RONKONKOMA, N.Y.,
Sept. 16, 2015 /PRNewswire/ -- Lakeland Industries, Inc.
(NASDAQ: LAKE), 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 2016 second quarter ended July 31, 2015.
For financial reporting presentation purposes, the operating
results in Brazil are excluded
from many of the statements in this announcement because the
Company's recent determination to exit Brazil has resulted in discontinued operations
accounting. Commencing with its first fiscal quarter 2016 ended
April 30, 2015, historical and future
financial results from the Brazilian operations are reflected as
discontinued operations in accordance with accounting principles
generally accepted in the United States
of America ("GAAP"). Discontinued operations accounting
entails the reclassification of all of the financial results of the
Brazil operations within the
consolidated financial results of the parent company, and a
restatement of prior periods to reflect the same treatment. The
global operations of Lakeland Industries excluding Brazil are shown in financial reports as
Continuing Operations. All information below has been
restated to exclude Brazil, except
where noted. On July 31, 2015, the
Company completed a conditional closing of the sale of its
wholly-owned Brazilian subsidiary ("Lakeland Brazil"), to Zap
Comercio de Brindes Corporativos Ltda (the "Transferee"), a company
owned by an existing Lakeland Brazil manager. This sale is pursuant
to a Shares Transfer Agreement entered into on June 19, 2015. The transactions contemplated by
the Shares Transfer Agreement, which shall be deemed to have been
consummated as of July 31, 2015, are
subject to acceptance of the shares transfer on the Commercial
Registry by the Brazilian authorities, which is expected to be
completed shortly. Although no assurances can be given in that
regard, the Company expects the Commercial Registry processing of
the shares transfer will not adversely affect the closing. Pursuant
to the Shares Transfer Agreement, the Transferee will acquire all
of the shares of Lakeland Brazil owned by the Company, and
effective with the fiscal 2016 third quarter beginning August 1, 2015 the Company expects no further
significant losses from discontinued operations, charges or
expenses relating to Brazil beyond
the existing accrual of $900,000
which was recorded in the fiscal second quarter financial
results.
Fiscal 2016 Second Quarter Financial Results Highlights (from
Continuing Operations, unless otherwise noted)
- Revenue Growth
- Sales were $29.5 million ("M")
this year and $22.8M last year, an
increase of 29.2%, with a portion of the growth resulting from
orders received by Lakeland due to its unique operating platform
during a period of industry capacity constraints.
- Margin Improvement and Expense Management
- Gross profit increased by 58.6% as compared to last year.
- Gross margin was 40.0%, compared to 32.6% last year, driven by
a more favorable product mix including demand for disposable and
chemical garments in response to a lack of industry capacity.
- Operating expenses worldwide increased by $0.5M and decreased as a percent of sales to
20.7% from 24.7% last year as a result of higher volume and
Selling, General and Administrative Expenses ("SGA") largely being
fixed other than freight out and commissions.
- Significant Increases in Operating Income, Adjusted EBITDA and
Free Cash Flow.*
- Operating income increased to $5.7M from operating income of $1.8M last year.
- Operating income as a percentage of sales increased to 19.3%
this year vs. 7.9% last year.
- Adjusted EBITDA worldwide this year was $6.1M vs. $2.1M
last year.
- Free cash flow (defined as adjusted EBITDA less cash paid for
taxes and less capital expenditures) increased from $1.5M last year to $5.5M this year.
- Excluded from free cash flow is a non-cash charge of
$1.2M in connection with the
Discontinued Operations in Brazil.
- Net Income Growth**
- Net income of $3.6M or
$0.50 per share vs $0.6M and $0.09 per
share for the three months ended July 31,
2015 and 2014, respectively.
- Net loss from discontinued operations, as of July 31, 2015 of $(1.6)M or $(0.22)
per share vs. $(0.9)M and
$(0.16) per share last year.
- Net income (loss) this year of $3.3M or $0.46 per
share vs. $(0.4)M and $(0.07) per share last year for the six months
ended July 31, 2015 and 2014,
respectively.
