Lakeland Industries, Inc. (NASDAQ: LAKE) today announced financial
results for its first quarter fiscal year 2010 ended April 30,
2009.
Financial Results Highlights and Recent Company Developments
-- Revenue of $24.0 million in Q1FY10 compared with $27.3 million in Q1FY09
-- Lower revenues resulting from winding down of global recession and
distributor/customer liquidity initiatives
-- International expansion efforts drive non-US revenue growth and improved
market share
-- Revenues from outside the US were 28% of total in Q1FY10 as compared
with 15.1% for Q1FY09
-- International Growth
-- Brazil acquisition added:
-- $2.6 million of sales in Q1FY10
-- Gross margin of 46.7% for Q1FY10
-- Stage set for further market expansion with strategically positioned
global manufacturing facilities and enhanced product lines
-- Strength in US dollar through Q1FY10 masks organic growth of
international operations
-- Sales of disposable products in North America declined by 28.3% in
Q1FY10 compared with prior year periods due to depressed economy,
particularly in the automotive supply chain
-- Despite weakness in US sales during Q1FY10, the US Reflective Division
increased sales by 35.5% over Q1FY09, driven by new infrastructure
spending and related industry regulations
-- Gross margin improved over Q1FY09 by 60 basis points, primarily from
inclusion of higher margin Brazil operations
-- Operating expenses significantly reduced year-over-year at most
operations; Brazil acquisition in May 2008 provides incremental expenses
in Q1FY10
-- Positive net income in Q1FY10 despite one-time, non-cash income tax
expense of $350,000 for change in deferred tax estimate relating to
ongoing restructuring of India operations
-- Effective expense and cash management initiatives resulted in $3.9
million reduction of bank debt at 4/30/09 from 1/31/09
-- Anticipated growth catalysts beginning in Q2FY10
-- Increased sales for purchases related to swine flu outbreak
-- Stabilization and improvement in global economy
-- Continued transition to lower cost raw materials
-- Expand use of selective manufacturing at lower cost facilities
-- Full quarterly impact of reduced operating expenses
-- Elimination of one-time, non-cash charge in Q1FY10
-- Weakening of US dollar against foreign currencies
-- Brazilian sales of branded Lakeland products
First Quarter Fiscal Year 2010 Financial Results
Net Sales. Net sales decreased $3.3 million, or 12.1%, to $24.0
million for the three months ended April 30, 2009 from $27.3
million for the three months ended April 30, 2008. The net decrease
was mainly due to lower domestic sales and the global economic
recession along with severe business conditions affecting
automakers and the related supply chain. External sales from China
increased by $0.1 million or 7.0% driven by sales to the Company's
new Australian distributor. Canada sales decreased by $0.1 million
or 7.4%; UK sales decreased by $0.5 million or 38%; Chile sales
decreased by $0.1 million or 22% and sales in India increased by
$0.1 million or 215%. In the US, sales of disposables decreased by
$5.2 million, chemical suit sales decreased by $0.1 million, wovens
decreased by $0.4 million, reflective sales increased by $0.3
million and glove sales decreased by $0.5 million. Sales in Brazil
were $2.6 million for Q1FY10, but were not included in operations
for Q1 FY09 as this business had been acquired in May 2008.
Gross Profit. Gross profit decreased $0.7 million, or 10%, to
$6.0 million for the three months ended April 30, 2009 from $6.7
million for the three months ended April 30, 2008. Gross profit as
a percentage of net sales increased to 25.1% for the three months
ended April 30, 2009 from 24.5% for the three months ended April
30, 2008. Despite gross margins for US disposable products
declining by 450 basis points due to higher priced raw material and
a very competitive pricing environment coupled with lower volumes,
the overall improvement in quarterly gross margin reflects an
improved international sales mix and other cost management
initiatives. Major factors contributing to the increased quarterly
gross margin include:
-- Inclusion of Brazil operations with gross margin of 46.7% for the
quarter
-- Chemical division gross margin increased by 8.6 percentage points
resulting from an improved sales mix
-- Canada gross margin increased by 14.8 percentage points mainly
resulting from more favorable exchange rates and local competitive pricing
climate
Operating Expenses. Operating expenses increased $0.1 million,
or 1.9%, to $5.3 million for the three months ended April 30, 2009
from $5.2 million for the three months ended April 30, 2008. As a
percentage of sales, operating expenses increased to 22.2% for the
three months ended April 30, 2009 from 19.2% for the three months
ended April 30, 2008. The $0.1 million increase in operating
expenses in the three months ended April 30, 2009 as compared to
the three months ended April 30, 2008 were comprised of:
-- ($0.3) million lower freight out costs resulting from significantly
lower prevailing carrier rates and lower volume
-- ($0.2) million in reduced administrative and officer salaries
resulting from cost cut-backs, along with related reduction in payroll
taxes and employee benefits
-- ($0.2) million in reduced sales commissions resulting from lower
volume
-- ($0.2) million in reduced shareholder costs relating to the proxy
contest in Q1 last year
-- ($0.1) million reduction in foreign exchange costs resulting from the
Company's hedging program and more favorable rates
-- ($0.1) million miscellaneous decreases
-- $0.1 million in increased operating costs in China resulting from the
large increase in direct international sales made by the unit in China and
are now allocated to SG&A costs; these expenses were previously allocated
to cost of goods sold
-- $1.1 million of operating expenses in Brazil for the three months
ended April 30,2009, not included in operations for the three months ended
April 30, 2008
Operating profit. Operating profit decreased 53.1% to $0.7
million for the three months ended April 30, 2009 from $1.4 million
for the three months ended April 30, 2008. Operating margins were
2.8% for the three months ended April 30, 2009 compared to 5.3% for
the three months ended April 30, 2008. The reduction in operating
profit and margin reflect the lower level of consolidated sales and
the modest increase in operating expenses partially offset by
higher gross margin as a percentage of revenue.
