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What changed in ALPHA PRO TECH LTD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ALPHA PRO TECH LTD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+139 added−167 removedSource: 10-K (2024-03-13) vs 10-K (2023-03-16)

Top changes in ALPHA PRO TECH LTD's 2023 10-K

139 paragraphs added · 167 removed · 106 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur goal in the design and manufacture of all our disposable protective garments is to keep the wearer cool, clean and comfortable and to provide the right level of protection for the wearer and the wearer’s environment. To achieve this, we offer a comprehensive selection of materials and garment designs to meet a wide range of application requirements.
Biggest changeDisposable Protective Apparel The Disposable Protective Apparel segment consists of a complete line of disposable protective garments (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), as well as face masks and face shields. 4 Our goal in the design and manufacture of all our disposable protective garments is to keep the wearer cool, clean and comfortable and to provide the right level of protection for the wearer and the wearer’s environment.
None of our employees are subject to collective bargaining agreements. We have had no labor-related work stoppages, and we believe that our relations with our employees are good. Workplace Health and Safety The health, safety, and wellness of our employees is a priority in which we have always invested, and will continue to do so.
None of our employees are subject to collective bargaining agreements. We have had no labor-related work stoppages, and we believe that our relations with our employees are good. 7 Workplace Health and Safety The health, safety, and wellness of our employees is a priority in which we have always invested, and will continue to do so.
Our products are grouped into two business segments: (1) the Building Supply segment, consisting of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, and seam tape, and synthetic roof underlayment, as well as other woven material; and (2) the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.
Our products are grouped into two business segments: (1) the Building Supply segment, consisting of construction weatherization products, such as housewrap, housewrap accessories including window and door flashing, and seam tape, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven materials; and (2) the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.
PRODUCTS Our principal products are grouped into two business segments: Building Supply: ● Housewrap ● Housewrap accessories: window and door flashing and seam tape ● Synthetic roof underlayment ● Other woven material Disposable Protective Apparel: ● Shoecovers ● Bouffant caps ● Gowns ● Coveralls ● Lab coats ● Frocks ● Face masks ● Face shields Building Supply The Building Supply segment consists of a line of construction supply weatherization products, namely housewrap, housewrap accessories and synthetic roof underlayment, as well as other woven material.
PRODUCTS Our principal products are grouped into two business segments: Building Supply: ● Housewrap ● Housewrap accessories: window and door flashing and seam tape ● Synthetic roof underlayment ● Synthetic roof underlayment accessories: self-adhered roof underlayment ● Other woven material Disposable Protective Apparel: ● Shoecovers ● Bouffant caps ● Gowns ● Coveralls ● Lab coats ● Frocks ● Face masks ● Face shields Building Supply The Building Supply segment consists of a line of construction supply weatherization products, namely housewrap, housewrap accessories and synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven material.
Our mask production facility is located in a 34,500 square foot building in Salt Lake City, Utah. We have encountered over the last three years a number of constraints within our supply chain due to raw material and labor shortages, as well as shipping delays. At times, these constraints have limited our ability to satisfy customer demand.
Our mask production facility is located in a 34,500 square foot building in Salt Lake City, Utah. We have encountered over the last several years a number of constraints within our supply chain due to raw material and labor shortages, as well as shipping delays. At times, these constraints have limited our ability to satisfy customer demand.
For the years ended December 31, 2022 and 2021, the Company did not generate sales from any single country, except the United States, that were significant to the Company’s consolidated net sales. The following table summarizes the locations of the Company’s long-lived assets by geographic region as of December 31, 2022 and 2021.
For the years ended December 31, 2023 and 2022, the Company did not generate sales from any single country, except the United States, that were significant to the Company’s consolidated net sales. The following table summarizes the locations of the Company’s long-lived assets by geographic region as of December 31, 2023 and 2022.
The name of the joint venture is Harmony Plastics Private Limited (“Harmony”). For a description of our relationship with Harmony see Note 7 to the Notes to our consolidated financial statements included in Item 8 of this report. Harmony has four facilities in India, three owned and one rented.
The name of the joint venture is Harmony Plastics Private Limited (“Harmony”). For a description of our relationship with Harmony see Note 6 to the Notes to our consolidated financial statements included in Item 8 of this report. Harmony has four facilities in India, three owned and one rented.
According to the disclosure requirements for smaller reporting companies, the Company has included consolidated balance sheets as of December 31, 2022 and 2021 and consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2022.
According to the disclosure requirements for smaller reporting companies, the Company has included consolidated balance sheets as of December 31, 2023 and 2022, and consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2023.
Standard payment terms are net 30 days from the date of shipment. All pricing and payment for our products are in U.S. dollars. Authorized returns must be unopened, in good condition and in the original carton and may be returned within 90 days of the original date of shipment.
All pricing and payment for our products are in U.S. dollars. Authorized returns must be unopened, in good condition and in the original carton and may be returned within 90 days of the original date of shipment.
As of December 31, 2022 2021 Long-lived assets by geographic region United States $ 4,380,000 $ 4,623,000 International 1,362,000 1,441,000 Consolidated total long-lived assets $ 5,742,000 $ 6,064,000 MANUFACTURING Our wholly-owned subsidiary, Alpha ProTech Engineered Products, Inc., manufactures and distributes a line of construction weatherization products for the Building Supply segment, comprised primarily of housewrap and synthetic roof underlayment.
As of December 31, 2023 2022 Long-lived assets by geographic region United States $ 4,340,000 $ 4,380,000 International 1,247,000 1,362,000 Consolidated total long-lived assets $ 5,587,000 $ 5,742,000 MANUFACTURING Our wholly-owned subsidiary, Alpha ProTech Engineered Products, Inc., manufactures and distributes a line of construction weatherization products for the Building Supply segment, comprised primarily of housewrap, housewrap accessories, synthetic roof underlayment and synthetic roof underlayment accessories.
HUMAN CAPITAL As of March 1, 2023, we had 122 full-time employees and one part-time employee, including 17 employees at our principal executive office in Markham, Ontario, Canada; 14 employees at our face mask production facility in Salt Lake City, Utah; 27 employees at our Disposable Protective Apparel segment cutting, warehouse and shipping facility in Nogales, Arizona; 42 employees at our Building Supply segment facility in Valdosta, Georgia; 21 employees on our sales and marketing team, located in various areas throughout the United States; and 1 employee in China.
HUMAN CAPITAL As of March 1, 2024, we had 124 full-time employees and one part-time employee, including 22 employees at our principal executive office in Aurora, Ontario, Canada; 7 employees at our face mask production facility in Salt Lake City, Utah; 27 employees at our Disposable Protective Apparel segment cutting, warehouse and shipping facility in Nogales, Arizona; 47 employees at our Building Supply segment facility in Valdosta, Georgia; 20 employees on our sales and marketing team, located in various areas throughout the United States; and 1 employee in China.
Years Ended December 31, 2022 2021 Net sales by geographic region United States $ 60,489,000 $ 65,844,000 International 1,492,000 2,793,000 Consolidated net sales $ 61,981,000 $ 68,637,000 Net sales by geographic region are based on the countries in which our customers are located. International sales include sales primarily to Canada and Japan. All sales are in U.S. dollars.
Years Ended December 31, 2023 2022 Net sales by geographic region United States $ 60,882,000 $ 60,489,000 International 350,000 1,492,000 Consolidated net sales $ 61,232,000 $ 61,981,000 Net sales by geographic region are based on the countries in which our customers are located. International sales include sales primarily to Canada and Japan. All sales are in U.S. dollars.
Our products are offered using proprietary materials such as ChemTech®, BarrierTech®, ComforTech®, AlphaGuard® and GenPro®, UltraGrip™, SafeStep®, MaxGrip®, AquaTrak®, SureGrip®, NuTech® and NaviTrak®. 4 The vast majority of the disposable protective garments are manufactured through our joint venture in India, and, to a much lesser extent, by other contract manufacturers in Asia and Mexico, as described in more detail below under “Manufacturing.” Certain proprietary products are made using materials supplied by us.
