RONKONKOMA, N.Y., Sept. 13, 2017 /PRNewswire/ -- Lakeland
Industries, Inc. (NASDAQ: LAKE) (the "Company" or "Lakeland"), a
leading global manufacturer of protective clothing for industry,
healthcare and to first responders on the federal, state and local
levels, today announced financial results for its fiscal 2018
second quarter ended July 31,
2017.
Fiscal 2018 Second Quarter Financial Results Highlights and
Recent Developments
- Net sales for 2Q18 of $23.9
million increased 7.4% as compared with $22.3 million in 2Q17
- Sales growth in the Americas, Asia and rest of world offset softness in
Europe
- Gross profit for 2Q18 of $8.7
million increased from $8.6
million in 2Q17
- Gross margin as a percentage of net sales in 2Q18 was 36.3%,
down from 38.6% in 2Q17
- Net income increased to $1.8
million in 2Q18, up 29% from $1.4
million in 2Q17
- Basic and diluted earnings per share of $0.25 in 2Q18, up 25% from $0.20 in 2Q17
- Cash at end of quarter increased 27% to $13.2 million from $10.4
million at beginning of the fiscal year
- Total debt reduced by 52% to $2.8
million at the end of the quarter from $5.8 million at the beginning of the fiscal
year
- Stockholders' equity increased by over 5% to $75.4 million at the end of 2Q18 from the
beginning of the fiscal year
- On August 22, 2017, completed a
public offering of 725,000 shares of common stock at a price of
$13.80 per share for net proceeds of
approximately $9.1 million
Management's Comments
Christopher J. Ryan, President
and Chief Executive Officer of Lakeland Industries, stated, "Our
solid financial performance in the fiscal 2018 second quarter
resulted from the implementation of a diversified growth strategy
in the nearly $7 billion market for
personal protective equipment (PPE) along with effective management
in all facets of our operations. While our sales in
Europe, which have been dominated
by England, remain soft as a
result of economic uncertainties following Brexit, the balance of
our global businesses are showing gains in sales and
profitability. In the second quarter, we saw a modest
improvement in the oil field services sector which had been
challenged for the past 3 years. The consolidated results are
a continuation of our performance from the fourth quarter of our
last fiscal year. Moreover, in the more than 30 years that I
have been involved with Lakeland, the Company has never been better
positioned and presented with more global opportunities than it is
today.
"Adding to our strength, subsequent to the end of our fiscal
2018 second quarter, we raised net proceeds of approximately
$9.1 million from an offering of our
common stock. This will enable us to further capitalize on
the diversification and growth of our global business. In the
past, Lakeland had been singularly focused on the US market for
disposable garments. In the second quarter, our
diversification has led to nearly half of our revenue coming from
international sales. Once confined to high cost manufacturing
in one country, we are now producing PPE in four countries around
the world. And once dependent on disposable products, we are
now a recognized global provider of comprehensive lines of
disposable, chemical, fire gear, reflective and fire retardant
garments.
"This diversification enables us to attack specific higher
growing markets – by product, vertical customer orientation, and
geographic segment -- as well as to establish footholds for other
operational benefits. Our strategies require investment of
capital and personnel development, which is why we have been
focused on our cash management. Cash increased 27% from the
beginning of the fiscal year to $13.2
million at the end of the second quarter. The cash
balance along with a portion of the net proceeds from the recent
offering of stock will be used for working capital for our growing
businesses around the world and building additional overseas
manufacturing facilities and payment of capital expenditures
associated with new equipment.
"We are now better capitalized given the Company's return to a
more heightened level of cash flow generation. In addition to
the generation of $1.8 million in
free cash flow or 7.5% of sales in the second quarter, our trailing
twelve months free cash flow increased by 30% from the prior
period. This was achieved while investing in the development
of new products, entering new geographic and vertical markets and
further spending on organizational enhancement to drive long term
growth. Operating expenses in the second quarter of
$6.5 million increased by
approximately $550,000 from the prior
year period, which enabled us to expand in high growth markets such
as Chile, Argentina and select countries in Asia/Pacific
Rim. These new territories are expected to be very
advantageous to us now and, more importantly, in the years to
come.
