Alpha Pro Tech Ltd (APT) 2009 Q3 法說會逐字稿

Good afternoon ladies and gentlemen, thank you for standing by. Welcome to the Alpha Pro Tech Limited third quarter 2009 earnings conference call. During today's presentation, all parties will be in a listen only mode. Following the presentation the conference will be opened for questions. (Operator Instructions) As a reminder, this conference is being recorded today, Tuesday October 27, 2009. I would now like to turn the conference over to our host, Mr. Cameron Donahue of Hayden Communications, go ahead sir.

Thank you, and good afternoon. We'd like to thank everyone for joining us today for Alpha Pro Tech's fiscal 2009 third quarter earnings conference call. Our call today will be hosted by Mr. Al Millar, President; and Mr. Lloyd Hoffman, Chief Financial Officer. Following management's discussion there will be a formal Q&A session open to participants on the call. Before we get started, I'm going to review the safe harbor statement.

This conference call contains forward-looking-statements that is pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking-statements involve risks, uncertainties and assumptions as described from time to time in registration statements, annual reports, and other reports of the Company's filed with the Securities and Exchange Commission. All statements other than statements of historical fact, which address the Company's expectations for sources of capital, or to express the Company's expectations for the future, with respect to financial performance or operational strategies, can be identified as forward-looking-statements. As a result, there can be no assurance that the Company's results will not be materially different from those described herein. Forward-looking-statements can be identified by such words as believed, anticipated, estimated, or expected, which reflect the current views of the Company with respect to future events. We caution listeners that these forward-looking-statements speak only as to the date hereof. The Company hereby expressly disclaims any obligation or undertaking to release publicly any updates or revision to any such statements to reflect any change in the Company's expectations, or any change in events, conditions, or circumstances on which our statement is based.

With that I'd like to turn the call over to Mr. Al Millar, President, for opening comments. Al, congratulations on another great quarter, the floor is yours.

Thanks Cameron. Thanks to everyone who joined us for our earnings call today. I'm joined by Lloyd Hoffman, our CFO. As most of you know, we conduct these calls twice a year, one to accompany our second quarter and first half results, and then again for our fourth quarter and full year results. However, because of the significant ramp up in our three operating segments, we're breaking with tradition to provide you with additional updates on operational and financial performance.

We will not go into the level of financial detail on this call that we do on our semi-annual/annual call, but I want to give you a high level overview of revenue and profitability results, and balance sheet data, along with a more in depth review of the market factors driving these results.

I'm pleased to report that due to strong sales activity, we again experienced record revenues for the third quarter, the period which ended September 30, '09. Our consolidated sales for the 2009 third quarter increased by 65.3%, and for the nine months year-to-date increased by 52.9%. I will leave the sales details for Lloyd to cover in a few minutes.

Equally impressive is the fact that our third quarter was up double digits from our extraordinarily strong and record breaking second quarter. For the third quarter ended September 30, '09, consolidated revenues were up 16.1% to $16.9 million from $14.5 million in our second quarter ended June 30. These outstanding results reflect our careful management of the business during a time of unprecedented growth and sales opportunity, and further demonstrates the scalability of our business in the face of this demand.

Our sales growth accelerated during the third quarter of 2009 due to our ability to ramp up manufacturing to meet the unexpected demand for our N-95 respirator mask for H1N1, or Swine Flu, outbreak. Our current run rate is approximately $36 million annually in N-95 masks alone. Starting in October we increased production and are now running at full capacity. Other mask lines are running at accelerated levels as well. If demand continues, as we expect, we have the capacity to build new N-95 lines at a reasonable cost, with an annual capacity of approximately $9 million each, and are currently discussing adding additional lines.

As we indicated in our last call, the Company feels these elevated levels in mask sales will continue for the foreseeable future. H1N1, from everything we are seeing, appears to be on a massive upswing, and is probably going to continue to evolve at intervals over the next two to five years. Keep in mind we've seen trends like this before with the Avian Flu and other outbreaks, we know how to ramp, but the demand and duration has exceeded prior outbreaks. As long as that continues, infection control products will continue to sell very well. We think the mask sales will continue certainly into next year. Beyond that we will reevaluate and update you accordingly.

