RONKONKOMA, N.Y., June 14, 2016 /PRNewswire/ -- Lakeland
Industries, Inc. (NASDAQ: LAKE) (the "Company"), 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 2017 first quarter ended
April 30, 2016.
![Lakeland Industries Logo. Lakeland Industries Logo.](http://photos.prnewswire.com/prnvar/20120611/NY21959LOGO)
For financial reporting presentation purposes, the operating
results in Brazil are excluded
from many of the statements in this announcement because the
Company's transfer of the stock of its Brazilian subsidiary 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 Company. The global
operations of Lakeland Industries, Inc. excluding Brazil are shown in financial reports as
continuing operations. All statements and information in this
announcement have been presented or are restated to exclude
Brazil, except where noted. On
July 31, 2015, the Company completed
a conditional closing of the transfer of all of the stock of its
then wholly-owned Brazilian subsidiary ("Lakeland Brazil"), to Zap
Comércio de Brindes Corporativos Ltda (the "Transferee"), a company
owned by a then existing Lakeland Brazil manager. This transfer is
pursuant to a Shares Transfer Agreement entered into on
June 19, 2015. The transactions
contemplated by the Shares Transfer Agreement, which were deemed to
have been consummated as of July 31,
2015, were completed in October
2015. Pursuant to the Shares Transfer Agreement, the
Transferee has acquired all of the shares of Lakeland Brazil owned
by the Company.
Fiscal 2017 First Quarter Financial Results
Highlights
"FROM CONTINUING OPERATIONS, UNLESS OTHERWISE
NOTED"
- Decline in year-over-year revenues reflects emergency demand in
the prior year that was absent this year, the global economic
slowdown particularly for the oil and gas sector, and currency
headwinds in fiscal 2017 first quarter as compared to same period
in fiscal 2016 which reduces revenues reported on a consolidated
GAAP basis in US dollars
- Gross margin decline from prior year on lower volume and
absence of higher margin emergency product orders
- Gross margin in 1Q17 increased sequentially from 4Q16 by 4
percentage points, with each period having similar currency
valuations and global business conditions as well as neither
quarter benefiting from higher margin emergency product orders
- Operating expenses increased as Company prepares for resumption
in global industrial growth and market share gains, including
bolstering of country sales management and financial personnel and
incurring additional professional fees associated with year-end
audit, legal and tax work
- Investment in MIS infrastructure continues with goal of further
improving productivity and profitability
- Balance sheet remain strong with $3.5
million of net cash provided by operations in 1Q17 driven by
cash management and reduced inventory; cash at the end of the
quarter increased to $10.3 million
from $7.0 million at the beginning of
the fiscal year
Management's Comments
Christopher J. Ryan, President
and Chief Executive Officer of Lakeland Industries, stated, "The
first quarter of fiscal 2017 showed progress on a number of
operational and, more importantly, forward looking objectives that
position the Company for its next phase of growth. This
growth is intended to be organic from the traditional markets we
serve by capitalizing on new markets and products while taking
market share in some of the more developed regions we
serve.
"Incremental to all of these growth opportunities is emergency
demand, such as the Ebola-related orders we received in the early
part of the prior fiscal year, which resulted in an unfavorable
comparison on a year-over-year basis for the first quarter of the
current year. These revenues were much higher than our
traditional sales, so this skewed year-over-year comparisons.
Also negatively impacting the first quarter of this year were the
currency volatility in Argentina,
Kazakhstan, Canada, China
and the UK and the continued weakness in the global industrial
economy, particularly in the oil and gas sector. This sector
represents roughly 10% of our annual revenues. As with any
business cycle, we anticipate a recovery in demand for our products
as oil prices rebound.