- Balance Sheet Strengthened
- Cash and cash equivalents decreased by $1.6M from $6.7M at
end of Q4 last year to $5.1M at end
of Q2 with the payment of the arbitration settlement of
$3.4M in cash while the revolver
balance held steady.
- Net book value per share at July 31,
2015 was $9.34.
- We reached a settlement and paid off the remaining Brazil
Arbitration debt yet ended the quarter with essentially the same
revolver loan balance as at prior quarter end.
- Stockholders' equity increased by 6.8% from the beginning of
the fiscal year.
*Includes non-GAAP measures – see table included herein for
reconciliation to GAAP measures
**All shares presented are Basic, unless otherwise noted.
Management's Comments
Christopher J. Ryan, President
and Chief Executive Officer of Lakeland Industries, stated, "The
second quarter of fiscal 2016 marked the second consecutive quarter
in which we reported a 500% increase in net income from continuing
operations as compared with the respective prior year periods. Free
cash flow from continuing operations in the second quarter of this
year increased by 267% from the prior year, which followed a 105%
increase for the first quarter. We attribute this growth to the
hard work of our growing worldwide team along with organic growth
from our recurring base of customers and our unique operating
platform which has provided us with the ability to deliver large
quantities of protective apparel for emergency and crisis
situations where there are global capacity shortages. Simply put,
we believe that no other protective apparel manufacturer in the
world can be as responsive to market demands as Lakeland and still
provide a high quality garment. We have continued to prove that we
have the ability to scale production and have the manufacturing
capacity and operational expertise to respond to market demand. Our
consecutive quarterly growth rate, while not sustainable at the
very high levels achieved during the first half of this fiscal
year, demonstrates the leverage in our business and our enhanced
presence in a total addressable market valued at nearly
$7 billion globally.
"Lakeland's brand is increasingly being recognized around the
world for the quality of its garments and the ability to deliver
large quantities in periods of exigent demand. In the past twelve
months alone, Lakeland has responded to the Ebola crisis in
West Africa and the bird flu
crisis in the United States, among
other less significant events of incremental demand. Emergency
requirements are nothing new to our industry but Lakeland is now
better positioned than ever to participate in this unpredictable
demand as "the new go-to manufacturer" for distributors, end users
and government and military customers around the world. In turn, we
are gaining market share and successfully executing on an organic
growth initiative to convert these emergency customers into
recurring buyers of our broad and expanding portfolio of protective
apparel.
"Over the past several years we have continued to report annual
sales growth from our traditional, non-emergency activities which
we view as somewhat recurring in nature. We believe the quality of
our revenues from continuing operations benefits from a growing
global customer base where we estimate that approximately 90% of
sales are for recurring demand. In the second quarter, our order
flow reflected the quality and defensibility of our revenue base,
which was evident despite seasonality and periodic slowdowns such
as the current economic circumstances in China and the reduced demand globally within
the oil and gas industry resulting from low oil prices. We have
experienced increases in unit volume sales in most of our
international businesses in the second quarter, although the impact
of this demand has been muted by the strong dollar against most
foreign currencies which reduces our reported financial results. In
the US alone, sales in the fiscal 2016 second quarter of
$19.5 million increased from the
prior year period by 55%, driven by approximately $4 million in orders for disposable and chemical
garments in response to the bird flu epidemic. Excluding this
non-recurring demand, US sales grew by 23%. On a consolidated sales
basis excluding orders relating to the bird flu epidemic, revenues
during a strong quarter increased by nearly 12% as compared to the
second quarter of fiscal 2015, despite the negative foreign
currency impact.
"The turnaround strategy that we implemented nearly three years
ago, including the steps to complete our exit from Brazil that we recently announced, has been
executed with success. The strong improvement in our financial
position and our exit from Brazil
has provided us with the ability to direct our attention to global
organic growth initiatives. We are now in our next phase of
planning which includes the development of our management and sales
teams, new product launches in response to customer demand,
implementation of information systems and technologies to enhance
performance, and capital investments to accommodate increased
manufacturing capacity and distribution requirements. This plan is
focused on long term growth in sales and profitability.
