What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 141 added, 93 removed, 110 unchanged (68% of the section changed)

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trade policy have introduced uncertainty regarding the future of global trade relations.

Following the inauguration of the second Trump administration, there have been numerous announcements made and actions taken related to tariff increases and other trade restrictions regarding imports into the U.S.

President Trump has indicated that his administration is likely to impose significant tariffs on imported goods, including a 145% tariff on Chinese imports, a tariff on goods from Mexico and up to 10% or 20% on all other U.S.

imports, including tariffs of 10% on products we import from India.

Given that we currently source very little from China, this may be a benefit in regards to our competition that does import from China, but any new or increased tariffs, quotas, embargoes, or other trade barriers affecting other countries from which we do source supplies or our global network of third-party suppliers could impact our supply chain and cost structure.

On February 1, 2025, President Trump announced the imposition of additional substantial tariffs on imports from various countries, including China, Canada and Mexico, and the subject countries indicated their intention to impose counter measures.

Under the announced measures, tariffs will be applied to certain products from Mexico, Vietnam, India, Canada, Sri Lanka, and China, among other countries.

The current tariffs, especially those imposed on imports from India and Sri Lanka, have increased the costs of certain products sourced from non-U.S.

Sales of certain of our products, for example, disposable protective garments, have experienced volatility in demand related to customers securing high order rates in prior periods, only to enter a period of destocking in more recent periods.

This significant level of volatility in demand levels, input and transportation costs, and material and labor availability, have pressured our ability to operate efficiently in recent periods.

We will continue to take actions to mitigate such impacts, including implementing commercial pricing adjustments, holding extra inventories, resourcing to alternate suppliers and insourcing of previously sourced products.

Although we believe we generally may be able to mitigate the impact of higher commodity costs over time, we may experience additional material costs and disruptions in supply in the future and may not be able to pass along higher costs to our customers in the form of price increases or otherwise mitigate the impacts to our operating results.

Any new or increased tariffs, quotas, embargoes, or other trade barriers affecting other countries from which we do source supplies or our global network of third-party suppliers could impact our supply chain and cost structure.

Additionally, retaliatory measures by affected countries could further disrupt our operations or reduce our competitiveness in international markets.

6 unchanged sentences

The following table sets forth certain operational data as a percentage of net sales for the periods indicated:

For the Three Months

Ended March 31,

For the Three Months Ended

For the Six Months

Ended June 30,

Selling, general and administrative expenses

1 unchanged sentence

Income before provision for income taxes

For the three months ended March 31, 2025 compared to the three months ended March 31, 2024

Consolidated sales for the three months ended March 31, 2025, increased to $13,822,000, from $13,482,000 for the three months ended March 31, 2024, representing an increase of $340,000, or 2.5%.

This increase consisted of increased sales in the Building Supply segment of $132,000 and increased sales in the Disposable Protective Apparel segment of $208,000.

Building Supply Segment

Building Supply segment sales for the three months ended March 31, 2025, increased by $132,000, or 1.6%, to $8,372,000 compared to $8,240,000 for the three months ended March 31, 2024.

The Building Supply segment increase during the three months ended March 31, 2025, was primarily due to a 21.8% increase in sales of synthetic roof underlayment and an 89.3% increase in sales of other woven material, partially offset by a 20.9% decrease in sales of housewrap compared to the same period of 2024.

The sales mix of the Building Supply segment for the three months ended March 31, 2025, was approximately 48% for synthetic roof underlayment, 45% for housewrap and 7% for other woven material.

This compared to approximately 40% for synthetic roof underlayment, 56% for housewrap and 4% for other woven material for the three months ended March 31, 2024.

Three and Six months ended June 30, 2025 compared to Three and Six months ended June 30, 2024

Consolidated sales for the three months ended June 30, 2025 , increased to $16,672,000, from $16,289,000 for the three months ended June 30, 2024, representing an increase of $383,000, or 2.4%.

This increase consisted of increased sales in the Building Supply segment of $1,143,000, partially offset by decreased sales in the Disposable Protective Apparel segment of $760,000.

Alpha Pro Tech, Ltd.

Building Supply segment sales for the three months ended June 30, 2025 , increased by $1,143,000, or 11.5%, to $11,084,000 compared to $9,941,000 for the three months ended June 30, 2024.