"Meanwhile, we have taken steps to reduce our cost structure
and, at the same time, undertake certain operating efficiencies to
enhance our global infrastructure in preparation of global sales
growth and market share gains -- with or without industrial or oil
sector recoveries which have been in corresponding down turns for
the past several quarters. Proof of concept for this strategy
can be found in our Canadian operations where sales in the first
quarter were up 25% in local currency as compared to the prior year
despite challenging economic conditions in the country. As
previously disclosed, in the first quarter of fiscal 2017 we
implemented a voluntary reduction in force for our USA operations which resulted in a charge
during the quarter of $300,000 that
will reduce payroll by over $1.0
million on an annualized basis. Certain manufacturing
functions will be assumed by our facilities in India and Mexico where our cost base is significantly
lower. Overall, we are leveraging our global operations to drive
costs lower, improve manufacturing efficiencies and increase
sales.
"We are pleased to report that operating profit has been
achieved in each of our major country operations except for a
modest loss in Mexico. As of April 30,
2016, we had cash and cash equivalents of approximately
$10.3 million, with this balance
increasing $3.3 million from the
beginning of the fiscal year. Net cash provided by operating
activities was $3.5 million for the
fiscal 2017 first quarter, primarily due to effective cash
management and inventory reductions. To further increase our
productivity and leverage our global workforce, we have been
bolstering our country sales management and financial personnel
while investing in management information systems infrastructure to
enhance our costing, inventory, bidding and workflow
management.
"As previously stated, regardless of the overall market's growth
and any continued economic uncertainties, we see a multitude of
organic growth opportunities in converting customers to Lakeland
products. New product development will aid in this
effort. An example of this strategy is the redesigning of our
disposable product for use in cleanrooms, estimated as an annual
addressable market of approximately $75
million to $100 million . We are well on our way to
realizing the benefits of our market and product diversity to
deliver long term sustainable growth in revenues, profitability and
cash flow."
Fiscal 2017 First Quarter Financial Results
Net sales from continuing operations decreased 18% to
$20.4 million for the three months
ended April 30, 2016 compared to
$24.8 million for the three months
ended April 30, 2015. Overall
sales volume was reduced in the quarter due to global softness in
the industrial sector partially resulting from a continuing
downturn in the oil and gas industry, as well as currency headwinds
in several of the foreign countries in which the Company has
operations. On a consolidated basis in US currency for the
first quarter of fiscal 2017, domestic sales were $12.2 million or 60% of total revenues and
international sales were $8.2 million
or 40% of total revenues. This compares with domestic
sales of $12.8 million or 52% of the
total and internationals sales of $12.0
million or 48% of the total in the same period of fiscal
2016.
Sales in the USA decreased 7%
or $1.0 million due primarily to the
strong sales levels in the disposables and chemical divisions
related to the Company's response to the Ebola crisis in the first
quarter of the prior year and a soft market in the industrial
sector in 1Q17. USA sales of
disposables decreased by $0.5
million, chemical sales decreased $0.6 million, wovens and fire protection sales
combined were level, while glove sales decreased $0.1 million and reflective sales increased
$0.2 million.
Among the Company's larger international operations, sales in
China and to the Asia Pacific Rim
were down 25% or $2.9 million, amid
currency headwinds. Canada
sales increased by 26% or $0.4
million, despite Canadian currency declines, as that country
benefited from the effective implementation of market share
attainment strategies an unexpected oil and gas turnaround as well
as protective apparel requirements to handle wildfires. UK sales
decreased by $3.3 million or 58%
mostly due to the Company's Ebola-related sales in fiscal 2016
first quarter and continuing currency challenges. Sales in
Russia and Kazakhstan increased $0.2 million or 73% as economic stability
improved. Latin America
sales decreased $0.5 million or 37%
due to a depressed commodities market which curtails agriculture
and mining production and due to the poor economic environment in
certain regions.
Gross profit decreased $2.5
million, or 27%, to $6.8
million for the three months ended April 30, 2016, from $9.3
million for the three months ended April 30, 2015. Gross profit as a percentage of
net sales decreased to 33.3% for the three months ended
April 30, 2016, from 37.4% for the
three months ended April 30, 2015,
but increased from 29.4% from the fourth quarter of fiscal 2016
ended January 31, 2016. Gross margins
for disposable products, the Company's largest product line,
remained level at 34% despite low volume. Major factors
driving the year-over-year changes in gross margins include
Chemical protective apparel line gross margins decreasing by 17
percentage points as compared to the same quarter in the previous
year primarily due to the very high volume and high margins
associated with the Company's response to the Ebola crisis, and
cost saving efforts and severance payments in the more recent
quarter associated with a reduction in force in the USA to move production to more cost effective
facilities in Mexico and
China.