Building supply product sales increased due to our expanded distribution relationships, which have gained significant traction during 2009. Our hard work at repositioning our distribution channel strategy in the last 24 months, as well as our focus on enhancing our infrastructure, allowed us to quickly take advantage of the market opportunities that occurred recently, and the growing acceptance of our building supply products in the marketplace continues to demonstrate the significant advantages we provide related to our product capabilities and our ability to service our customers.

Within both the roof underlayment and the housewrap market, we have distinct competitive advantages. In our roof underlayment we've built into our polymers an anti-skid feature that helps prevent roofers from sliding off the roof. We have also a pre-printed nail pattern so users do not have to continually measure to hit studs. Users just hit the X on the printed material. In addition, one of the things that our distributors really like is that we are vertically integrated, so we have control of the supply chain, where our competitors basically outsource to a third party. This helps us control costs, quality, and time to market.

We believe the market for synthetic underlayment is approximately $500 million, down from $1 billion during the housing boom; and the roof underlay market breaks out roughly at 90% felt and 10% synthetics. That is evolving every day, and over the next two to five years synthetics will become the major share of that market. You can see that we have significant upside opportunity as this market moves forward. And then you'll also want to factor in a turn around in the building industry when that occurs. We are now the market leader in this space, and expect to keep and expand our market share during the transition to synthetic. One of the driving forces in this transition is that synthetic is now priced at the same levels of traditional felt, and provides a 50% labor savings.

Our building wrap continues to gain traction as well, evidenced by the 33% growth through the first nine months. We are increasing sales by having a lower price point, superior customization, and shorter lead times than the competition. We generated $5.3 million in consolidated building product sales in the third quarter of '09, that puts the Company on a $21 million run rate for this division. We did $8.2 million for the full year of 2008, so we continue to see accelerated adoption for these products and expect to see this growth continue.

We are now back in full production in our Indian manufacturing plants and our Valdosta plant. You will see inventory starting to build in upcoming quarters. We initiated a 20,000 square foot expansion in one of our Indian facilities, which is expected to be finished in quarter four of '09. We will have an additional 20,000 square foot expansion starting in the fourth quarter for the Indian facilities.

As a reminder, we do not incur an CapEx for the expansions as the joint venture pays for these costs. As well as India, we will be expanding our Valdosta factories to 203,000 square feet from 89,000 square feet.

Lastly, sales for the disposable protective apparel segment for the three months ended September 30, '09 were adversely affected by a supply chain issue in which goods from Asia were delayed, due to the high demand for products in regard to the H1N1 flu pandemic. With that, I'll turn the call over to Lloyd to review our top and bottom line details, and select balance sheet data, then I'll make some final comments. Lloyd?

Thanks Al. Let's get right to the [inaudible]. Consolidated sales for the third quarter of 2009 increased by 65.3% to $16.9 million from $10.2 million. For the nine months, sales increased 52.9% to $40.8 million from $26.7 million. Let me break out the sales by segment.

Building supply segment sales for the third quarter increased by 67.7% to a quarterly record of $5.3 million as compared to $3.2 million. The increase in the quarter is primarily due to a 72.6% increase in sales of REX synthetic roof underlayment, and a 52% increase in REX Wrap housewrap. This quarterly record of $5.3 million is also up 40.8% sequentially from the previous record of $3.8 million set in the second quarter of this year. Year-to-date building supply segment sales increased by 75.6% to $11.3 million from $6.4 million.

Third quarter apparel sales decreased by 3.2% to $5.3 million from $5.4 million. As Al mentioned, sales were adversely affected by shipping delays from China. Year-to-date disposable protective apparel segment sales increased by 6.2% to $16.2 million from $15.2 million.

Infection control segment sales for the quarter increased by 290.1% to a quarterly record of $6.3 million compared to $1.6 million. Mask sales were up 379% or $4.2 million, and shield sales were up 157% or $500,000. This quarterly record is also up 34.4% sequentially from the quarterly record of $4.7 million set in the second quarter of this year. Infection control segment for the nine months is up 166.2% to $13.3 million compared to $5 million. Mask sales are up $6.6 million and shields are up $1.9 million.

