What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-05 compared with 2021-08-05 · 211 added, 204 removed, 614 unchanged (40% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets (Unaudited)

2020 (1)  

September 30,

Current assets:

2 unchanged sentences

$ 23,292,000  

Accounts receivable, net of allowance for doubtful accounts of $ 79,000 as of June 30, 2021 and $ 71,000 as of December 31, 2020

Accounts receivable, net of allowance for doubtful accounts of $ 64,000 as of September 30, 2021 and $ 71,000 as of December 31, 2020

3,991,000  

36 unchanged sentences

209,000  

Lease liabilities

16 unchanged sentences

50,000,000 shares authorized;

13,208,341 and 13,419,847 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

13,162,341 and 13,419,847 shares outstanding as of September 30, 2021 and December 31, 2020, respectively

132,000  

16 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Septermber 30,

Cost of goods sold, excluding depreciation and amortization

19 unchanged sentences

Equity (Unaudited)

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Balance as of December 31, 2020

7 unchanged sentences

Balance as of June 30, 2021

For the Six Months Ended June 30, 2020

Common stock repurchased and retired

Stock-based compensation expense

Balance as of September 30, 2021

For the Nine Months Ended September 30, 2020

Balance as of December 31, 2019

6 unchanged sentences

Balance as of June 30, 2020

Common stock repurchased and retired

Stock-based compensation expense

Options exercised

Balance as of September 30, 2020

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited).

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows (Unaudited)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash Flows From Operating Activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Stock-based compensation

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Lease liabilities

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash Flows From Investing Activities:

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The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the resumption of widespread economic activity in certain sectors.

Future developments include the duration, scope and severity of the pandemic and new variants, including the Delta variant, the actions taken to contain or mitigate its impact, the impact on governmental programs and budgets, the development of treatments or vaccines, and the efficacy of mass vaccinations, and the resumption of widespread economic activity in certain sectors.

Due to the inherent uncertainty of the unprecedented and rapidly evolving situation, we are unable to predict with any certainty the likely impact of the COVID- 19 pandemic on our future operations.

6 unchanged sentences

The interim condensed consolidated financial statements should be read in conjunction with the Company’s current year SEC filings, as well as the Company’s consolidated financial statements for the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2020 ( the “2020 Form 10 -K”), filed with the SEC on March 10, 2021.

The results of operations for the three and six months ended June 30, 2021 in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three and nine months ended September 30, 2021 in this Quarterly Report on Form 10 -Q are not necessarily indicative of the results to be expected for the full year.

The condensed consolidated balance sheet as of December 31, 2020 was prepared using information from the audited consolidated balance sheet contained in the 2020 Form 10 -K;

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The Company manufactures certain private label goods for customers and has determined that control does not pass to the customer at the time of manufacture, based upon the nature of the private labelling.

The Company has determined as of June 30, 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

As of June 30, 2021, we had contract liabilities of $ 103,000 as a result of customer advance payments of orders in connection with the COVID- 19 pandemic.

The Company has determined as of September 30, 2021 that it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

See Note 10 and Note 11 of these Notes to Condensed Consolidated Financial Statements (Unaudited) for information on revenue disaggregated by type and by geographic region.

9 unchanged sentences

Although no new awards may be granted under the 2004 Option Plan, all previously granted awards under the 2004 Option Plan will continue to be governed by the terms of the 2004 Option Plan.

As of June 30, 2021, 8,912 restricted stock equity awards had been granted under the 2020 Incentive Plan.

As of September 30, 2021, 24,052 restricted stock equity awards had been granted under the 2020 Incentive Plan.

The Company records compensation expense for the fair value of stock-based awards determined as of the grant date, including employee stock options and restricted stock awards over the determined requisite service period, which is generally ratably over the vesting term.

For the six months ended June 30, 2021 and 2020, no stock options were granted under the Company’s 2004 Option Plan.

The Company recognized $ 169,000 and $ 183,000 in stock-based compensation expense for the six months ended June 30, 2021 and 2020, respectively, related to outstanding options.

For the six months ended June 30, 2021 and 2020 no restricted stock awards were granted under the 2020 Incentive Plan.

The Company recognized $ 54,000 and $ 0 in compensation expense associated with outstanding restricted stock awards for the six months ended June 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021 and 2020, no stock options were granted under the Company’s 2004 Option Plan or the 2020 Incentive Plan.

The Company recognized $ 155,000 and $ 274,000 in stock-based compensation expense for the nine months ended September 30, 2021 and 2020, respectively, related to outstanding options previously granted under the 2004 Option Plan.

For the nine months ended September 30, 2021 and 2020 15,140 and 0 restricted stock awards were granted respectively under the 2020 Incentive Plan.

The Company recognized $ 83,000 and $ 0 in compensation expense associated with outstanding restricted stock awards for the nine months ended September 30, 2021 and 2020, respectively.

Alpha Pro Tech, Ltd.

6 unchanged sentences

The Company accounts for option forfeitures as they occur.

The following table summarizes stock option activity for the six months ended June 30, 2021:

The following table summarizes stock option activity for the nine months ended September 30, 2021:

Weighted Average

6 unchanged sentences

Canceled/expired/forfeited

Options outstanding, June 30, 2021

( 6,666 )  

Options exercisable, June 30, 2021

Options outstanding, September 30, 2021

437,580  

As of June 30, 2021, $ 111,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 0.82 years.

As of June 30, 2021, we had no investments.

No marketable securities were sold during the six months ended June 30, 2020.

Certain marketable securities were sold during the six months ended June 30, 2020.

The total loss on marketable securities during the six months ended June 30, 2020 was $ 18,000 .

The loss for the six months ended June 30, 2020 was due to an unrealized loss of $ 35,000 and a realized gain of $ 17,000 .

Options exercisable, September 30, 2021

330,583  

As of September 30, 2021, $ 71,000 of total unrecognized compensation cost related to stock options was expected to be recognized over a weighted average period of 0.61 years.

As of September 30, 2021, we had no investments.

No marketable securities were sold during the three or nine months ended September 30, 2021.

Certain marketable securities were sold during the three months ended September 30, 2020, The total loss on marketable securities during the three months ended September 30, 2020 was $ 24,000 , consisting of an unrealized loss of $ 42,000 and a realized gain of $ 18,000 .

Certain marketable securities were sold during the nine months ended September 30, 2020.

The total loss on marketable securities during the nine months ended September 30, 2020 was $ 42,000 , due to an unrealized loss of $ 77,000 and a realized gain of $ 35,000 .

