Alpha Pro Tech(APT) - 2025 Q2 - Quarterly Report

FORM 10-Q Cover Page This section identifies the document as Alpha Pro Tech, Ltd.'s Quarterly Report on Form 10-Q for Q2 2025, classifying the company as a non-accelerated and smaller reporting company - Alpha Pro Tech, Ltd.'s Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - Classified as a non-accelerated filer and a smaller reporting company[5] PART I. FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the interim period ITEM 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, shareholders' equity, and cash flows, along with their accompanying notes, providing a detailed view of the company's financial performance and position for the interim periods Condensed Consolidated Balance Sheets (Unaudited) The balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $14,464,000 | $18,636,000 | | Total current assets | $50,543,000 | $50,639,000 | | Total assets | $73,165,000 | $73,742,000 | | Total current liabilities | $3,015,000 | $3,123,000 | | Total liabilities | $10,917,000 | $11,508,000 | | Total shareholders' equity | $62,248,000 | $62,234,000 | Condensed Consolidated Statements of Income (Unaudited) The income statements detail the company's revenues, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Income Statement Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change (YoY) | | :----------------------------------- | :----------- | :----------- | :----------- | | Net sales | $16,672,000 | $16,289,000 | +2.4% | | Gross profit | $6,131,000 | $6,841,000 | -10.4% | | Income from operations | $1,335,000 | $1,712,000 | -22.0% | | Net income | $1,244,000 | $1,644,000 | -24.3% | | Basic earnings per common share | $0.12 | $0.15 | -20.0% | Income Statement Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | Change (YoY) | | :----------------------------------- | :----------- | :----------- | :----------- | | Net sales | $30,494,000 | $29,772,000 | +2.4% | | Gross profit | $11,523,000 | $12,259,000 | -6.0% | | Income from operations | $1,790,000 | $2,038,000 | -12.2% | | Net income | $1,857,000 | $2,220,000 | -16.4% | | Basic earnings per common share | $0.18 | $0.20 | -10.0% | Condensed Consolidated Statements of Comprehensive Income (Unaudited) This section presents the company's comprehensive income, including net income and other comprehensive income components, for the interim periods Comprehensive Income (Three Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Net income | $1,244,000 | $1,644,000 | | Other comprehensive income - foreign currency translation loss | ($22,000) | ($58,000) | | Comprehensive income | $1,222,000 | $1,586,000 | Comprehensive Income (Six Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Net income | $1,857,000 | $2,220,000 | | Other comprehensive income - foreign currency translation loss | ($87,000) | ($52,000) | | Comprehensive income | $1,770,000 | $2,168,000 | Condensed Consolidated Statements of Shareholders' Equity (Unaudited) This statement outlines changes in shareholders' equity, including net income, share repurchases, and stock-based compensation, for the six months ended June 30, 2025 and 2024 Shareholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Impact on Total Equity | | :-------------------------- | :--------------------- | | Balance as of Dec 31, 2024 | $62,234,000 | | Net income | $1,857,000 | | Common stock repurchased and retired | ($2,008,000) | | Treasury stock excise tax | ($20,000) | | Stock-based compensation expense | $272,000 | | Other comprehensive loss | ($87,000) | | Balance as of June 30, 2025 | $62,248,000 | Shareholders' Equity Changes (Six Months Ended June 30, 2024) | Item | Impact on Total Equity | | :-------------------------- | :--------------------- | | Balance as of Dec 31, 2023 | $61,568,000 | | Net income | $2,220,000 | | Common stock repurchased and retired | ($2,701,000) | | Treasury stock excise tax | ($27,000) | | Stock-based compensation expense | $218,000 | | Options exercised | $815,000 | | Other comprehensive income (loss) | ($52,000) | | Balance as of June 30, 2024 | $62,041,000 | Condensed Consolidated Statements of Cash Flows (Unaudited) The cash flow statements summarize cash generated and used in operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Net cash used in operating activities | ($1,871,000) | ($2,042,000) | | Net cash used in investing activities | ($273,000) | ($216,000) | | Net cash used in financing activities | ($2,028,000) | ($1,913,000) | | Decrease in cash and cash equivalents | ($4,172,000) | ($4,171,000) | | Cash and cash equivalents, end of period | $14,464,000 | $16,207,000 | Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide additional detail and context for the condensed consolidated financial statements, explaining accounting policies and significant transactions Note 1. The Company Alpha Pro Tech, Ltd. operates in two main segments: Building Supply (construction weatherization products) and Disposable Protective Apparel (protective garments, face masks, face shields). Its products are sold under the 'Alpha Pro Tech' brand and private label, primarily in the U.S - The Building Supply segment includes housewrap, synthetic roof underlayment, and other woven materials[18] - The Disposable Protective Apparel segment offers shoecovers, bouffant caps, coveralls, gowns, frocks, lab coats, face masks, and face shields for various markets[19] - Products are sold predominantly in the United States under the 'Alpha Pro Tech' brand name and private label[20] Note 2. Basis of Presentation and Revenue Recognition Policy The interim financial statements are unaudited and prepared in accordance with SEC rules, omitting certain U.S. GAAP disclosures. Revenue is recognized when control of products transfers to customers, typically upon delivery to a third-party carrier or the customer - Interim financial information is unaudited and prepared in accordance with SEC rules, omitting certain U.S. GAAP disclosures[21] - Revenue is recognized when control of promised products is transferred to the customer, generally upon delivery to a third-party carrier (FOB shipping point) or to the customer (FOB destination)[22] - Shipping and handling charges billed to customers are included in revenue, while associated costs are recorded in cost of goods sold[22] Note 3. Shareholder's Equity The company continued its share repurchase program, buying back 402,513 shares for $2,008,000 during the six months ended June 30, 2025. Stock-based compensation expense for RSUs was $243,000 for the same period, with $453,000 of unrecognized RSU compensation cost remaining - During the three months ended June 30, 2025, the Company repurchased and retired 181,100 shares of common stock for $830,000[24] - During the six months ended June 30, 2025, the Company repurchased and retired 402,513 shares of common stock for $2,008,000[24] - As of June 30, 2025, $2,735,000 was available to repurchase common shares under the repurchase program[24] Stock-based Compensation Expense (Six Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Stock-based compensation expense (RSUs) | $243,000 | $189,000 | - As of June 30, 2025, $453,000 of total unrecognized compensation cost related to RSU grants was expected to be recognized over a weighted average remainder period of 1.13 years[29] Note 4. Recent Accounting Pronouncements The company is evaluating the impact of new accounting standards, specifically ASU 2023-09 (Income Taxes) effective after December 15, 2024, and ASU 2024-03 (Expense Disaggregation Disclosures) effective after December 15, 2026 - ASU 2023-09, Income Taxes (Topic 740), effective for fiscal years beginning after December 15, 2024, improves income tax disclosures[32] - ASU 2024-03, Expense Disaggregation Disclosures, effective for annual periods beginning after December 15, 2026, requires disclosure about types of costs and expenses[33] - The Company is currently evaluating the impact of ASU 2024-03 on its related disclosures[33] Note 5. Inventories Inventories, net of reserves, decreased slightly to $22,361,000 as of June 30, 2025, from $22,733,000 as of December 31, 2024, with a decrease in raw materials and finished goods, partially offset by an increase in work in process Inventories, net (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :-------------- | :---------------- | | Raw materials | $10,339,000 | $10,948,000 | | Work in process | $3,466,000 | $2,934,000 | | Finished goods | $8,556,000 | $8,851,000 | | Total Inventories | $22,361,000 | $22,733,000 | Note 6. Equity Investment in Unconsolidated Affiliate The company holds a 41.7% equity investment in Harmony Plastics Private Limited, an unconsolidated affiliate in India, which manufactures products for both of Alpha Pro Tech's segments. The investment was $6,005,000 as of June 30, 2025, impacted by cumulative equity in income and foreign currency translation losses - Alpha ProTech Engineered Products, Inc. holds a 41.7% ownership interest in Harmony Plastics Private Limited, an unconsolidated affiliate in India[36] - Harmony supplies products for both the Company's Building Supply and Disposable Protective Apparel segments[37] Related Party