"While our management team has been very mindful of its
operating performance, we also are focused on improvements to the
balance sheet. Beyond the growth in our cash position, we
have reduced our debt balance by $ 3.0
million since the beginning of the fiscal year. Total
debt outstanding at July 31, 2017 was
$2.8 million, the lowest level in
memory. At the same time, we are also enjoying the benefits
of effective income tax strategies. The combination of sales
growth, operational expense management and tax benefits contributed
to our net income in the second quarter improving by 29% as
compared to the prior year, while our top line grew by over
7%. Lakeland is performing well by utilizing its
diversification and attention to all facets of the business to
maximize financial results."
Fiscal 2018 Second Quarter Financial Results
Net sales increased to $23.9
million for the three months ended July 31, 2017 compared to $22.3 million for the three months ended
July 31, 2016, an increase of
7.4%. On a consolidated basis for the second quarter of
fiscal 2018, domestic sales were $12.6
million or 53% of total revenues and international sales
were $11.3 million or 47% of total
revenues. This compares with domestic sales of $11.8 million or 53% of the total, and
internationals sales of $10.5 million
or 47% of the total in the same period of fiscal 2017.
Sales in the US increased $0.8
million or nearly 6%, primarily due to increased sales to
strategic fire distributors of turnout gear and fire retardant
("FR") garments, disposable products and chemical protective
clothing due to demand from the oil field services and refinery
sectors. US sales of disposables increased $0.6 million, chemicals increased $0.3 million, and sales of fire products
increased $0.4 million. Sales
of gloves, wovens and reflective products remained mostly level at
$0.6 million, $0.9 million, and $2.1
million, respectively.
Among the Company's larger international operations, sales in
China and to the Asia Pacific Rim
increased $1.3 million or more than
11% as industrial activity improved and several larger customers
began replacing depleted inventories. Sales in Canada increased to $3
million in local currency, setting another record quarter
for the Company amid strong demand for disposable garment.
European sales decreased by $0.6
million, a second sequential quarter of declines for the
region, led by continued uncertainty in the UK where sales were
down 22% year-over-year due Brexit. Russia and Kazakhstan sales combined for
an increase of $0.1 million or
43%, and Latin America sales
increased $0.6 million or 62% due to
resolution of supply chain issues and an overall increase in
industrial activity.
Gross profit increased $0.1
million or 1.2% to $8.7
million for the three months ended July 31, 2017, from $8.6
million for the three months ended July 31, 2016. Gross profit as a percentage
of net sales decreased to 36.3% for the fiscal 2018 second quarter,
from 38.6% for the same period of the prior year. Major
factors driving gross margins were:
- Disposables gross margins decreased 2.2 percentage points due
to product mix and as price pressure continues to be a
challenge.
- Chemical gross margin increased by 4.5 percentage points
primarily due to improved volume and manufacturing production being
moved to more cost effective facilities in Mexico and China during the first quarter of fiscal
2018.
- Fire protection and FR apparel gross margin decreased 2.3
percentage points as the Company prepares for the upcoming change
to the National Fire Protection Agency ("NFPA") standards by
discounting products produced under the old standard and due to
product mix.
- Wovens gross margins decreased 7.4 percentage points as the
market continues to shift from heavy weight FR coveralls to lighter
weight FR coveralls which generally carry lower margins.
- Reflective gross margins increased 3.5 percentage points as a
result of increased pricing on some products and product mix.
Operating expense increased 9.2% from $6.0 million for the three months ended
July 31, 2016 to $6.5 million for the three months ended
July 31, 2017. Operating
expense as a percentage of net sales was 27.2% for the three months
ended July 31, 2017 up from 26.7% for
the three months ended July 31, 2016.
The main factors for the higher operating expenses are increases in
salary and non-cash equity compensation primarily related to the
growth in the Company's global salesforce, including a modification
for performance level adjustments.
Operating income decreased to a profit of $2.2 million for the three months ended
July 31, 2017, from $2.6 million for the three months ended
July 31, 2016, as most operating
expenses are fixed in nature other than commissions and freight
out, and due to the increases in the operating expenses.
Operating margins were 9.1% for the three months ended July 31, 2017, compared to 11.8% for the three
months ended July 31, 2016.
