Business Context and Reporting Period
Company: Alpha Pro Tech, Ltd. (NYSE American: APT)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended June 30, 2026
Business Overview: The Company operates two segments: Building Supply (construction weatherization products like housewrap and synthetic roof underlayment) and Disposable Protective Apparel (garments, masks, and shields for cleanroom, medical, and industrial markets). Products are sold primarily in the U.S. under the Alpha Pro Tech brand and private labels.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 |
Six Months Ended June 30, 2026 |
|---|---|---|
| Net Sales | $18,674,000 | $33,259,000 |
| Gross Profit | $6,978,000 (37.4% margin) | $12,494,000 (37.6% margin) |
| Income from Operations | $2,012,000 (10.8% margin) | $2,592,000 (7.8% margin) |
| Net Income | $1,826,000 | $2,528,000 |
| Diluted EPS | $0.18 | $0.24 |
| Cash and Cash Equivalents | $18,901,000 (as of June 30, 2026) | |
| Working Capital | $51,014,000 (as of June 30, 2026) | |
| Total Liabilities | $10,428,000 (as of June 30, 2026) |
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 12.0% ($2.0M) for the quarter and 9.1% ($2.8M) for the six months compared to the same periods in 2025.
- Building Supply: Sales up 5.5% for the quarter and 0.5% for the six months, driven by housewrap and woven material sales despite a 4.2% decline in single-family housing starts.
- Disposable Protective Apparel: Sales surged 24.9% for the quarter and 24.2% for the six months, driven by strong demand for protective garments and higher selling prices due to tariffs.
- Profitability: Net income increased 46.8% for the quarter and 36.1% for the six months.
- Tariff Impact: Results include a one-time benefit from IEEPA tariff refunds of approximately $294,000 in the quarter and $294,000 for the six months (reducing Cost of Goods Sold).
- Excluding Tariffs: Adjusted net income increased 29.2% for the quarter and 24.3% for the six months.
- Balance Sheet:
- Inventory: Decreased 21.0% ($4.9M) to $18.65M, attributed to reduced purchasing due to high tariff rates.
- Accounts Receivable: Increased 36.8% ($3.0M) to $11.14M, reflecting higher sales volume; days sales outstanding rose from 40 to 47 days.
- Cash: Increased 11.3% ($1.9M) to $18.9M, driven by strong operating cash flow of $2.2M.
Guidance, Outlook, Risks, and Unusual Items
- Unusual Items (Tariffs):
- The Company recognized $300,000 in IEEPA tariff refunds in Q2 2026.
- Subsequent Event: In July 2026, the Company received an additional $3.2 million in refunds. These were not recognized in the June 30, 2026 financial statements due to ongoing litigation and uncertainty regarding final resolution (gain contingency model).
- Outlook:
- Building Supply: Management expects a soft but stable market for the remainder of 2026, with a modest rebound in housing starts expected in 2027. The Company plans to expand roofing product offerings.
- Cost Pressures: Gross margins were impacted by geopolitical instability (U.S.-Iran conflict) raising energy and raw material costs. A price increase is planned for Q3 2026 to offset these costs.
- Risks:
- Trade Policy: Ongoing litigation regarding IEEPA tariffs and potential new tariffs (e.g., 15% under Section 122) creates uncertainty for supply chains and costs.
- Market Conditions: Housing market weakness and high mortgage rates constrain the Building Supply segment.
- Foreign Currency: Exposure to currency fluctuations related to the unconsolidated affiliate in India (Harmony).
- Capital Allocation:
- Repurchased 21,800 shares for $99,000 in Q2. $1.3 million remains available under the repurchase program, which expires December 15, 2026.
Investor Verification Checklist
- Tariff Refund Realization: Verify the status of the $3.2 million in subsequent tariff refunds and the likelihood of their recognition in future periods given the ongoing litigation.
- Inventory Turnover: Monitor the impact of the 21% inventory reduction on future sales fulfillment and potential stockouts.
- Receivables Quality: Assess the increase in days sales outstanding (40 to 47 days) to ensure collection trends remain healthy despite higher sales.
- Cost Pass-Through: Confirm the effectiveness of the planned Q3 2026 price increases in mitigating rising raw material and energy costs.
- Segment Mix: Track the sustainability of the 25% growth in the Disposable Protective Apparel segment versus the flat growth in Building Supply.