The vast majority of the disposable protective garments are manufactured through our joint venture in India, and, to a much lesser extent, by other contract manufacturers in Asia and Mexico, as described in more detail below under “Manufacturing.” Certain proprietary products are made using materials supplied by us.
Our executive offices are located at 60 Centurian Drive, Suite 112, Markham, Ontario, Canada L3R 9R2, and our telephone number is (905) 479-0654. Our website is located at www.alphaprotech.com. The Company continued to qualify as a smaller reporting company at the measurement date for determining such qualification during 2022.
Our executive offices are located at 53 Wellington Street East, Aurora, Ontario, Canada L4G 1H6, and our telephone number is (905) 479-0654. Our website is located at www.alphaprotech.com. The Company continued to qualify as a smaller reporting company at the measurement date for determining such qualification during 2023.
We also rely on trade secrets and proprietary know-how to maintain and develop our commercial position. The United States patents issued have an average remaining duration of approximately 1.2 years before expiration. Trademarks Many of our products are sold under various trademarks and trade names, including Alpha Pro Tech.
We also rely on trade secrets and proprietary know-how to maintain and develop our commercial position. The United States patents issued expired on February 4, 2024, and cannot be extended. Trademarks Many of our products are sold under various trademarks and trade names, including Alpha Pro Tech.
Disruptions in the supply chain as well as unpredictable changes in the response to the COVID-19 pandemic have created occasional backlogs of unfulfilled orders for our personal protective equipment (“PPE”) products and certain of our building supply products, and uncertainty in the timing of deliveries and fulfillment of backlogged orders can occur from time to time.
Disruptions in the supply chain have created occasional backlogs of unfulfilled orders for our personal protective equipment (“PPE”) products and certain of our building supply products, and uncertainty in the timing of deliveries and fulfillment of backlogged orders can occur from time to time. Standard payment terms are net 30 days from the date of shipment.
We remain committed to fostering an inclusive environment in which our differing backgrounds, life experiences, and perspectives join to positively impact the communities in which we live and serve.
Diversity and Inclusion We strive to foster a culture where mutual respect, inclusive behavior, and dignity are core to our individual expectations. We remain committed to fostering an inclusive environment in which our differing backgrounds, life experiences, and perspectives join to positively impact the communities in which we live and serve.
The Company maintains a variety of programs to reduce and eliminate injuries and promote safety and regularly measures progress against those programs.
The Company maintains a variety of programs to reduce and eliminate injuries and promote safety and regularly measures progress against those programs. These programs promote personal responsibility for workplace safety and encourage associates to set a meaningful example as safety ambassadors.
Removed
These products are manufactured in our manufacturing facility in Valdosta, Georgia and through our joint venture in India, as described in more detail below under “Manufacturing.” Disposable Protective Apparel The Disposable Protective Apparel segment consists of a complete line of disposable protective garments (shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), as well as face masks and face shields.
Added
These products are manufactured in our manufacturing facility in Valdosta, Georgia and through our joint venture in India, as described in more detail below under “Manufacturing.” Our synthetic roof underlayment accessories consist of our new self-adhered TECHNOplus which provides and additional layer of protection and aids in prevention of damage caused by ice dams and wind driven rain, and REX Ultra HT which is designed to deal with roofing’s most demanding installation conditions and high temperature applications.
Removed
Our materials are clean and durable and offer the wearer a great comfort level.
Added
To achieve this, we offer a comprehensive selection of materials and garment designs to meet a wide range of application requirements. Our materials are clean and durable and offer the wearer a great comfort level. Our products are offered using proprietary materials such as ChemTech®, BarrierTech®, ComforTech®, AlphaGuard®, GenPro®, UltraGrip™, SafeStep®, MaxGrip®, AquaTrak®, SureGrip®, NuTech® and NaviTrak®.
Removed
These programs promote personal responsibility for workplace safety and encourage associates to set a meaningful example as safety ambassadors. 7 Diversity and Inclusion We strive to foster a culture where mutual respect, inclusive behavior, and dignity are core to our individual expectations.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Our Industry The loss of any large customer or a reduction in orders from any large customer could reduce our net sales and harm our operating results. Our operating results could be negatively affected by the loss of revenue from one or more large customers.
Biggest changeFurthermore, as the joint venture is in a foreign country, social and economic events in that country could also affect the value of our investment and our ability to conduct business in that country. 8 Risks Related to Our Industry The loss of any large customer or a reduction in orders from any large customer could reduce our net sales and harm our operating results.
While we have not experienced any material losses related to cyber-attacks or information security breaches to date, any such event could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations and damage to the Company’s reputation, which could adversely affect the Company’s business. 11 The Company ’ s future results may be affected by various legal and regulatory proceedings and legal compliance risks.
While we have not experienced any material losses related to cyber-attacks or information security breaches to date, any such event could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations and damage to the Company’s reputation, which could adversely affect the Company’s business. 10 The Company ’ s future results may be affected by various legal and regulatory proceedings and legal compliance risks.
Litigation may result in substantial costs and diversion of resources, which could have a material adverse effect on our business, results of operations and financial condition. 10 Our industry is highly competitive, which may negatively affect our ability to grow our customer base and generate sales. The markets for our products are intensely competitive.
Litigation may result in substantial costs and diversion of resources, which could have a material adverse effect on our business, results of operations and financial condition. 9 Our industry is highly competitive, which may negatively affect our ability to grow our customer base and generate sales. The markets for our products are intensely competitive.
In particular, if COVID-19 or other events result in a continued prolonged period of travel, commercial and other similar restrictions, we could experience global supply disruptions. These restrictions have disrupted and could continue to disrupt our ability to receive manufactured products from China and may disrupt our suppliers located elsewhere who rely on products from China.
In particular, if another pandemic or other events result in a prolonged period of travel, commercial and other similar restrictions, we could experience global supply disruptions. These restrictions have disrupted and could continue to disrupt our ability to receive manufactured products from China and may disrupt our suppliers located elsewhere who rely on products from China.
We are subject to the risk of losing large customers or incurring significant reductions in sales to these customers. 9 We rely on suppliers and contractors, and our business could be seriously harmed if these suppliers and contractors are not able to meet our requirements.
We are subject to the risk of losing large customers or incurring significant reductions in sales to these customers. We rely on suppliers and contractors, and our business could be seriously harmed if these suppliers and contractors are not able to meet our requirements. We rely on a limited number of suppliers and contractors for the manufacture of our products.
We rely on a limited number of suppliers and contractors for the manufacture of our products. If we lose the services of these key suppliers and contractors, or if they are not willing or able to satisfy our requirements, finding substitute suppliers or contractors may be time-consuming and would affect our results of operations in the near term.
If we lose the services of these key suppliers and contractors, or if they are not willing or able to satisfy our requirements, finding substitute suppliers or contractors may be time-consuming and would affect our results of operations in the near term.
The success and competitiveness of our products depend in part upon our ability to protect our current and future technology, manufacturing processes and brand names, including Alpha Pro Tech, through a combination of patent, trademark, trade secret and unfair competition laws.
The success and competitiveness of our products depend in part upon our ability to protect our current and future technology, manufacturing processes and brand names, including Alpha Pro Tech, through a combination of patent, trademark, trade secret and unfair competition laws. Our patents expired in February 2024, which may make it more difficult to protect our intellectual property.
The resulting foreign currency translation gains or losses are deferred as accumulated other comprehensive loss (“AOCL”) and reclassified to earnings only upon sale or liquidation of that business.
The resulting foreign currency translation gains or losses are deferred as accumulated other comprehensive loss (“AOCL”) and reclassified to earnings only upon sale or liquidation of that business. Our joint venture, as well as any additional joint ventures, may present risks.
A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on the Company’s results of operations or cash flows in any particular period. Our common stock price is volatile, which could result in substantial losses for individual shareholders.
A future adverse ruling, settlement or unfavorable development could result in charges that could have a material adverse effect on the Company’s results of operations or cash flows in any particular period.
Any disruption of our production schedule caused by an unexpected shortage of supplies even for a relatively short period of time could cause us to alter production schedules or suspend production entirely, which could cause a loss of revenues, which would adversely affect our operations Our success depends in part on protection of our intellectual property, and our failure to protect our intellectual property could adversely affect our competitive advantage, our brand recognition and our business.