Supported by the visibility afforded by our recurring customer
base, our goal is to deliver an approximate double digit compounded
annual revenue growth rate for the foreseeable future, which may
further increase with the contributions of emergency events in any
given year."
Operating Results as
Restated for Discontinued Operations ($ 000)
Reconciliation to
GAAP Results
|
|
Quarter Ended
July 31, 2015
|
Quarter Ended
July 31, 2014
|
Net sales from
continuing operations
|
$29,465
|
$22,812
|
Year over year
growth
|
29.2%
|
-----
|
Gross profit from
continuing operations
|
11,795
|
7,437
|
Gross profit
%
|
40.0%
|
32.6%
|
Operating expenses
from continuing operations
|
6,095
|
5,639
|
Operating expenses as
a percentage of sales
|
20.7%
|
24.7%
|
Operating income from
continuing operations
|
5,700
|
1,798
|
Operating income as a
percentage of sales
|
19.3%
|
7.9%
|
Interest expense from
continuing operations
|
210
|
517
|
Other (income)
expense from continuing operations
|
-----
|
42
|
Pretax income (loss)
from continuing operations
|
5,490
|
1,239
|
Income tax expense
(benefit) from continuing operations
|
1,902
|
677
|
Net income from
continuing operations
|
3,588
|
562
|
Non-cash
reclassification of Other Comprehensive Income to
Statement of Operations with no impact on stockholder's
equity
|
(1,286)
|
-----
|
Loss from
discontinued operations
|
(837)
|
(948)
|
Loss before taxes for
discontinued operations
|
(2,123)
|
(948)
|
Income tax expense
(benefit) from discontinued operations
|
(569)
|
-----
|
Net (loss) from
discontinued operations
|
(1,554)
|
(948)
|
Net income
(loss)
|
$2,034
|
$(386)
|
|
|
|
Weighted average
shares for EPS-Basic
|
7,145,418
|
5,924,524
|
Net income per share
from continuing operations
|
$0.50
|
$0.09
|
Net loss per share
from discontinued operations
|
$(0.22)
|
$(0.16)
|
Net income (loss) per
share
|
$0.28
|
$(0.07)
|
|
|
|
Operating income from
continuing operations
|
$5,700
|
$1,798
|
Depreciation and
amortization
|
228
|
258
|
Other income from
continuing operations
|
-----
|
(18)
|
EBITDA from continuing
operations
|
5,928
|
2,038
|
Equity
Compensation
|
127
|
25
|
Adjusted
EBITDA
|
6,055
|
2,063
|
Cash paid for taxes
(foreign)
|
391
|
365
|
Capital
expenditures
|
167
|
149
|
Free cash
flow
|
$5,497
|
$1,549
|
Operating Results as
Restated for Discontinued Operations ($ 000)
Reconciliation to
GAAP Results
|
Quarterly
results
|
Six-Months
Ended July 31,
2015
|
Six-Months
Ended July 31,
2014
|
Net sales from
continuing operations
|
$54,284
|
$44,570
|
Year over year
growth
|
21.8%
|
-----
|
Gross profit from
continuing operations
|
21,073
|
13,942
|
Gross profit
%
|
38.8%
|
31.3%
|
Operating expenses
from continuing operations
|
12,154
|
11,286
|
Operating expenses as
a percentage of sales
|
22.4%
|
25.3%
|
Operating income from
continuing operations
|
8,919
|
2,656
|
Operating income as a
percentage of sales
|
16.4%
|
6.0%
|
Interest expense from
continuing operations
|
393
|
1,003
|
Other (income)
expense from continuing operations
|
16
|
(37)
|
Pretax income (loss)
from continuing operations
|
8,542
|
1,616
|
Income tax expense
(benefit) from continuing operations
|
2,794
|
700
|
Net income from
continuing operations
|
5,748
|
916
|
Non-cash
reclassification of Other Comprehensive Income to
Statement of Operations with no impact on stockholder's
equity
|
(1,286)
|
-----
|
Loss from