Turning to gross profit, the gross profit margin for the third quarter was 48.6% as compared to 42.6% for the same period of last year. For the nine months gross profit margin improved to 47.1% compared to 44%. Gross profit has improve due to the change in the product mix, in which infection control sales, which have higher margins, has increased as a percentage of our total sales.

For the third quarter and nine months, selling, general, and administrative expenses have increased in actual dollars, but have decreased significantly as a percentage of sales. For the third quarter expenses decreased to 21.7% of sales from 30.1%. And for the nine months, SG&A decreased to 25.3% from 35.3%. We believe that we can grow the business while decreasing expenses as a percentage of sales from historical levels.

The effective tax rate for the third quarter and nine months was 36.3% and we feel that that's going to be fairly consistent for the year.

Net income for the third quarter was a record $2.8 million as compared to $745,000 in the same quarter last year. Sequentially third quarter net income increased by 36.9% as compared to the second quarter of this year, which was our previous record. Diluted income per share for the third quarter of 2009 and 2008 was $0.12 and $0.03 respectively. Net income for the year increased to $5.5 million compared to $1.3 million. Diluted income for '09 and '08 was $0.24 versus $0.05.

Turning to the balance sheet, as of September 30 the balance sheet continues to remain strong with a current ratio of six to one, and we had working capital of $25.3 million. Our strong financial performance has led to a cash position of $9.1 million as of September 30, that is up 98.4% from the $4.6 million as of December 31, 2008. Inventory has decreased to $9.4 million compared to $12.1 million as of December, primarily due to a decreased in inventory for the building supply segment. Inventory levels are expected to increase going forward to meet our accelerated demand.

During the first nine months of 2009 we repurchased 1.6 million shares of common stock at a cost of $2.1 million. We have repurchased a total of 6.2 million shares of common stock at a cost of $7.7 million through our repurchase program.

The Company currently has no outstanding debt, and remains an unused $3.5 million credit facility that was renewed in May. With that, I'd like to turn the call back to Al for closing comments. Al?

Thanks Lloyd. Over the last two years or so through innovative product introductions and new distribution strategies, both of which we can control, as well as the emergence of another flue pandemic, over which we have no control, we are seeing significant up side in our 2009 revenues. The important factor to note is that we had developed the infrastructure to take advantage of this upsurge without de-leveraging our business model. We are gratified, not only by our strong revenue performance through the first nine months of '09, but our significant profitability. We will remain focused on innovation with the goal of creating new products to introduce to the market place. We will broaden our distribution channels to deliver products to our three market segments, and we will continue to leverage our infrastructure to maximize these sales and our profitability.

Our building supply segment distribution channel strategy continues to strengthen each and every quarter and should continue to broaden our ability to take advantage of market opportunities throughout this year and into the future.

N-95 respirator mask sales are expected to continue to grow significantly in the fourth quarter from current levels and are expected to be substantially stronger than normal for the foreseeable future amidst concerns regarding the global H1N1 pandemic.

Gross margins will continue to be positively affected by the change in product mix in which infection control sales, which have higher margins increase as a percentage of total sales. And since we are leveraging our expense structure more effectively, we expect continued growth in profitability, a stronger balance sheet, and continued cash generation.

We want to thank everyone for the continued interest and support. That concludes our prepared remarks for today and we'd now like to open the call up to your questions.

(OPERATOR INSTRUCTIONS) And our first question comes from the line of Joe Maxa, with Dougherty and company. Go ahead, please.

Thank you. Gentlemen, good quarter.

Thanks, Joe.

Let me ask you; can you elaborate on your comments that your demand for the N-95 mask will be at elevated levels for the foreseeable future? I wonder, how long are you talking and what're you hearing out there?

Well, the comment I guess I just made, Joe was two to five years.

So, you think it's potential to run at your 36 million rate, 36 million annual rate plus for that time frame?

Yes sir.

Okay. What do you see--?

Let me clarify that, Joe. Should we continue to see the numbers that we're seeing today, I would imagine at some point we'll increase production capacity.

Do you see a potential for sales to decline after the typical flu season ends in the spring?

You know, you're talking about the flu season ending in the spring. You're talking North America. If the pandemic continues as pandemics do, it will now evolve into, come spring, it'll head for Asia, Australia, Japan, the United Kingdom, back into South America, before we get here with the third phase again at this time next year.