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016 - 13 Financial Instruments - Credit Losses (Topic 326 ):

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13 Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments.

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Notes to Condensed Consolidated Financial Statements (Unaudited)

As of June 30, 2021 and December 31, 2020, inventories net of reserves consisted of the following:

As of September 30, 2021 and December 31, 2020, inventories net of reserves consisted of the following:

September 30,

Raw materials

24 unchanged sentences

The Company periodically reviews its investment in Harmony for impairment.

Management has determined that no impairment was required as of June 30, 2021 or December 31, 2020.

For the three months ended June 30, 2021 and 2020, Alpha Pro Tech purchased $ 7,435,000 and $ 3,774,000 of inventories, respectively, from Harmony.

For the six months ended June 30, 2021 and 2020, Alpha Pro Tech purchased $ 13,789,000 and $ 8,480,000 of inventories, respectively, from Harmony.

For the three months ended June 30, 2021 and 2020, the Company sold $ 451,000 and $ 471,000 of inventories, respectively, to Harmony.

For the six months ended June 30, 2021 and 2020, the Company sold $ 821,000 and $ 653,000 of inventories, respectively, to Harmony.

Management has determined that no impairment was required as of September 30, 2021 or December 31, 2020.

For the three months ended September 30, 2021 and 2020, the Company purchased $ 6,190,000 and $ 4,156,000 of inventories, respectively, from Harmony.

For the nine months ended September 30, 2021 and 2020, the Company purchased $ 19,979,000 and $ 12,636,000 of inventories, respectively, from Harmony.

For the three months ended September 30, 2021 and 2020, the Company sold $ 399,000 and $ 180,000 of inventories, respectively, to Harmony.

For the nine months ended September 30, 2021 and 2020, the Company sold $ 1,291,000 and $ 833,000 of inventories, respectively, to Harmony.

Alpha Pro Tech, Ltd.

Notes to Condensed Consolidated Financial Statements (Unaudited)

For the three months ended June 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 188,000 and $ 119,000 , respectively, related to Harmony.

For the six months ended June 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 510,000 and $ 206,000 , respectively, related to Harmony.

As of June 30, 2021, the Company’s investment in Harmony was $ 6,059,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,628,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Accrued Liabilities

As of June 30, 2021 and December 31, 2020, accrued liabilities consisted of the following:

For the three months ended September 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 112,000 and $ 250,000 , respectively, related to Harmony.

For the nine months ended September 30, 2021 and 2020, the Company recorded equity in income of unconsolidated affiliate of $ 623,000 and $ 456,000 , respectively, related to Harmony.

As of September 30, 2021, the Company’s investment in Harmony was $ 6,172,000 , which consisted of its original $ 1,450,000 investment and cumulative equity in income of unconsolidated affiliate of $ 5,741,000 , less $ 942,000 in repayments of the advance and $ 77,000 in dividends.

Accrued Liabiliti e s

As of September 30, 2021 and December 31, 2020, accrued liabilities consisted of the following:

September 30,

Payroll expenses and taxes payable

4 unchanged sentences

earnings per common share (“EPS”), which utilizes the weighted average number of common shares outstanding without regard to dilutive shares, and “diluted”

EPS, which includes all such dilutive shares, for the three and six months ended June 30, 2021 and 2020:

EPS, which includes all such dilutive shares, for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

Septermber 30,

Net income (numerator)

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The Company evaluates the performance of its segments and allocates resources to them based primarily on net sales.

The following table presents consolidated net sales for each segment for the three and six months ended June 30, 2021 and 2020:

The following table presents consolidated net sales for each segment for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Building Supply

13 unchanged sentences

$ 73,681,000  

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and six months ended June 30, 2021 and 2020:

The following table presents the reconciliation of consolidated segment income to consolidated net income for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Building Supply

18 unchanged sentences

4,804,000  

Provision (benefit) for income taxes

Provision for income taxes

196,000  

9 unchanged sentences

Notes to Condensed Consolidated Financial Statements (Unaudited)

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of June 30, 2021 and December 31, 2020:

The following table presents the consolidated net property and equipment, goodwill and definite-lived intangible assets (“consolidated assets”) by segment as of September 30, 2021 and December 31, 2020:

September 30,

Building Supply

14 unchanged sentences

Financial Information about Geographic Areas

The following table summarizes the Company’s net sales by geographic region for the three and six months ended June 30, 2021 and 2020:

The following table summarizes the Company’s net sales by geographic region for the three and nine months ended September 30, 2021 and 2020:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net sales by geographic region

United States

$ 17,694,000  

$ 22,546,000  

$ 38,592,000  

$ 38,165,000  

International

112,000  

2,954,000  

2,375,000  

5,489,000  

Consolidated net sales

$ 17,806,000  

$ 25,500,000  

$ 40,967,000  

$ 43,654,000  

Net sales by geographic region are based on the countries in which our customers are located.

For the three and six months ended June 30, 2021 and 2020, the Company did not generate sales from any single country, other than 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 June 30, 2021 and December 31, 2020:

For the three and nine months ended September 30, 2021 and 2020, the Company did not generate sales from any single country, other than 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 September 30, 2021 and December 31, 2020:

September 30,

Long-lived assets by geographic region

United States

$ 3,915,000  

$ 2,787,000  

International

1,507,000  

1,566,000  

Consolidated total long-lived assets

$ 5,422,000  

$ 4,353,000  

Related Party Transactions

As of June 30, 2021, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

As of September 30, 2021, the Company had no related party transactions, other than the Company’s transactions with its unconsolidated affiliate, Harmony.

See Note 7 of these Notes to Condensed Consolidated Financial Statements (Unaudited).

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The Company’s primary operating lease commitments at 

June 30, 2021 

related to the Company’s manufacturing facilities in Valdosta, Georgia;

September 30, 2021 related to the Company’s manufacturing facilities in Valdosta, Georgia;

Nogales, Arizona;

and Salt Lake City, Utah, as well as the Company’s corporate headquarters in Markham, Ontario, Canada.

As of June 30, 2021, the Company had operating lease right-of-use assets of $ 3,094,000  and operating lease liabilities of $ 3,148,000 .

As of June 30, 2021, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $ 221,000 and $ 425,000 , respectively during the 

three and six months ended June 30, 2021.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of June 30, 2021 were as follows:

Remaining six months of 2021

As of September 30, 2021, the Company had operating lease right-of-use assets of $ 2,872,000  and operating lease liabilities of $ 2,926,000 .