Operating expenses increased from $6.1
million for the three months ended April 30, 2015 to $6.6
million for the three months ended April 30, 2016. Operating expenses as a
percentage of net sales was 32.4% for the three months ended
April 30, 2016 up from 24.4% for the
three months ended April 30, 2015.
The main factors for the increase in operating expenses are a
$0.3 million increase in payroll
administration and salaries for the expansion of the Company's
global sales management among other activities and $0.3 million increase in professional fees for
audit fees, legal fees and year-end tax preparation, and a
$0.1 million increase in travel
expense.
Operating profit was $0.2 million
for the three months ended April 30,
2016, from $3.2 million for
the three months ended April 30,
2015, mainly as a result of weak sales volume.
Operating margins were 0.8% for the three months ended April 30, 2016, compared to 13.0% for the three
months ended April 30, 2015.
Net income was $0.0 million for
the three months ended April 30, 2016
from $1.2 million for the three month
ended April 30, 2015. The results for
the three months ended April 30, 2016
are primarily due to low sales volume and increased spending on the
Company's global growth strategies.
As of April 30, 2016, Lakeland had
cash and cash equivalents of approximately $10.3 million and working capital of $44.5 million. Cash and cash equivalents
increased $3.3 million from the
beginning of the fiscal year. The Company's $15 million revolving credit facility had
$9.3 million of borrowings
outstanding as of April 30, 2016,
with availability of $5.7
million.
Financial Results Conference Call
Lakeland will host a conference call at 4:30 pm eastern today to discuss the Company's
fiscal 2017 first 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 June
21, 2016, dial 877-344-7529 (Domestic) or 412-317-0088
(International) or 855-669-9658 (Canada), Pass Code 10087061.
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 as
Restated for Discontinued Operations ($000)
Reconciliation to
GAAP Results
|
|
|
|
Quarter Ended
April 30, 2016
|
Quarter Ended
April 30 2015
|
Net sales from
continuing operations
|
$20,369
|
$24,819
|
Year over year
growth
|
(17.9)%
|
-----
|
Gross profit from
continuing operations
|
6,776
|
9,279
|
Gross profit
%
|
33.3%
|
37.4%
|
Operating expenses
from continuing operations
|
6,607
|
6,059
|
Operating expenses as
a percentage of sales
|
32.4%
|
24.4%
|
Operating income from
continuing operations
|
169
|
3,220
|
Operating income as a
percentage of sales
|
0.8%
|
13.0%
|
Interest expense from
continuing operations
|
198
|
183
|
Other (income)
expense from continuing operations
|
8
|
15
|
Pretax income (loss)
from continuing operations
|
(21)
|
3,052
|
Income tax expense
(benefit) from continuing operations
|
(24)
|
892
|
Net income from
continuing operations
|
$3
|
$2,160
|
Loss from
discontinued operations
|
-----
|
(931)
|
Loss before taxes for
discontinued operations
|
-----
|
(931)
|
Income tax expense
(benefit) from discontinued operations
|
-----
|
-----
|
Net (loss) from
discontinued operations
|
-----
|
(931)
|
Net income
(loss)
|
$3
|
$1,229
|
|
|
|
Weighted average
shares for EPS-Basic
|
7,254,162
|
7,062,144
|
Net income per share
from continuing operations
|
$0.0
|
$0.31
|
Net loss per share