Any disruption of our production schedule caused by an unexpected shortage of supplies even for a relatively short period of time could cause us to alter production schedules or suspend production entirely, which could cause a loss of revenues, which would adversely affect our operations.
The market price of our common stock has been volatile, and we expect that it will continue to be volatile.
Our common stock price is volatile, which could result in substantial losses for individual shareholders. The market price of our common stock has been volatile, and we expect that it will continue to be volatile.
Our customers are not contractually obligated to purchase any fixed quantities of products, and they may stop placing orders with us at any time.
Our operating results could be negatively affected by the loss of revenue from one or more large customers. Our customers are not contractually obligated to purchase any fixed quantities of products, and they may stop placing orders with us at any time.
Removed
While preparing the financial statements for the year ending December 31, 2022, the Company identified an error with respect to recording foreign currency translation gains or losses related to the Company’s unconsolidated affiliate operations in India.
Added
Our success depends in part on protection of our intellectual property, and our failure to protect our intellectual property could adversely affect our competitive advantage, our brand recognition and our business.
Removed
Management has determined that this revision was not material on a quantitative or qualitative basis to the prior period financial statements based on our analysis performed in accordance with the guidance provided by SEC Staff Accounting Bulletins No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements and did not require a restatement.
Added
It is possible we or a third party that we rely on could incur interruptions from a loss of communications, hardware or software failures, a cybersecurity attack or an incident relating to our IT systems or technology, ransomware, phishing attacks, computer viruses or malware.
Removed
However, management determined that adjusting the cumulative effect of the prior period errors in the current year would materially affect the current year presentation and therefore management elected to revise the prior period financial statements. We have identified a material weakness in our internal control over financial reporting that resulted in errors in our financial statements.
Added
In the current environment, there are numerous and evolving risks to cybersecurity and privacy, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, employee malfeasance and human or technological error.
Removed
If we fail to remediate this material weakness or if we experience additional material weaknesses in the future, we may be unable to accurately and timely report our financial results or comply with the requirements of being a public company, which may adversely affect investor confidence in us; could cause the price of our common stock to decline and harm our business and operating results; and expose us to potential litigation.
Added
High-profile cybersecurity incidents at other companies and in government agencies have increased in recent years, and security industry experts and government officials have warned about the risks of hackers and cyberattacks targeting businesses such as ours.
Removed
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected and corrected on a timely basis.
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Manufacturers are required to certify that neither convicted, forced or indentured labor (as defined under U.S. law) nor child labor (as defined by law in the manufacturer’s country) is used in the production process, that compensation is paid in accordance with local law and that their factories are in compliance with local safety regulations.
Removed
Based on its evaluation in accordance with the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), management identified a material weakness in the translation of foreign currency which decreased equity investment in unconsolidated affiliate and created an accumulated other comprehensive loss. 8 The correction of these errors and the adjustments for these changes to the Company’s previously issued audited annual consolidated financial statements are shown in Note 2 to the financial statements, and the correction of these errors and the adjustments for these changes to the previously issued unaudited quarterly consolidated financial statements are shown in Note 19 to the financial statements.
Added
Although we promote ethical business practices and our sourcing personnel periodically visit and monitor the operations of our independent contract manufacturers, suppliers and licensees, we do not control them or their labor practices.
Removed
If the Company is not able to remediate the material weakness, or if the Company identifies any new material weaknesses in the future, it may be unable to maintain compliance with the requirements of securities laws or stock exchange listing rules regarding timely filing of information; it could lose access to sources of capital or liquidity; and investors may lose confidence in its financial reporting and its stock price may decline as a result.
Added
If one of our independent contract manufacturers, suppliers or licensees violates labor or other laws or diverges from those labor practices generally accepted as ethical in the U.S., it could result in adverse publicity for us, damage our reputation in the U.S., or render our conduct of business in a particular foreign country undesirable or impractical, any of which could harm our business.
Removed
Though the Company is taking steps to remediate the material weakness, it cannot assure you that the measures it has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses. Our joint venture, as well as any additional joint ventures, may present risks.
Removed
Risks Related to the COVID-19 Pandemic The effects of the COVID-19 pandemic could continue to have a material adverse effect on our business, financial results and results of operations. The ongoing COVID-19 pandemic has caused some disruptions to our business operations to date, and could have a material adverse effect on our business, operations and financial condition in the future.
Removed
The potential negative effects to our operations, including reductions in production levels, research and development activities and increased costs resulting from our efforts to mitigate the impact of COVID-19, have adversely affected and may continue to adversely affect our ability to provide our products.
Removed
Worldwide supply chain disruption relating to the COVID-19 pandemic has resulted in product shortages that have impacted and may continue to impact our ability to manufacture our products.
Removed
We currently utilize third parties to, among other things, manufacture certain components and materials for our products, and to provide services such as sterilization services, and we purchase these materials and services from numerous suppliers worldwide.
Removed
If either we or any third parties in the supply chain for materials used in the production of our products continue to be adversely impacted by the COVID-19 pandemic, including the restrictions resulting from the COVID-19 pandemic, our supply chain may continue to be disrupted, limiting our ability to manufacture our products.
Removed
These disruptions may, among other things, continue to impact our ability to produce and supply products in quantities necessary to meet market demand. In addition, we have experienced increases in the costs of materials and supplies and shipping costs due to supply chain disruptions, and expect to continue to see higher costs.
Removed
As a result of the COVID-19 pandemic, we experienced a significant increase in orders of our PPE products from both legacy and new customers in 2020, followed by a decline in sales in 2021 and 2022 for such products relative to 2020 levels.
Removed
Because of the uncertainty associated with the pandemic, we may experience additional decreases in sales from certain of these customers at the point at which conditions related to the virus change or improve and demand for these products subsides, which could impact our expectations of future orders and sales.
Removed
Moreover, the impacts of the COVID-19 pandemic may exacerbate other pre-existing risks, such as political, regulatory, social, financial, operational and cybersecurity risks, and those associated with global economic conditions, any of which could have a material adverse effect on our business.
Removed
The full impact of COVID-19 on our financial condition and results of operations remains uncertain and will depend on future developments, such as the ultimate duration and scope of the outbreak (including the emergence or re-emergence of variants and their transmissibility, and the success of vaccination programs and treatments).
Removed
In addition, our common stock price experienced significant fluctuations due to the effects of the COVID-19 outbreak on our operations. Such fluctuations may create conditions in which the market price of our common stock does not reflect an accurate measure of the long-term value of our common stock.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThese leases related to additional temporary spaces needed due to higher inventory levels as a result of COVID-19. 12 The Company manufactures its surgical face masks at a facility located in Salt Lake City, Utah. The monthly rent is $18,638 for 34,500 square feet. This lease expires on July 31, 2024.
Biggest changeThe Company manufactures its surgical face masks at a facility located in Salt Lake City, Utah. The monthly rent is $19,200 for 34,500 square feet. This lease expires on July 31, 2024. We will not be renewing this lease as we will be moving our face mask facility to our new Nogales, Arizona leased space.
The Disposable Protective Apparel segment has its cutting operation, warehousing and shipping facility in Nogales, Arizona. The approximate monthly rent is $30,600 for 60,000 square feet. This lease expires on December 31, 2023. The Disposable Protective Apparel segment also has an additional warehousing facility located in Nogales, Arizona.
The Disposable Protective Apparel segment has its cutting operation, warehousing and shipping facility in Nogales, Arizona. The approximate monthly rent is $30,600 for 60,000 square feet. This lease expired on December 31, 2023. The Disposable Protective Apparel segment also has an additional warehousing facility located in Nogales, Arizona.
Working out of the principal executive office are the President and Chief Executive Officer, Lloyd Hoffman, and the Chief Financial Officer, Colleen McDonald. The Building Supply segment manufacturing facility is located in Valdosta, Georgia. The average monthly rent is $37,500 for 165,400 square feet. This lease expires on January 1, 2024.
Working out of the principal executive office are the President and Chief Executive Officer, Lloyd Hoffman, and the Chief Financial Officer, Colleen McDonald. The Building Supply segment manufacturing facility is located in Valdosta, Georgia. The approximate average monthly rent is $39,000 for 165,400 square feet. This lease expires on December 31, 2034.