As of September 30, 2021, we did not have any finance leases recorded on the Company’s condensed consolidated balance sheet. Operating lease expense was approximately $ 265,000 and $ 769,000 , respectively during the 

three and nine months ended September 30, 2021.

The aggregate future minimum lease payments and reconciliation to lease liabilities as of September 30, 2021 were as follows:

September 30,

Remaining three months of 2021

Total future minimum lease payments

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Total Lease liabilities

As of June 30, 2021, the weighted average remaining lease term of the Company’s operating leases was 

During the six months ended June 30, 2021, the weighted average discount rate with respect to these leases was 

As of September 30, 2021, the weighted average remaining lease term of the Company’s operating leases was 

During the nine months ended September 30, 2021, the weighted average discount rate with respect to these leases was 

The Company accounts for income taxes using the asset and liability method.

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Subsequent Events

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of June 30, 2021 through the filing date of this Quarterly Report on Form 10 -Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

The Company has reviewed and evaluated whether subsequent events have occurred from the condensed consolidated balance sheet date of September 30, 2021 through the filing date of this Quarterly Report on Form 10 -Q that would require accounting or disclosure and has concluded that there are no such subsequent events.

Alpha Pro Tech, Ltd.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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The Company has determined that, as of June 30, 2021, it had no material contract assets, and concluded that its contract liabilities (primarily rebates) had the right of offset against customer receivables.

As of June 30, 2021, the Company had contract liabilities of $103,000 as a result of customer advance payments of orders connected to the COVID-19 pandemic (see “Impact of the Novel Coronavirus (COVID-19)”

The Company has determined that, as of September 30, 2021, 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:

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Impact of the Novel Coronavirus (COVID-19)

Since the start of the COVID-19 pandemic, 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.

We experienced a dramatic increase in revenue from sales of PPE products during the year of 2020, especially with respect to face masks, face shields and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.

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.

We experienced a dramatic increase in revenue from sales of PPE products throughout 2020, especially with respect to face masks, face shields and disposable protective garments, including shoecovers, coveralls, gowns, lab coats and bouffant caps.

In an effort to meet the unprecedented demand, and to aid communities around the world in responding to the ongoing 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.

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As detailed below under “Results of Operations,”

we witnessed a softening in the demand for our N-95 particulate respirator face mask during the six months of 2021 and expect sales will decline to be more in-line with pre-pandemic levels in future periods.

We expect growth in pre-pandemic demand for our disposable protective garments and continued growth in Building Supply segment products, although this demand could be negatively impacted if we experience a decrease in housing starts and increased uncertainty in the housing market and the economy in general.

we witnessed a softening in the demand for face masks, and face shields during the first nine months of 2021 and we expect sales will continue to decline to be more in-line with pre-pandemic levels in future periods.

We expect growth in pre-pandemic demand for our disposable protective garments and continued growth in Building Supply segment products although the Building Supply segment could be negatively impacted if there is a decrease in housing starts and increased uncertainty in the housing market and the economy in general.

Additionally, as supply chain issues for certain housing components not supplied by the Company, which could lead to a slowdown in new home construction.

The extent of the pandemic’s effect on our future operational and financial performance will depend in large part on future developments.

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For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended Septermber 30,

For the Nine Months

Ended Septermber 30,

Selling, general and administrative expenses

1 unchanged sentence

Income before provision for income taxes

Three months ended June 30, 2021 compared to three months ended June 30, 2020

Consolidated sales for the three months ended June 30, 2021 decreased to $17,806,000, from $25,500,000 for the three months ended June 30, 2020, representing a decrease of $7,694,000, or 30.2%.

Three months ended September 30, 2021 compared to three months ended September 30, 2020

Consolidated sales for the three months ended September 30, 2021 decreased to $14,475,000, from $30,027,000 for the three months ended September 30, 2020, representing a decrease of $15,552,000, or 51.8%.

This decrease consisted of decreased sales in the Disposable Protective Apparel segment of $17,956,000, partially offset by increased sales in the Building Supply segment of $2,404,000.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the three months ended June 30, 2021 decreased by $10,040,000, or 55.6%, to $8,008,000, compared to $18,048,000 for the same period of 2020.

This segment decrease was due to a 89.4% decrease in sales of face masks and a 93.2% decrease in face shields, partially offset by a 36.3% increase in sales of disposable protective garments.

The decreases for face masks and face shields were primarily due to increased demand resulting from the COVID-19 pandemic in the second quarter of 2020.

Management expects future sales of face mask and face shields to be more in-line with pre-pandemic levels in future periods.

Sales for the disposable protective garments in the second quarter of 2021 were a record and up a very strong 36.3%.

This represents two consecutive quarters of record sales for disposable protective garments as the first quarter of 2021 was the previous record.

This was due to strong open orders, generated largely in 2020 primarily from our major international channel partner.

Open orders for the disposable protective garments are now more in line with pre-pandemic levels and sales in the coming quarters could be negatively affected as current inventory levels in the supply chain, primarily with our major international channel partner, are higher than historical.

We are working closely with all our channel partners to uncover new end-customer sales opportunities.

The sales mix of the Disposable Protective Apparel segment for the three months ended June 30, 2021 was approximately 85% for disposable protective garments, 11% for face masks and 4% for face shields.

This sales mix is compared to approximately 28% for disposable protective garments, 47% for face masks and 25% for face shields for the three months ended June 30, 2020.

Sales for the Disposable Protective Apparel segment for the three months ended September 30, 2021 decreased by $17,956,000, or 80.3%, to $4,403,000, compared to $22,359,000 for the same period of 2020.

This segment decrease was due to a 92.3% decrease in sales of face masks, a 91.9% decrease in face shields and a 33.1% decrease in sales of disposable protective garments.

The decreases for face masks, face shields and disposable protective garments were primarily due to increased demand resulting from the COVID-19 pandemic in the third quarter of 2020.

Future sales of face mask and face shields are expected to be in line with pre-pandemic levels.

Sales for the disposable protective garments in the third quarter of 2021 were down as inventory levels in the supply chain, primarily with our major international channel partner, were higher than historical levels, as a result of record sales in the first and second quarter of 2021.

This partner’s sales to its end users for the three and nine months ended September 30, 2021 were significantly higher than pre-pandemic levels due to strong open orders, generated largely in 2020.

We are working closely with all of our channel partners to uncover new end-customer sales opportunities.

Alpha Pro Tech, Ltd.

The sales mix of the Disposable Protective Apparel segment for the three months ended September 30, 2021 was approximately 69% for disposable protective garments, 23% for face masks and 8% for face shields.