Transactions with Harmony (Six Months Ended June 30) | Transaction | 2025 | 2024 | | :----------------------------------- | :----------- | :----------- | | Inventories purchased from Harmony | $9,914,000 | $11,179,000 | | Inventories sold to Harmony | $415,000 | $240,000 | | Equity in income of unconsolidated affiliate | $278,000 | $338,000 | - As of June 30, 2025, the Company's investment in Harmony was $6,005,000, which includes cumulative equity in income and is adjusted for accumulated other comprehensive loss on foreign currency translations[42] Note 7. Accrued Liabilities Total accrued liabilities decreased to $694,000 as of June 30, 2025, from $947,000 as of December 31, 2024, primarily due to a reduction in commissions and bonuses payable and general accrued liabilities Accrued Liabilities (June 30, 2025 vs. December 31, 2024) | Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :-------------- | :---------------- | | Payroll expenses and taxes payable | $196,000 | $221,000 | | Commissions and bonuses payable and general accrued liabilities | $498,000 | $726,000 | | Total accrued liabilities | $694,000 | $947,000 | Note 8. Basic and Diluted Earnings Per Common Share Basic and diluted earnings per common share decreased for both the three and six months ended June 30, 2025, compared to the prior year, reflecting the overall decline in net income Basic and Diluted EPS (Three Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Basic EPS | $0.12 | $0.15 | | Diluted EPS | $0.12 | $0.15 | Basic and Diluted EPS (Six Months Ended June 30) | Metric | 2025 | 2024 | | :----------------------------------- | :----- | :----- | | Basic EPS | $0.18 | $0.20 | | Diluted EPS | $0.18 | $0.20 | Note 9. Accumulated Other Comprehensive Loss Accumulated Other Comprehensive Loss (AOCL) increased to $1,586,000 as of June 30, 2025, primarily due to foreign currency translation adjustments related to the unconsolidated affiliate, Harmony - AOCL consists of foreign currency translation adjustments related to the unconsolidated affiliate, Harmony, whose functional currency is not the U.S. dollar[45] - AOCL was $1,586,000 as of June 30, 2025, compared to $1,499,000 as of December 31, 2024[45] Note 10. Segments Reporting The company operates in two segments: Building Supply and Disposable Protective Apparel. Building Supply sales increased, while Disposable Protective Apparel sales decreased for both the three and six months ended June 30, 2025. Segment net income also saw varied performance, with Building Supply increasing and Disposable Protective Apparel decreasing Segment Net Sales (Three Months Ended June 30) | Segment | 2025 | 2024 | Change (YoY) | | :-------------------------- | :----------- | :----------- | :----------- | | Building Supply | $11,084,000 | $9,941,000 | +11.5% | | Disposable Protective Apparel | $5,588,000 | $6,348,000 | -12.0% | | Consolidated Net Sales | $16,672,000 | $16,289,000 | +2.4% | Segment Net Sales (Six Months Ended June 30) | Segment | 2025 | 2024 | Change (YoY) | | :-------------------------- | :----------- | :----------- | :----------- | | Building Supply | $19,456,000 | $18,181,000 | +7.0% | | Disposable Protective Apparel | $11,038,000 | $11,591,000 | -4.8% | | Consolidated Net Sales | $30,494,000 | $29,772,000 | +2.4% | Segment Net Income (Six Months Ended June 30) | Segment | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Building Supply | $3,160,000 | $2,792,000 | | Disposable Protective Apparel | $1,836,000 | $2,872,000 | Total Segment Assets (June 30, 2025 vs. December 31, 2024) | Segment | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Building Supply | $5,883,000 | $6,069,000 | | Disposable Protective Apparel | $1,369,000 | $1,424,000 | | Total Segment Assets | $7,252,000 | $7,493,000 | Note 11. Financial Information about Geographic Areas The majority of the company's net sales and long-lived assets are concentrated in the United States, with international sales and assets representing a small portion Net Sales by Geographic Region (Six Months Ended June 30) | Region | 2025 | 2024 | | :------------- | :----------- | :----------- | | United States | $30,116,000 | $29,427,000 | | International | $378,000 | $345,000 | | Consolidated Net Sales | $30,494,000 | $29,772,000 | Long-lived Assets by Geographic Region (June 30, 2025 vs. December 31, 2024) | Region | June 30, 2025 | December 31, 2024 | | :------------- | :-------------- | :---------------- | | United States | $7,125,000 | $7,325,000 | | International | $1,185,000 | $1,195,000 | | Consolidated Total Long-lived Assets | $8,310,000 | $8,520,000 | Note 12. Related Party Transactions The company had no related party transactions other than those with its unconsolidated affiliate, Harmony, as detailed in Note 6 - The Company had no related party transactions other than with its unconsolidated affiliate, Harmony[55] Note 13. Leases The company's operating lease right-of-use assets were $8,252,000 and lease liabilities were $8,340,000 as of June 30, 2025. Operating lease expense for the six months ended June 30, 2025, was approximately $760,000, with a weighted average remaining lease term of 9.72 years - As of June 30, 2025, operating lease right-of-use assets were $8,252,000 and operating lease liabilities were $8,340,000[57] - Operating lease expense was approximately $760,000 during the six months ended June 30, 2025[57] - The weighted average remaining lease term of the Company's operating leases was 9.72 years, with a weighted average discount rate of 7.0%[58] Note 14. Income taxes The company accounts for income taxes using the asset and liability method and does not record a tax provision on equity in income of unconsolidated affiliates, which reduces its effective tax rate - The Company accounts for income taxes using the asset and liability method[60] - The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate[119] Note 15. Contingencies The company is subject to various pending and threatened litigation actions in the ordinary course of business, but management does not anticipate a material effect on its financial condition or results of operations - The Company is subject to various pending and threatened litigation actions in the ordinary course of business[63] - Management does not anticipate that the ultimate liability from such litigation will have a material effect on the Company's financial condition and results of operations[63] Note 16. Subsequent Events The company has reviewed and evaluated subsequent events through the filing date of the Quarterly Report on Form 10-Q and concluded that no events require recognition or disclosure - No subsequent events requiring recognition or disclosure were identified from June 30, 2025, through the filing date of this Quarterly Report on Form 10-Q[64] ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to 2024. It covers sales performance by segment, gross profit, operating expenses, and liquidity, highlighting the impact of tariffs and market volatility Special Note Regarding Forward-Looking Statements This section cautions readers about forward-looking statements in the report, outlining various risks that could cause actual results to differ materially from expectations, including foreign currency risks, supply chain issues, competition, and global economic conditions - The report contains forward-looking statements, which are subject to various risks and uncertainties[66] - Key risks include foreign currency exchange risks, joint venture risks, loss of large customers, reliance on suppliers, international manufacturing risks, intellectual property protection, tariff policies, competitive industry, environmental regulations, new product acceptance, global economic conditions, climate change, AI uncertainties, security breaches, and legal proceedings[67] Special Note Regarding Smaller Reporting Company Status As a smaller reporting company, Alpha Pro Tech has elected to omit certain information from this Management's Discussion and Analysis of Financial Condition and Results of Operations - The Company is a 'smaller reporting company' and has elected to omit certain information from this Management's Discussion and Analysis[69] Critical Accounting Policies and Estimates The company refers to its 2024 Form 10-K for a full description of its critical accounting policies and estimates, noting that there have been no material changes since December 31, 2024 - There have been no material changes to the Company's critical accounting policies and estimates since December 31, 2024[71] OVERVIEW Alpha Pro Tech manufactures and markets building supply and disposable protective apparel products. The company faces challenges from U.S. trade policy, tariffs, and demand volatility, particularly in disposable protective garments, and is implementing strategies to mitigate these impacts - Alpha Pro Tech operates in two business segments: Building Supply (construction weatherization products) and Disposable Protective Apparel (protective garments, face masks, face shields)[73] - The company's target markets include construction, building supply, roofing distributors, pharmaceutical, medical device, and healthcare