Net income increased to $1.8
million for the three months ended July 31, 2017 from $1.4
million for the three months ended July 31, 2016. The results for three months ended
July 31, 2017 are primarily due to
continuing cost containment efforts amid the implementation of
international growth strategies which drove operating expenses
higher, increases in sales volume partially mitigated by the lower
overall gross margin, and favorable tax benefits to lower
year-over-year income taxes. Income tax expense for the
second quarter of fiscal 2018 was $0.3
million, compared with $1.0
million in income tax expense for the prior year
period. The decrease in tax expense was a result of
higher operating income during the three months ended July 31, 2016 and a corresponding lower foreign
income recognized in the US due to lower UK and Canadian profits,
as a result of the change in corporate financing where
Canada is no longer co-borrower
therefore Canadian income is not subject to inclusion in the US tax
return, and a benefit resulting from the vesting of restricted
stock granted under the Company's 2015 stock plan that generated
permanent tax differences in the US in the three months ended
July 31, 2017. We also have the
benefit of the tax credit from the worthless stock deduction
relating to our exit from Brazil,
so there should be no cash taxes in the US for the next 2 years,
depending on our profitability in these periods and assuming no
changes to the U.S. tax code. We do pay local taxes on
certain country operations when those operations are profitable on
a local basis.
As of July 31, 2017, Lakeland had
cash and cash equivalents of approximately $13.2 million and working capital of $53.1 million. Cash and cash equivalents
increased $2.8 million or 27% from
the beginning of the fiscal year, while working capital increased
by $5.3 million for an improvement of
nearly 11%. The Company's $15 million
revolving credit facility had a $0
balance as of July 31, 2017 Total
debt outstanding at July 31, 2017 was
$2.8 million, down from $5.8 million at January
31, 2017 and $13.4 million at
January 31, 2016.
The Company incurred capital expenditures of approximately
$310,000 during the second quarter of
fiscal year 2018. Capital expenditures for the first two
quarters of the fiscal year was approximately $450,000, which includes the cost for a phased
global rollout of a new enterprise resource planning ("ERP")
system.
No stock was acquired as part of the Company's $2.5 million stock repurchase program which was
approved on July 19, 2016.
Subsequent to the end of the fiscal second quarter, on
August 22, 2017 the Company completed
a public offering of 725,000 shares of common stock at a price of
$13.80 per share for net proceeds of
approximately $9.1 million. The
Company expects to use the net proceeds from the offering for
building additional overseas manufacturing facilities, payment of
capital expenditures associated with equipment, repayment of all
borrowings under its line of credit, and general corporate
purposes.
Financial Results Conference Call
Lakeland will host a conference call at 4:30 pm eastern today to discuss the Company's
fiscal 2018 second quarter financial results. The call will be
hosted by Christopher J. Ryan,
Lakeland's President and CEO, and Teri W.
Hunt, Lakeland's Chief Financial Officer. Investors can
listen to the call by dialing 888-347-6609 (Domestic) or
412-902-4291 (International) or 855-669-9657 (Canada).
For a replay of this call through September 20, 2017, dial 877-344-7529 (Domestic)
or 412-317-0088 (International) or 855-669-9658 (Canada), Pass Code 10111959.
About Lakeland Industries, Inc.:
Lakeland Industries,
Inc. (NASDAQ: LAKE) manufactures and sells a comprehensive line of
safety garments and accessories for the industrial protective
clothing market. The Company's products are sold by a direct
sales force and through independent sales representatives to a
network of over 1,200 safety and mill supply distributors. These
distributors in turn supply end user industrial customers such as
chemical/petrochemical, automobile, steel, glass, construction,
smelting, janitorial, pharmaceutical and high technology
electronics manufacturers, as well as hospitals and laboratories.
In addition, Lakeland supplies federal, state, and local government
agencies, fire and police departments, airport crash rescue units,
the Department of Defense, the Centers for Disease Control and
Prevention, and many other federal and state agencies. For
more information concerning Lakeland, please visit the Company
online at www.lakeland.com.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: Forward-looking statements involve risks,
uncertainties and assumptions as described from time to time in
Press Releases and Forms 8-K, registration statements, quarterly
and annual reports and other reports and filings filed with the
Securities and Exchange Commission or made by management. All
statements, other than statements of historical facts, which
address Lakeland's expectations of sources or uses for capital or
which express the Company's expectation for the future with respect
to financial performance or operating strategies can be identified
as forward-looking statements. As a result, there can be no
assurance that Lakeland's future results will not be materially
different from those described herein as "believed," "projected,"
"planned," "intended," "anticipated," "estimated" or "expected," or
other words which reflect the current view of the Company with
respect to future events. We caution readers that these
forward-looking statements speak only as of the date hereof.