So, does it tail off? Not in the foreseeable future that we can see.

Okay, that's very good. Are you looking at distribution in other countries, currently?

We currently have distribution in other countries. We do sell our masks offshore.

Okay, okay. Let me ask you, on the roofing side; it looks like you're on -- well, actually, let's just say building supply side, you're on track to double sales this year. Can you double that again next year? And if so, how do you get there?

We continue to do just what we're doing, Joe. Yes, we can double our sales next year. But, you know, we'd like a little help from the building industry to kick into high gear as well. But, we're going to continue to expand our distribution and sell more product to more people.

You know, don't forget that felt will continue to lose market share and we'll continue to gain it. Does that answer it?

I'm sorry. Our next question comes from the line of Ali Mohammad with Ballston Partners. Go ahead please.

Hi, great quarter and great work here, guys.

Thanks, Ali.

Thanks, Ali.

I was wondering, has there been a bit of a change in the way that you've -- you know, even in North America, people are looking at stocking masks. Because, there's no sort of expiration to a mask's life, where it's relatively long. Are we seeing you know, people developing for corporate, for government, for healthcare purposes, sort of stock piles that are there to last in case of a major pandemic, even in the event that this is slightly milder than, you know, people are expecting?

You know, here comes the problem, Ali. We as Alpha Pro Tech would love to have a major stock of N-95 face masks in our warehouse. The problem being, everything we manufacture, we're shipping out the door. We can't get ahead of the game.

I imagine the people that are using the masks are using them as fast as they're buying them from us.

I guess what I mean is, do you see them also stockpiling masks so they are ready the next time? I think there is --.

They would like to, I think.

They would like to and this is sort of what gives you confidence that even in North America this is going to go beyond and not exclusive of you know, the other geographic regions?

Well exactly and if you noticed that what we did was, we mentioned a little downturn in our apparel because of the production in China. And what you have in China today is everybody has jumped on the face mask bandwagon. Now, they don't manufacture the N-95 as we do. But they manufacture a lot of ear loop masks and that is eating up a lot of Asian production time as they fight their version of swine flu.

So, I don't think you're going to see a great stockpiling by anybody because I don't think any of us can get ahead of the game.

Okay and then you also mentioned you're on a 9 million, it seems, quarter run rate for the N-95 mask.

Yes.

Of your 4.2 in mask sales this past quarter, how much were N-95 masks?

Lloyd's going to try and answer that one, I think.

N-95 masks were roughly 50% of the total sales.

So, we could see a $7.5 million, or let's say, a $7 million increase in N-95 masks in the next quarter if you're at that run rate? Basically because you were 50% of 4.2. Now, we're running at 9--

Well no, the sales for -- the mask sales for the third quarter were over 5 million.

Oh, excuse me; they were up by that one?

Yes, they're up by the 4.2, that's right.

Okay so 50% of that was N-95 and now we see N-95 going up to 9 million and the margin on that, the gross margin on that is higher than the corporate business mix? And really, there's not much incremental SG&A?

Ali, actually, sorry; when I said 50%, it's probably more in the range of about 75%.

Okay. And then, there's no incremental SG&A and gross margins are higher than the corporate average? Is that fair?

That's right.

Thank you very much. Great job, guys.

Thanks, Ali.

Thank you and we have a follow up question from Joe Maxa. Please go ahead, sir.

Can you elaborate again on this issue in China with the protective apparel business? Do you expect that to come back? Or, because of the production it sounded like it was being taken up by other masks? Maybe that stays at a little bit lower level?

No, our production in China, you'll see coming back right now. We will have a very strong fourth quarter.

Okay and will that be possibly a higher quarter than normal because of the delays in Q3? So we should look at it being kind of lumpy and then maybe back down in Q1?

Got a thought on that one, Mike?

How much was delayed because of the shipping in Q3?

What we're saying, Joe, is our apparel business will be up double digits for the year and be continuing very strong. The question we can't answer today is just how much production we're going to get. We believe we're going to be fine and that our numbers will still continue to light up the charts.

But I've got to get a little further, a few more weeks into the quarter before we see where we are.