facilities[74][75] - Recent U.S. trade policy, including additional tariffs on imports from various countries, has increased costs and introduced demand volatility, especially for disposable protective garments[76] - The company is taking actions to mitigate impacts, including commercial pricing adjustments, holding extra inventories, resourcing to alternate suppliers, and insourcing[76] RESULTS OF OPERATIONS Consolidated net sales increased slightly, but gross profit and net income decreased for both the three and six months ended June 30, 2025, compared to 2024. This was driven by lower margins in Disposable Protective Apparel, higher rebates, freight costs, and tariffs, despite growth in the Building Supply segment Sales Consolidated sales increased by 2.4% for both the three and six months ended June 30, 2025. Building Supply segment sales saw strong growth, particularly in core products, while Disposable Protective Apparel sales declined due to decreases in garments and face masks Consolidated Net Sales (YoY Change) | Period | 2025 Sales | 2024 Sales | Change | % Change | | :----------------------- | :----------- | :----------- | :------- | :------- | | Three Months Ended Jun 30 | $16,672,000 | $16,289,000 | $383,000 | +2.4% | | Six Months Ended Jun 30 | $30,494,000 | $29,772,000 | $722,000 | +2.4% | - Building Supply segment sales increased by 11.5% to $11,084,000 for the three months ended June 30, 2025, a record quarter for core building products (housewrap and synthetic roof underlayment)[80] - Disposable Protective Apparel segment sales decreased by 12.0% to $5,588,000 for the three months ended June 30, 2025, driven by an 11.3% decrease in disposable protective garments and a 28.3% decrease in face masks[85] - For the six months ended June 30, 2025, Building Supply segment sales increased by 7.0% to $19,456,000, marking the second highest mid-year sales on record for the segment[91] - Disposable Protective Apparel segment sales for the six months ended June 30, 2025, decreased by 4.8% to $11,038,000, primarily due to a 40.9% decrease in face mask sales[97] Gross Profit Gross profit and gross profit margin decreased for both the three and six months ended June 30, 2025. This decline was primarily attributed to lower margins in the Disposable Protective Apparel segment, higher sales rebates, increased ocean freight rates, and U.S. tariffs Gross Profit and Margin (YoY Change) | Metric | Three Months Ended Jun 30, 2025 | Three Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2025 | Six Months Ended Jun 30, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Gross profit | $6,131,000 (-10.4%) | $6,841,000 | $11,523,000 (-6.0%) | $12,259,000 | | Gross profit margin | 36.8% | 42.0% | 37.8% | 41.2% | - The gross profit margin was negatively affected by a margin decrease primarily in the Disposable Protective Apparel segment, higher sales rebates, ocean freight rates, and US tariffs[101] - Management plans to increase selling prices starting in July 2025 to partially mitigate the impact of new 2025 US tariffs[101] Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses decreased for both the three and six months ended June 30, 2025, primarily due to reduced corporate unallocated expenses and, to a lesser extent, Building Supply segment expenses. This was partially offset by slight increases in Disposable Protective Apparel expenses SG&A Expenses (YoY Change) | Metric | Three Months Ended Jun 30, 2025 | Three Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2025 | Six Months Ended Jun 30, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | SG&A expenses | $4,556,000 (-6.7%) | $4,884,000 | $9,250,000 (-5.0%) | $9,732,000 | | SG&A as % of net sales | 27.3% | 30.0% | 30.3% | 32.7% | - The decrease in SG&A expenses was primarily due to decreased professional fees, insurance expenses, general office expenses, and reorganization costs (related to moving face mask manufacturing) in corporate unallocated expenses[104][107] CEO Bonus Accrued | Period | 2025 | 2024 | | :----------------------- | :--------- | :--------- | | Three Months Ended Jun 30 | $84,000 | $111,000 | | Six Months Ended Jun 30 | $125,000 | $149,000 | Depreciation and Amortization Depreciation and amortization expense saw a minor decrease for both the three and six months ended June 30, 2025, compared to the prior year Depreciation and Amortization Expense (YoY Change) | Period | 2025 | 2024 | Change | % Change | | :----------------------- | :--------- | :--------- | :------- | :------- | | Three Months Ended Jun 30 | $240,000 | $245,000 | -$5,000 | -2.0% | | Six Months