from discontinued operations
|
$0.0
|
$(0.14)
|
Net income (loss) per
share
|
$0.0
|
$0.17
|
|
|
|
Operating income from
continuing operations
|
$169
|
$3,220
|
Depreciation and
amortization
|
287
|
246
|
Other income from
continuing operations
|
8
|
15
|
EBITDA from continuing
operations
|
464
|
3480
|
Equity
Compensation
|
130
|
128
|
USA Severance
Associated with Restructure
|
309
|
-----
|
Adjusted
EBITDA
|
903
|
3,608
|
Cash paid for taxes
(foreign)
|
132
|
604
|
Capital
expenditures
|
30
|
307
|
Free cash
flow
|
$741
|
$2,697
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
April 30, 2016 and
January 31, 2016
|
|
|
|
|
|
ASSETS
|
April 30,
|
January
31,
|
|
2016
|
2016
|
Current
assets
|
|
($000's)
|
Cash and cash
equivalents
|
$10,331
|
$7,022
|
Accounts receivable,
net of allowance for doubtful accounts of $541 and $593 at April
30,
2016 January 31, 2016, respectively
|
11,649
|
11,476
|
Inventories, net of
reserves of $2,347 and $2,566 at April 30, 2016 and January 31,
2016,
respectively
|
38,891
|
40,841
|
Deferred income
taxes
|
1,707
|
1,555
|
Assets of discontinued
operations in Brazil
|
-----
|
-----
|
Prepaid VAT
tax
|
1,177
|
1,143
|
Other current
assets
|
2,848
|
1,635
|
Total current
assets
|
66,603
|
63,672
|
Property and
equipment, net
|
9,141
|
9,268
|
Assets held for
sale
|
1,101
|
1,101
|
Deferred income tax,
noncurrent
|
12,783
|
12,783
|
Prepaid VAT and other
taxes
|
377
|
377
|
Security
deposits
|
99
|
93
|
Intangibles, prepaid
bank fees and other assets, net
|
62
|
95
|
Goodwill
|
871
|
871
|
Total
assets
|
$91,037
|
$88,260
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
Current
liabilities
|
|
|
Accounts
payable
|
$7,366
|
$4,254
|
Accrued compensation
and benefits
|
846
|
1,157
|
Other accrued
expenses
|
1,197
|
1,575
|
Liabilities of
discontinued operations in Brazil
|
207
|
238
|
Current maturity of
long-term debt
|
50
|
50
|
Short-term
borrowing
|
3,198
|
3,226
|
Borrowings under
revolving credit facility
|
9,281
|
9,458
|
Total current
liabilities
|
22,145
|
19,958
|
Long-term portion of
Canada loan
|
768
|
691
|
VAT taxes payable
long term
|
8
|
95
|
Total
liabilities
|
22,921
|
20,744
|
Stockholders'
equity
|
|
|
Preferred stock, $0.01
par; authorized 1,500,000 shares (none issued)
|
-----
|
-----
|
Common stock, $.01
par; authorized 10,000,000 shares,
|
|
|
Issued 7,611,440 and
7,610,603; outstanding 7,254,999 and 7,254,162 at April 30,
2016
|
|
|
January 31, 2016,
respectively
|
76
|
76
|
Treasury stock, at
cost; 356,441 shares at April 30, 2016 and January 31,
2016
|
(3,352)
|
(3,352)
|
Additional paid-in
capital
|
64,597
|
64,468
|
Retained
earnings
|
8,511
|
8,508
|
Accumulated other
comprehensive loss
|
(1,716)
|
(2,184)
|
Total stockholders'
equity
|
68,116
|
67,516
|
Total liabilities and
stockholders' equity
|
$91,037
|
$88,260
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
Three Months Ended
April 30, 2016 and 2015
|
|
|
Three Months
Ended
|
|
April 30,
|
|
($000's)
except for share
information
|
|
2016
|
2015
|
Net sales from
continuing operations
|
$20,369
|
$24,819
|
Cost of goods sold
from continuing operations
|
13,593
|
15,540
|
Gross profit from
continuing operations
|
6,776
|
9,279
|
Operating expenses
from continuing operations
|
6,607
|
6,059
|
Operating profit from
continuing
operations