Item 2. Properties. The Company’s principal executive office is located at 60 Centurian Drive, Suite 112, Markham, Ontario, Canada, L3R 9R2. The approximate monthly rent is $2,500 for 2,831 square feet under a lease which expires September 30, 2023.
Item 2. Properties. The Company’s principal executive office is located at 53 Wellington Street East, Aurora, Ontario, Canada, L4G 1H6. The approximate monthly rent is $6,600 for 2,568 square feet under a lease which expires August 31, 2026.
Removed
The approximate monthly rent is $6,100 for 16,500 square feet, the lease expires in July 2023, and we do not intend to renew the lease at this time.
Added
The approximate monthly rent is $6,600 for 16,500 square feet, the lease expired in February 2024. We will remain in these two locations as we transition to our new leased space in Nogales Arizona beginning in March of 2024. Our new space is 137,500 square feet, approximate monthly rent is $ 76,000 and expires on February 28, 2029.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Lawsuit is in its early stages and the final outcome, including the potential amount of any recovery for the Company’s claims, is uncertain. Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies, that has not been recorded as the matter was not resolved as of December 31, 2022. Any recovery will be recorded when received.
Biggest changeThe final outcome of the Lawsuit, including the potential amount of any recovery for the Company’s claims, is uncertain. Any potential recovery represents a gain contingency in accordance with ASC 450, Contingencies, that has not been recorded as the matter was not resolved as of December 31, 2023. Any recovery will be recorded when received.
Although it is not possible to determine with certainty at this point in time what liability, if any, the Company will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and results of operations.
Although it is not possible to determine with certainty at this point in time what liability, if any, the Company will have as a result of such litigation, based on consultation with legal counsel, management does not anticipate that the ultimate liability, if any, resulting from such litigation will have a material effect on the Company’s financial condition and results of operations. 13 Item 4.
As of December 31, 2022, the Company has written off the $490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit. As of the date hereof, no counterclaims have been asserted against the Company. The Company believes there would not be any meritorious claims against the Company in the Lawsuit.
In 2022, the Company wrote off the $490,000 balance of the deposit paid for the equipment, pending any recovery in the Lawsuit. As of the date hereof, no counterclaims have been asserted against the Company. The Company believes there would not be any meritorious claims against the Company in the Lawsuit.
Removed
Item 4. Mine Safety Disclosures. N/A PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeFinancial Statements and Supplementary Data 22 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 49 Item 9A. Controls and Procedures 49 Item 9B. Other Information 50
Biggest changeFinancial Statements and Supplementary Data 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 51 Item 9A. Controls and Procedures 51 Item 9B. Other Information 51 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 51 PART III: 52 Item 10. Directors, Executive Officers and Corporate Governance 52 Item 11. Executive Compensation 52 Item 12.
Item 4. Mine Safety Disclosures 13 PART II: 13 Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 13 Item 6. (Reserved) 14 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 21 Item 8.
Item 4. Mine Safety Disclosures 14 PART II: 14 Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 14 Item 6. (Reserved) 14 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 14 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20 Item 8.
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Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 52 Item 13. Certain Relationships and Related Transactions, and Director Independence 53 Item 14. Principal Accountant Fees and Services 53 PART IV: 53 Item 15. Exhibits and Financial Statement Schedules 53

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (1) October 1 - 31, 2022 82,000 $ 4.08 82,000 $ 900,000 November 1 - 30, 2022 84,800 4.10 84,800 559,000 December 1 - 31, 2022 89,200 4.04 89,200 2,195,000 256,000 4.07 256,000 (1) On December 15, 2022, the Company announced that the Board of Directors had authorized a $2,000,000 expansion of the Company’s existing share repurchase program.
Biggest changeIssuer Purchases of Equity Securities Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) October 1 - 31, 2023 120,400 $ 4.14 120,400 November 1 - 30, 2023 31,800 4.17 31,800 December 1 - 31, 2023 74,700 5.14 74,700 226,900 4.48 226,900 (1) On November 27, 2023, the Company announced that the Board of Directors had authorized a $2,000,000 expansion of the Company’s existing share repurchase program.
MARKET INFORMATION The Company’s common stock trades on the NYSE American (formerly the NYSE MKT, the NYSE Amex and the American Stock Exchange) (the “NYSE American”) under the symbol “APT.” As of March 1, 2023, the Company’s common stock was held by 104 shareholders of record and approximately 17,700 beneficial owners.
MARKET INFORMATION The Company’s common stock trades on the NYSE American (formerly the NYSE MKT, the NYSE Amex and the American Stock Exchange) (the “NYSE American”) under the symbol “APT.” As of March 1, 2024, the Company’s common stock was held by 102 shareholders of record and approximately 12,437 beneficial owners.
The Board of Directors’ current policy is not to pay dividends but rather to use available funds to repurchase common shares in accordance with the Company’s repurchase program and to fund the continued development and growth of the Company.
The Board of Directors’ current policy is not to pay dividends but rather to use available funds to repurchase common shares in accordance with the Company’s repurchase program and to fund the continued development and growth of the Company. Consequently, the Company currently has no plans to pay cash dividends in the foreseeable future.
The stock repurchase plan expires on December 15, 2024 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS We did not sell any unregistered equity securities during the periods covered by this Annual Report on Form 10-K.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS We did not sell any unregistered equity securities during the periods covered by this Annual Report on Form 10-K.
All of the shares included in this table were purchased pursuant to this program. Since the inception of the share repurchase program in 1999, the Company has authorized the repurchase of $48,402,000 of common stock, of which $2,195,000 was available for repurchase as of December 31, 2022.
All of the shares included in this table were purchased pursuant to this program. Since the inception of the share repurchase program in 1999, the Company has authorized the repurchase of $52,402,000 of common stock, of which $2,194,000 was available for repurchase as of December 31, 2023. The stock repurchase plan expires on December 15, 2024.
Consequently, the Company currently has no plans to pay cash dividends in the foreseeable future. 13 ISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18 (a)(3) of the Securities Exchange Act of 1934, during the fourth quarter of 2022.
ISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth purchases made by or on behalf of the Company or any “affiliated purchaser,” as defined in Rule 10b-18 (a)(3) of the Securities Exchange Act of 1934, during the fourth quarter of 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe impairment on deposit was due to equipment for the Disposable Protective Apparel segment that was not delivered and the Company has filed a lawsuit (the “Lawsuit”) in this matter. See Part I, Item 3, “Legal Proceedings,” for more information on the Lawsuit. Income before Provision for Income Taxes.
Biggest changeThe increase was primarily due to an increase in equity in income of unconsolidated affiliate of $390,000 and an increase in interest income of $668,000. In addition, there was a loss on fixed assets of $490,000 in 2022 due to equipment for the Disposable Protective Apparel segment that was not delivered. The Company has filed a lawsuit in this matter.
The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business. Leases: We determine if an arrangement is a lease at its inception. Operating leases are included as right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheet.
The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business. 15 Leases: We determine if an arrangement is a lease at its inception. Operating leases are included as right-of-use (“ROU”) assets and lease liabilities on our consolidated balance sheet.
Special Note Regarding Smaller Reporting Company Status We are filing this Annual Report on Form 10-K as a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) based on our public float (the aggregate market value of our common equity held by non-affiliates of the Company) as of the last business day of our second fiscal quarter of 2022.
Special Note Regarding Smaller Reporting Company Status We are filing this Annual Report on Form 10-K as a “smaller reporting company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended) based on our public float (the aggregate market value of our common equity held by non-affiliates of the Company) as of the last business day of our second fiscal quarter of 2023.
Our significant accounting policies and estimates are more fully described in Note 3 – “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in Item 8. Our critical accounting policies and estimates include the following: Accounts Receivable: Accounts receivable are recorded at the invoice amount and do not bear interest.
Our significant accounting policies and estimates are more fully described in Note 2 – “Summary of Significant Accounting Policies” in the notes to our consolidated financial statements in Item 8. Our critical accounting policies and estimates include the following: Accounts Receivable: Accounts receivable are recorded at the invoice amount and do not bear interest.