Ended Jun 30 | $483,000 | $489,000 | -$6,000 | -1.2% | Income from Operations Income from operations decreased by 22.0% for the three months and 12.2% for the six months ended June 30, 2025, primarily due to a decrease in gross profit, partially offset by reduced selling, general and administrative expenses Income from Operations (YoY Change) | Period | 2025 | 2024 | Change | % Change | | :----------------------- | :----------- | :----------- | :------- | :------- | | Three Months Ended Jun 30 | $1,335,000 | $1,712,000 | -$377,000 | -22.0% | | Six Months Ended Jun 30 | $1,790,000 | $2,038,000 | -$248,000 | -12.2% | - Income from operations as a percentage of net sales was 8.0% for the three months and 5.9% for the six months ended June 30, 2025, down from 10.5% and 6.8% respectively in 2024[110][111] Other Income Other income decreased for both the three and six months ended June 30, 2025, primarily due to lower interest income and a decrease in equity in income from the unconsolidated affiliate Other Income (YoY Change) | Period | 2025 | 2024 | Change | | :----------------------- | :--------- | :--------- | :------- | | Three Months Ended Jun 30 | $276,000 | $407,000 | -$131,000 | | Six Months Ended Jun 30 | $593,000 | $803,000 | -$210,000 | - The decrease was primarily due to lower interest income and reduced equity in income of the unconsolidated affiliate[112][113] Income before Provision for Income Taxes Income before provision for income taxes decreased by 24.0% for the three months and 16.1% for the six months ended June 30, 2025, reflecting the combined impact of lower income from operations and other income Income before Provision for Income Taxes (YoY Change) | Period | 2025 | 2024 | Change | % Change | | :----------------------- | :----------- | :----------- | :------- | :------- | | Three Months Ended Jun 30 | $1,611,000 | $2,119,000 | -$508,000 | -24.0% | | Six Months Ended Jun 30 | $2,383,000 | $2,841,000 | -$458,000 | -16.1% | Provision for Income Taxes The provision for income taxes decreased for both periods, with the estimated effective tax rate remaining relatively stable. The company is evaluating the potential impacts of the recently enacted One Big Beautiful Bill Act (OBBBA) Provision for Income Taxes and Effective Tax Rate (YoY Change) | Period | Provision 2025 | Provision 2024 | Effective Rate 2025 | Effective Rate 2024 | | :----------------------- | :--------------- | :--------------- | :------------------ | :------------------ | | Three Months Ended Jun 30 | $367,000 | $475,000 | 22.8% | 22.4% | | Six Months Ended Jun 30 | $526,000 | $621,000 | 22.1% | 21.9% | - The Company is evaluating the potential impacts of the One Big Beautiful Bill Act (OBBBA) but does not anticipate a material impact on its financial statements[118] Net Income Net income decreased by 24.3% for the three months and 16.4% for the six months ended June 30, 2025, primarily due to the decline in income before taxes, partially offset by a lower tax provision. Basic and diluted EPS also decreased accordingly Net Income and EPS (YoY Change) | Metric | Three Months Ended Jun 30, 2025 | Three Months Ended Jun 30, 2024 | Six Months Ended Jun 30, 2025 | Six Months Ended Jun 30, 2024 | | :----------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income | $1,244,000 (-24.3%) | $1,644,000 | $1,857,000 (-16.4%) | $2,220,000 | | Net income as % of net sales | 7.5% | 10.1% | 6.1% | 7.5% | | Basic and diluted EPS | $0.12 | $0.15 | $0.18 | $0.20 | LIQUIDITY AND CAPITAL RESOURCES The company's cash and cash equivalents decreased by 22.4% to $14,464,000 as of June 30, 2025, primarily due to cash used in operating and financing activities, including significant common stock repurchases. Accounts receivable increased, while inventory decreased - Cash and cash equivalents decreased by 22.4%, or $4,172,000, to $14,464,000 as of June 30, 2025, compared to December 31, 2024[122] - Working capital was $47,528,000 and the current ratio was 17:1 as of June 30, 2025[122] Cash Flow Activities (Six Months Ended June 30, 2025) | Activity | Amount | | :----------------------------------- | :----------- | | Net cash used in operating activities | ($1,871,000) | | Net cash used in investing activities | ($273,000) | | Net cash used in financing activities | ($2,028,000) | - Accounts receivable increased by 99.8% to $9,780,000 as of June 30, 2025, primarily due to increased sales in the latter part of Q2 2025 and a higher percentage of receivables with extended terms[124] - Inventory decreased by 1.6% to $22,361,000 as of June 30, 2025[125] - During the six months