borrowings available under its credit facility will be sufficient to satisfy projected working capital needs and planned capital expenditures for the foreseeable future.