This sales mix is compared to approximately 20% for disposable protective garments, 60% for face masks and 20% for face shields for the three months ended September 30, 2020.

Building Supply Segment

Building Supply segment sales for the three months ended June 30, 2021 increased by $2,346,000, or 31.5%, to $9,798,000, compared to $7,452,000 for the three months ended June 30, 2020.

The Building Supply segment increase was primarily due to a 35.6% increase in sales of synthetic roof underlayment, a 29.1% increase in sales of housewrap and a 19.6% increase in sales of other woven material compared to the same period of 2020.

The sales mix of the Building Supply segment for the three months ended June 30, 2021 was approximately 48% for synthetic roof underlayment, 43% for housewrap and 9% for other woven material.

This compared to approximately 46% for synthetic roof underlayment, 44% for housewrap and 10% for other woven material for the three months ended June 30, 2020.

Building Supply segment sales for the three months ended September 30, 2021 increased by $2,404,000, or 31.4%, to a quarterly record of $10,072,000, compared to $7,668,000 for the three months ended September 30, 2020.

We have had back to back quarterly record sales as the second quarter of 2021 was the previous highest quarter on record.

Also, the first quarter of 2021 was a record first quarter in the Building Segment.

In addition, sales increased by over 30% in each of the second and third quarters of 2021 compared to the prior year comparative quarter.

The Building Supply segment increase during the three months ended September 30, 2021 was primarily due to a 35.9% increase in sales of synthetic roof underlayment, a 25.7% increase in sales of housewrap and a 26.7% increase in sales of other woven material compared to the same period of 2020.

The sales mix of the Building Supply segment for the three months ended September 30, 2021 was approximately 50% for synthetic roof underlayment, 43% for housewrap and 7% for other woven material.

This compared to approximately 49% for synthetic roof underlayment, 44% for housewrap and 7% for other woven material for the three months ended September 30, 2020.

Our synthetic roof underlayment product line includes REX SynFelt®, REX TECHNOply®

1 unchanged sentence

Plus and REX Wrap Fortis®.

Building Supply segment sales remained strong in the second quarter of 2021 bolstered by a stronger than expected demand for new home construction.

The synthetic roof underlayment sales increase of 35.6% was attributed to both an increase in the growth of the brand coupled with demand from product shortages in the market.

Our Housewrap family of products remained strong with a 29.1% increase, driven by the new home construction market.

Management is optimistic about continued growth in this segment as open orders for our synthetic roof underlay and housewrap remain very strong. As a result of our continued optimism, we have committed to increasing production capacity of this segment by investing approximately $4.0 million in new equipment, part of which is expected to be operational in the third and fourth quarters of 2021.

As a result of a delay in the relevant supply chain, the final piece of equipment is now anticipated to arrive in the latter part of the fourth quarter of 2021 and is expected to be operational in the first quarter of 2022.

Six months ended June 30, 2021 compared to six months ended June 30, 2020

Consolidated sales for the six months ended June 30, 2021 decreased to $40,967,000 from $43,654,000 for the six months ended June 30, 2020, representing a decrease of $2,687,000, or 6.2%.

Building Supply segment sales in the third quarter of 2021 showed continued significant growth due to strong demand for both our synthetic roof underlayment and housewrap products.

Synthetic roof underlayment sales increased by 35.9% compared to the third quarter of 2020 due to the increase in inventory requirements at the dealer level, as well as the expansion of new home construction.

The housewrap family of products continued grow with a 25.7% year-over-year increase due to growth in new market share as well as high demand for new home construction.

Our system of selling housewrap with associated accessories is becoming increasingly accepted in the market.

Management is optimistic about continued growth for the future as the demand for Building Supply products looks to remain strong.

Management has committed to increasing production capacity for this segment by investing approximately $4.0 million in new equipment, a part of which became operational in the latter part of the third quarter of 2021, which contributed to the record sales quarter.

As a result of a delay in the supply chain, the most expensive piece of equipment is now anticipated to arrive in the latter part of the fourth quarter of 2021 and is expected to be operational in the first quarter of 2022.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

Consolidated sales for the nine months ended September 30, 2021 decreased to $55,442,000 from $73,681,000 for the nine months ended September 30, 2020, representing a decrease of $18,239,000, or 24.8%.

This decrease consisted of decreased sales in the Disposable Protective Apparel Segment of $23,772,000 and increased sales in the Building Supply segment of $5,533,000.

Alpha Pro Tech, Ltd.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the six months ended June 30, 2021 decreased by $5,817,000, or 20.3%, to $22,829,000, compared to $28,646,000 for the same period of 2020.

Sales for the Disposable Protective Apparel segment for the nine months ended September 30, 2021 decreased by $23,772,000, or 46.6%, to $27,232,000, compared to $51,004,000 for the same period of 2020.

This segment decrease was due to a 71.4% decrease in sales of face masks, a 69.6% decrease in sales of face shields and a 15.9% increase in sales of disposable protective garments, all primarily due to customer demand associated with the pandemic.

The sales mix of the Disposable Protective Apparel segment for the six months ended June 30, 2021 was 59% for disposable protective garments, 29% for masks and 12% for shields.

This sales mix is compared to 34% for disposable protective garments, 46% for masks and 20% for shields for the six months ended June 30, 2020.

Alpha Pro Tech, Ltd.

The sales mix of the Disposable Protective Apparel segment for the nine months ended September 30, 2021 was 61% for disposable protective garments, 28% for masks and 11% for shields.

This sales mix is compared to 28% for disposable protective garments, 52% for masks and 20% for shields for the nine months ended September 30, 2020.

Building Supply Segment

Building Supply segment sales for the six months ended June 30, 2021 increased by $3,130,000, or 20.9%, to $18,138,000, compared to $15,008,000 for the same period of 2020.

The Building Supply segment increase was primarily due to an increase in sales of synthetic roof underlayment of 33.6%, an increase in sales of housewrap of 16.5%, and a decrease in sales of other woven material of 3.8% compared to the same period of 2020.

Building Supply segment sales for the nine months ended September 30, 2021 increased by $5,533,000, or 24.4%, to $28,210,000, compared to $22,677,000 for the same period of 2020.

The Building Supply segment increase was primarily due to an increase in sales of synthetic roof underlayment of 34.4%, an increase in sales of housewrap of 19.6%, and an increase in sales of other woven material of 4.3% compared to the same period of 2020.

Synthetic roof underlayment sales increased as a result of increased sales of the Company’s TECHNO family of products.