Management has not identified any new standards that it believes merit further discussion at this time.
Management has not identified any other new standards that it believes merit further discussion at this time.
The Company has determined that, as of December 31, 2022, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. 15 Sales Returns, Rebates and Allowances: Sales revenues are reduced for any anticipated sales returns, rebates and allowances based on historical experience.
The Company has determined that, as of December 31, 2023, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables. Sales Returns, Rebates and Allowances: Sales revenues are reduced for any anticipated sales returns, rebates and allowances based on historical experience.
Our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value of such options. In 2022 and 2021, we recorded $147,000 and $315,000, respectively, in compensation expense for share-based awards. OVERVIEW Alpha Pro Tech is in the business of protecting people, products and environments.
Our stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value of such options. In 2023 and 2022, we recorded $170,000 and $147,000, respectively, in compensation expense for share-based awards. OVERVIEW Alpha Pro Tech is in the business of protecting people, products and environments.
In 2022 and 2021, we recorded approximately $152,000 and $376,000, respectively, in write-downs of inventory. Foreign currency translation: Our unconsolidated affiliate operations are in India, so U.S. GAAP requires the Company to adjust the value of its investment for changes in foreign currency exchange rates.
In 2023 and 2022, we recorded approximately $292,000 and $152,000, respectively, in write-downs of inventory. Foreign currency translation: Our unconsolidated affiliate operations are in India, so U.S. GAAP requires the Company to adjust the value of its investment for changes in foreign currency exchange rates.
We also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets. As of December 31, 2022, we had $1.7 million in ROU assets and $1.8 million in lease liabilities.
We also elected a practical expedient to not separate lease and non-lease components. We did not elect the practical expedient to use hindsight in determining our lease terms or assessing impairment of our ROU assets. As of December 31, 2023, we had $4.8 million in ROU assets and $4.8 million in lease liabilities.
The estimated effective tax rate was 25.3% for the year ended December 31, 2022, compared to 20.5% for the year ended December 31, 2021. The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate. Net Income.
The estimated effective tax rate was 22.8% for the year ended December 31, 2023, compared to 25.3% for the year ended December 31, 2022. The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate. Net Income.
RESULTS OF OPERATIONS The following table sets forth certain operational data as a percentage of sales for the years indicated: 2022 2021 Net sales 100.0 % 100.0 % Gross profit 35.0 % 36.9 % Selling, general and administrative expenses 26.2 % 24.1 % Income from operations 7.5 % 11.5 % Income before provision for income taxes 7.1 % 12.4 % Net income 5.3 % 9.8 % Year ended December 31, 2022 compared to year ended December 31, 2021 Sales.
RESULTS OF OPERATIONS The following table sets forth certain operational data as a percentage of sales for the years indicated: 2023 2022 Net sales 100.0 % 100.0 % Gross profit 37.3 % 35.0 % Selling, general and administrative expenses 29.0 % 26.2 % Income from operations 6.7 % 7.5 % Income before provision for income taxes 8.9 % 7.1 % Net income 6.8 % 5.3 % Year ended December 31, 2023 compared to year ended December 31, 2022 Sales.
The sales mix of the Building Supply segment for the year ended December 31, 2022 was approximately 47% for synthetic roof underlayment, 43% for housewrap and 10% for other woven material. This compared to approximately 50% for synthetic roof underlayment, 43% for housewrap and 7% for other woven material for the year ended December 31, 2021.
The sales mix of the Building Supply segment for the year ended December 31, 2023, was approximately 42% for synthetic roof underlayment, 47% for housewrap and 11% for other woven material. This compared to approximately 47% for synthetic roof underlayment, 43% for housewrap and 10% for other woven material for the year ended December 31, 2022.
Net cash used in investing activities was $492,000 for the year ended December 31, 2022, compared to net cash used in investing activities of $2,524,000 for 2021. Investing activities for the year ended December 31, 2022 consisted of the purchase of property and equipment of $492,000.
Net cash used in investing activities was $792,000 for the year ended December 31, 2023, compared to net cash used in investing activities of $492,000 for 2022. Investing activities for the year ended December 31, 2023 and 2022, consisted of the purchase of property and equipment.
Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, new products, production levels and sales in 2023, the expected effects of the COVID-19 pandemic, and other information that is not historical information.
Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs, plans or intentions, including, without limitation, our expected orders, new products, production levels and sales in 2024, and other information that is not historical information.
Net income as a percentage of net sales for the year ended December 31, 2022 was 5.3%, and net income as a percentage of net sales for 2021 was 9.8%. Basic earnings per common share for the years ended December 31, 2022 and 2021 were $0.26 and $0.51, respectively.
Net income as a percentage of net sales for the year ended December 31, 2023, was 6.8%, and net income as a percentage of net sales for 2022 was 5.3%. Basic and diluted earnings per common share for the years ended December 31, 2023 and 2022, were $0.35 and $0.26, respectively.
Our products are grouped into two business segments: (i) the Building Supply segment, consisting of construction weatherization products, such as housewrap and synthetic roof underlayment as well as other woven material; and (ii) the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.
Our products are sold under the “Alpha Pro Tech” brand name, as well as under private label. 16 Our products are grouped into two business segments: (i) the Building Supply segment, consisting of construction weatherization products, such as housewrap, housewrap accessories, synthetic roof underlayment and synthetic roof underlayment accessories, as well as other woven material; and (ii) the Disposable Protective Apparel segment, consisting of disposable protective garments (including shoecovers, bouffant caps, coveralls, gowns, frocks and lab coats), face masks and face shields.
The Building Supply segment increase during the year ended December 31, 2022 was primarily due to a 1.3% increase in sales of housewrap and a 37.4% increase in sales of other woven material, partially offset by a decrease in sales of synthetic roof underlayment of 3.6% and an increase in rebates compared to the same period of 2021.
The Building Supply segment increase during the year ended December 31, 2023, was primarily due to a 22.2% increase in sales of housewrap and a 18.0% increase in sales of other woven material, partially offset by a decrease in sales of synthetic roof underlayment of 3.0% and an increase in rebates compared to the same period of 2022.
The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased employee compensation and general factory and office expenses, partially offset by increased rent and utilities. The increase in the Building Supply segment expenses was related to increased employee compensation, marketing, insurance, travel and to a lesser extent general office expenses, partially offset by decreased commission expense.
The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased employee compensation, partially offset by increased marketing expenses, travel expenses and sales commission. The increase in the Building Supply segment expenses was related to increased employee compensation, sales commission, travel, insurance, and general factory expenses.
The sales mix of the Disposable Protective Apparel segment for the year ended December 31, 2022 was approximately 71% for disposable protective garments, 19% for face masks and 10% for face shields. This sales mix is compared to approximately 63% for disposable protective garments, 26% for face masks and 11% for face shields for the year ended December 31, 2021.
The sales mix of the Disposable Protective Apparel segment for the year ended December 31, 2023, was approximately 88% for disposable protective garments, 9% for face masks and 3% for face shields. This sales mix is compared to approximately 71% for disposable protective garments, 19% for face masks and 10% for face shields for the year ended December 31, 2022.
The general terms for receivables is net 30 days. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future.
The allowance for credit losses is the Company’s best estimate of the amount of expected credit losses in the Company’s existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in a requirement for additional allowances in the future.
Net cash used in financing activities for the year ended December 31, 2021 resulted from the payment of $4,408,000 for the repurchase of common stock partially offset by the proceeds of $427,000 from the exercise of stock options. As of December 31, 2022, we had $2,195,000 available for additional stock purchases under our stock repurchase program.
Net cash used in financing activities for the year ended December 31, 2022 resulted from the payment of $3,882,000 for the repurchase of common stock, partially offset by $80,000 in proceeds from the exercise of stock options. 19 As of December 31, 2023, we had $2,194,000 available for stock purchases under our stock repurchase program.
As a result of being a smaller reporting company, we are allowed and have elected to omit certain information from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate and necessary to aid in an understanding of the current consolidated financial position, changes in financial position and results of operations of the Company. 14 Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“U.S.