|
169
|
3,220
|
Other income (loss),
net from continuing operations
|
8
|
15
|
Interest expense from
continuing operations
|
198
|
183
|
Income (loss) before
taxes from continuing operations
|
(21)
|
3,052
|
Income tax expense
(benefit) from continuing operations
|
(24)
|
892
|
Net income (loss)
from continuing operations
|
$3
|
$2,160
|
Net loss from
discontinued operations
|
$-----
|
$(931)
|
Net income
(loss)
|
$3
|
$1,229
|
Net income (loss) per
common share – Basic:
|
|
|
Income from continuing
operations
|
$0.0
|
$0.31
|
Loss from
discontinued operations
|
$0.0
|
$(0.14)
|
Net income
(loss)
|
$0.0
|
$0.17
|
Net income (loss) per
common share – Diluted:
|
|
|
Income from continuing
operations
|
$0.0
|
$0.30
|
Loss from discontinued
operations
|
$0.0
|
$(0.13)
|
Net income
(loss)
|
$0.0
|
$0.17
|
Weighted average
common shares outstanding:
|
|
|
Basic
|
7,254,162
|
7,062,144
|
Diluted
|
7,324,583
|
7,235,385
|
|
Numbers
may not add due to rounding
|
LAKELAND INDUSTRIES,
INC. AND SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
Three Months Ended
April 30, 2016 and 2015
|
|
|
For the Three Months
Ended
April
30,
|
|
2016
|
2015
|
Cash flows from
operating activities:
|
|
|
Net income
(loss)
|
$3
|
$1,229
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities
|
|
|
Provision for
inventory obsolescence
|
(219)
|
7
|
Provision for doubtful
accounts
|
(53)
|
90
|
Deferred income taxes
current
|
(153)
|
128
|
Deferred taxes
long-term
|
(87)
|
70
|
Depreciation and
amortization
|
287
|
246
|
Stock based and
restricted stock compensation
|
130
|
127
|
Loss on disposal of
fixed assets
|
31
|
-----
|
Interest expense
resulting from Arbitration Award
|
-----
|
16
|
(Increase) decrease
in operating assets
|
|
|
Accounts
receivable
|
50
|
(1,630)
|
Inventories
|
2,425
|
(2,471)
|
Prepaid VAT taxes and
other current assets
|
(34)
|
501
|
Other current
assets
|
(1,169)
|
(714)
|
Assets of discontinued
operations
|
-----
|
(672)
|
Increase (decrease)
in operating liabilities
|
|
|
Accounts
payable
|
3,010
|
828
|
Accrued expenses and
other liabilities
|
(727)
|
77
|
Arbitration award in
Brazil
|
-----
|
(250)
|
Net cash (used by) the
sales of Brazil
|
(31)
|
-----
|
Liabilities of
discontinued operations
|
-----
|
871
|
Net cash (used in)
provided by operating activities
|
3,463
|
(1,547)
|
Cash flows from
investing activities:
|
|
|
Purchases of property
and equipment
|
(30)
|
(307)
|
Net cash used in
investing activities
|
(30)
|
(307)
|
Cash flows from
financing activities:
|
|
|
Net borrowings under
credit agreement (revolver)
|
(177)
|
3,024
|
Canada loan
repayments
|
(6)
|
(6)
|
Argentina
borrowings
|
-----
|
269
|
Argentina
repayments
|
(54)
|
-----
|
UK borrowings,
net
|
20
|
569
|
China
borrowings
|
1,300
|
1,302
|
China
repayments
|
(1,275)
|
(1,295)
|
Shares returned to pay
employee taxes under restricted stock program
|
(1)
|
(41)
|
Net cash provided by
financing activities
|
(193)
|
3,822
|
Effect of exchange
rate changes on cash
|
69
|
44
|
Net increase in cash
and cash equivalents
|
3,309
|
2,012
|
Cash and cash
equivalents at beginning of year
|
7,022
|
6,709
|
Cash and cash
equivalents at end of year
|
$10,331
|
$8,721
|
|
|
|
Numbers may not add
due to rounding
|
|
|
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SOURCE Lakeland Industries, Inc.