Synthetic roof underlayment and housewrap sales were positively affected during the six months ended June 30, 2021 by improved U.S.

Synthetic roof underlayment and housewrap sales were positively affected during the nine months ended September 30, 2021 by improved U.S.

housing starts.

The sales mix of the Building Supply segment for the six months ended June 30, 2021 was 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material.

This compared to 45% for synthetic roof underlayment, 45% for housewrap and 10% for other woven material for the six months ended June 30, 2020.

As a result of supply chain issues for certain housing components not supplied by the Company, there could be a slowdown in new home construction, which could negatively affect our sales.

The sales mix of the Building Supply segment for the nine months ended September 30, 2021 was 50% for synthetic roof underlayment, 42% for housewrap and 8% for other woven material.

This compared to 46% for synthetic roof underlayment, 45% for housewrap and 9% for other woven material for the nine months ended September 30, 2020.

Gross Profit.

Gross profit decreased by $6,381,000, or 50.6%, to $6,232,000 for the three months ended June 30, 2021, from $12,613,000 for the three months ended June 30, 2020.

The gross profit margin was 35.0% for the three months ended June 30, 2021, compared to 49.5% for the three months ended June 30, 2020.

Gross profit decreased by $5,756,000, or 27.2%, to $15,411,000 for the six months ended June 30, 2021, from $21,167,000 for the same period of 2020.

The gross profit margin was 37.6% for the six months ended June 30, 2021, compared to 48.5% for the same period of 2020.

Management believes that gross profit margin will be negatively affected in 2021 as a result of changes in product mix as the need for face masks and face shields, which have a higher gross profit margin than our other products, declines from the surge in customer demand in 2020 as a result of the COVID-19 pandemic.

In addition, our portfolio of products, as well as a spectrum of industries worldwide, have been affected by increases in raw material costs, as well as significant increases in ocean freight and other transportation costs.

Gross profit decreased by $10,194,000, or 67.3%, to $4,942,000 for the three months ended September 30, 2021, from $15,136,000 for the three months ended September 30, 2020.

The gross profit margin was 34.1% for the three months ended September 30, 2021, compared to 50.4% for the three months ended September 30, 2020.

Gross profit decreased by $15,950,000, or 43.9%, to $20,353,000 for the nine months ended September 30, 2021, from $36,303,000 for the same period of 2020.

The gross profit margin was 36.7% for the nine months ended September 30, 2021, compared to 49.3% for the same period of 2020.

Management believes that gross profit margin will continue to be negatively affected in 2021 as a result of changes in product mix as the need for face masks and face shields, which have a higher gross profit margin than our other products, declines from the surge in customer demand in 2020 as a result of the COVID-19 pandemic.

In addition, gross profit is being negatively affected by significant increases in ocean freight and other transportation costs.

Additionally, our portfolio of products has been affected by much higher than normal raw material costs.

In the current environment, cost increases may rise more rapidly than our sales prices, which could decrease gross profit.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses decreased by $354,000, or 7.8%, to $4,199,000 for the three months ended June 30, 2021, from $4,553,000 for the three months ended June 30, 2020.

However, as a percentage of net sales, selling, general and administrative expenses increased to 23.6% three months ended June 30, 2021, up from 17.9% for the same period of 2020, primarily as a result of lower net sales.

The change in expenses by segment for the three months ended June 30, 2021 was as follows:

Selling, general and administrative expenses decreased by $696,000, or 15.2%, to $3,884,000 for the three months ended September 30, 2021, from $4,580,000 for the three months ended September 30, 2020.

However, as a percentage of net sales, selling, general and administrative expenses increased to 26.8% for the three months ended September 30, 2021, up from 15.3% for the same period of 2020, primarily as a result of lower net sales.

Alpha Pro Tech, Ltd.

The change in expenses by segment for the three months ended September 30, 2021 was as follows:

Disposable Protective Apparel was down $484,000, or 28.8%;

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and corporate unallocated expenses were down $399,000, or 25.8%.

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased commission and general factory expenses.

The increase in the Building Supply segment expenses was primarily related to increased employee compensation and travel expenses, partially offset by decreased insurance costs.

The decrease in corporate unallocated expenses was primarily due to lower employee compensation.

Selling, general and administrative expenses increased by $121,000, or 1.4%, to $8,777,000 for the six months ended June 30, 2021, from $8,656,000 for the six months ended June 30, 2020.

As a percentage of net sales, selling, general and administrative expenses increased to 21.4% for the six months ended June 30, 2021, up from 19.8% for the same period of 2020, primarily as a result of lower net sales.

The change in expenses by segment for the six months ended June 30, 2021 was as follows:

Disposable Protective Apparel was up $236,000, or 8.4%;

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased employee compensation, commission and general factory expenses.

The increase in the Building Supply segment expenses was primarily related to increased employee compensation, marketing, commission and travel expenses, partially offset by decreased insurance costs.

The decrease in corporate unallocated expenses was primarily due to lower accrued bonuses.

Selling, general and administrative expenses decreased by $575,000, or 4.3%, to $12,661,000 for the nine months ended September 30, 2021, from $13,236,000 for the nine months ended September 30, 2020.

As a percentage of net sales, selling, general and administrative expenses increased to 22.8% for the nine months ended September 30, 2021, up from 18.0% for the same period of 2020, primarily as a result of lower net sales.

The change in expenses by segment for the nine months ended September 30, 2021 was as follows:

Disposable Protective Apparel was down $248,000, or 5.5%;

Building Supply was up $201,000, or 5.0%;

and corporate unallocated expenses were down $528,000, or 11.2%.

The increase in the Disposable Protective Apparel segment expenses was primarily related to increased employee compensation, partially offset by decreased commission and general factory expenses.

The increase in the Building Supply segment expenses was related to increased employee compensation and increased insurance costs.

The decrease in corporate unallocated expenses was primarily due to decreased accrued bonuses and decreased professional fees, partially offset by increased public company expenses, increased professional fees and increased insurance expense.

Alpha Pro Tech, Ltd.

The decrease in the Disposable Protective Apparel segment expenses was primarily related to decreased commission and general factory expenses, partially offset by increased employee compensation.

The increase in the Building Supply segment expenses was related to increased employee compensation.

The decrease in corporate unallocated expenses was primarily due to decreased accrued bonuses and professional fees, partially offset by increased public company expenses, insurance expenses and general office expenses.

In accordance with the terms of his employment agreement, the Company’s current President and Chief Executive Officer is entitled to an annual bonus equal to 5% of the pre-tax profits of the Company, excluding bonus expense, up to a maximum of $1.0 million.