The Company hereby expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
such statements to reflect any change in the Company's expectations
or any change in events conditions or circumstances on which such
statement is based.
Non-GAAP Financial Measures
To supplement its
consolidated financial statements, which are prepared and presented
in accordance with Generally Accepted Accounting Principles (GAAP),
the Company uses the following non-GAAP financial measures: EBITDA,
Adjusted EBITDA and Free Cash Flow. The presentation of this
financial information is not intended to be considered in isolation
or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. The Company uses
these non-GAAP financial measures for financial and operational
decision making and as a means to evaluate period-to-period
comparisons. The Company believes that they provide useful
information about operating results, enhance the overall
understanding of past financial performance and future prospects,
and allow for greater transparency with respect to key metrics used
by management in its financial and operational decision making. The
non-GAAP financial measures used by the Company in this press
release may be different from the methods used by other
companies.
For more information on the non-GAAP financial measures, please
see the Reconciliation of GAAP to non-GAAP Financial Measures
tables in this press release. These accompanying tables
include details on the GAAP financial measures that are most
directly comparable to non-GAAP financial measures and the related
reconciliations between these financial measures.
Operating Results
($000)
|
|
|
|
|
|
Reconciliation to
GAAP Results
|
|
|
|
|
|
|
Quarter Ended
July 31, 2017
|
|
|
|
Quarter Ended
July 31, 2016
|
|
|
|
|
|
|
Net
sales
|
$23,909
|
|
|
|
$22,269
|
Year over year
growth
|
7.4%
|
|
|
|
-----
|
Gross
profit
|
8,690
|
|
|
|
8,590
|
Gross profit
%
|
36.3%
|
|
|
|
38.6%
|
Operating
expenses
|
6,508
|
|
|
|
5,959
|
Operating expenses as
a percentage of sales
|
27.2%
|
|
|
|
26.8%
|
|
|
|
|
|
|
Operating
income
|
2,182
|
|
|
|
2,631
|
Operating income as a
percentage of sales
|
9.1%
|
|
|
|
11.8%
|
Interest
expense
|
36
|
|
|
|
175
|
|
|
|
|
|
|
Other (income)
expense
|
4
|
|
|
|
(35)
|
|
|
|
|
|
|
Pretax income
(loss)
|
2,150
|
|
|
|
2,421
|
Income tax expense
(benefit)
|
308
|
|
|
|
990
|
Net income
(loss)
|
$1,842
|
|
|
|
$1,431
|
|
|
|
|
|
|
Weighted average
shares for EPS-Basic
|
7,266
|
|
|
|
7,255
|
Net income (loss)
per share
|
$0.25
|
|
|
|
$0.20
|
|
|
|
|
|
|
Operating
income
|
$2,182
|
|
|
|
$2,631
|
|
|
|
|
|
|
Depreciation and
amortization
|
202
|
|
|
|
282
|
|
|
|
|
|
|
EBITDA
|
2,384
|
|
|
|
2,913
|
Equity
Compensation
|
99
|
|
|
|
(52)
|
|
|
|
|
|
|
USA Severance
Associated with Restructure
|
-----
|
|
|
|
152
|
|
|
|
|
|
|
Adjusted
EBITDA
|
2,483
|
|
|
|
3,013
|
Cash paid for taxes
(foreign)
|
362
|
|
|
|
460
|
Capital
expenditures
|
307
|
|
|
|
16
|
|
|
|
|
|
|
Free cash
flow
|
1,814
|
|
|
|
$2,537
|
|
|
|
|
|
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
|
|
|
|
ASSETS
|
July 31,
|
|
January
31,
|
|
2017
|
|
2017
|
Current
assets
|
($000's)
|
Cash and cash
equivalents
|