Okay.

Yes. We look at the third quarter where we were down about 3%. I'd say we probably would've been up about 10%, would be probably a good number, if that gives you an idea.

Yes, it certainly does and we're looking -- okay. We're looking for that 10% number to return for Q4.

That's right.

Got it. Do you think you guys can reach 50% gross margin blended?

No.

No?

Lloyd's question.

I think that might be a little high.

Right.

Okay, just thought I might ask.

We're in the 48% range this quarter; so certainly in the high 40s.

And I'm just looking to get a review of when your additional capacity coming on line for your building products. I didn't pick up those numbers.

When will we be on line?

Right. You talked about another 20,000 square feet in India coming on line in the Q4 and then you're adding another 20,000 square feet. And you mentioned, I think, about 100,000 square foot addition. Maybe if you could just clarify that for me, please?

Yes. Valdosta is basically complete now. The first 20,000 in India will be completed within 10 working days or a working days. The second 20,000 in India will be completed, I would imagine, by end February.

Got it. All right; thanks. I'll jump back.

Right-o

Thank you and our next question comes from the line of Amy [Northless] with Pilot Advisors. Go ahead please.

Hi, very nice quarter, guys. I guess I got just confused by Ali's question and the incremental mask. I mean, if you say basically by 2010, we could be on a $36 million run rate for just, you know, H1N1 masks. And then we've got to go ahead and layer on, in incrementals, $3 million a quarter from this other stuff? So, that's $36 million plus $12 million?

Amy, the $3 million of the other stuff; I'm not sure what (inaudible).

Well, yes, the other things because you said basically, you know, 75% of the 4.2 million increase was not masks or it was masks or, you confused me because you said three numbers real fast.

Yes. Our N-95 capacity right now is $36 million. We can add to that with building lines. We have additional mask business that is probably in the range of about 4 million or 5 million on top of that. And then, we have shields; that is another couple of million in addition.

So, if you take all of those pieces together, you're roughly at a little over $42 million, I think.

Okay and that's what we could do today, which is pretty much sold out for 2010 at an incremental 50% margin-ish?

Well, we're not sold out. That's our capacity, at the moment.

We're at capacity?

We're currently running at capacity and have been running since the last week or so.

Okay.

So we're not sold out through 2010.

Great and are you finding more companies being, you know, asking for masks as part of their safety protocol, whether it be, you know, hospitals, banks, or whatever; large institutions?

We have found banks and some financial institutions that are providing their employees with masks.

Okay and then jumping to the building segment, is the growth of the building segment so large that seasonality really won't play such a large part in the fourth quarter?

Fourth quarter tends to be, in the building business, a little bit weaker. So there is some seasonality, yes. But we do believe that our fourth quarter is going to be very strong, relative to the fourth quarter of last year.

Okay. Perfect; all right. I'll get back in queue. Thanks guys.

Thank you and our next question comes from the line of Jamie [Wyland] with Wyland Management. Go ahead, please.

Ah yes, great quarter, fellows. You mentioned that it -- your lines can be added to generate $9 million of revenue per line. How much does it cost you to do that? And how long does it take you to add a line?

Well, the cost, Jamie, is insignificant. It's really not a major cost involved in it. And it's about an eight to 10 week lead time. We build our own lines.

Okay. Is there any difference between your mask and the major competitors out there, in terms of quality and price?

Well, from everything I can see, we are probably the lower cost mask in the field right now, as far as N-95s go. And our mask is entirely different, in that it's a flat mask.

They all have to do the same thing, Jamie. They have to filter 95% of the air you breathe down to .3 microns. So, it's not a quality issue.

Okay.

And one of the things that we hear from a lot of healthcare professionals is that it's much easier to breathe through our mask and much more comfortable on their face.

So I assume --.

So from that standpoint, people enjoy wearing our mask much more than some of our competitors.

Do people make a conscious decision? Or, do they order from their hospital supplier a given mask, that a person only stocks one mask?

That is correct. And what has happened in some cases this year is their traditional supply channel has now dried up. And they have switched to an alpha N-95. Our belief, going forward, is that the people that have switched will continued to be happy with alpha and stay with us after the pandemic.