As a result of being a smaller reporting company, we are allowed and have elected to omit certain information from this Management’s Discussion and Analysis of Financial Condition and Results of Operations; however, we have provided all information for the periods presented that we believe to be appropriate and necessary to aid in an understanding of the current consolidated financial position, changes in financial position and results of operations of the Company.
The decrease in corporate unallocated expenses was primarily due to decreased employee compensation, accrued bonuses, stock option and restricted stock expenses and public company expenses, partially offset by increased insurance expenses.
The increase in corporate unallocated expenses was primarily due to increased employee compensation, accrued bonuses, stock option and restricted stock expenses, professional fees, and general office expenses, partially offset by decreased insurance expenses.
The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment. Income from Operations. Income from operations decreased by $3,277,000, or 41.3%, to $4,650,000 for the year ended December 31, 2022, compared to $7,927,000 for the year ended December 31, 2021.
The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment. Income from Operations. Income from operations decreased by $518,000, or 11.1%, to $4,132,000 for the year ended December 31, 2023, compared to $4,650,000 for the year ended December 31, 2022.
We accomplish this by developing, manufacturing and marketing a line of high-value, disposable protective apparel products for the cleanroom, industrial, pharmaceutical, medical and dental markets. We also manufacture a line of building supply construction weatherization products. Our products are sold under the “Alpha Pro Tech” brand name, as well as under private label.
We accomplish this by developing, manufacturing and marketing a line of high-value, disposable protective apparel products for the cleanroom, industrial, pharmaceutical, medical and dental markets. We also manufacture a line of building supply construction weatherization products.
Income from operations as a percentage of net sales for the year ended December 31, 2022 was 7.5%, compared to 11.5% for 2021. Other Income. Other income decreased by $828,000 to a loss of $255,000 for the year ended December 31, 2022, from other income of $573,000 for 2021.
Income from operations as a percentage of net sales for the year ended December 31, 2023, was 6.7%, compared to 7.5% for 2022. Other Income. Other income increased by $1,548,000 to income of $1,293,000 for the year ended December 31, 2023, from a loss of $255,000 for 2022.
In 2022 and 2021, we recorded approximately $3,000 and $0, respectively, in charge-offs against the allowance. Inventories: Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost or net realizable value. Allowances are recorded for slow-moving, obsolete or unusable inventory.
Inventories: Inventories include freight-in, materials, labor and overhead costs and are stated at the lower of cost or net realizable value. Allowances are recorded for slow-moving, obsolete or unusable inventory.
The Company expects to fund the remaining balance from cash flow from operations. We believe that our current cash balance and expected cash flow from operations will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.
Future repurchases are expected to be funded from cash on hand and cash flows from operating activities. We believe that our current cash balance and expected cash flow from operations will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.
The decreased income from operations was primarily due to a decrease in gross profit of $3,615,000, partially offset by a decrease in selling, general and administrative expenses of $335,000 and a decrease in depreciation and amortization expense of $3,000.
The decreased income from operations was primarily due to an increase in gross profit of $1,146,000, offset by an increase in selling, general and administrative expenses of $1,553,000 and an increase in depreciation and amortization expense of $111,000.
Net cash used in financing activities for the year ended December 31, 2022 resulted from the payment of $3,882,000 for the repurchase of common stock, partially offset by the proceeds of $80,000 from the exercise of stock options.
Net cash used in financing activities for the year ended December 31, 2023 resulted from the payment of $4,002,000 for the repurchase of common stock and $40,000 for treasury stock excise tax, partially offset by $464,000 in proceeds from the exercise of stock options.
Consolidated sales for the year ended December 31, 2022 decreased to $61,981,000, from $68,637,000 for the year ended December 31, 2021, representing a decrease of $6,656,000, or 9.7%. This decrease consisted of decreased sales in the Disposable Protective Apparel segment of $6,704,000, partially offset by increased sales in the Building Supply segment of $48,000.
Consolidated sales for the year ended December 31, 2023, decreased to $61,232,000, from $61,981,000 for the year ended December 31, 2022, representing a decrease of $749,000, or 1.2%. This decrease consisted of decreased sales in the Disposable Protective Apparel segment of $4,208,000, partially offset by increased sales in the Building Supply segment of $3,459,000.
The decrease in cash from December 31, 2021 was due to cash used in investing activities of $492,000 and cash used in financing activities of $3,802,000, partially offset by cash provided by operating activities of $4,277,000.
The increase in cash from December 31, 2022, was due to cash provided by operating activities of $8,458,000, partially offset by cash used in investing activities of $792,000 and cash used in financing activities of $3,578,000.
A bonus amount of $231,000 was accrued for the year ended December 31, 2022, compared to $447,000 for the year ended December 31, 2021. Depreciation and Amortization. Depreciation and amortization expense decreased by $3,000, or 0.4%, to $814,000 for the year ended December 31, 2022, from $817,000 for the year ended December 31, 2021.
A bonus amount of $286,000 was accrued for the year ended December 31, 2023, compared to $231,000 for the year ended December 31, 2022. Depreciation and Amortization. Depreciation and amortization expense increased by $111,000, or 13.6%, to $925,000 for the year ended December 31, 2023, from $814,000 for the year ended December 31, 2022.
This decrease in income before provision for income taxes was due to a decrease in income from operations of $3,277,000 and a decrease in other income of $828,000. Provision for Income Taxes . The provision for income taxes for the year ended December 31, 2022 was $1,113,000, compared to $1,744,000 for 2021.
This increase in income before provision for income taxes was due to an increase in other income of $1,548,000, partially offset by a decrease in income from operations of $518,000. Provision for Income Taxes . The provision for income taxes for the year ended December 31, 2023, was $1,236,000, compared to $1,113,000 for 2022.
Net cash provided by operating activities of $4,277,000 for the year ended December 31, 2022 was due to net income of $3,282,000, as adjusted primarily by the following: stock-based compensation expense of $147,000, depreciation and amortization expense of $814,000, equity in income of unconsolidated affiliate of $87,000, operating lease expense net of accretion of $923,000, an increase in accounts receivable of $2,193,000, a decrease in prepaid expenses of $2,043,000, a decrease in inventory of $572,000, a decrease in accounts payable and accrued liabilities of $271,000, and a decrease in lease liabilities of $926,000, all compared to December 31, 2021.
Net cash provided by operating activities of $8,458,000 for the year ended December 31, 2023 was due to net income of $4,189,000, as adjusted primarily by the following: stock-based compensation expense of $170,000, depreciation and amortization expense of $925,000, equity in income of unconsolidated affiliate of $477,000, operating lease asset amortization of $774,000, a decrease in accounts receivable of $428,000, an increase in prepaid expenses of $1,108,000, a decrease in inventory of $4,266,000, an increase in accounts payable and accrued liabilities of $398,000, and an decrease in lease liabilities of $785,000, all compared to December 31, 2022.
Investing activities for the year ended December 31, 2021 consisted of the purchase of property and equipment of $2,524,000. Net cash used in financing activities was $3,802,000 for the year ended December 31, 2022, compared to net cash used in financing activities of $3,981,000 for 2021.
Net cash used in financing activities was $3,578,000 for the year ended December 31, 2023, compared to net cash used in financing activities of $3,802,000 for 2022.
Special Note Regarding Forward-Looking Statements Certain information set forth in this Annual Report on Form 10-K contains “forward-looking statements” within the meaning of federal securities laws.
You should read the following discussion and analysis together with our consolidated financial statements and the notes to our consolidated financial statements, which appear elsewhere in this report. 14 Special Note Regarding Forward-Looking Statements Certain information set forth in this Annual Report on Form 10-K contains “forward-looking statements” within the meaning of federal securities laws.
During the year ended December 31, 2022, we repurchased 910,700 shares of common stock at a cost of $3,882,000. As of December 31, 2022, we had repurchased a total of 19,460,617 shares of common stock at a cost of approximately $46,324,000 through our repurchase program which commenced in 1999. We retire all stock upon repurchase.
During the year ended December 31, 2023, we repurchased 951,010 shares of common stock at a cost of $4,002,000. As of December 31, 2023, we had repurchased a total of 20,411,627 shares of common stock at a cost of approximately $50,326,000 through our repurchase program which commenced in 1999. We retire all stock upon repurchase.