discontinued operations
|
(1,868)
|
(1,302)
|
Loss before taxes for
discontinued operations
|
(3,154)
|
(1,302)
|
Income tax expense
(benefit) from discontinued operations
|
(669)
|
-----
|
Net (loss) from
discontinued operations
|
(2,485)
|
(1,302)
|
Net income
(loss)
|
$3,263
|
$(386)
|
|
|
|
Weighted average
shares for EPS-Basic
|
7,104,471
|
5,923,885
|
Net income (loss) per
share from continuing operations
|
$0.81
|
$0.15
|
Net loss per share
from discontinued operations
|
$(0.35)
|
$(0.22)
|
Net income (loss) per
share
|
$0.46
|
$(0.07)
|
|
|
|
Operating income from
continuing operations
|
$8,919
|
$2,656
|
Depreciation and
amortization
|
474
|
558
|
Other (income)
expense from continuing operations
|
(25)
|
23
|
EBITDA from continuing
operations
|
9,368
|
3,237
|
Equity
Compensation
|
255
|
49
|
Inventory reserve in
USA and China – discontinued product lines
raw material/finished goods
|
-----
|
300
|
PA plant shutdown
costs
|
-----
|
235
|
Adjusted
EBITDA
|
9,623
|
3,821
|
Cash paid for taxes
(foreign)
|
995
|
672
|
Capital
expenditures
|
474
|
238
|
Free cash
flow
|
$8,154
|
$2,911
|
Financial Results Conference Call
Lakeland will host a conference call at 4:30 pm eastern today to discuss the Company's
fiscal 2016 second quarter financial results. The call will be
hosted by Christopher J. Ryan,
Lakeland's President and CEO, and Teri W.
Hunt, Lakeland's Acting 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), Pass Code 10071831.
For a replay of this call through September 23, 2015, dial 877-344-7529 (Domestic)
or 412-317-0088 (International) or 855-669-9658 (Canada), Pass Code 10071831.
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 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.
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
July 31, 2015
and January 31, 2015
|
|
|
|
ASSETS
|
July 31,
|
January
31,
|
|
2015
|
2015*
|
Current
assets
|
($000's)
|
($000's)
|
Cash and cash
equivalents
|
$5,065
|
$6,709
|
Accounts receivable,
net of allowance for doubtful accounts of $446 and
$484 at July 31, 2015 and January 31, 2015,
respectively
|
15,711
|
13,277
|
Inventories, net of
reserves of approximately $2,605 and $2,454 at July 31,
2015 and January 31, 2015,
respectively
|
41,902
|
37,092
|
Deferred income
taxes
|
84
|
1,144
|
Assets of discontinued
operations in Brazil
|
-----
|
6,335
|
|
|
|
Prepaid VAT
tax
|
1,657
|
1,717
|
Other current
assets
|
2,773
|
2,361
|
Total current
assets
|
67,192
|
68,635
|
Property and
equipment, net
|
9,696
|
10,144
|
Assets held for
sale
|
881
|
-----
|
Deferred income tax,
noncurrent
|
13,101
|
13,101
|
Prepaid VAT and other
taxes
|
173
|
173
|
Security
deposits
|
80
|
113
|
Intangibles, prepaid
bank fees and other assets, net
|
141
|
171
|
Goodwill
|
871
|
871
|
Total
assets
|
$92,135
|
$93,208
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$8,508
|
$7,763
|
Accrued compensation
and benefits
|
1,047
|
1,120
|
Other accrued
expenses
|
1,696
|
1,462
|
Liabilities of
discontinued operations in Brazil
|
753
|
6,574
|
Current maturity of
long-term debt
|
50
|
50
|
Current maturity of
accrued arbitration award
|
-----
|
1,000
|
Short-term
borrowing
|
2,746
|
2,611
|
Borrowings under
revolving credit facility
|
8,897
|
5,642
|
Total current
liabilities
|
23,697
|
26,222
|
Accrued arbitration
award, less current portion
|
-----
|
2,870
|