Okay. You mentioned, your margins will probably stay somewhere a little south of 50%. But I assume, as the volumes grow your SG&A remains -- should remain somewhat static?

Yes. You know, SG&A has decreased, as we indicated, significantly. We're now in the third quarter in the low 20%. It might change a little but I wouldn't say dramatically, as a percentage of sales.

Okay, very good. And lastly, on building supplies, how much additional capacity, percentage wise, are you adding and what type of, you're at $21 million run rate right now, why are you adding so much capacity? How much do you expect that you could possibly be doing in the years ahead?

Well in the years ahead, if you look at it, if we have call it 20% of the ongoing market in building products, all you have to do is convert the $500 million, roughly, that are felt today to synthetic, and it gives us $100 million.

And is that achievable in three or four years?

Yes, sure it is.

Okay. How much capacity do we have right now if we were to utilize all that you're now bringing on stream?

Probably, I'm going to guess quickly off the top of my head, about $40 million. We have some new equipment that we're adding as well. I would imagine we're pretty safe at $40 million and possibly beyond that. But I'd have to get everything up and running and let you know.

Okay so I assume you're looking at building supplies growing certainly 50% or so in the next year.

We're sure hoping for it.

Okay. Well done fellows, thanks.

Thank you. (Operator Instructions) Our next question comes from the line of Russell [Lynn] with Park West Capital Management. Go ahead please.

Good afternoon, thank you for taking my question. Can you hear me? Hello?

Yes Russell.

Oh, you can hear me?

Yes.

Okay, good. I just had a question about the composition of your inventory. It sounds like you're sold out of most of your disposable infective apparel and infection control. Is the majority of your inventory then in building products?

No our building product inventory is actually about one third of it. The largest piece of our inventory is the disposable protective apparel, and building would be second. But building is on the low end right now, because we were at $7 million not too long ago, we're down to $3 million. We're actually a little light right now on the building, and expect that to grow a bit. But the largest dollars is the protective apparel.

And so that's not affected by that slowdown you were talking about in China, manufacturing problems?

We were lucky there was some product that if we could have received it, would have been able to ship in the third quarter. We have inventory, but there was product that we needed to get.

These are like different skus or something.

Yes, different skus.

That's right.

So again roughly its one third and one third? How does it break down again? I'm sorry.

For argument's sake you could say one third, one third, one third. It's probably higher than that, apparel is probably more like 50%, one third for building and the rest is infection.

And the infection, I guess that would be all shields then.

Masks and shields, that's right.

No masks though, right?

There's raw materials. We haven't been able to build up finished goods, but we still have raw materials.

Got you, got you. Okay, great. Thank you very much.

Thank you, and our next question comes from the line of Barry Cohen with Dot Capital. Go ahead please.

Good evening gentlemen, thank you for hosting the call, I appreciate it. A couple of quick questions as you were kind of working through the math of your capacity, some of the global capacity on the mask side, and expectations for maybe what some kind of shadow capacity it. You know if you believe what you say, and it sounds as if you do whole heartedly, the demand for this product, what expectation should we have potentially as investors for you to contemplate raising prices given basic economic theory?

If you were suggesting, Barry, that we would raise prices because of demand for the product, that won't happen.

I was more kind of suggesting that the combination of both demand and manufacturing capacity.

No. The only thing that would raise prices at our end is increased costs from our suppliers to us. We're quite comfortable with our gross margins, we're not going to gouge because of a pandemic.

Okay. It just sounded like you were pricing below, I think you mentioned, I wasn't suggesting you gouge by the way, it just sounded like you were pricing below the competitors, which is why I was asking the question.

No, we're a different supply chain than for example someone like a 3M. And I'm sure their costs are much higher than ours are. You know we're very comfortable with our gross margins and we see no reason to move them.

Thank you, I appreciate your help.

You're welcome.

Thank you, and our next question comes from the line of Ryan [Warch] with Warch Capital. Go ahead please.

Hey guys, a quick question. If you say that costs are minimal to add new machines and you seem to see demand in to the foreseeable future for the N-95 mask, are you currently adding new machines? Or when do you plan on adding new machines?

We currently, as I mentioned, we're not adding them today. We are looking at what's happening with H1N1 going forward. It's a simple thing to add equipment. When you're running 24/7 and you're running flat out you try to focus on that particular aspect of your business. If you start adding equipment maybe a little additional space for warehousing, etc., you're taking away from your focus at hand. We will add equipment when we believe we have to add it to continue to gain market share and to supply the pandemic as it is.

Secondly, are you guys constrained by getting raw materials for making the masks?

At this point in time, no, we're well stocked in raw materials and we have ample materials on order going forward.

Okay. And lastly, what kind of timeframe do you think you guys would, if you do, add a new machine? I mean it's pretty up in the air.

It's pretty up in the air, but I imagine first quarter should tell us what we're doing.

Okay, and it's what, eight to ten weeks to get a new one up and running?

Correct.

Okay, great. Thanks guys.

Thanks.

Thank you. And our next question comes from the line of Steve [Pettian] with SAP Capital Management. Go ahead please.

Hey guys, great quarter. Just one follow up question on the synthetic roof business. Is that a padded knit product?

No it's not, Steve.

And what ...

...manufacturers out there.

Okay, and then I guess the follow up would be, have you had any conversations from any competitors looking to possibly acquire you?

Well you know Steve I couldn't answer that if I knew the answer to it.

Okay, and then I missed your answer to this regarding the cost to ramp up, bring on new lines for the N-95, what were the costs to do that?

I didn't give the actual number Steve, but it's minimal.

Okay, and you said possibly first quarter you'll make a decision on that.

Correct.

Okay, great. Great quarter, keep up the good work.

Thanks.

Thank you, and our next question comes from the line of Steve Rudd with USIP. Go ahead please.

Hi, just a quick one, Al you've done a good job of buying back shares, I take it you're going to continue with that as we go forward?

Steve where we are right now we're kind of in a hold pattern. We have a buyback in place and we certainly have cash in the bank, we're just looking to see what we're actually going to need going forward here in the next 30 to 60 days.

Okay and I take it then your choice is, and not to put words in your mouth, but extending the line and putting on an additional for masks or buying back shares.

If required, yes.

Okay. All right, thanks very much.

Thank you, and our next question comes from the line of Alan Robinson, go ahead please.

Hello, congratulations on a great quarter. I'm a private investor, a shareholder.

Yes sir.

I'm assuming with your production increase on the masks, and the other business units doing well that you've done some hiring here lately. Could you tell me how many employees you currently have, and what your plans are for future hiring? And also what percentage of your workforce is permanent and contingent workers as well.

Well I'm kind of hoping that all our employees are permanent. You know we've had to put on, of course, the additional shifts in Salt Lake City, and we're standing at a couple of hundred employees.

Most of the add, if we look at the infection control side, we've added quite a few people, but it's all based, they're all manufacturing people, and we can hire and fire as required. We have not hired any people really on the SG&A side.

So you don't have contract workers or temporary contingent workforce, they're all permanent employees?

That's right.

Right.

All right, that's it, that's my question, thank you.

Thanks.

Thank you, and our next question comes from the line of Paul [Cubala]. Go ahead please.

Al, outstanding quarter and superb leadership on your behalf. My question is with regard to the earnings going forward, all the cash that you've got coming into the company, is there a potential opportunity for a dividend for shareholders? And also is there a chance for a forward split if the share price increases?

None of those have been discussed at this point in time. That's something that, there will be board decisions at some point in the future.

That's all I had, thank you very much and congratulations.

Thank you, and ladies and gentlemen that does conclude our question and answer session. I would now like to turn the conference back over to management for any closing statements.

I just want to say we appreciate everybody coming in to participate with us today. The questions I think were great. We're going to continue to try to shoot the lights out here, hopefully hit some homeruns along with the triples, and continue to build this company to what we'd like to see it at, as all of us are shareholders and that's what we're trying to do, the best thing we can on behalf of the corporation. So I thank everybody for joining us today, and we'll catch you certainly after the fourth quarter. Thanks a bunch.

And ladies and gentlemen this concludes the Alpha Pro Tech Limited third quarter 2009 earnings conference call. If you would like to listen to a replay of the conference please dial 800-406-7325 or 303-590-3030 with the pass code 4176615. Thank you for your participation and you may now disconnect.