A bonus amount of $123,000 was accrued for the three months ended June 30, 2021, compared to $423,000 for the three months ended June 30, 2020.

A bonus amount of $372,000 was accrued for the six months ended June 30, 2021, as compared to $650,000 for the same period of 2020.

A bonus amount of $51,000 was accrued for the three months ended September 30, 2021, compared to $350,000 for the three months ended September 30, 2020.

A bonus amount of $406,000 was accrued for the nine months ended September 30, 2021, as compared to $1,000,000 for the same period of 2020.

Depreciation and Amortization.

Depreciation and amortization expense increased by $25,000, or 14.0%, to $203,000 for the three months ended June 30, 2021, from $178,000 for the three months ended June 30, 2020.

Depreciation and amortization expense increased by $41,000, or 11.4%, to $401,000 for the six months ended June 30, 2021, from $360,000 for the same period of 2020.

Depreciation and amortization expense increased by $23,000, or 12.4%, to $209,000 for the three months ended September 30, 2021, from $186,000 for the three months ended September 30, 2020.

Depreciation and amortization expense increased by $65,000, or 11.9%, to $611,000 for the nine months ended September 30, 2021, from $546,000 for the same period of 2020.

The increase was primarily attributable to increased depreciation for machinery and equipment in the Building Supply segment and increased corporate depreciation related to computer technology.

Income from Operations.

Income from operations decreased by $6,052,000, or 76.8%, to $1,830,000 for the three months ended June 30, 2021, compared to $7,882,000 for the three months ended June 30, 2020.

The decreased income from operations was primarily due to a decrease in gross profit of $6,381,000 and an increase in depreciation and amortization expense of $25,000, partially offset by a decrease in selling, general and administrative expenses of $354,000 Income from operations as a percentage of net sales for the three months ended June 30, 2021 was 10.3%, compared to 30.9% for the same period of 2020.

Income from operations decreased by $5,918,000, or 48.7%, to $6,233,000 for the six months ended June 30, 2021, compared to $12,151,000 for the six months ended June 30, 2020.

The decreased income from operations was primarily due to a decrease in gross profit of $5,756,000, an increase in selling, general and administrative expenses of $121,000 and an increase in depreciation and amortization expense of $41,000.

Income from operations as a percentage of net sales for the six months ended June 30, 2021 was 15.2%, compared to 27.8% for the same period of 2020.

Income from operations decreased by $9,521,000, or 91.8%, to $849,000 for the three months ended September 30, 2021, compared to $10,370,000 for the three months ended September 30, 2020.

The decreased income from operations was primarily due to a decrease in gross profit of $10,194,000 and an increase in depreciation and amortization expense of $23,000, partially offset by a decrease in selling, general and administrative expenses of $696,000.

Income from operations as a percentage of net sales for the three months ended September 30, 2021 was 5.9%, compared to 34.5% for the same period of 2020.

Income from operations decreased by $15,440,000, or 68.6%, to $7,081,000 for the nine months ended September 30, 2021, compared to $22,521,000 for the nine months ended September 30, 2020.

The decreased income from operations was primarily due to a decrease in gross profit of $15,950,000, and an increase in depreciation and amortization expense of $65,000, partially offset by a decrease in selling, general and administrative expenses of $575,000.

Income from operations as a percentage of net sales for the nine months ended September 30, 2021 was 12.8%, compared to 30.6% for the same period of 2020.

Other Income.

Other income increased by $28,000, or 17.5%, to $188,000 for the three months ended June 30, 2021, from $160,000 for the three months ended June 30, 2020.

The increase was primarily due to an increase in equity in income of unconsolidated affiliate of $69,000, and partially offset by a decrease of $41,000 on gains on marketable securities.

Other income increased by $307,000 to $511,000 for the six months ended June 30, 2021, from $204,000 for the same period of 2020.

The increase was primarily due an increase in equity in income of unconsolidated affiliate of $304,000 and to a loss on marketable securities in 2020 compared to no gain or loss on marketable securities during the same period of 2021, for a net increase of $18,000, partially offset by a decrease in interest income of $15,000.

Other income decreased by $114,000, or 50.2%, to $113,000 for the three months ended September 30, 2021, from $227,000 for the three months ended September 30, 2020.

The decrease was primarily due to a decrease in equity in income of unconsolidated affiliate of $138,000, partially offset by an increase of $24,000 on loss on marketable securities.

Other income increased by $194,000 to $625,000 for the nine months ended September 30, 2021, from $431,000 for the same period of 2020.

The increase was primarily due an increase in equity in income of unconsolidated affiliate of $167,000 and a loss on marketable securities in 2020 compared to no gain or loss on marketable securities during the same period of 2021, for a net increase of $42,000, partially offset by a decrease in interest income of $15,000.

Alpha Pro Tech, Ltd.

Income before Provision for Income Taxes.

Income before provision for income taxes for the three months ended June 30, 2021 was $2,018,000, compared to income before provision for income taxes of $8,042,000 for the same period of 2020, representing a decrease of $6,024,000, or 74.9%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $6,052,000 and partially offset by an increase in other income of $28,000.

Income before provision for income taxes for the six months ended June 30, 2021 was $6,744,000, compared to income before provision for income taxes of $12,355,000 for the six months ended June 30, 2020, representing a decrease of $5,611,000, or 45.4%.

Income before provision for income taxes for the three months ended September 30, 2021 was $962,000, compared to income before provision for income taxes of $10,597,000 for the same period of 2020, representing a decrease of $9,635,000, or 90.9%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $9,521,000 and a decrease in other income of $114,000.

Income before provision for income taxes for the nine months ended September 30, 2021 was $7,706,000, compared to income before provision for income taxes of $22,952,000 for the nine months ended September 30, 2020, representing a decrease of $15,246,000, or 66.4%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $15,440,000, partially offset by an increase in other income of $194,000.

Provision for Income Taxes .

The provision for income taxes for the three months ended June 30, 2021 was $347,000, compared to $1,822,000 for the same period of 2020.

The estimated effective tax rate was 17.2% for the three months ended June 30, 2021, compared to 22.7% for the three months ended June 30, 2020.

The provision for income taxes for the three months ended September 30, 2021 was $196,000, compared to $2,490,000 for the same period of 2020.

The estimated effective tax rate was 20.4% for the three months ended September 30, 2021, compared to 23.5% for the three months ended September 30, 2020.

The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.

Alpha Pro Tech, Ltd.