Interest Expenses. Interest expenses increased by $0.1 million
for the three months ended April 30, 2009 as compared to the three
months ended April 30, 2008 due to higher borrowing levels
outstanding mainly due to the purchase price paid for the Brazil
acquisition, partially offset by lower interest rates.
Income Tax Expense. Income tax expenses consist of federal,
state, and foreign income taxes. Income tax expenses decreased $0.1
million, or 12%, to $0.4 million for the three months April 30,
2009 from $0.5 million for the three months ended April 30, 2008.
The Company's effective tax rates were 81.5% and 35.2% for the
three months ended April 30, 2009 and 2008, respectively. The
effective tax rate in Q1FY10 was affected by a $350,000 reserve
against deferred taxes resulting from the India restructuring,
losses in India and UK with no tax benefit, tax benefits in Brazil
resulting from government incentives and goodwill write-offs, and
credits to prior year taxes in the US not previously recorded. The
$350,000 reserve is a one-time, non-cash expense.
Net Income. Net income decreased $0.8 million, or 89%, to $0.1
million for the three months ended April 30, 2009 from $0.8 million
for the three months ended April 30, 2008. The decrease in net
income primarily resulted from a decrease in sales and substantial
increase in provision for income taxes resulting from the one-time,
non-cash reserve of $350,000, partially offset by effective expense
management and cost controls.
Management's Comments
Commenting on the financial results, Lakeland Industries
President and Chief Executive Officer Christopher J. Ryan said,
"Lakeland, like most companies, experienced ever challenging
business conditions in the calendar year to date. Our international
diversification strategy which commenced a few years ago had
anticipated a slowdown in economic activity in the US, where most
of our business had been derived, although we had not foreseen its
severity or the global reach it would have. We are very pleased to
report that international revenues represented over 28% of total
revenues in the first quarter of fiscal 2010, which is an increase
from 15.1% in the same period of the prior year. While this
positions us favorably with diversification and the ability to
expand our market share, the strong US dollar against many foreign
currencies masks our true organic growth. Nevertheless, while we
have grown in many of our markets, we have experienced a slowdown
in orders in other markets that mirror the local economic activity.
There has been a noticeable effort among distributors and end user
customers to allow their inventory levels to reduce so that they
may better cope with global liquidity concerns or until there is a
resumption in business activity.
In response to this operating climate in our first fiscal
quarter, we vigorously took all of our costs and expenses under
review. A key initiative relied on our ability to leverage our
global manufacturing facilities such that we may benefit from lower
cost operations and faster delivery to our growing base of global
customers. This has produced one of the intended results in the
improvement of gross margin percentage on lower sales volume in the
first fiscal quarter. Our status as low cost manufacturer along
with favorable geographic proximity to customers has positioned us
well, particularly in taking advantage of the immediate term
increase in orders for products relating to the swine flu outbreak.
Swine flu-related orders should be additive to our second fiscal
quarter which began May 1, 2009.
Among other expense management initiatives, we have reduced
overhead and wages commensurately with our sales levels. As a well
capitalized company amid a contracting global economy, our business
is in demand by suppliers and business partners. The global
recession has afforded us the opportunity to renegotiate terms and
pricing on materials we use in making our products as well as items
and services used in various aspects of daily business. In addition
to more disciplined spending, we have been aggressively managing
our cash flow. To this end, work-in-process as well as finished
goods inventories have been reduced and are being closely managed.