Disposable Protective Apparel Segment Sales for the Disposable Protective Apparel segment for the year ended December 31, 2022 decreased by $6,704,000, or 21.1%, to $25,044,000, compared to $31,748,000 for 2021.
Disposable Protective Apparel Segment Sales for the Disposable Protective Apparel segment for the year ended December 31, 2023, decreased by $4,208,000, or 16.8%, to $20,836,000, compared to $25,044,000 for 2022.
Accounts payable and accrued liabilities as of December 31, 2022 decreased by $271,000, or 15.2%, to $1,507,000, from $1,778,000 as of December 31, 2021. The decrease was primarily due to a decrease in accrued bonuses and payroll, partially offset by an increase in trade accounts payable.
Accounts payable and accrued liabilities as of December 31, 2023 increased by $398,000, or 26.4%, to $1,905,000, from $1,507,000 as of December 31, 2022. The increase was primarily due to an increase in accrued bonuses and payroll.
The change in expenses by segment for the year ended December 31, 2022 was as follows: Disposable Protective Apparel was down $709,000, or 13.0%; Building Supply was up $810,000, or 14.4%; and corporate unallocated expenses were down $582,000, or 10.5%.
The change in expenses by segment for the year ended December 31, 2023, was as follows: Disposable Protective Apparel was down by $55,000, or 1.1%; Building Supply was up by $1,244,000, or 19.3%; and corporate unallocated expenses were up by $364,000, or 7.3%.
As a percentage of net sales, selling, general and administrative expenses increased to 26.2% for the year ended December 31, 2022, from 24.1% for 2021, primarily as a result of lower net sales.
Selling, general and administrative expenses increased by $1,553,000, or 9.6%, to $17,772,000 for the year ended December 31, 2023, from $16,219,000 for the year ended December 31, 2022. As a percentage of net sales, selling, general and administrative expenses increased to 29.0% for the year ended December 31, 2023, from 26.2% for 2022.
Building Supply Segment Building Supply segment sales for the year ended December 31, 2022 increased by $48,000, or 0.1%, to $36,937,000, compared to $36,889,000 for the year ended December 31, 2021.
Building Supply Segment Building Supply segment sales for the year ended December 31, 2023, increased by $3,459,000, or 9.4%, to a record sales year of $40,396,000 compared to $36,937,000 for the year ended December 31, 2022.
The number of days that sales remained outstanding as of December 31, 2022, calculated by using an average of accounts receivable outstanding and annual revenue, was 35 days, compared to 24 days as of December 31, 2021. Inventory decreased by $572,000, or 2.3%, to $24,397,000 as of December 31, 2022, from $24,969,000 as of December 31, 2021.
The number of days that sales remained outstanding as of December 31, 2023, calculated by using an average of accounts receivable outstanding and annual revenue, was 40 days, compared to 35 days as of December 31, 2022. The increase in days was due to higher sales in the last months of 2023 compared to the same period of 2022.
The segment was up 8.7% year to date at the end of the third quarter of 2022. We have experienced the five highest quarters on record for the Building Supply segment over the past seven quarters: the first, second and third quarters of 2022 and the second and third quarters of 2021.
We have experienced the six highest quarters on record for the Building Supply segment over the past eight quarters: the second, third, and fourth quarters of 2023 and the first, second and third quarters of 2022.
See Note 7 – “Equity Investments in Unconsolidated Affiliate” in the notes to our consolidated financial statements in Item 8 for more information on our relationship with our non-consolidated affiliate Harmony Plastics Private Limited. 20 New Accounting Standards Management periodically reviews new accounting standards that are issued.
Related Parties During 2023 and 2022, the Company had no related party transactions, other than the Company’s transactions with its non-consolidated affiliate, Harmony. See Note 7 – “Equity Investments in Unconsolidated Affiliate” in the notes to our consolidated financial statements in Item 8 for more information on our relationship with our non-consolidated affiliate Harmony Plastics Private Limited.
As of December 31, 2022, the Company’s current ratio (current assets/current liabilities) was 22:1, compared to a current ratio of 20:1 as of December 31, 2021. Cash decreased by 0.1%, or $17,000, to $16,290,000 as of December 31, 2022, compared to $16,307,000 as of December 31, 2021, and working capital decreased by $182,000 from $50,338,000 as of December 31, 2021.
LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2023, the Company had cash and cash equivalents (“cash”) of $20,378,000 and working capital of $50,498,000. As of December 31, 2023, the Company’s current ratio (current assets/current liabilities) was 21:1, compared to a current ratio of 22:1 as of December 31, 2022.
This segment decrease was due to a 10.7% decrease in sales of disposable protective garments, a 43.8% decrease in sales of face masks and a 25.6% decrease in sales of face shields.
This segment decrease was due to a 4.0% increase in sales of disposable protective garments that was more than offset by a 62.3% decrease in sales of face masks and a 75.5% decrease in sales of face shields.
The gross profit margin was 35.0% for the year ended December 31, 2022, compared to 36.9% for the year ended December 31, 2021. 18 The gross profit margin was negatively affected in 2022 by significant increases in ocean freight and other transportation costs. Ocean freight rates have recently come down but not to pre-pandemic levels.
The gross profit margin was 37.3% for the year ended December 31, 2023, compared to 35.0% for the year ended December 31, 2022. The gross profit margin in 2023 was positively affected by ocean freight rates that have come down since the latter part of 2022.
Accounts receivable increased by $2,193,000, or 45.9%, to $6,973,000 as of December 31, 2022, from $4,780,000 as of December 31, 2021. The increase in accounts receivable was primarily related to increased payment terms to our major international channel partner.
Accounts receivable decreased by $428,000, or 6.1%, to $6,545,000 as of December 31, 2023, from $6,973,000 as of December 31, 2022. The decrease in accounts receivable was primarily related to decreased receivables from our related party.
The decrease was primarily due to decreased prepaid inventory and equipment, partially offset by increased prepayments for insurance. Right-of-use assets as of December 31, 2022 decreased by $923,000 to $1,725,000 from $2,648,000 as of December 31, 2021 as a result of amortization of the balance.
Prepaid expenses increased by $1,108,000, or 22.6%, to $6,010,000 as of December 31, 2023, from $4,902,000 as of December 31, 2022. The increase was primarily due to increased prepaid inventory and equipment and increased prepayments for insurance.
Net income for the year ended December 31, 2022 was $3,282,000, compared to net income of $6,756,000 for 2021, representing a decrease of $3,474,000, or 51.4%.
Net income for the year ended December 31, 2023, was $4,189,000 compared to net income of $3,282,000 for 2022, representing an increase of $907,000, or 27.6%. The net income increase between 2023 and 2022, was due to an increase in income before provision for income taxes of $1,030,000, partially offset by an increase in provision for income taxes of $123,000.
Income before provision for income taxes for the year ended December 31, 2022 was $4,395,000, compared to income before provision for income taxes of $8,500,000 for 2021, representing a decrease of $4,105,000, or 48.3%.
See Part I, Item 3, “Legal Proceedings,” for more information on the Lawsuit. 18 Income before Provision for Income Taxes. Income before provision for income taxes for the year ended December 31, 2023, was $5,425,000, compared to income before provision for income taxes of $4,395,000 for 2022, representing an increase of $1,030,000, or 23.4%.
The decrease was due to a decrease in inventory for the Disposable Protective Apparel segment of $1,850,000, or 11.4%, to $14,385,000, partially offset by an increase in inventory for the Building Supply segment of $1,278,000, or 14.6%, to $10,012,000. Prepaid expenses decreased by $2,041,000, or 29.4%, to $4,902,000 as of December 31, 2022, from $6,943,000 as of December 31, 2021.
Inventory decreased by $4,266,000, or 17.5%, to $20,131,000 as of December 31, 2023, from $24,397,000 as of December 31, 2022. The decrease was due to a decrease in inventory for the Disposable Protective Apparel segment of $1,224,000, or 8.5%, to $13,161,000, and a decrease in inventory for the Building Supply segment of $3,042,000, or 30.4%, to $6,970,000.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis together with our consolidated financial statements and the notes to our consolidated financial statements, which appear elsewhere in this report.
Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.
Other woven material sales increased in 2022 compared to the same period of 2021 by 37.4% due to increased sales to our major customer, as well as a new customer.
Other woven material sales increased by 18.0% in 2023 compared to the same period of 2022, due to increased sales to our major customer, but management does not expect this to be a growth driver in the coming year. 17 Management expects growth in the building supply segment in the coming year, especially in housewrap sales.
In addition, disposable protective garment sales in 2022 were up approximately 14% as compared to pre-pandemic levels. Sales in 2022 were negatively affected by excess inventories within our distributor and end-customer base as a result of the pandemic.
Sales of disposable protective garments in 2023 were up by 4.0% as our channel partners and our end customers are continuing to work through their excess inventory, which had accumulated as a result of the pandemic.
Sales of face shields in 2022 were down compared to 2021, but sales in the second half of the year were in line with pre-pandemic levels Gross Profit. Gross profit decreased by $3,615,000, or 14.3%, to $21,683,000 for the year ended December 31, 2022, from $25,298,000 for the year ended December 31, 2021.
The market continues to be saturated with products but we’re cautiously optimistic that face mask and face shield sales will show growth in the coming year. Gross Profit. Gross profit increased by $1,146,000, or 5.3%, to $22,829,000 for the year ended December 31, 2023, from $21,683,000 for the year ended December 31, 2022.
Removed
The Company determines the allowance based upon historical write-off experience and known conditions about customers’ current ability to pay. Account balances are charged against the allowance when the potential for recovery is considered remote. For new customers with no order history with the Company we may require advance payments to reduce our credit risk.
Added
Critical Accounting Policies and Estimates The preparation of our financial statements in conformity with U.S. generally accepted accounting principles (“U.S.
Removed
Impact of the Novel Coronavirus (COVID-19) After the start of the COVID-19 pandemic in early 2020, we experienced a significant surge in customer demand for our proprietary N-95 Particulate Respirator face mask product and other personal protective equipment (“PPE”) products as a result of COVID-19.
Added
The Company pools accounts receivable based on risk characteristics, which include type of customer and age of open receivable balance. The allowance for credit losses pool is estimated based on historical write-off experience and known conditions, adjusted for management’s reasonable and supportable expectations of future conditions.
Removed
We experienced a dramatic increase in revenue from sales of PPE products during 2020 and to a lesser extent during 2021 and 2022, especially with respect to face masks and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.
Added
Account balances are charged against the allowance when management determines that the probability for collection of an account balance is remote. As of December 31, 2023, the Company had recorded an allowance for credit losses on accounts receivable of $35,000. As of December 31, 2022, the Company had recorded an allowance for doubtful accounts on accounts receivable of $45,000.
Removed
In an effort to meet the unprecedented demand, and to aid communities around the world in responding to the healthcare crisis, the Company ramped up production during the first quarter of 2020 of our PPE products, in particular our N-95 face mask, which is manufactured by the Company in the United States.
Added
Our synthetic roof underlayment product line primarily includes REX SynFelt®, REX TECHNOply® TECHNO SB and our housewrap product line primarily consists of REX Wrap®, REX Wrap Plus® and REX™ Wrap Fortis.
Removed
We addressed the growing customer demand for PPE products by increasing and improving the human, mechanical, and supply chain components behind production, but even with these increases and improvements, customer demand for PPE products exceeded industry supply from time to time.
Added
Housewrap accessories consist of REXTREME Window and Door Flashing and REX™ Premium Seam Tape and our synthetic roof underlayment accessories consist of our new self- adhered TECHNOplus and REX Ultra HT. The housewrap market continues to be soft, as housing starts in 2023 in the United States decreased by 8.8% compared to the same period a year ago.
Removed
Since 2020, we have encountered a number of constraints within our supply chain due to government-mandated shutdowns, raw materials shortages and shipping delays. Although we continue to work to alleviate these supply chain issues by securing additional supply sources, in the event of subsequent shutdowns, shortages or delays, our production and sales could be further impacted.
Added
We experienced a 22.2% increase in housewrap and accessories sales, as we continue to significantly outperform the market through market diversification and product development. Sales of our REX Wrap® and REX Wrap Plus®, our entry-level housewrap products, were up by 15.1% over the prior year, despite the decrease in housing starts, as we continue to form relationships with new dealers.
Removed
Further, we have experienced increases in the costs of raw materials, and if the prices of raw materials continue to rise more rapidly than our sales prices, our profits may be impacted negatively. 16 Global shortages in important components and logistics challenges have resulted in, and will continue to cause, inflationary cost pressure in the Company’s supply chain.
Added
Management also expects to see growth opportunities with REX™ Wrap Fortis, our premium housewrap line, as we continue to make inroads into the multi-family and commercial construction sector, evidenced by a 33.9% increase in sales for this product in 2023. We also experienced a 180.5% increase in sales of housewrap accessories in 2023.
Removed
To date, the inflationary cost pressure has been more pronounced in the Company’s logistics costs, but these supply chain challenges have had an impact on the Company’s results of operations and ability to deliver products and services to its customers. If shortages in important supply chain materials or logistics challenges continue, the Company could fail to meet product demand.
Added
Management expects that we will continue to see positive trends relative to the industry for both our entry level and premium housewrap and housewrap accessories product lines. The synthetic roof underlayment market has also been affected by the continued decrease in new home starts, economic uncertainty, more offshore competition and a push in the market to reduce product selling prices.
Removed
Additionally, if inflationary pressures in logistics or component costs persist, we may not be able to quickly or easily adjust pricing, reduce costs, or implement countermeasures, all of which would adversely impact our business, financial condition, results of operations, or cash flows. In addition, the war in Ukraine has further increased existing global supply chain, logistics, and inflationary challenges.
Added
Despite these pressures, our synthetic roof underlayment sales also outperformed the market despite being down 3.0% in 2023 compared to 2022. We launched our new line of self-adhered roofing products in late 2023, which we expect to result in revenue growth within our current customer base and allow for expansion into new markets and business segments.
Removed
COVID-19 and other factors have resulted in a downturn in the global financial markets and a slowdown in the global economy. This economic environment may impact some of our customers’ ability to pay or lead them to request extended payment terms, and we have experienced cost increases from some of our suppliers.
Added
We continue to work closely with our customers to develop and expand our product lines.
Removed
Additionally, we expect that demand for our Building Supply segment products could be negatively impacted as the overall market for housing starts has decreased and there is increased uncertainty in the housing market and the economy in general, although to date the negative impact on our Building Supply segment has been limited.
Added
While housing starts have trended down nationally, we have continued to grow market share. We also hope to build on our success within the multi-family and commercial segment and the single-family segment. However, there continues to be uncertainty in housing starts and the economy in general that could affect this segment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed2 unchanged
Biggest changeThe resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business We do not expect any significant effect on our consolidated results of operations from interest or currency rate fluctuations. We do not hedge interest rates or foreign exchange risks. 21 Alpha Pro Tech, Ltd.
Biggest changeWe do not expect any significant effect on our consolidated results of operations from interest or currency rate fluctuations. We do not hedge interest rates or foreign exchange risks. 20 Alpha Pro Tech, Ltd.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We subcontract the manufacturing of products in Sri Lanka, China and, to a lesser extent, in Mexico, and have a joint venture in India. In addition, our principal executive office, with 18 employees, is located in Canada.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We subcontract the manufacturing of products in Sri Lanka, China and, to a lesser extent, in Mexico, and have a joint venture in India. In addition, our principal executive office, with 22 employees, is located in Canada.
The strengthening of the U.S. dollar relative to the foreign currency in India results is an unfavorable currency translation impact on the value of our equity of unconsolidated affiliate and is reported in AOCL.
The strengthening of the U.S. dollar relative to the foreign currency in India results is an unfavorable currency translation impact on the value of our equity of unconsolidated affiliate and is reported in AOCL. The resulting foreign currency translation gains or losses are deferred as AOCL and reclassified to earnings only upon sale or liquidation of that business.

Other APT 10-K year-over-year comparisons