The provision for income taxes for the six months ended June 30, 2021 was $1,354,000, compared to $794,000 for the same period of 2020.

The provision for income taxes consisted of an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified Incentive Stock Options and the exercise of Non-Qualified Stock Options.

The estimated effective tax rate was 20.1% for the six months ended June 30, 2021, compared to 6.4% for the six months ended June 30, 2020.

Excluding the estimated nonrecurring tax benefit of $2.0 million, the estimated effective tax rate was 22.6% for the six months ended June 30, 2020.

The provision for income taxes for the nine months ended September 30, 2021 was $1,550,000, compared to $3,284,000 for the same period of 2020.

The provision for income taxes consisted of an estimated nonrecurring tax benefit of $2.0 million in the first quarter of 2020 as a result of the exercise of disqualified incentive stock options and non-qualified stock options.

The estimated effective tax rate was 20.1% for the nine months ended September 30, 2021, compared to 14.3% for the nine months ended September 30, 2020.

Excluding the estimated nonrecurring tax benefit of $2.0 million, the estimated effective tax rate was 23.0% for the nine months ended September 30, 2020.

The Company does not record a tax provision on equity in income of unconsolidated affiliate, which reduces the effective tax rate.

Net income for the three months ended June 30, 2021 was $1,671,000, compared to net income of $6,220,000 for the three months ended June 30, 2020, representing a decrease of $4,549,000, or 73.1%.

Net income as a percentage of net sales for the three months ended June 30, 2021 was 9.4%, and net income as a percentage of net sales for the same period of 2020 was 24.4%.

Basic earnings per common share for the three months ended June 30, 2021, and 2020 were $0.13 and $0.47, respectively.

Diluted earnings per common share for the three months ended June 30, 2021 and 2020 were $0.12 and $0.46, respectively.

Net income for the six months ended June 30, 2021 was $5,390,000, compared to net income of $11,561,000 for the same period of 2020, representing a decrease of $6,171,000, or 53.4%.

The net income decrease comparing the 2021 and 2020 periods was due to a decrease in income before provision for income taxes of $5,611,000, and an increase in provision for income taxes of $712,000.

Net income for the three months ended September 30, 2021 was $766,000, compared to net income of $8,107,000 for the three months ended September 30, 2020, representing a decrease of $7,341,000, or 90.6%.

Net income as a percentage of net sales for the three months ended September 30, 2021 was 5.3%, and net income as a percentage of net sales for the same period of 2020 was 27.0%.

Basic earnings per common share for the three months ended September 30, 2021, and 2020 were $0.06 and $0.60, respectively.

Diluted earnings per common share for the three months ended September 30, 2021 and 2020 were $0.06 and $0.58, respectively.

Net income for the nine months ended September 30, 2021 was $6,156,000, compared to net income of $19,668,000 for the same period of 2020, representing a decrease of $13,512,000, or 68.7%.

The net income decrease comparing the 2021 and 2020 periods was due to a decrease in income before provision for income taxes of $15,246,000, partially offset by a decrease in provision for income taxes of $1,734,000.

As mentioned above, a tax benefit from stock options exercised positively impacted net income in the first quarter of 2020 by an estimated $2.0 million.

Net income as a percentage of net sales for the six months ended June 30, 2021 was 13.2%, and net income as a percentage of net sales for the same period of 2020 was 26.5%.

Basic earnings per common share for the six months ended June 30, 2021 and 2020 were $0.41 and $0.87, respectively.

Diluted earnings per common share for the six months ended June 30, 2021 and 2020 were $0.40 and $0.84, respectively.

Net income as a percentage of net sales for the nine months ended September 30, 2021 was 11.1%, and net income as a percentage of net sales for the same period of 2020 was 26.7%.

Basic earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.46 and $1.46, respectively.

Diluted earnings per common share for the nine months ended September 30, 2021 and 2020 were $0.45 and $1.41, respectively.

Alpha Pro Tech, Ltd.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2021, the Company had cash of $15,538,000 and working capital of $50,110,000.

As of June 30, 2021, the Company’s current ratio (current assets/current liabilities) was 19:1, compared to a current ratio of 9:1 as of December 31, 2020.

Cash decreased by 33.3%, or $7,754,000, to $15,538,000 as of June 30, 2021, compared to $23,292,000 as of December 31, 2020, and working capital increased by $659,000 from $49,451,000 as of December 31, 2020.

The decrease in cash from December 31, 2020 was due to cash used in operating activities of $2,969,000, cash used in investing activities of $1,468,000 and cash used in financing activities of $3,317,000.

As of September 30, 2021, the Company had cash of $17,636,000 and working capital of $49,746,000.

As of September 30, 2021, the Company’s current ratio (current assets/current liabilities) was 17:1, compared to a current ratio of 9:1 as of December 31, 2020.

Cash decreased by 24.3%, or $5,656,000, to $17,636,000 as of September 30, 2021, compared to $23,292,000 as of December 31, 2020, and working capital increased by $295,000 from $49,451,000 as of December 31, 2020.

The decrease in cash from December 31, 2020 was due to cash used in investing activities of $2,391,000 and cash used in financing activities of $3,686,000 partially offset by cash provided by operating activities of $421,000.

We previously had a $3,500,000 credit facility with Wells Fargo Bank, consisting of a line of credit with interest at prime plus 0.5%.

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The Company determined that the credit line is not necessary at this time, as it had not been used in several years, and the Company currently has sufficient funding from operations.

Net cash used in operating activities of $2,969,000 for the three months ended June 30, 2021 was due to net income of $5,390,000, impacted primarily by the following:

Net cash provided by operating activities of $421,000 for the three months ended September 30, 2021 was due to net income of $6,156,000, impacted primarily by the following:

stock-based compensation expense of $238,000, depreciation and amortization expense of $611,000, equity in income of unconsolidated affiliate of $623,000, operating lease expense net of accretion of $663,000, a decrease in accounts receivable of $3,650,000, an increase in prepaid expenses of $337,000, an increase in inventory of $6,441,000, a decrease in accounts payable and accrued liabilities of $2,627,000, a decrease in customer advance payments of $209,000 and a decrease in lease liabilities of $660,000.

Accounts receivable decreased by $1,961,000, or 21.7%, to $7,076,000 as of June 30, 2021, from $9,037,000 as of December 31, 2020.

Accounts receivable decreased by $3,650,000, or 40.4%, to $5,387,000 as of September 30, 2021, from $9,037,000 as of December 31, 2020.

The decrease in accounts receivable was related to decreased sales as compared to the fourth quarter of 2020.