ended June 30, 2025, the company repurchased 402,513 shares of common stock at a cost of $2,008,000, with $2,735,000 remaining available under the repurchase program[130] Recent Accounting Pronouncements This section reiterates the discussion from Note 4 regarding ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), with the company evaluating the impact of the latter - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024[132] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for annual periods beginning after December 15, 2026, and the Company is evaluating its impact[133] ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Alpha Pro Tech is not required to provide the quantitative and qualitative disclosures about market risk typically required by this Item - As a smaller reporting company, Alpha Pro Tech, Ltd. is not required to provide the information otherwise required by this Item[135] ITEM 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025. No material changes in internal control over financial reporting occurred during the quarter - The effectiveness of the design and operation of disclosure controls and procedures was evaluated and concluded to be effective as of March 31, 2025[136][138] - No material changes in internal control over financial reporting occurred during the quarter[139] PART II. OTHER INFORMATION This part includes information on legal proceedings, risk factors, equity security sales, other disclosures, and a list of exhibits for the reporting period ITEM 1. Legal Proceedings The company is involved in various pending and threatened litigation actions in the ordinary course of business, but management does not anticipate that the ultimate liability will have a material effect on its financial condition or results of operations - The Company is subject to various pending and threatened litigation actions in the ordinary course of business[140] - Management does not anticipate that the ultimate liability from such litigation will have a material effect on the Company's financial condition and results of operations[140] ITEM 1A. Risk Factors This section refers to the 2024 Form 10-K for a comprehensive list of risk factors, with a specific update on the increased risks related to new tariff policies and potential countermeasures, which could raise costs and disrupt the global supply chain - No material changes to risk factors from the 2024 Form 10-K, except for an update on tariff policies[141] - New tariff policies and potential countermeasures, including those announced by President Trump in February and April 2025, could increase costs and disrupt the global supply chain[142][143][145] - Country-specific tariffs on imports from Vietnam, India, and Mexico could increase product costs for the U.S. market and impact international manufacturing facilities[144] ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 181,100 shares of common stock for $830,000 during the three months ended June 30, 2025, under its existing share repurchase program. No unregistered equity securities were sold during the period Issuer Purchases of Equity Securities (April 1 - June 30, 2025) | Period | Total Number of Shares Purchased | Average Price per Share | | :----------------- | :----------------------------- | :---------------------- | | April 1 - 30, 2025 | 75,600 | $4.46 | | May 1 - 31, 2025 | 24,800 | $4.48 | | June 1 - 30, 2025 | 80,700 | $4.63 | | Total | 181,100 | $4.54 | - As of June 30, 2025, $2,735,000 was available for repurchase under the Company's existing share repurchase program[147] - The Company did not sell any unregistered equity securities during the periods covered by this Quarterly Report on Form 10-Q[148] ITEM 5. Other Information This section states that there is no other information to report, specifically confirming that no directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the period covered by this report[150] ITEM 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including organizational documents, certifications from the CEO and CFO, and interactive data files in Inline XBRL format - Exhibits include the Certificate of Incorporation, Amended and Restated Bylaws, Certifications of the President and CEO and Chief Financial Officer, and Interactive Data Files (Inline XBRL)[154] SIGNATURES This section formally concludes the report, indicating the signing date and the names of the principal executive and financial officers - The report was signed on August 7, 2025, by Lloyd Hoffman, President and Chief Executive Officer, and Colleen McDonald, Chief Financial Officer[158]