It was a record quarter for sales of the core building products, which include housewrap and synthetic roof underlayment and comprise approximately 90% of the total Building Supply segment sales.

Including sales of other woven material, which make up the additional approximately 10% of sales, the second quarter of 2025 was the second highest quarter on record for Building Supply segment sales.

The Building Supply segment increase during the three months ended June 30, 2025, was primarily due to a 10.6% increase in sales of synthetic roof underlayment, a 17.0% increase in sales of housewrap and a 0.1% increase in sales of other woven material compared to the same period of 2024

The sales mix of the Building Supply segment for the three months ended June 30, 2025, was approximately 40% for synthetic roof underlayment, 50% for housewrap and 10% for other woven material.

This compared to approximately 40% for synthetic roof underlayment, 48% for housewrap and 12% for other woven material for the three months ended June 30, 2024.

Our synthetic roof underlayment product line primarily includes REX SynFelt®, REX TECHNOply® and TECHNO SB and our synthetic roof underlayment accessories consist of our new self-adhered TECHNOplus Ice & Water and REX Hi Temp.

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Housewrap accessories consist of REXTREME Window and Door Flashing and REX™ Premium Seam Tape.

Alpha Pro Tech, Ltd.

The housing market continued to show weakness in the first quarter of 2025, continuing the weak trend of 2024, with single-family housing starts down 5.7% compared to the same quarter in 2024.

During the first quarter of 2025, we outperformed the market as sales of the core building products (housewrap and synthetic roof underlayment) were down 3.6%.

Excluding the decline in housewrap sales to two private-label distributors, which were beyond our control, the first quarter sales performance of our core building products would have increased compared to the prior year quarter.

Sales of synthetic roof underlayment, which were up 21.8% in the first three months of 2025, have been robust due to national programs with builders and contractors as well as category expansion, which includes self-adhered products.

As our relationships strengthen with downstream customers, we have successfully leveraged distribution to stock our full line.

Housewrap sales in the first quarter of 2025 have been challenging due to lower single-family housing starts, a significant decline in sales to two private-label distributors (as mentioned above), economic uncertainty, and a period of colder temperatures and increased snowfall during the first quarter of 2025.

Sales of other woven material increased by $317,000, or 89.3%, for the three months ended March 31, 2025 compared to the same period of 2024, primarily due to increased sales to our major customer.

The housing market continued to show weakness in the second quarter of 2025, continuing the weak trend of 2024, with single-family housing starts down 9.0% compared to the same quarter in 2024.

During the second quarter of 2025, we significantly outperformed the market as sales of the core building products (housewrap and synthetic roof underlayment) were up 13.2% as compared to the same period of 2024.

Our core REX branded products and core private label product sales were both strong in the second quarter of 2025.

Sales of other woven material increased by $1,000, or 0.1%, to $1,246,000 compared to $1,245,000 for the three months ended June 30, 2025 compared to the same period of 2024.

The Company is pursuing new opportunities for other woven material that could improve sales, and we hired a Director of Product and Business Development during the first quarter of 2025.

Management expects growth in the Building Supply segment in the coming year and is encouraged by business in the pipeline.

However, there continues to be uncertainty in housing starts and volatility and uncertainty in the economy in general could affect this segment.

Disposable Protective Apparel Segment

Sales for the Disposable Protective Apparel segment for the three months ended March 31, 2025, increased by $208,000, or 4.0%, to $5,450,000, compared to $5,242,000 for the three months ended March 31, 2024.

This segment increase was due to a 12.0% increase in sales of disposable protective garments, partially offset by a 6.7% decrease in sales of face shields and a 50.5% decrease in sales of face masks.

The sales mix of the Disposable Protective Apparel segment for the three months ended March 31, 2025, was approximately 90% for disposable protective garments, 6% for face masks and 4% for face shields.

This sales mix is compared to approximately 84% for disposable protective garments, 11% for face masks and 5% for face shields for the three months ended March 31, 2024.

Sales of disposable protective garments in the three months ended March 31, 2025 were up 12.0%, due in part to achieving an elevated status with our largest international channel partners, consummated in late 2024 and launched in early 2025.

We expect this endeavor to result in steady organic growth with end-users in the cleanroom and controlled environment marketplace.

Additionally, during the second half of 2024, we consummated new and evolved distribution agreements with other channel partners that set in motion mutual growth incentives for this year and for years to come.

Also, we are working diligently to discover and work closely with new channel partners.

Sales of face masks in the first quarter of 2025 were negatively affected by excessive purchases primarily by one of our channel partners in the later part of 2024 in preparation for the 2025 flu/COVID season.

Thus, their on-hand inventory in the first quarter of 2025 was higher than historical levels.

We anticipate demand to improve once inventory levels return to more normal levels.

Our partnerships remain strong with a mutual desire to achieve organic growth in 2025.

Lastly, there remains uncertainty and volatility in the economy due to tariffs.

Management believes that the Company is well positioned, as a significant portion of our competition purchases disposable protective garments from China which currently have significantly higher tariff rates than the garments that we have source from India.

This puts us in a favorable cost position in relation to those competitors.

However, new tariffs on India may negatively affect our margins on products we produce there.

Management expects growth in the Building Supply segment in 2025 and is encouraged by the strength in the second quarter of 2025.

However, there continues to be uncertainty in housing starts and volatility and uncertainty in the economy as well as a stronger than normal hurricane season in the latter part of 2024 which could affect this segment.

Disposable Protective Apparel segment sales for the three months ended June 30, 2025 , decreased by $760,000, or 12.0%, to $5,588,000, compared to $6,348,000 for the three months ended June 30, 2024.

This segment decrease was due to an 11.3% decrease in sales of disposable protective garments and a 28.3% decrease in sales of face masks, partially offset by a 4.8% increase in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the three months ended June 30, 2025, was approximately 90% for disposable protective garments, 6% for face masks and 4% for face shields.

This sales mix is compared to approximately 90% for disposable protective garments, 7% for face masks and 3% for face shields for the three months ended June 30, 2024.

Sales of disposable protective garments in the three months ended June 30, 2025 were down 11.3%, however, this is a challenging comparison as sales during the three months ended June 30, 2024 were the highest since the COVID-19 sales bump.

The second quarter of 2025 started strong but experienced a decline part way through the quarter, resulting in lower-than-expected performance in the second quarter of 2025.

Tariffs have added uncertainty and volatility to the marketplace, as we are seeing end-customers reducing and conserving their inventories in an effort to reduce overall spend.

Sales of face masks in the second quarter of 2025 continued to fall below management’s expectations, while we have seen a positive trend with sales of face shields.

Face mask sales continue to be negatively affected by excessive purchases by one of our channel partners in the latter part of 2024.

Demand from this channel partner started to improve at the end of the second quarter, which will potentially continue through the rest of 2025.

Our distribution partnerships across multiple distribution channels are strong, with mutual desire to achieve organic growth in 2025 while navigating increased costs due to tariffs.

Our efforts to discover and partner with new channels in this segment have been productive, and we are pleased to bring on a few select, strategic regional players this past quarter.

Alpha Pro Tech, Ltd.

Consolidated sales for the six months ended June 30, 2025 increased to $30,494,000 from $29,772,000 for the six months ended June 30, 2024, representing an increase of $722,000, or 2.4%.

This increase consisted of increased sales in the Building Supply segment of $1,275,000, partially offset by decreased sales in the Disposable Protective Apparel segment of $553,000.

Building Supply segment sales for the six months ended June 30, 2025 increased by $1,275,000, or 7.0%, to $19,456,000, compared to $18,181,000 for the same period of 2024.

This is the second highest mid-year Building Supply segment sales on record.

The Building Supply segment sales increase during the six months ended June 30, 2025, was primarily due to a 15.7% increase in sales of synthetic roof underlayment and a 19.9% increase in sales of other woven material, partially offset by a 1.8% decrease in sales of housewrap compared to the same period of 2024.

The sales mix of the Building Supply segment for the six months ended June 30, 2025 was 48% for housewrap, 43% for synthetic roof underlayment and 9% for other woven material.

This compared to 52% for housewrap, 40% for synthetic roof underlayment and 8% for other woven material for the six months ended June 30, 2024.

We are encouraged by our year-to-date increase in core building product sales of 5.2%, especially since single-family housing starts were down 6.8% during the same period.

Excluding the decline in housewrap sales to two private-label distributors, which were beyond our control, the year-to-date sales performance of our core building products would have improved upon an already mid-year sales record for Building Supply segment sales.

Sales of other woven material were up 19.9% year-to-date, primarily due to increased sales to our largest customer for this product line.

As previously stated, we have hired a Director of Product and Business Development, with the intent of significantly increasing sales of other woven material.

Management expects continued growth in the Building Supply segment for the remainder of 2025 and is encouraged by the strength in the second quarter of 2025.

However, there continues to be uncertainty in housing starts, volatility and uncertainty in the economy as well as a stronger than normal hurricane season in the latter part of 2024 which could affect this segment.

Disposable Protective Apparel segment sales for the six months ended June 30, 2025 decreased by $553,000, or 4.8%, to $11,038,000, compared to $11,591,000 for the same period of 2024.

This segment decrease was due to a 1.1% decrease in sales of disposable protective garments, a 40.9% decrease in sales of face masks, and a 1.3% decrease in sales of face shields.

The sales mix of the Disposable Protective Apparel segment for the six months ended June 30, 2025 was 90% for disposable protective garments, 6% for face masks and 4% for face shields.

This sales mix is compared to 87% for disposable protective garments, 9% for face masks and 4% for face shields for the six months ended June 30, 2024.

Gross Profit .

Gross profit decreased by $25,000, or 0.5%, to $5,392,000 for the three months ended March 31, 2025, from $5,417,000 for the three months ended March 31, 2024.

The gross profit margin was 39.0% for the three months ended March 31, 2025, compared to 40.2% for the three months ended March 31, 2024.

The gross profit margin in the three months ended March 31, 2025 was negatively affected by a margin decrease in both the Disposable Protective Apparel and Building Supply segments.

Gross profit margin was negatively affected primarily by the inventory received last year which incurred higher ocean freight rates.

There was significant volatility in ocean freight rates in 2024, due to factors such as geopolitical tensions, labor disputes and market dynamics but we are now experiencing an easing of those freight rates.

Gross profit decreased by $710,000, or 10.4%, to $6,131,000 for the three months ended June 30, 2025, from $6,841,000 for the three months ended June 30, 2024.

The gross profit margin was 36.8% for the three months ended June 30, 2025, compared to 42.0% for the three months ended June 30, 2024.

Gross profit decreased by $736,000, or 6.0%, to $11,523,000 for the six months ended June 30, 2025, from $12,259,000 for the six months ended June 30, 2024.

The gross profit margin was 37.8% for the six months ended June 30, 2025, compared to 41.2% for the six months ended June 30, 2024.

The gross profit margin in the three months and six months ended June 30, 2025 was negatively affected by a margin decrease primarily in the Disposable Protective Apparel segment.

Gross profit margin in the Disposable Protective Apparel segment in 2025 was lower compared to the 2024 margin, which was higher than historical margins.

In addition, gross profit margin has been negatively affected in 2025, primarily by higher sales rebates, ocean freight rates and to a lesser degree US tariffs.

Management will be increasing selling prices starting in July 2025 to partially mitigate the impact of the new 2025 US tariffs, but it is expected that tariffs will have a negative effect on gross profit.

Alpha Pro Tech, Ltd.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses decreased by $153,000, or 3.2%, to $4,694,000 for the three months ended March 31, 2025, from $4,847,000 for the three months ended March 31, 2024.

As a percentage of net sales, selling, general and administrative expenses decreased to 34.0% for the three months ended March 31, 2025, from 36.0% for the same period of 2024.

The change in expenses by segment for the three months ended March 31, 2025, was as follows:

Selling, general and administrative expenses decreased by $328,000, or 6.7%, to $4,556,000 for the three months ended June 30, 2025, from $4,884,000 for the three months ended June 30, 2024.

As a percentage of net sales, selling, general and administrative expenses decreased to 27.3% for the three months ended June 30, 2025, from 30.0% for the same period of 2024.

The change in expenses by segment for the three months ended June 30, 2025, was as follows:

Building Supply expenses were down by $21,000, or 1.2%;

Disposable Protective Apparel expenses were down by $85,000, or 6.1%;

and corporate unallocated expenses were down by $222,000, or 12.9%.

The decrease in the Building Supply segment expenses was primarily related to decreased employee compensation and marketing expenses, partially offset by increased sales travel expenses.

The increase in the Disposable Protective Apparel segment expenses was primarily related to increased employee compensation, marketing and sales travel expenses.

The decrease in corporate unallocated expenses was primarily due to decreased professional fees, insurance expenses, general office expenses, and reorganization costs in the three months ended June 30, 2025 compared to the same period of 2024.

The reorganization costs in 2024 were incurred in connection with moving our face mask manufacturing facility from Utah to Arizona.

Selling, general and administrative expenses decreased by $482,000, or 5.0%, to $9,250,000 for the six months ended June 30, 2025, from $9,732,000 for the six months ended June 30, 2024.

As a percentage of net sales, selling, general and administrative expenses decreased to 30.3% for the six months ended June 30, 2025, from 32.7% for the same period of 2024.

The change in expenses by segment for the six months ended June 30, 2025, was as follows:

Building Supply expenses were down by $128,000, or 3.4%;

Disposable Protective Apparel expenses were up by $2,000, or 0.1%;

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The decrease in the Building Supply segment expenses was primarily related to decreased employee compensation.

The increase in the Disposable Protective Apparel segment expenses was primarily related to increased employee compensation, marketing and sales travel expenses.

The decrease in corporate unallocated expenses was primarily due to decreased, professional fees, insurance expenses, general office expenses, and reorganization costs in 2024.

The increase in the Disposable Protective Apparel segment expenses was primarily related to increased employee compensation, marketing and sales travel expenses, partially offset by lower rent and utilities, general office and factory expenses and commission.

The decrease in corporate unallocated expenses was primarily due to decreased professional fees, insurance expenses, general office expenses, and reorganization costs in the six months ended June 30, 2025 compared to the same period of 2024.

The reorganization costs in 2024 were incurred in connection with moving our face mask manufacturing facility from Utah to Arizona.

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 $41,000 was accrued for the three months ended March 31, 2025, compared to $38,000 for the three months ended March 31, 2024.

A bonus amount of $84,000 was accrued for the three months ended June 30, 2025, compared to $111,000 for the three months ended June 30, 2024.

A bonus amount of $125,000 was accrued for the six months ended June 30, 2025, compared to $149,000 for the six months ended June 30, 2024.

Depreciation and Amortization .

Depreciation and amortization expense decreased by $1,000, or 0.8%, to $243,000 for the three months ended March 31, 2025, from $244,000 for the three months ended March 31, 2024.

Depreciation and amortization expense decreased by $5,000, or 2.0%, to $240,000 for the three months ended June 30, 2025, from $245,000 for the three months ended June 30, 2024.

Depreciation and amortization expense decreased by $6,000, or 1.2%, to $483,000 for the six months ended June 30, 2025, from $489,000 for the six months ended June 30, 2024.

Income from Operations.

Income from operations increased by $129,000, or 39.6%, to $455,000 for the three months ended March 31, 2025, compared to $326,000 for the three months ended March 31, 2024.

The increased income from operations was primarily due to a decrease in selling, general and administrative expenses of $153,000 and a decrease in depreciation and amortization expenses of $1,000, partially offset by a decrease in gross profit of $25,000.

Income from operations as a percentage of net sales for the three months ended March 31, 2025, was 3.3%, compared to 2.4% for the three months ended March 31, 2024.

Income from operations decreased by $377,000, or 22.0%, to $1,335,000 for the three months ended June 30, 2025, compared to $1,712,000 for the three months ended June 30, 2024.

The decreased income from operations was primarily due to a decrease in gross profit of $710,000, partially offset by a decrease in selling, general and administrative expenses of $328,000 and a decrease in depreciation and amortization expenses of $5,000.

Income from operations as a percentage of net sales for the three months ended June 30, 2025, was 8.0%, compared to 10.5% for the three months ended June 30, 2024.

Income from operations decreased by $248,000, or 12.2%, to $1,790,000 for the six months ended June 30, 2025, compared to $2,038,000 for the six months ended June 30, 2024.

The decreased income from operations was primarily due to a decrease in gross profit of $736,000, partially offset by a decrease in selling, general and administrative expenses of $482,000 and a decrease in depreciation and amortization expenses of $6,000.

Income from operations as a percentage of net sales for the six months ended June 30, 2025, was 5.9%, compared to 6.8% for the six months ended June 30, 2024.

Alpha Pro Tech, Ltd.

Other Income .

Other income decreased by $79,000 to income of $317,000 for the three months ended March 31, 2025, compared to $396,000 for the same period of 2024.

The decrease was primarily due to a decrease in interest income of $82,000, partially offset by an increase in equity in income of unconsolidated affiliate of $3,000.

Other income decreased by $131,000 to income of $276,000 for the three months ended June 30, 2025, compared to $407,000 for the same period of 2024.

The decrease was primarily due to a decrease in interest income of $68,000 and a decrease in equity in income of unconsolidated affiliate of $63,000.

Other income decreased by $210,000 to income of $593,000 for the six months ended June 30, 2025, compared to $803,000 for the same period of 2024.

The decrease was primarily due to a decrease in interest income of $150,000 and a decrease in equity in income of unconsolidated affiliate of $60,000.

Income before Provision for Income Taxes .

Income before provision for income taxes for the three months ended March 31, 2025, was $772,000, compared to income before provision for income taxes of $722,000 for the same period of 2024, representing an increase of $50,000, or 6.9%.

This increase in income before provision for income taxes was due to an increase in income from operations of $129,000, partially offset by a decrease in other income of $79,000.

Income before provision for income taxes for the three months ended June 30, 2025, was $1,611,000, compared to income before provision for income taxes of $2,119,000 for the same period of 2024, representing a decrease of $508,000, or 24.0%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $377,000 and a decrease in other income of $131,000.

Income before provision for income taxes for the six months ended June 30, 2025, was $2,383,000, compared to income before provision for income taxes of $2,841,000 for the same period of 2024, representing a decrease of $458,000, or 16.1%.

This decrease in income before provision for income taxes was due to a decrease in income from operations of $248,000 and a decrease in other income of $210,000.

Provision for Income Taxes .

The provision for income taxes for the three months ended March 31, 2025, was $159,000, compared to $146,000 for the same period of 2024.

The estimated effective tax rate was 20.6% for the three months ended March 31, 2025, compared to 20.2% for the three months ended March 31, 2024.

The provision for income taxes for the three months ended June 30, 2025, was $367,000, compared to $475,000 for the same period of 2024.

The estimated effective tax rate was 22.8% for the three months ended June 30, 2025, compared to 22.4% for the three months ended June 30, 2024.

The provision for income taxes for the six months ended June 30, 2025, was $526,000, compared to $621,000 for the same period of 2024.

The estimated effective tax rate was 22.1% for the six months ended June 30, 2025, compared to 21.9% for the six months ended June 30, 2024.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes permanent extensions of most expiring Tax Cuts and Jobs Act provisions and international tax changes.

The Company is still evaluating the potential impacts of the OBBBA;

however, the Company does not anticipate it will have a material impact on the Company’s financial statements.

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, 2025, was $1,244,000 compared to net income of $1,644,000 for the same period of 2024, representing a decrease of $400,000, or 24.3%.

The net income decrease between the three months ended June 30, 2025 and the same period of 2024 was due to a decrease in income before provision for income taxes of $508,000, partially offset by a decrease in provision for income taxes of $108,000.

Net income as a percentage of net sales was 7.5% for the three months ended June 30, 2025, compared to 10.1% for the same period of 2024.

Basic and diluted earnings per common share for each of the three months ended June 30, 2025 and 2024, was $0.12 and $0.15, respectively.

Net income for the six months ended June 30, 2025, was $1,857,000 compared to net income of $2,220,000 for the same period of 2024, representing a decrease of $363,000, or 16.4%.

The net income decrease between the six months ended June 30, 2025 and the same period of 2024 was due to a decrease in income before provision for income taxes of $458,000, partially offset by a decrease in provision for income taxes of $95,000.

Net income as a percentage of net sales was 6.1% for the six months ended June 30, 2025, compared to 7.5% for the same period of 2024.

Basic and diluted earnings per common share for each of the six months ended June 30, 2025 and 2024, was $0.18 and $0.20, respectively.

Alpha Pro Tech, Ltd.

Net income for the three months ended March 31, 2025, was $613,000 compared to net income of $576,000 for the same period of 2024, representing an increase of $37,000, or 6.4%.

The net income increase between the three months ended March 31, 2025 and the same period of 2024 was due to an increase in income before provision for income taxes of $50,000, partially offset by an increase in provision for income taxes of $13,000.

Net income as a percentage of net sales was 4.4% for the three months ended March 31, 2025, compared to 4.3% for the same period of 2024.

Basic and diluted earnings per common share for each of the three months ended March 31, 2025 and 2024, was $0.06 and $0.05, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2025, the Company had cash and cash equivalents (“cash”) of $13,352,000 and working capital of $47,035,000.

As of March 31, 2025, the Company’s current ratio (current assets/current liabilities) was 21:1.

Cash decreased by 28.4%, or $5,284,000, to $13,352,000 as of March 31, 2025, compared to $18,636,000 as of December 31, 2024, and working capital decreased by $481,000, to $47,035,000 from $47,516,000 as of December 31, 2024.

As of June 30, 2025, the Company had cash and cash equivalents (“cash”) of $14,464,000 and working capital of $47,528,000.

As of June 30, 2025, the Company’s current ratio (current assets/current liabilities) was 17:1.

Cash decreased by 22.4%, or $4,172,000, to $14,464,000 as of June 30, 2025, compared to $18,636,000 as of December 31, 2024, and working capital increased by $12,000, to $47,528,000 from $47,516,000 as of December 31, 2024.

The decrease in cash from December 31, 2024, was due to cash used in operating activities of $1,871,000, cash used in investing activities of $273,000, and cash used in financing activities of $2,028,000.

Net cash used in operating activities of $3,959,000 for the three months ended March 31, 2025 was due to net income of $613,000, as adjusted primarily by the following:

stock-based compensation expense of $136,000, depreciation and amortization expense of $243,000, equity in income of unconsolidated affiliate of $141,000, operating lease asset amortization of $229,000, an increase in accounts receivable of $2,778,000, an increase in prepaid expenses of $375,000, an increase in inventory of $832,000, a decrease in accounts payable and accrued liabilities of $841,000, and a decrease in lease liabilities of $213,000, all compared to December 31, 2024.

Accounts receivable increased by $2,778,000, or 56.8%, to $7,672,000 as of March 31, 2025, from $4,894,000 as of December 31, 2024.

The increase in accounts receivable was primarily related to increased sales in the latter part of the first quarter of 2025 compared to the latter part of 2024.

The number of days that sales remained outstanding as of March 31, 2025, calculated by using an average of accounts receivable outstanding and annual revenue, was 41 days, compared to 36 days as of December 31, 2024.

Inventory increased by $832,000, or 3.7%, to $23,565,000 as of March 31, 2025, from $22,733,000 as of December 31, 2024.

The increase was due to an increase in inventory for the Building Supply segment of $904,000, or 8.3%, to $11,835,000, partially offset by a decrease in inventory for the Disposable Protective Apparel segment of $72,000, or 0.6%, to $11,730,000.

Prepaid expenses increased by $375,000, or 8.6%, to $4,751,000 as of March 31, 2025, from $4,376,000 as of December 31, 2024.

The increase was primarily due to prepaid inventory, partially offset by decreased prepaid tax payments.

Right-of-use-assets as of March 31, 2025, decreased by $229,000 to $8,485,000 from $8,714,000 as of December 31, 2024, as a result of amortization of the right-of- use-assets.

Lease liabilities as of March 31, 2025, decreased by $213,000 to $8,562,000 from $8,775,000 as of December 31, 2024.

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

Accounts payable and accrued liabilities as of March 31, 2025, decreased by $841,000, or 37.7%, to $1,389,000, from $2,230,000 as of December 31, 2024.

The decrease was primarily due to decreases in accrued bonuses, accrued taxes and trade payables.

Net cash used in investing activities was $135,000 for the three months ended March 31, 2025, compared to net cash used in investing activities of $83,000 for 2024.

Investing activities for the three months ended March 31, 2025 and 2024 consisted primarily of the purchase of property and equipment.

Net cash used in financing activities was $1,190,000 for the three months ended March 31, 2025, compared to net cash used in financing activities of $616,000 for the same period of 2024.

Net cash used in financing activities for the three months ended March 31, 2025 resulted from the payment of $1,178,000 for the repurchase of common stock and $12,000 for treasury stock excise tax.

Net cash used in financing activities for the three months ended March 31, 2024 resulted from the payment of $1,417,000 for the repurchase of common stock and $14,000 for treasury stock excise tax, partially offset by $815,000 in proceeds from the exercise of stock options.