The number of days that sales remained outstanding as of June 30, 2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 39 days, compared to 34 days as of December 31, 2020.

Alpha Pro Tech, Ltd.

Inventory increased by $5,248,000, or 31.3%, to $21,997,000 as of June 30, 2021, from $16,749,000 as of December 31, 2020.

The increase was primarily due to an increase in inventory for the Disposable Protective Apparel segment of $3,777,000, or 32.9%, to $15,275,000 and an increase in inventory for the Building Supply segment of $1,471,000 or 28.0%, to $6,722,000.

Prepaid expenses increased by $2,135,000, or 34.3%, to $8,360,000 as of June 30, 2021, from $6,225,000 as of December 31, 2020.

The increase was primarily due to prepayments for machinery and equipment for the Building Supply segment and, to a lesser extent, for the Disposable Protective Apparel segment, as well as prepaid inventory.

Right-of-use assets as of June 30, 2021 decreased by $441,000 to $3,094,000 from $3,535,000 as of December 31, 2020 as a result of amortization of the balance.

Lease liabilities as of June 30, 2021 decreased by $438,000 to $3,148,000 from $3,586,000 as of December 31, 2020.

The number of days that sales remained outstanding as of September 30, 2021, calculated by using an average of accounts receivable outstanding and annual revenue, was 40 days, compared to 34 days as of December 31, 2020.

Inventory increased by $6,441,000, or 38.5%, to $23,190,000 as of September 30, 2021, from $16,749,000 as of December 31, 2020.

The increase was due to an increase in inventory for the Disposable Protective Apparel segment of $4,852,000, or 42.2%, to $16,350,000 and an increase in inventory for the Building Supply segment of $1,589,000 or 30.3%, to $6,840,000.

Prepaid expenses increased by $337,000, or 5.4%, to $6,562,000 as of September 30, 2021, from $6,225,000 as of December 31, 2020.

The increase was primarily due to prepayments for tax payments and insurance.

Right-of-use assets as of September 30, 2021 decreased by $663,000 to $2,872,000 from $3,535,000 as of December 31, 2020 as a result of amortization of the balance.

Lease liabilities as of September 30, 2021 decreased by $660,000 to $2,926,000 from $3,586,000 as of December 31, 2020.

The recording of the lease liabilities was the result of adopting ASC 842, Leases.

The decrease in the lease liabilities was the result of lease payments made during the year.

Accounts payable and accrued liabilities as of June 30, 2021 decreased by $2,894,000, or 60.6%, to $1,882,000, from $4,776,000 as of December 31, 2020.

Accounts payable and accrued liabilities as of September 30, 2021 decreased by $2,627,000, or 55.0%, to $2,149,000, from $4,776,000 as of December 31, 2020.

The decrease was primarily due to a decrease in accrued bonuses and a decrease in trade accounts payable.

Customer advance payment of orders as of June 30, 2021 was $103,000, which was the result of customer deposits for future dated PPE orders in response to the COVID-19 pandemic, compared to $209,000 as of December 31, 2020.

Net cash used in investing activities was $1,468,000 for the six months ended June 30, 2021, compared to net cash used in investing activities of $372,000 for the same period of 2020.

Investing activities for the six months ended June 30, 2021 consisted of the purchase of property and equipment of $1,468,000.

Investing activities for the six months ended June 30, 2020 consisted of the purchase of property and equipment of $419,000 and proceeds from the sale of marketable securities of $47,000.

Net cash used in financing activities was $3,317,000 for the six months ended June 30, 2021, compared to net cash provided by financing activities of $1,810,000 for the same period of 2020.

Net cash used in financing activities for the six months ended June 30, 2021 resulted from the payment of $3,708,000 for the repurchase of common stock, mainly offset by proceeds of $391,000 from the exercise of stock options.

Net cash provided by financing activities for the six months ended June 30, 2020 resulted from proceeds of $1,935,000 from the exercise of stock options, partially offset the payment of $125,000 for the repurchase of common stock.

As of June 30, 2021, we had $777,000 available for additional stock purchases under our stock repurchase program.

During the three months ended June 30, 2021, we repurchased 150,000 shares of common stock at a cost of $1,342,000.

As of June 30, 2021, we had repurchased a total of 18,446,917 shares of common stock at a cost of approximately $41,742,000 through our repurchase program.

Customer advance payment of orders as of September 30, 2021 was $0, which was the result of no customer deposits for future dated PPE orders in response to the COVID-19 pandemic, compared to $209,000 as of December 31, 2020.

Net cash used in investing activities was $2,391,000 for the nine months ended September 30, 2021, compared to net cash used in investing activities of $567,000 for the same period of 2020.

Investing activities for the nine months ended September 30, 2021 consisted of the purchase of property and equipment of $2,391,000.

Investing activities for the nine months ended September 30, 2020 consisted of the purchase of property and equipment of $687,000 and proceeds from the sale of marketable securities of $120,000.

Net cash used in financing activities was $3,686,000 for the nine months ended September 30, 2021, compared to net cash provided by financing activities of $1,564,000 for the same period of 2020.

Net cash used in financing activities for the nine months ended September 30, 2021 resulted from the payment of $4,077,000 for the repurchase of common stock, partially offset by proceeds of $391,000 from the exercise of stock options.

Net cash provided by financing activities for the nine months ended September 30, 2020 resulted from proceeds of $1,970,000 from the exercise of stock options, partially offset by the payment of $406,000 for the repurchase of common stock.

Alpha Pro Tech, Ltd.

As of September 30, 2021, we had $409,000 available for additional stock purchases under our stock repurchase program.

During the three months ended September 30, 2021, we repurchased 46,000 shares of common stock at a cost of $369,000.

As of September 30, 2021, we had repurchased a total of 18,492,917 shares of common stock at a cost of approximately $42,111,000 through our repurchase program.

We retire all stock upon repurchase.

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We believe that our current cash balance will be sufficient to satisfy our projected working capital and planned capital expenditures for the foreseeable future.

We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $2,450,000 has been paid as of June 30, 2021.

We have made approximately $4,000,000 in commitments for capital investments to increase our production capacity in our Building supply segment, of which $2,450,000 has been paid as of September 30, 2021.

Recent Accounting Pronouncements

5 unchanged sentences

Adoption of the new standard did not have a material impact on our consolidated financial statements.

Alpha Pro Tech, Ltd.

In December 2019, the FASB issued ASU No.

3 unchanged sentences

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

Management periodically reviews new accounting standards that are issued.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements