Focus Company: Alpha Pro Tech Ltd. (APT)
By: Max R. Bowser - The Bowser Report - Date: April 2, 2005
Introduction
This Canadian company is a developer and manufacturer of innovative disposable and limited-use protective apparel products and infection control products for the clean room, industrial, pharmaceutical, medical, dental and food service markets. Alpha ProTech Engineered Products develops and manufactures a line of construction supply weatherization products, including housewrap and roof underlayment, as well as a line of antimicrobial paint. The Company has manufacturing facilities in Salt Lake City, Utah; Nogales, Arizona; Janesville, Wisconsin; and Valdosta, Georgia.
Products
The Company operates through four so called business segments:
- Apparel, consisting of a complete line of disposable clothing such as overalls, frocks, lab coats, hoods, bouffant caps and shoecovers (including the Aqua Track® and spunbond shoecovers);
- Mask and shields, consisting principally of medical, dental and industrial masks and eye shields;
- Extended care, consisting principally of fleece and other related products, which includes a line of pet beds; and
- Engineered Products. This new segment, which was only formed in 2004, consists of a line of construction supply weatherization products as well as a line of paint with an antimicrobial formula that inhibits growth of bacteria, fungi and algae on the painted surfaces in hospitals, surgical rooms, clean rooms and associated controlled environments. This paint has been tested at Nelson Labs, a privately owned testing organization, specializing in microbiology. The Nelson findings were confirmed by a leading university. Engineered Products' sales for the year ended December 31, 2004 were immaterial but, management expects this segment to contribute significantly to revenues in 2005.
Two recent announcements seem to confirm the believe in the Engineered Products segment.
- On January 31 they signed a 3 year mutually exclusive agreement with Perma "R" Products, Inc., a Grenada, Mississippi-based company in the construction industry. As part of the agreement, Perma "R" will be responsible for all marketing of Alpha Pro Tech's house wrap products, and Perma "R" has agreed to minimum sales of $5 million per year.
- And on February 28, they signed another 3-year, mutually exclusive agreement with Perma "R" Products, Inc. This time they agreed that Perma "R" will be responsible for all sales & marketing of Alpha Pro Tech's roof underlayment product, with minimum sales of $3 million per year.
"I'm pleased to announce this agreement with Perma "R" Products for APT's roof underlayment. This is in addition to our previously announced 3 year $5 million minimum per year agreement for our house wrap product," commented Al Millar, Alpha Pro Tech's President. "This agreement will make our unique technology available to home builders nationwide. With Alpha Pro Tech's underlayment technology, houses can wait up to six months before shingles, tiles or other coverings are installed, without damage from rain or other reasonable weather conditions. In essence, this provides much more continuity in the building process, and will enable work to continue inside with protection from the elements. The exceptional reputation of Perma "R" Products, and the strong customer base validates our technology and provides us with a strong entry into this large industry."
Financials
In 2003, APT received a big boost from the Severe Acute Respiratory Syndrome (SARS) epidemic in Asia, which threatened to spread to other parts of the world. Its N-94 Particulate Respirator facemask was the recommended mask by the U.S. Center for Disease Control & Prevention (CDC).
Approximately $3.5 million of the sales in 2003 were as a direct result of the SARS outbreak. Excluding the $3.5 million non-core SARS related N-95 mask and eye shield sales in 2003, Alpha Pro Tech's core business grew by $1.4 million or 5.9 % to $24.8 million in 2004 from $23.5 million in 2003. The growth was attributed to sales to the pharmaceutical industry, cleanroom industry and to the industrial safety industry.
Revenues for the year ended December 31, 2004 were $24.8 million compared to $27.0 million in the prior year. Net income for 2004 was $1.8 million, or $ 0.08 per share, compared to net income of $3.0 million, or $0.13 per share in 2003.
The Company also improved its balance sheet, as cash increased 42.3 % to $4.9 million compared to $3.4 million at the end of fiscal 2003. Current ratio increased to 6.30:1 compared to 5.11:1 at the end of 2003.
"Our strong financial position provided us with the necessary capital to successfully launch our Engineered Products subsidiary. We remain focused on diversifying our products and target markets, thus meeting the specific needs of our customers. We have worked diligently with our distributors to best position Alpha Pro Tech's products in the marketplace, and we believe those efforts will produce meaningful revenue growth in 2005", commented Al Millar.
Of the 23,215,809 shares outstanding, 20% are held by insiders. In fact, the company has extended its buyback program with the authorized purchase of an additional 500,000 shares. This is the company's sixth buyback since 1999.
General information
| Market | AMEX |
| Symbol | APT |
| Price | $2.01 |
| Contact: | Alpha Pro Tech - 60 Centurian Drive, Suite 112 - Markham, ON L3R 9R2, Canada |
| Telephone | (905) 479-0654 |
| Website | www.alphaprotech.com |
© Max R. Bowser - The Bowser Report
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