$13,188
|
|
$10,365
|
Accounts receivable,
net of allowance for doubtful accounts of $230 and $417 at July 31,
2017
and January 31, 2017,
respectively
|
13,763
|
|
10,704
|
Inventories, net of
allowance of $2,316 and $2,305 at July 31, 2017 and January 31,
2017,
respectively
|
34,062
|
|
35,535
|
Prepaid VAT
tax
|
1,332
|
|
1,361
|
Other current
assets
|
1,923
|
|
2,121
|
Total current
assets
|
64,268
|
|
60,086
|
Property and
equipment, net
|
8,672
|
|
8,527
|
Assets held for
sale
|
901
|
|
901
|
Deferred income
tax
|
13,287
|
|
13,515
|
Prepaid VAT and other
taxes
|
460
|
|
478
|
Other
assets
|
220
|
|
176
|
Goodwill
|
871
|
|
871
|
Total
assets
|
$88,679
|
|
$84,554
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities
|
|
|
|
Accounts
payable
|
$8,217
|
|
$4,928
|
Accrued compensation
and benefits
|
1,205
|
|
1,311
|
Other accrued
expenses
|
1,115
|
|
1,018
|
Current maturity of
long-term debt
|
208
|
|
50
|
Short-term
borrowings
|
430
|
|
153
|
Borrowings under
revolving credit facility
|
------
|
|
4,865
|
Total current
liabilities
|
11,175
|
|
12,325
|
Long-term portion of
debt
|
2,131
|
|
716
|
VAT taxes
payable
|
6
|
|
6
|
Total
liabilities
|
13,312
|
|
13,047
|
Commitments and
contingencies
|
|
|
|
Stockholders'
equity
|
|
|
|
Preferred stock, $0.01
par; authorized 1,500,000 shares (none issued)
|
-----
|
|
-----
|
Common stock, $.01
par; authorized 10,000,000 shares,
Issued 7,663,890 and
7,620,215; outstanding 7,307,449 and 7,263,774 at July 31, 2017
and January 31, 2017, respectively
|
77
|
|
76
|
Treasury stock, at
cost; 356,441 shares at July 31, 2017 and January 31,
2017
|
(3,352)
|
|
(3,352)
|
Additional paid-in
capital
|
64,942
|
|
64,764
|
Retained
earnings
|
15,954
|
|
12,401
|
Accumulated other
comprehensive loss
|
(2,254)
|
|
(2,382)
|
Total stockholders'
equity
|
75,367
|
|
71,507
|
Total liabilities and
stockholders' equity
|
$88,679
|
|
$84,554
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
July 31,
|
July 31,
|
|
($000's except for
share information)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net sales
|
$23,909
|
|
$22,269
|
|
$46,870
|
|
$42,638
|
Cost of goods
sold
|
15,219
|
|
13,679
|
|
29,623
|
|
27,272
|
Gross
profit
|
8,690
|
|
8,590
|
|
17,247
|
|
15,366
|
Operating
expenses
|
6,508
|
|
5,959
|
|
12,593
|
|
12,566
|
Operating
profit
|
2,182
|
|
2,631
|
|
4,654
|
|
2,800
|
Other income (loss),
net
|
4
|
|
(35)
|
|
6
|
|
(27)
|
Interest
expense
|
(36)
|
|
(175)
|
|
(112)
|
|
(373)
|
Income before
taxes
|
2,150
|
|
2,421
|
|
4,548
|
|
2,400
|
Income tax
expense
|
308
|
|
990
|
|
996
|
|
966
|
Net income
|
$1,842
|
|
$1,431
|
|
$3,552
|
|
$1,434
|
Net income per common
share:
|
|
|
|
|
|
|
|
Basic
|
$0.25
|
|
$0.20
|
|
$0.49
|
|
$0.20
|
Diluted
|
$0.25
|
|
$0.20
|
|
$0.49
|
|
$0.20
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
7,266,291
|
|
7,254,999
|
|
7,265,053
|
|
7,254,585
|
Diluted
|
7,280,050
|
|
7,311,166
|
|
7,316,876
|
|
7,315,867
|
View original content with
multimedia:http://www.prnewswire.com/news-releases/lakeland-industries-inc-reports-29-increase-in-net-income-for-fiscal-2018-second-quarter-financial-results-300519099.html
SOURCE Lakeland Industries, Inc.