Alpha Pro Tech, Ltd.

As of March 31, 2025, we had $1,564,000 available for stock purchases under our stock repurchase program.

During the three months ended March 31, 2025, we repurchased 221,413 shares of common stock at a cost of $1,178,000.

As of March 31, 2025, we had repurchased a total of 21,464,040 shares of common stock at a cost of approximately $55,956,000 through our repurchase program which commenced in 1999.

Net cash used in operating activities of $1,871,000 for the six months ended June 30, 2025 was due to net income of $1,857,000, as adjusted primarily by the following:

stock-based compensation expense of $272,000, depreciation and amortization expense of $483,000, equity in income of unconsolidated affiliate of $278,000, operating lease asset amortization of $462,000, an increase in accounts receivable of $4,886,000, a decrease in prepaid expenses of $438,000, a decrease in inventory of $372,000, a decrease in accounts payable and accrued liabilities of $156,000, and a decrease in lease liabilities of $435,000, all compared to December 31, 2024.

Accounts receivable increased by $4,886,000, or 99.8%, to $9,780,000 as of June 30, 2025, from $4,894,000 as of December 31, 2024.

The increase in accounts receivable was primarily related to increased sales in the latter part of the second quarter of 2025 compared to the latter part of 2024 and due to a higher percentage than normal of receivables with extended terms.

The number of days that sales remained outstanding as of June 30, 2025, calculated by using an average of accounts receivable outstanding and annual revenue, was 40 days, compared to 36 days as of December 31, 2024.

Inventory decreased by $372,000, or 1.6%, to $22,361,000 as of June 30, 2025, from $22,733,000 as of December 31, 2024.

The decrease was due to a decrease in inventory for the Disposable Protective Apparel segment of $519,000, or 4.4%, to $11,283,000, partially offset by an increase in inventory for the Building Supply segment of $147,000, or 1.3%, to $11,078,000.

Prepaid expenses decreased by $438,000, or 10.0%, to $3,938,000 as of June 30, 2025, from $4,376,000 as of December 31, 2024.

The decrease was primarily due to a decrease in prepaid insurance.

Right-of-use-assets as of June 30, 2025, decreased by $462,000 to $8,252,000 from $8,714,000 as of December 31, 2024, as a result of amortization of the right-of- use-assets.

Lease liabilities as of June 30, 2025, decreased by $435,000 to $8,340,000 from $8,775,000 as of December 31, 2024.

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

Accounts payable and accrued liabilities as of June 30, 2025, decreased by $156,000, or 7.0%, to $2,074,000, from $2,230,000 as of December 31, 2024.

The decrease was primarily due to decreases in accrued bonuses, partially offset by increased trade payables.

Net cash used in investing activities was $273,000 for the six months ended June 30, 2025, compared to net cash used in investing activities of $216,000 for the same period of 2024.

Investing activities for the six months ended June 30, 2025 and 2024 consisted primarily of the purchase of property and equipment.

Net cash used in financing activities was $2,028,000 for the six months ended June 30, 2025, compared to net cash used in financing activities of $1,913,000 for the same period of 2024.

Net cash used in financing activities for the six months ended June 30, 2025 resulted from the payment of $2,008,000 for the repurchase of common stock and $20,000 for treasury stock excise tax.

Net cash used in financing activities for the six months ended June 30, 2024 resulted from the payment of $2,701,000 for the repurchase of common stock and $27,000 for treasury stock excise tax, partially offset by $815,000 in proceeds from the exercise of stock options.

As of June 30, 2025, we had $2,735,000 available for stock purchases under our stock repurchase program.

During the six months ended June 30, 2025, we repurchased 402,513 shares of common stock at a cost of $2,008,000.

As of June 30, 2025, we had repurchased a total of 21,645,140 shares of common stock at a cost of approximately $56,786,000 through our repurchase program which commenced in 1999.

We retire all stock upon repurchase.

Future repurchases are expected to be funded from cash on hand and cash flows from operating activities.

Alpha Pro Tech, Ltd.

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.

4 unchanged sentences

Specifically, they improve income tax disclosures related to rate reconciliation and income taxes paid.

ASU 2023-09 becomes effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-09 became effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40):

7 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 2. Management’s Discussion and Analysis