Again, due to the development of our globally diversified operating
footprint, we can more effectively manage our costs while improving
customer service. The result of our cash management initiatives is
the paying down of $3.9 million of our debt in the first fiscal
quarter. At April 30, 2009, our loan balance was $20.5 million, a
reduction from $24.4 million at the end of our fiscal fourth
quarter on January 31, 2009.
Looking ahead, we believe there will be an inflexion point for
our operating performance. With the US dollar as strong as it was
during our first fiscal quarter, the translation of our foreign
sales and earnings were negatively impacted. The pendulum has been
swinging the other direction and this should have a positive impact
on international sales and earnings in the coming quarters. Many of
the overhead reductions made throughout the first quarter will more
completely impact the second quarter ended July 31, 2009, which is
a period that will also have an elimination of the one-time,
non-cash charge of approximately $0.06 cents per share in the first
quarter. Finally, the global economy seems to have bottomed out and
we have made considerable inroads toward penetrating new
distributors and new end-user customers. There has been an overall
increase in the number of customers we serve and the number of
purchase orders we receive, although given the most recent economic
activity the average order size has declined. As the economy
improves and we further penetrate our new and increasing number of
customers, we envision an overall increase in the quantity and
magnitude of orders. Furthermore, we have several new products
using lower cost raw materials that we have recently introduced or
are preparing for commercial launch which complement our expended
product lines. Overall, we are encouraged by the prospects of our
second quarter and future periods."
Financial Results Conference Call
Lakeland will host a conference call at 10:00 AM (EDT) on June
9, 2009, to discuss the Company's first quarter fiscal year 2010
financial results. The conference call will be hosted by
Christopher J. Ryan, Lakeland's President and CEO. Investors can
listen to the call by dialing 877-874-1588 (domestic) or
719-325-4782 (international), code 4953494.
A conference call replay will be available by dialing
888-203-1112 (domestic) or 719-457-0820 (international), code
4953494.
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 1,000 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 8-K(s), registration statements, annual reports
and other periodic 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," which words
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.
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
April January
30, 31,
ASSETS 2009 2009
(Unaudited)
Current assets:
Cash and cash equivalents $ 3,940 $ 2,755
Accounts receivable, net 15,089 13,353
Inventories, net 52,239 57,074
Deferred income taxes 2,228 2,578
Prepaid Income Taxes 518 531
Other current assets 1,861 2,071
--------- ---------
Total current assets 75,875 78,362
Property and equipment, net 13,888 13,736
Other Assets 4,488 4,406
Goodwill 5,109 5,109
--------- ---------
$ 99,360 $ 101,613
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,054 $ 3,853
Accrued compensation and benefits 2,836 3,069
Other accrued expenses 63 435
Loans payable 575 -----
Current maturity of long term debt 94 94
--------- ---------
Total current liabilities 8,622 7,452
Borrowing under revolving credit facility 20,491 24,408
Construction loan payable (net of current maturity of
$94) 1,389 1,368
Other liabilities 79 75
--------- ---------
Total liabilities 30,581 33,302
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par;
authorized 1,500,000 shares (none issued)
Common Stock, $0.01 par; authorized 10,000,000
shares issued and outstanding 5,523,288 shares at
April 30, 2009 and at January 31, 2009,
respectively 55 55
Less treasury stock at cost 125,322 shares at April
30, 2009 and 107,317 at January 31, 2009 (1,353) (1,255)
Other comprehensive loss (3,827) (4,192)
Additional paid-in capital 49,615 49,512
Retained earnings 24,289 24,191
--------- ---------
Total stockholders' equity 68,779 68,311
--------- ---------
Total liabilities and stockholders' equity $ 99,360 $ 101,613
========= =========
LAKELAND INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended
April 30,
2009 2008
--------- ---------
Net sales $ 23,975 $ 27,280
Cost of goods sold 17,965 20,601
--------- ---------
Gross profit 6,010 6,679
Operating expenses 5,331 5,231
--------- ---------
Operating profit 679 1,448
Interest and other income, net 40 30
Interest expense (194) (99)
--------- ---------
Income before income taxes 525 1,379
Income tax expense 428 486
--------- ---------
Net income $ 97 $ 893
========= =========
Net income per common share:
Basic $ 0.02 $ 0.16
========= =========
Diluted $ 0.02 $ 0.16
========= =========
Weighted average common shares outstanding:
Basic 5,406,291 5,487,260
========= =========
Diluted 5,468,616 5,520,868
========= =========
Contacts: Lakeland Industries 631-981-9700 Christopher Ryan
Email Contact Gary Pokrassa Email Contact Darrow Associates
631-367-1866 Jordan Darrow Email Contact
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