Long-term portion of
Canada loan
|
759
|
800
|
VAT taxes payable
long term
|
118
|
60
|
Total
liabilities
|
24,574
|
29,952
|
Stockholders'
equity
|
|
|
Preferred stock, $.01
par; authorized 1,500,000 shares (none issued)
|
-----
|
-----
|
Common stock, $.01
par; authorized 10,000,000 shares, Issued 7,590,235 and
7,414,037; outstanding 7,233,794 and 7,057,596
at July 31, 2015 and January 31, 2015
respectively
|
76
|
74
|
Treasury stock, at
cost; 356,441 shares at July 31, 2015 and January 31,
2015
|
(3,352)
|
(3,352)
|
Additional paid-in
capital
|
64,130
|
64,594
|
Retained
earnings
|
7,917
|
4,654
|
Accumulated other
comprehensive loss
|
(1,210)
|
(2,714)
|
Total stockholders'
equity
|
67,561
|
63,256
|
Total liabilities and
stockholders' equity
|
$92,135
|
$93,208
|
* Restated for discontinued operations
Numbers may not add due to rounding
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three and Six Months
Ended July 31, 2015 and 2014
|
|
|
|
|
Three Months
Ended
|
Six Months
Ended
|
|
July 31,
|
July 31,
|
|
($000's)
except for share
information
|
($000's)
except for share
information
|
|
2015
|
2014*
|
2015
|
2014*
|
Net sales from
continuing operations
|
$29,465
|
$22,812
|
$54,284
|
$44,570
|
Cost of goods sold
from continuing operations
|
17,670
|
15,375
|
33,211
|
30,628
|
Gross profit from
continuing operations
|
11,795
|
7,437
|
21,073
|
13,942
|
Operating expenses
from continuing operations
|
6,095
|
5,639
|
12,154
|
11,286
|
Operating profit from
continuing operations
|
5,700
|
1,798
|
8,919
|
2,656
|
Other income (loss),
net from continuing operations
|
-----
|
(42)
|
16
|
(37)
|
Interest expense from
continuing operations
|
210
|
517
|
393
|
1,003
|
Income before taxes
from continuing operations
|
5,490
|
1,239
|
8,542
|
1,616
|
Income tax expense
from continuing operations
|
1,902
|
677
|
2,794
|
700
|
Net income from
continuing operations
|
$3,588
|
$562
|
$5,748
|
$916
|
Non-cash
reclassification of Other Comprehensive
Income to Statement of Operations (no impact on
stockholder's equity)
|
(1,286)
|
-----
|
(1,286)
|
-----
|
Loss from operations
from discontinued operations
|
(322)
|
(948)
|
(1,253)
|
(1,302)
|
Loss from disposal of
discontinued operations
|
(515)
|
-----
|
(515)
|
-----
|
Loss before taxes for
discontinued operations
|
(2,123)
|
(948)
|
(3,054)
|
(1,302)
|
Income tax benefit
from discontinued operations
|
(569)
|
-----
|
(569)
|
-----
|
Net loss from
discontinued operations
|
(1,554)
|
(948)
|
(2,485)
|
(1,302)
|
Net income
(loss)
|
$2,034
|
$(386)
|
$3,263
|
$(386)
|
Net income (loss) per
common share – Basic:
|
|
|
|
|
Income from continuing
operations
|
$0.50
|
$0.09
|
$0.81
|
$0.15
|
Loss from
discontinued operations
|
$(0.22)
|
$(0.16)
|
$(0.35)
|
$(0.22)
|
Net income
(loss)
|
$0.28
|
$(0.07)
|
$0.46
|
$(0.07)
|
Net income (loss) per
common share – Diluted:
|
|
|
|
|
Income from continuing
operations
|
$0.50
|
$0.09
|
$0.79
|
$0.15
|
Loss from discontinued
operations
|
$(0.22)
|
$(0.16)
|
$(0.34)
|
$(0.22)
|
Net income
(loss)
|
$0.28
|
$(0.07)
|
$0.45
|
$(0.07)
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
7,145,418
|
5,924,524
|
7,104,471
|
5,923,885
|
Diluted
|
7,167,123
|
5,924,524
|
7,191,469
|
5,923,885
|
*Restated for discontinued operations
Numbers may not add due to rounding
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SOURCE Lakeland Industries, Inc.